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EP20 – Lisa Reed, Business Consultant

In this episode of the show we have our second ever guest on, our good friend Lisa Reed, who is a Business Consultant.

Note that this episode has two parts – click here for the audio for part 2.

Lisa has recently rebranded her consultancy to A Little Ray of Sunshine, she is a business consultant with a management accounting background which is quite different to business consultant who has a sales and marketing background. She has many many years of commercial experience both in the corporate arena where she worked with budgets in the billions, through to small corporates and SMBs.

This is an absolutely packed episode, full of knowledge bombs, wisdom and light-bulb moments. No matter what level of business you’re operating at, whether you’re at startup phase or working in the $100-200+ million range, this is an episode to listen to.

Listen to this episode and learn:

  • why asking your accountant for business advice could be a bad move
  • the 3 types of accountant and why the difference between them is important to be aware of
  • we chat about financial tools and why keeping your books up to date is a critical part of growing your business
  • why you and your ego could be the thing thats limiting your business growth
  • ….and many other foundational components of building and growing a successful business

Highlights, Notes and Action Items from this episode:

  • Lisa’s business – alittlerayofsunshine.com.au
  • Financial tools mentioned
  • How grow a business
    • the 5 ways model
    • identify the unique core competencies of the business and focus on growing those
  • Remove “key person reliance” – look at who has responsibility for daily, weekly, monthly critical tasks in a business, ask yourself what would happen if they left and build on action plan around that scenario so you can eliminate risk
  • 3 levels of focus
    • tactical – the daily, weekly
    • operational – monthly, quarterly
    • strategic – long term, this is where the business owner should spend most of their time
  • One of the first things Lisa works on in a business is removing the business owner from the daily tasks
  • Be mindful of the breakeven gap and “busy fool syndrome” – we want the breakeven gap to be as big as possible
  • Books recommended in this episode:
    • The Personal MBA
    • The Lean Startup
    • Delivering Happiness
    • Peak by Chip Conley
  • 3 types of accountants:
    • Tax Accountant
    • Financial Accountant
    • Management Accountant
  • Quoteables:
    • Business is people and performance, 90% of it is people
    • Business owners need to be people people
    • Business is always limited by the business owner
    • Recruit people that are better than you
    • Change is slow, expect a minimum of 3 months for change to happen
The 5 ways financial model - 5 areas to focus on to increase your business profits
The 5 ways financial model – 5 areas to focus on to increase your business profits (click to enlarge)
The break even gap - the difference between your sales and break even sales
The break even gap – the difference between your sales and break even sales (click to enlarge)

Podcast transcript:

The intro to talking all things business in the next hour or so

Ed Keay-Smith: You’re listening to the Business Marketing Show, episode number twenty, part one of two. You can find us at www.BusinessMarketingShow.com or on iTunes.

Brendan Tully: Welcome to the Business Marketing Show, I am Brendan from the Search Engine Shop. I am here with my co-host Ed Keay-Smith from Online Impact. How are you, Ed?

Ed Keay-Smith: I’m very good, Brendan. How about yourself mate?

Brendan Tully: Good.

Ed Keay-Smith: We have someone extra super duper special today with us.

Brendan Tully: We do, our second guest star on the show.

Ed Keay-Smith: Yes. Who’s also related to the first guest.

Brendan Tully: Yes.

Ed Keay-Smith: Special person.

Brendan Tully: That’s very true. That’s a good point.

Ed Keay-Smith: Who is it?

Brendan Tully: It’s Lisa Reed from A Little Ray of Sunshine Business Consultants.

Ed Keay-Smith: Yay. Hello, Lisa.

Brendan Tully: Hi, Lisa.

Lisa Reed: Hi, guys, what a wonderful introduction. You guys crack me up.

Ed Keay-Smith: That’s our job.

Brendan Tully: We’re working on the introduction. It’s a work in progress.

Ed Keay-Smith: Yeah, this is only podcast number twenty-odd so we’re still getting there. We’ve still got a lot …

Brendan Tully: I think it’s twenty-one.

Ed Keay-Smith: Twenty-one, it could be twenty-one. Yeah, it could be twenty-one. Welcome, Lisa. Thank you for coming on the podcast. Great to have you. We’ll have a bit of a history about …

Lisa Reed: Thank you for having me.

Ed Keay-Smith: You’re welcome. How we know you and so, I’ll let Brendan go first because he’s known you for much, much longer than I have.

Business growth and getting the right advice

Brendan Tully: Yes. I’ve known Lisa since 2004, I think, maybe even 2003 when, in another life, pretty much, when I was running my IT business and online store. I think at the time, Lisa, we had hired… I want to talk to you about this because I see this with other businesses I work with and friends as well, and this is something you told me about. When businesses get to a certain size and the business outgrows the business owners they have this kind of knee jerk reaction that they need to hire a general manager or CEO to run the business.

We, at the time, our business grew from a million to six million in a year and we thought we needed a CEO but in reality … That’s one of the things you taught me that the business had outgrown us and what we knew and our skills, and that was the wrong move. Through whatever twist of fate we ended up coming across you and hired you as a business consultant which was the difference it made to the business within three months was like night and day. I remembered that at the time. You are a business consultant, right? That’s how you explain what you do. Is that correct?

What is a business consultant?

Lisa Reed: Yeah, that’s exactly right. Honestly, that term, I was talking to somebody about this yesterday. That term didn’t exist when I started in business. There was a choice when I started. I could be called a management consultant which most people would associate with the bigger consultancies, or a tax accountant, and tax isn’t my thing. I can do business tax but it’s not my thing. I take my hat off to all tax accountants. They’re incredible keeping up with all the changes. Yeah, I chose to call myself a business consultant because I wanted to work with business people and really be an advisor to them. I’ve been using that term for ten years. Brendan, interestingly now, a whole heap of people on the websites, or on the internet use that term.

Brendan Tully: I know.

Lisa Reed: That’s great.

Brendan Tully: This is my first question because I remember at the time, and I know you have this frustration with some marketing consultants and all sorts of other people calling themselves business consultants and a lot of people have started calling me a business consultant and because of that I’m very clear. I’m like, “I’m not a business consultant.” I’m probably the closest I could get is maybe a technology consultant. Yeah. That’s not what I do.

Lisa Reed: It’s a bit like the architecture argument. There’s a lot of technology people that are calling themselves solution architects and the architects really hate that because it’s a term that really is designated for their profession. Yeah, you’re right, I guess from a business perspective, I like to think of business consultants as people that are pretty seasoned or well-heeled in all aspects of business. Not just marketing and sales. When I first started in business there were a lot of business coaches who predominately had fairly strong marketing and sales skill sets but really no commercial skill sets. Very limited knowledge in terms of financial, procurement, internal control.

I think now the market’s developed to a point where it is more healthy. There are providers that call themselves business consultants that have a broad business skill set. That pleases me greatly. I’m still very dubious. I definitely ask twenty-one questions whenever somebody comes into the market and calls themselves a business consultant.

Ed Keay-Smith: That’s a very good question. What does classify someone as a business consultant? What are those questions that you ask people? There may be people listening to this who think they’re dealing with a business consultant, but technically they’re not really a business consultant. What sort of questions would you ask, Lisa?

What do you look for in a business consultant?

Lisa Reed: Yeah, very good question. Ed, you know it’s interesting there’s no defined job role, I guess. For me I always look for somebody that is really well heeled from a commercial perspective. I think that’s the most important thing. If you’re a business owner, you’ve put your life on the line and you’re growing a business and other people are relying on you, potentially your employees, suppliers. You need to make sure that commercially you’re sound so you’ve got a platform for growth.

When I talk about commercial I’m always thinking from a whole business process point of view. If you’re marketing and you’re selling, you want to make sure the way that you’re selling is profitable. You want to make sure that the way you collect money means that you’ve actually got a healthy cash flow. The financial aspect right through your end to end process should be fairly sound. We even think about how we purchase supplies and how we engage suppliers. That whole approach really needs to be quite strong. For me, that’s where I usually start. A lot of businesses are growing without that discipline, I guess, because it’s not something that you do learn unless you’ve been able to access a mentor who says to you right from day one, “This is how you need to do it.” and it’s black and white. For me it is black and white.

Ed Keay-Smith: Yeah. I think there’s a lot of businesses that exist based on pure luck, I think. We’ve had recent conversations of different companies that exist that aren’t using any sort of technology in terms of bookkeeping or simple things like that and they’re still using manual ledgers. That sort of information, if they’re not told that then they don’t know. It’s sort of what you don’t know, what you don’t know.

Lisa Reed: Yeah, it’s pretty incredible. There are some amazing, amazing mathematicians who still do a lot of their calcs in their heads, so that’s definitely possible, but it’s just the slow way these days.

Ed Keay-Smith: Yeah, and it’s not leaving anything systematized so someone can step in and take over. If it’s all in someone else’s head or if only one person knows how to do it in the company then that’s a bad, bad idea. What else would you ask?

Where do you start with a business who seeks help?

Lisa Reed: You just lead into the next point. I always look at who the key people are in the business. One of the big things that limits a business is key person reliance. From a risk point of view we always look at who has responsibility in terms of the daily, weekly work for the critical tasks in a business. We ask what would happen if that person decides to take long service leave or wins the lotto and isn’t around for three months, what happens to the business? Most businesses aren’t protected. That’s one of the first places we start. We work out how we can actually mitigate that key person reliance and more often than not it’s going to be the business owner. They haven’t thought about that. They’re conscious of it, but they really haven’t thought of what their action plan is. That’s a really big thing that we’d work on, too.

Ed Keay-Smith: Cool.

Brendan Tully: Wow, I like that. Key person reliance because you know I have that in my mind a lot because I deal so much with technology. We have single source dependency and single system dependency. That’s a good reminder that it’s not just technology, and software and systems but people too, right?

Lisa Reed: Yeah, massively people. My perspective is that business is pretty much people and performance. Ninety percent of it’s people. It’s augmented and supported by the tool kits that we put together, but it’s pretty much people. Business owners have to be people-people or almost psychologists, honestly.

Brendan Tully: Yeah, I’d agree with that. I remember when we got to, there was a tipping point when we got over, with our IT company, when we got over ten staff you got to the point where you were like a counsellor. I called it like running a day care for adults which is a bit harsh. It was like you had to counsel all these people. When we got to twenty people it was like someone was having a fight with someone else. Someone was upset at someone else. Then there was always one person sick and one person on holidays. It really was like you were this counsellor for all these people. I was in my early twenties, it was like, I was one of the youngest people.

Lisa Reed: Do you know what? That’s what I love about what I do. I honestly love those conversations. I really enjoy them. Our consult room’s set up with four deep, leather chairs that you can sit in. You can’t lay in them. I think if we actually had a couch that you could lay in we’d be in trouble. Yeah, those conversations, I find, are just the conversations that actually give me great joy.

I had a fellow and a new business owner, he left his employment two weeks ago. He’s basically starting a business and looking to acquire one. I had him in on Wednesday for the first time and it was such a great session. He was the most amazing guy. He is really well thought out in terms of his approach, but he just, he needed a high level of sounding board. This guy has left a high level job, so he’s a pretty switched on guy. He actually came to his appointment in a beautiful, shiny, soft top, black Porsche. He’s a pretty switched on fellow. That said to me that he knows what he wants and he’s pretty directed. It was a real privilege to be his first sounding board as he starts in business. I love those conversations. Obviously, that one was a positive. There can definitely be tough conversations too, but I like those as well.

Brendan Tully: Nice.

Evolving from ‘Business Balance’ to ‘A Little Ray of Sunshine’ Business Consultants

Ed Keay-Smith: Nice conversations, Lisa. Always.Very funny. This is great that you’ve got this change coming along and it started as of first of October.

Lisa Reed: I know, it’s so exciting.

Ed Keay-Smith: It’s very exciting. By the time people listen to this that will have passed a little bit because we’ve got a few episodes in the bank that will be coming out before. I think in terms of what you used to do, and that’s how I got to know you, through your previous business Business Balance and we did a lot of workshops together for small business and through the, who was it through?

Brendan Tully: Chamber of Commerce.

Ed Keay-Smith: Yeah, Chamber of Commerce and …

Brendan Tully: Fremantle Chamber of Commerce.

Ed Keay-Smith: Yeah and AusIndustry Federal Government, AusIndustrylots of funded stuff. I actually started talking to you completely by accident because I called a wrong number.

Brendan Tully: That’s crazy.

Lisa Reed: That was the weirdest, wasn’t it?

Ed Keay-Smith: What’s that?

Lisa Reed: It was just the universe, I reckon.

Ed Keay-Smith: That was the universe, yeah.

Lisa Reed: Intervening.

Ed Keay-Smith: You just happened to be going down the process of setting up these workshops and I had been thinking about doing exactly the same thing. Anyway, it was one of those very weird and wacky things that happen. I think of all the ways that could not have happened. The very fine threads that connect us all. It’s pretty freaky. That’s how I knew you through Business Balance. You’ve had a major mindset change of what you want to do. What came about in your thinking that you said, “I’m going to move from what I’ve been doing for the last ten years to doing something completely different?”. A pivot is what we were talking about before.

Lisa Reed: Yeah.

Brendan Tully: The new business, you haven’t mentioned the new business name yet, Ed.

Ed Keay-Smith: I haven’t? I mentioned … I thought you did, A Little Ray of Sunshine.

Brendan Tully: We did at the start before the intro.

Ed Keay-Smith: Oh, okay. Sorry, yeah. You used to be called Business Balance, and now it’s called A Little Ray of Sunshine. They are two very different names. Tell us the story about how you moved from Business Balance and I think if a lot of people had heard Business Balance they’d probably have some sort of a guess at maybe what you did. A Little Ray of Sunshine, though, that’s a different thing. You’re going down a very different path and you’re using very different methods. What were your thought processes moving from Business Balance to A Little Ray of Sunshine?

Lisa Reed: Yeah, it’s a big pivot. I guess it helps to know the history. When I first started in business one of the motivators was to maintain a life-work balance which wasn’t really possible in the corporate world and in the business that I left. While the experience was incredible growing up through a multinational company, the career path was quite mapped out and the hours were pretty major. To be able to balance your life really didn’t happen until you got to sixty and that was pretty much the projection. It didn’t matter who you talked to. So I opted out and really wanted to try and find a little space for myself. And I fell into helping businesses. Honestly, I really didn’t have a plan when I left the corporate world. Through my tax accountant, fell into helping privately owned businesses.

When I registered my business name I went back to a couple of the contacts that I had and picked up some management consulting work with corporates or publicly listed companies. I did quite a few process improvement projects for probably the first three years. On the side I worked with privately owned businesses. My whole approach was teaching business owners about life in terms of how you balance life with the demands of a pretty taxing business role. In their case most of them pretty much lived their business, so they didn’t have too much life outside of work. That was really how I came up with the name Business Balance. For me it was about being in business, but actually having a balance and having a life.

That worked really well for the first probably five years. That flavour was definitely something that was palatable in the marketplace. It’s probably been less so in the last three to four years the more that technology has come to the forefront and in terms of how we operate. Balance has become a word that definitely has negative connotations. There’s been a lot of press, and that’s definitely been in my consciousness. I’ve been watching that.

I guess one of the other things that happened for us is our marketplace has completely changed. When your marketplace changes and your customer, or you’re client facing or customer facing, you pretty much have not change with it. What I found was that there was less of a requirement to talk about balancing life with business. Pretty much most of the enquiries and most of the new business we get is really being that trusted advisor to business people. That can be corporate managers, really senior corporate managers in publicly listed companies, or it can be the owners or directors of privately owned businesses. Most of the businesses that we would work with sort of in a range from typically about a mil to about a hundred mil. You probably call them in the business world, they’re probably called small caps in private business. A lot of what we’ve been doing in the last three years is really just being those trusted advisors.

The comments that consistently came through from the clients that we’ve been working with is … Oh my gosh. In terms of what we were doing for them, we were just a ray of sunshine. We just kept hearing that comment time and time again. It sort of stuck.

Ed Keay-Smith: Yeah, okay.

Lisa Reed: It’s very different for a business consulting firm to be called that, but I loved it. We’ve definitely, it’s probably been more appealing to the female demographic than the male demographic, and honestly I probably got more male clients than I do female clients, so in their eyes it’s very quirky. I think we’ve been around long enough now that we’re able to take a risk with it. The more that we’re out there, the more people will understand how it came about. For me, it’s actually a beautiful name because it says something about our purpose which is really to help illuminate paths for people. Yeah, it’s exciting. I’m really excited about it.

Ed Keay-Smith: That’s great. It does, it does make perfect sense when you sort of explain the reasoning behind it. Well done.

Lisa Reed: Thank you.

Ed Keay-Smith: Lots of exciting things coming. What else do we have on the questions for Lisa?

A business’s growth is limited by its owner

Brendan Tully: Okay, I mentioned this before so this is kind of a perfect segway in. One of the first things you taught me, Lisa, is that in business you outgrow everything eventually. Well, if a business is growing hopefully you outgrow everything eventually, or change in inevitable. I can’t remember how you explained it, it was ten years ago, but you had a really succinct way of approaching that. Let’s talk about that for a minute. Outgrowing things and being mindful of that.

Lisa Reed: Yeah, okay. I guess I always come from a position that a business is limited by its owner. I’m really quite upfront about putting that on the table when I work initially with a business owner. Sometimes that’s quite confronting because a lot of people put their heart and soul and energy into growing a business. The reality is when you look at it as an observer, more often than not it’s the owner that’s limiting the business. The limitation comes from having to be involved in daily, weekly things.

When we take a slice, or a view of an organisation, we look at where the activity, where the majority of the activity is. If most of the people in an organisation are at a level that we call tactical, their focus is daily, weekly tasks, then that’s usually good. Often you need to see people also working at the next level up which is operational. That’s where the focus is more monthly, quarterly and often a six month or a twelve month period out. Typically that’s where a business owner should sit. As a business grows you move from being in the tactical and you move up into the operational. The bigger you get … Let’s say that you move from being five person to ten person, the more time you should spend in those upper levels.

There’s a level about operational which is called strategic. That’s where you’re constantly looking at what’s happening in the market and you always form a view about what your business is doing or the direction it’s taking for the next one to three years. When businesses get caught in the growth part of a business life cycle, typically a business owner gets pulled down into the tactical. They’re actually doing daily, weekly stuff. That’s one of the first things we work on is releasing a business owner from that, finding the perfect person to come in and replace them, to wear their shoes. To basically fit into a job role and be able to do whatever the business owner is doing equally well, hopefully better so that a business owner can be released and basically float up to the higher level of management.

As a business grows it’s true that a business, or a business grows around a business owner, basically. As long as a business owner can release from the daily, weekly tasks and then the monthly, quarterly and still keep a hold on the reigns. You got to recruit the right people that can actually do the tasks better than you. That’s the trick. A lot of people will roll in a general manager like you talked about in your business who has ideas and aspirations, but probably doesn’t work the business the same way as you do. Whenever we look at replacing business owners and the tasks that they’re doing, it has to be somebody that can do that as well, or better.

Usually if you get that right, and it does take a while to get it right. It’s often the most challenging thing, finding the right people. You can see business owners float up and it’s just the most amazing thing to watch. It can happen depending on where a business is in its lifecycle. It can happen quite quickly. Usually we talk about change over a three month period, minimum. It might take longer, it might take eighteen months. It’s just the coolest thing to watch. I love it.

Brendan Tully: Awesome.

Solo operators vs small businesses

Ed Keay-Smith: Snap. One of the things we often hear is people say they have a business or they run a business, but technically they’re self-employed. They don’t actually really have a business, and they couldn’t walk away from it, as you say, for three months, without affecting the business. Do you find that is pretty common with a lot of people? They actually think they have a business, but technically they really don’t, they’re just, they’re self-employed.

Lisa Reed: Yeah. Look, I would call those businesses solo freelancers. They’re basically labour hire. You live contract to contract. From a business perspective really for me you’re in business the day you employ your first person because then you have responsibility and then the business is bigger than you. That point where you make that first decision to employ a person for me is the signal that you can actually release, too. It’s a different mindset being a soloist to actually running a business that employs people. That’s no disrespect to freelancers, because that’s actually at the moment there’s an amazing influx of freelancers in the market. It’s changed the whole space in the last three to five years which is fantastic. I think it’s great. More resources available for privately owned businesses which we’ve never had access to before, so it’s fantastic. Yeah.

It’s an interesting space. Look I’ve, for me, I’ve definitely oscillated in and out of being solo and then growing a ten to twelve. I’ve probably grown and shrunk five times now in ten years. It’s just finding the right balance. Often it’s more profitable to run a business with five employees than it is when you get to twenty employees. They’re choices that you make as a business owner depending on what your vision and your direction is.

Brendan Tully: That’s like, for me whenever I felt the business was successful and on the numbers, the number reflect that, business felt easy. The business should feel easy. It shouldn’t feel like you are spinning your wheels all day long putting out fires. I think some of the things you said there about being, pulling out of the tactical and some of those things about staff. When we grew our business I was so focused. I had the wrong focus. For me, we were so focused on being bigger and better and having more staff and we weren’t focused on profitability. I think particularly in that really small business space, five to ten staff, there’s an error in what they’re striving towards. They’re looking at their top line revenue numbers and not really looking at the bottom line profit numbers that what they’re putting in their pocket at the end of the day.

Lisa Reed: Yup, spot on. I think for freelancers they’re in the professional services space. That’s a bit different too, to product or e-commerce retailers, which would be similar to where you were, Brendan and the dynamics are a little different. If you’re a freelancer you’re probably far more profitable as a one man band than you will be if you suddenly have five people. If you’re conscious of your numbers, then it’s definitely different perspective. Whereas if you’re selling products, typically you’ll never make enough margin if you’re a one man band selling products. You need the scale of people to actually generate more volume or profit.

Brendan Tully: Okay. Sorry, go ahead.

Lisa Reed: Each business is a little different depending on your industry.

Business growth advice, checking your ego, and 3 types of accountants

Brendan Tully: Okay, that brings me to my next point or question. One of the things, and this was a mistake I made and I see so many business owners make this mistake is they ask … Whenever they’re having problems in business, the default route, or the default person to ask questions to is their tax accountant. You explained to me that there’s actually three different types of accountant and probably your tax accountant in many cases might be the worse person to ask about business growth and some of those things about that. I’ll let you explain, there are three different … I don’t know if it’s changed from ten years ago, but let’s talk about that, the three different types of accountant and they’re completely different people, right?

Lisa Reed: I’m so impressed. You’re such a good student. What a memory you have.

Brendan Tully: Well, I remember. I remember our first consult and literally like ten minutes in you had the white board out and I love when you get the white board out. I was twenty-three or twenty-four and it was the first time I realised that businesses, it is part art but it really is a science and a set of best practices. I could see straight away that you, you were a person who knew about the science, who knew about the best practices and on top of that, I don’t know if it’s … I don’t know how to frame this without coming off badly. A lot of guys in business it’s a lot about ego and bravo and “I’m the best”. I don’t know if because you’re not a man, but you didn’t have ego. There was no real ego attached to it. It was very, some of that ego that gets in the way was removed from it.

It was a real light bulb moment for me that changed the way I do business. I guess it changed my path. Yeah, I guess that was one of the big things, learning about those three different types of accountants and why that you might be getting the wrong advice if you ask your tax guy.

Lisa Reed: Yeah, okay. I’m going to speak about ego first and then I’ll come back the accountants.

Brendan Tully: Sure.

Lisa Reed: Ego’s a big one for me and I just had a conversation about this in the last couple of days. Everybody needs a bit of ego. In business it’s not great to lead with ego. Given that business is pretty much all about people, the majority of the population don’t deal well when they’re faced with ego. For me it’s really important for business owners, the ego gets checked and you can check it wherever you want in the day, but it shouldn’t come to work. The only time it has to come out is if you’re physically challenged and it’s a survival situation where you need to actually use that ego to get yourself out of a situation.

In business generally, ninety percent of the time it’s not needed. One of the biggest limitations in growing a business is ego. We talk about checking it in at the door all the time. It’s a very valid point, you’re right. I’m not big on ego. I do have an ego, and if I’m challenged it’ll come out, but I definitely don’t lead with it.

From a business perspective when we’re talking about … Let’s come back to accounting. When I first came out the challenge I talked about was I had the choice of calling myself a management consultant or a tax accountant. I can do tax and I am a registered BAS agent, but I don’t want to do tax returns. I started explaining to business owners that there is a difference between someone like me and basically tax accountants. A lot of tax accountants when I actually started consulting were quite challenged that I was in the business advisory space. Tax accountants have traditionally always called themselves tax accountants and business advisors.

When I did a bit of research when I started I found that most tax accountants have never owned businesses. Most of them had never managed budgets that were in the order of a couple of million. I’d come from a job where I was looking after strategic plans for a business that was in the order of billions and not that I had full control, but I definitely was responsible for how some of that got spent. My context was very different to a lot of the people that were doing the accounts for business owners who I was working with. What I found was often the advice I was giving them from commercial perspective to improve their profit was conflicted with advice they were getting from their tax accountants. What I started going was explaining the differences I saw to them.

There are three types of accountants. There are tax accountants, bless them, who are incredible people and we use some amazing tax accountants for our clients who know their stuff and I rely on them a lot. They are fully versed with the tax legislation and they have a complete understanding of how that tax law applies to businesses and to business owners personally. They specialise in doing business tax returns and also individual tax returns for the business owners. It’s a very different space to an accounting space where you’re responsible for preparing a profit and a loss, and a balance sheet and a cash flow forecast which are the three key financial statements.

In big business the person that prepares those three financial statements is called a Financial Accountant. In small business it’s called a Bookkeeper. It could be a business owner if they’re doing the accounts in a hand written ledger, Ed.

Lisa Reed: The Financial Accountant is responsible for those three financial reports which ultimately the Tax Accountant relies on to prepare the tax returns at the end of the year. In small business usually we have to do BAS returns, FBT returns, PAYG summaries. The Financial Accountant or Bookkeeper or if it’s the business owner doing accounts will often do those too. We’ve got those two roles, and then the third role is someone like me. My professional, my trade is management accounting. I sit in a business and I look at how to improve end to end business processes basically to make more money. That’s always my outcome, or my deliverable for a business owner. If you’re going to run a business, then at the end of the day you need more money in your hand from running a business than you would have if you put it in a bank account and earned interest.

Management Accountants are rare in industry. You’ll usually find them in big business roles, business analyst roles, business advisor roles. In private enterprise it’s rare to actually find a management accountant in private practice. That’s me. People like me have quite sound commercial skills because we’re used to the financial perspective, that procurement perspective, looking at internal controls. We’re also used to looking at process improvement and how to improve businesses to make more money.

From an accounting perspective if you’re running a business, really you would talk to somebody with managing accounting skills to improve your business. You would talk to a Financial Accountant about preparing your three financial statements and you would talk to a Tax Accountant about your tax returns at the end of the year. I typically wouldn’t suggest you would go to a Tax Accountant for business improvement advice, but you definitely would go to them for tax planning advice.

Brendan Tully: Mm-hmm. That’s pretty much exactly what you told me ten years ago.

Ed Keay-Smith: Principles don’t change, do they?

Brendan Tully: The other thing you said, think of a tax accountant as more of a tax lawyer, I think that’s the other thing you said, rather than an accountant.

Lisa Reed: Yeah, that’s true because they basically make sure that you toe the line with the law. Yeah. It’s interesting now, a lot of the people that are in the business coaching space or the business consulting space do tend to sit in what I call the management accounting space. That’s where I’m always going to ask twenty-one questions about what sort of experience they have. It’s not just credentials; it’s actually how deep the experience is. If you’re giving somebody business improvement advice and it’s not sound commercially, then for me that’s a red flag because that’s definitely going to impact your financial statements and it’s going to impact your tax return, too. As a management accountant, or a business consultant, or a business coach you need to understand the financial accounting role and also the tax accounting role to make sure you’re advising correctly in terms of performance improvement.

Brendan Tully: Yeah.

Lisa Reed: Yeah.

Ed Keay-Smith: Awesome.

Brendan Tully: I know how you feel there because I get upset when people give strategic and high level technology advice and know nothing about technology. I can definitely relate there, or they have no business giving technology to big business or where it has serious implications.

Lisa Reed: Yeah, I think one of the big issues we have at the moment is people are really loose with terms. I don’t know how we got there. I think the proliferation of information has definitely aided that. Yeah. Sometimes it’s, I guess you just have to be aware …

Brendan Tully: Yeah.

Lisa Reed: … and cautious.

Business owners need a yearn to learn in order to grow a business

Ed Keay-Smith: That’s half the challenge, isn’t it? I mean, there’s so many people who come into business not knowing five percent of the things they really need to know. I count myself in that category. There’s so many things I’ve learned in twelve years of business and I still know, I feel that I still know practically nothing. Seriously, there’s so much to learn.

Lisa Reed: Ed, it’s amazing, isn’t it?

Ed Keay-Smith: Yeah. The simplicity of people thinking in their head, “Just go and start a business. What’s hard about it?” Even though the numbers are completely stacked against them for success, it’s fascinating that people don’t do any research before they jump in to what they’re about to do. It’s no different to any of the marketing things that Brendan and I and yourself do. People don’t do any market research before they go into doing any, creating products, setting up advertising campaigns or a website. They sort of do everything all backwards. There must be a sequence of things that people should follow. If someone’s thinking about going and starting a business, what are the couple of major things they need to get straight first before they even go and spend a dollar on marketing, advertising, websites? What would you suggest are the most important areas to get straight first?

Lisa Reed: I guess it depends on how much of an investment they’re looking at. I honestly drive people that have the new best great idea that they’re actually looking at sinking $100,000 into, I drive them into the Curtin Ignition program in WA that’s run once a year.Because it’s a really beautiful way to test whether your idea’s going to work. It’s a test tube way basically, for business ideas. In terms of people that are looking at committing a smaller amount of money, it is such a hard one. Usually by the time I talk to people, they’re committed and most of them have sold a house and put $250,000 into something and they’re 6 months down the track.

Unfortunately, everybody’s a bit different, but what I tend to find is that … This is what I see, so this is my observation and it might not test the same across Australia, but in WA, what I tend to see is there’s a lot of females that put a lot of money into marketing without actually testing if there’s a demand. I see fellas put a lot of money into products or services before they actually test there’s a demand, and they have no marketing.

Brendan Tully: Yeah.

Ed Keay-Smith: We’re like, “Yeah, that’s too many people.”

Brendan Tully: We’ve seen that so many times. I just had someone who came through that spent $100,000 on a web site and an app, and this is a female, and they now have zero money for marketing, not a cracker. It’s basically, it’s going to sit there now doing nothing because nothing was planned in terms of, “How are we going to market this thing once we’ve created this monster?” Now it’s $100,000 that’s spent, not doing anything.

Dr Byron Sharp, growing a business with marketing reach, and good ideas

Lisa Reed: I think that’s the most important question. You’ve just hit on it there. When we’re talking about growing businesses, the most important thing is your marketing reach. If there’s a demand for a product or a service, then you need to work on the most effective way of increasing your reach in the market space you choose to operate in as quickly as you can. There’s a fabulous researcher and I love his research work. He is in, I think it’s the University of South Australia. His name’s Byron Sharp and I’ve been reading a lot of his stuff the last couple of years. He is one of the only marketing researchers that has longitude studies, so over 10 or so years with major companies.

A lot of his work basically suggests that one of the only measures we should focus on is reach because frequency, depending on a product or service, doesn’t change too much. Spending a lot of money on loyalty is not going to change frequency. It’s pretty much all about reach. That’s what I teach people. You have to have a budget to get reach, right. If you don’t get reach, you’ve got no one.

Brendan Tully: Me and Ed have talked about before, and one concept that I use to explain to customers is, you need to understand how the market is, how the customers work, and you need to understand whether they have active demand for your product. You need a way to capture that demand, whether they’re even aware of it. If they’re not aware of it, you need to create that awareness and then you have to actually create the demand. Everyone assumes that their big idea, customers will just come, but that’s a lot of … Like I said before, when I first started working with you was a really a light bulb moment that business really is a science and a set of best practices and then there’s a little bit of art on top of that. If you can’t, to a certain extent, check the boxes, then no matter how good the idea is, you’re not going to be the next Facebook if it doesn’t meet these certain criteria.

I went through a phase, it must have been 2 years ago now, where in the space of a few weeks I had a bunch of different people call me and they had $20-50,000 to spend on this new, great big idea and it was so easy to poke holes in it. You ask a couple of questions and it was pretty clear they had a great idea, that’s good, but they hadn’t really thought it out. I had this article on my website called Version 0.1 that is really all about stuff that’s talked about in the Lean Startup Book. You need to test this idea. If you can’t sell the idea to 1 person or 5 people in person without needing a web site and apps and all this sort of stuff, it’s just not going to work.

Lisa Reed: Spot on, spot on.

Ed Keay-Smith: Yeah, absolutely spot on. Gee, Brendan. What consistently impresses me, Lisa, it’s obvious that Brendan has come from the School of Lisa, because …

Brendan Tully: It’s true.

Ed Keay-Smith: I learned a lot from this young man.

Lisa Reed: I’m amazed at the retention. I’m so impressed.

Brendan Tully: Honestly, it sent me on a path that since then, I have devoured every business book I can get my hands on because I realise that if you want to be successful, like you said, it really is, the business is limited by the business owner. There’s so many things that you can’t control in business, but that’s one thing I can control, is my own learning and my own growth.

Ed Keay-Smith: Here, here.

Brendan Tully: Like I said, that was like one of the turning points of my life, is sitting down in that first consult. I’m like, “Wow. There is so much I don’t know, and so much of this is just logic and common sense that …” You get so wrapped up in the emotions of a fantastic idea. How good is this? My 5 friends tell me it’s such a good idea, but it just doesn’t stack up.

Lisa Reed: I love it.

Ed Keay-Smith: Yeah, the old 5 friends.

Use the data to improve your business marketing

Lisa Reed: I reckon one of the benefits you guys have in terms of working with people is the ability to use data, and that’s something that, in the last couple of years, has just been almost a magic additive to the black and white business formula for me. The fact that you can test something online to see whether there’s a demand, look at the data, and say yes or no, it’s going to work, we couldn’t do that 10 years ago. We could only do that in shopping centre test runs. That’s massively changed, too. It’s not hard to test because that data’s available.

Brendan Tully: Yeah, absolutely. It’s never really like … In some ways, it’s never been easier to start a business and test an idea than it is today, because you can use the tools and see if it’s going to work. You can turn something on today on Facebook Ads or something and see what real people think of it.

Ed Keay-Smith: Yeah, absolutely, yeah. It’s very, very true. With all the different marketing tools we have available, like AdWords and Facebook Ads …

Brendan Tully: Email marketing.

Ed Keay-Smith: Email marketing and remarketing and all the other “marketings,” it’s pretty damn amazing. We can tap into something in five minutes and find ads there and all the research tools that are available to look into your marketplace. There’s really no excuse not to do it. It’s typically because people are just too gung ho and they’re rushing in and not thinking. They’re all excited by their idea and they don’t actually spend the time to do the research, and that’s where they typically will come unstuck.

Lisa Reed: Yeah, yep. We’re using data internally a lot, too. Data’s been really helpful for the last probably 3-5 years externally, looking at marketing, but using it internally is incredibly helpful, too. You get to see some amazing trends just from the collection of data, like time sheets and even employee survey results. If they’re run even more frequently than once a year, there’s some great data that helps you grow businesses internally, too. I’m loving data at the moment. I think that’s probably my tendency because I’m an accountant, too. Matt (husband) always tells me that’s the case because I’m data, data, data. This is what the data’s telling me. It’s great.

Ed Keay-Smith: I’d agree. I’d agree. You’ve got to be careful that the interpretation of the data, too.

Lisa Reed: Yeah, you do. You do. It’s just a guide, right?

Ed Keay-Smith: Yeah.

Lisa Reed: You still got to use your knowledge.

Brendan Tully: We talk about this all the time, that so many business owners, they want more hits on their website, they want to rank higher on Google, but they haven’t looked at the data. They haven’t looked at their Google Analytics, their number one source of data for their website. Often, they are getting enough traffic and that’s not the problem. They don’t need to rank any higher on Google.

Ed Keay-Smith: Yeah, they don’t have any conversion happening on their website.

Brendan Tully: Yeah. Absolutely.

Ed Keay-Smith: What else can we ask the lovely Lisa?

Brendan Tully: How long do we have you for, Lisa?

Lisa Reed: Well, I’m good for at least another 40 minutes. I’ve got a client taking me out to lunch today, which is very exciting.

Clients do take you out for lunch!

Ed Keay-Smith: That’s good. That’s what all clients are supposed to do. One of the prerequisites for any of our clients is, “Do they agree to take me out to lunch on at least a quarterly basis,” and if they say no to that, I’m not interested in working with them.

Lisa Reed: Ed, I’ve never had that as a rule. Can I steal that? That’s awesome.

Ed Keay-Smith: You can absolutely go for it. Go for it, and any of my clients, if you’re listening to this podcast, just remember that, okay? You know who you are.

Brendan Tully: Oh, funny. Let’s say someone is running a business. They’re having … When should someone look at using a business consultant or an external consultant in that kind of advisory … There’s a difference between business advisor and business growth, right? They’re 2 separate things, really.

General business advisory services vs business growth services

Lisa Reed: Yeah, probably in the general sense, advisory can be growth, but what we tend to do is, we tend to say base-level advice is advisory. Then you’ll speak to somebody that’s probably more well-heeled about growth and succession planning and setting up a sale-able business. That’s more consulting. From a practical perspective, for me, it’s the same thing, really. I provide private advisory to business owners. I coach them. I mentor them. We also provide consulting services on a project basis to improve their business. When you think about, “Should I actually contact someone,” honestly, I believe if you have never run a business, then from the first point you have that thought, you should actually find someone. Seek someone out and set up a relationship so you actually have someone to walk you through the first stage of that business life cycle.

For me, it’s a proactive decision. It’s a bit like seeing your GP or seeing your naturopath or seeing your chiropractor. I completely believe that if you’re setting up a business, then you should see somebody because setting up a business is a huge amount of work. You should be talking to somebody at least once a month. It might only be for 2 hours, but you have your list of questions ready and you provide those in advance so the person can consider them so you get full value for 2 hours. You can get advisory services through a lot of the government entities, like in Perth there’s the SBDC and the Small Business Centres [July 2015: now called Business Local providers]. In other states, it’ll be the same. Then you can also seek business coaches or business consultants. Really, for me, it’s finding the right person that you can work with.

It’s all about relationships. Most people in the space are going to have experience. Usually you want the experience to be relevant to the business that you’re starting. Then it’s how you get along with them, because you really want a long-term relationship with this person. Each person can take you through a different phase, so you might work with someone in start-up mode and then you might swap to work with someone in growth mode. I tend to work with people in growth mode and then the maturity sale mode, so I do a lot of work with people that are looking at selling their businesses and typically work with them for 2-3 years before they sell. We set up a sale-able business and I also do a lot of growth work, too. Probably, for me it’s 50/50.

Most of the start-ups are located pretty well through the government groups and there’s some really good advisors in the government entities. You just need to seek them out.

A few good business books to read

Ed Keay-Smith: Yeah, and there’s some good places to go to. In Perth, there’s a Spacecubed that they’ve got a start-up community there. Spacecubed is a sort of open workspace, shared workspace system that’s been around for a few years. We know Brodie who started that. There’s lots of places you can go to get that support. One of the books I’m actually reading now, because that’s a simple place to start. There’s some fantastic books out there to read to get you started. I think one of the best ones that’s I’ve read is called The Personal MBA. I don’t know if you’ve read that one, guys.

Lisa Reed: I have, actually.

Ed Keay-Smith: By John Kaufman. A fantastic book; the website’s www.personalmba.com. Fantastic, really, really good book and he has a very good listing of the other business books to read, as well, a good selection.

Lisa Reed: If you’re in start-up mode, I love The Lean Startup by Eric Ries. That’s one of my favourites.

Brendan Tully: That is a great book, yeah.

Lisa Reed: Yeah, and you’re right. That book has a great list of references. It depends on what you’re looking at, but a lot of the people that I work with that are in growth phase, we do a lot around strategy, so basically brand strategy and marketing plan. A lot of people, when you grow a business, aren’t really clear about what their brand is and what position they have in the market and how to communicate that to potential ideal clients. We do a lot of work on that. Usually, you could be focused on that from somewhere from 3-12 months, so the books that I love that help people in that space are Delivering Happiness by Tony Hsieh and Peak by Chip Conley. Those 2 guys have absolutely nailed positioning and culture and the difference with how they talk about it is it’s all about how the client perceives the business. It’s not about how the business owner wants the business to be perceived. It’s a slight change in focus, but it’s massive when it comes to brand strategy and marketing. They’re 2 great books.

Branding, brand strategy and ‘Partners in Spade’

Brendan Tully: I think that people confuse brand. They think about the logos and the colours, but it really is how the market perceives you, really. That’s what brand is. The colours and logos doesn’t matter, really.

Ed Keay-Smith: You’ve got to believe. That was a red rag to a bull there, Brendan.

Lisa Reed: It’s how the clients interact with the business, for me. The brand is more about the touch point, the sensory experience, than it is really about the logo. Brendan, you’re completely right. No disrespect to any brand designers, because they do an amazing job, but it’s part of a brand identity. It really is. For me, how we bring a brand to life through people, that’s really the brand strategy.

Brendan Tully: So many quotable things here. It’s bringing a brand to life through people.

Ed Keay-Smith: We’re going to have to set aside a separate book.

Lisa Reed: Do you know, I have to give you guys another reference. There’s a couple of awesome guys who you’ll love. They’re very, very quirky, which is …

Ed Keay-Smith: Brendan and me? Sorry.

Lisa Reed: Brendan and Ed.

Ed Keay-Smith: Sorry, sorry. I thought you were talking about us. Okay.

Lisa Reed: There’s a group called Partners in Spade that are in New York that are basically brand strategists or brand consultants and they’re leading the way at the moment in terms of bringing brands to life. Have you heard of Kate Spade?

Ed Keay-Smith: No, I haven’t. No.

Brendan Tully: No.

Lisa Reed: You’ll have to look that up.

Brendan Tully: We will.

Ed Keay-Smith: We’ll add that to the show notes.

Lisa Reed: Females listening to the show will have heard.

Brendan Tully: All right. Say that again?

Lisa Reed: The females listening will have heard of Kate Spade.

Brendan Tully: Kate Spade.

Lisa Reed: Yeah. These guys are very talented guys. They’ve got a little boutique agency in New York and they pretty much do their own thing. They’re amazing at what they do, so if you Google and have a look at some of their projects, what they do is pretty much what I teach and I’ve never seen anybody do it as well as what I talk about. I’ve only actually become aware of them probably in the last 2 years. Yeah, they’re very cool. A great example of bringing a brand to life.

Bookkeeping, business financials and overdue BAS

Brendan Tully: I have one question I didn’t ask you when we were talking about finances and stuff. One of the other things you taught me about which I know a lot of business owners or businesses have problems with, you have a rule that the books need to be up to date within 7 days because a lot of … Tying it back into managing the business and cashflow and cashflow forecast and stuff are totally useless if the data, if things aren’t up to date. Is that still the case? Is that still your, the ideal scenario?

Lisa Reed: You’re making me feel bad. You know what? I’ve actually just moved a bookkeeper on, an accountant on in a business because the books weren’t up to date each week. I’m ruthless. It has to be that way because otherwise a business owner can’t see where they are and cash-flow is just so crucial. Even if you’re making healthy profits, you need to know where you’re at. For me, the best day for getting the books up to date is a Friday or a Monday so right at the beginning of the week, a business owner has an idea of where they’re heading.

Brendan Tully: Yeah. That’s my deal. I used to do mine on Friday, but then I switched to Thursday so I have one day in case we have a problem. I have a bookkeeper, but I do an hour a week of looking at things and I also do, as part of my finance stuff, I check out backups and some of the other mission-critical things in the business because things like backups I would count as important as the financials. I know it’s a mistake that I made early on in the last business that the financials weren’t up to date, so you have no idea what’s going on, and a growing business will just chew through cash like nobody’s business. Also, “not all growth is good” was one of the things I learned as well, because in our business, we had explosive growth that was totally uncontrolled which is very, very different from the type of growth that you talk about, which is controlled, strategic growth. Those financials are really important as part of that.

Lisa Reed: Yeah, you’re spot on. I don’t think there’s ever a period in business where you cannot have your books up to date every week. For me, it’s just a black and white rule.

Brendan Tully: Yeah.

Lisa Reed: Yeah. It also means, for business owners and management teams, some of the bigger businesses that I work with, it means that there’s just a discipline that you have to have your receipts in. They’re scanned, ready to be used by the bookkeeper or referred, and they have to be there because otherwise the books can’t be kept up to date. That works really well for me.

Brendan Tully: I hear some horror stories from our bookkeeper when she’s here from what goes on in other businesses and I go, “Seriously?” Sometimes I think I’m slack because I may be a couple of weeks behind or something, but everything’s always paid on time and BAS is always paid on time and all that sort of stuff. She said she’s got some clients that are 2 years behind. I’m going …

Lisa Reed: Wow.

Ed Keay-Smith: There’s money to pay the BAS, as well. That’s the other important one.

Brendan Tully: Yeah.

Lisa Reed: I’ll tell you a horror story. I had one person that approached us to help them, 13 years behind.

Brendan Tully: Serious?

Ed Keay-Smith: No way.

Lisa Reed: Yeah.

Brendan Tully: 13 years?

Lisa Reed: I know

Brendan Tully: Of unpaid BAS?

Lisa Reed: Un-submitted tax returns and unaccounted for books. I honestly, the only way you can get somebody up to date like that, is to take their bank statements and just code off a bank statement. I’ve done that before for someone that’s been out for 3 years, but 13 years. This is when I had a bookkeeping practice, so this is 3 or 4 years ago. When the legislation changed, which meant that the requirement for bookkeepers was upgraded, we got this whole inflow of clients from tax accountants, that tax accountants didn’t want to deal with them and so we just started getting all these referrals. It was a nightmare of a 6 months which precipitated me selling the bookkeeping part of the business.

Brendan Tully: No wonder.

Lisa Reed: This poor lady, my heart went to her but we weren’t in a position to actually help. The worst I think I’ve seen and we’ve helped was 6 years. Yeah, it’s tough. When you get that far behind, it’s just a painful process. It ain’t worth getting one BAS behind.

Ed Keay-Smith: No. How do they even do? I can’t understand how they actually get away with that amount of time not putting in their books. I don’t understand how that can actually happen.

Lisa Reed: The tax office only appears, the system … This is inside knowledge. The system doesn’t appear a trigger unless you have a BAS out of sequence, so if you submit one BAS but you’d forgotten the earlier BAS, that’s what it used to be. I think that might be changing, there sensitivities at the moment, though. They’re pretty tough.

Your numbers tell a story and trending financial results

Brendan Tully: Yeah, that’s crazy. One thing that … That was the one thing that I learned very early on is, you actually need to be able to read a P&L. You taught me that the numbers, the static numbers, are great, but it’s really the trends we need to be looking at. This is what we use online marketing as well. The numbers mean nothing by themselves. A set of numbers actually means nothing without the trend over time. I think as one of the first things someone listening to this … If you cannot read a P&L and a balance sheet, you need to learn that and you need to understand the trends from one week or one month to the next.

You used to say, or you still say that the numbers tell a story and that was one of the first things that I focused on learning. Now I can pick up any business, a friend’s business. I can look at the P&L and I can go, “Yep. I can see exactly where the problems are here.” You can look at a balance sheet and you’re like, “Yeah, look at this number down at the bottom. That’s not right. Something’s wrong.” Most small business owners don’t know how to read those numbers.

Ed Keay-Smith: This was a question. Sorry, Lisa. I was just saying, this was a question I asked my client yesterday. I was trying to get down to some nitty gritty and we’re talking about setting up some email marketing processes. It got down to the conversation about numbers and I was asking him, “Do you know what your sales figures are for the last month?” “Uh, no.” “Do you know what your profit is?” “I wouldn’t have a clue.” All these basic, rudimentary questions that you should know, he just wasn’t even close to knowing and it was really quite horrific. You go ahead.

Cool tools for financials: Xero, Calxa, Shoeboxed

Lisa Reed: Bless, you know, I always feel for people like that. Honestly, I think it’s because nobody’s held them accountable. I really, I believe business owners are responsible and as consultants, we’re accountable if we’re working with them to make sure they know that stuff. It’s pretty basic. If a business owner can’t tell me their income and their gross profit and their net profit from last month, it’s a bit of an issue. Most of them will have a rough feel, but if you’ve got no idea, it definitely says you’re not looking at your financials. We’re so lucky now because there’s so many tools that we can use. We’ve always used the basic accounting packages and most of my clients that are not on enterprise systems. Any of the small businesses, pretty much anybody that’s under probably $2,000,000, have moved to Xero, which is just an awesome package. Most of the bigger guys are still stuck on server packages. I say “stuck” because I think at some point, there will be better cloud solutions. At the moment, they’re stuck.

We’ve always done trends. We’ve done basically visual dashboards in excel, but now there’s some awesome add-ons that you can actually attach to your accounting package that we use, so that might be worth mentioning. There’s a couple that I would recommend. There’s one that we use for cash-flow forecasting which is called CALXA, and I just use the cash flow forecast piece in there. There’s other reporting, but I love the cash flow forecasting which means you don’t have to use an Excel spreadsheet if you’re not comfortable with Excel. Most of the data just pulls from your accounting system, so it’s a great add-on for Xero or for MYOB, QB Online, too. The other one that I love for dashboards at the moment, and you can use it for financial or non-financial, there’s 2 actually. The one that most business owners prefer is Fathom HQ (Postscript: read the fine print, as Fathom HQ do on sell your data which is not comforting for a lot of business owners), which is just a cloud piece of software that you can attach really easy with Xero, pretty easy with MYOB, too.

Ed Keay-Smith: Awesome.

Lisa Reed: You can tailor those so that you can see trends. That just takes all the crunch work out of it; so really, business owners have no excuse for not looking at their financials.

Brendan Tully: The other one is, get Shoeboxed, as well. Managing receipts and paperwork, I love that.

Lisa Reed: Yeah. Do you know what? With Shoeboxed, you’re in a really good workflow with that. I find if business owners are disciplined, it’s beautiful. If they’re not, then what happens is they get behind with their weekly bookkeeping. It’s awesome if you can be disciplined and use it. It’s a great tool. Yeah. Those tools, for me, it just changed. There can be no excuses. They’ve changed the whole context of looking at your financial reports in the last couple of years.

Brendan Tully: Yep, yep. It really ties into business growth, too, because if you grow a business that’s not actually profitable, then you are going to be losing more money. If it has a negative cash flow cycle or there’s negative cash flow, then it’s going to chew the money in the bank or you’re going to need to put more money into it. Those numbers really form the foundation of any growth or anything you’re doing online otherwise.

Break even gap and busy fool syndrome

Lisa Reed: Spot on, and you’ve led right into one of the best ways to check whether growth is worthwhile, is to trend what we call the break-even gap. There’s a term that we use, it’s called the busy fool syndrome. If you look at the break even gap over a period of time and that break even gap is decreasing, then it means you’re doing way more work than you’re earning profit and you really got to question whether it’s worth growing. The idea is when you grow, you want to maximise that break even gap, which means that you’re making, a really reasonable profit. Ideally, that gap from the first day you’re in business right until your 10th year in business, never diminishes. That’s obviously not the reality as you grow. It definitely, it diminishes and then increases, but the idea is that we always keep our eye on that, our eye on the pie. We never want to get to the busy fool syndrome. Have you guys seen that?

Brendan Tully: No. First I’ve heard of that.

Ed Keay-Smith: No.

Brendan Tully: I understand the concept. I have a different way of framing it in my mind.

Ed Keay-Smith: I sometimes am a busy fool. That is energy.

Lisa Reed: I’ll send you something.

Ed Keay-Smith: The busy fool syndrome.

Lisa Reed: I’ll send you a copy. It’s just a visual.

Ed Keay-Smith: Yeah, that’s great.

Lisa Reed: It’s very cool.

Ed Keay-Smith: Cool. Now we’ve been talking, guys, for an hour and 10 minutes. What else do we think we can get across in this space of time that’s important before we let Lisa go?

Business growth, the 5 ways formula, core competencies as value drivers and USPs

Lisa Reed: Do you know? One of the things, if you want to talk about it, is how do you grow? We could talk about that in terms of what’s needed to be in an action plan.

Brendan Tully: Yes.

Ed Keay-Smith: Yeah. Go for it.

Brendan Tully: I love that diagram that you had in your book that I use all the time, and our model of online marketing is actually based around that. That’s a good idea. Let’s talk about that.

Lisa Reed: You’re talking about the 5 ways?

Brendan Tully: The 5 ways, yeah. Yeah.

Ed Keay-Smith: I don’t know this one. I don’t think I’ve seen this. Have you done this in workshops or anything, Lisa, or is this something that … The 5 ways?

Lisa Reed: It’s actually a financial model and I … That’s a base level model that we definitely talk about in business. I’ll tell you the formula, Ed. You will have heard of it. Basically, it’s leads by conversion rate equals customers by average dollar sales, by the number of transactions that they would buy from you in a year equals sales minus cost of sales equals profit. That formula is a base level formula that we use to teach business owners the importance of every one of those components.

The 5 key things we keep our eyes on are the number of leads, so for me that’s your reach; how well you convert, which you guys are familiar with; the average dollar sale; the repeat transactions, which for me is frequency, and frequency’s pretty much set for each product and service; and then the cost of doing business. When we talk about cost, we look at the variable costs related to a direct sale or a direct service provision, so anything that we would charge to a client or is part of our cost of sales, and then our overhead, so what it costs us to run our office and our business. That’s largely rent, insurances, salaries, wages, and on costs, those sorts of things. That’s our base level formula and I guess that’s one of the fundamental formulas that every business owner has to get their head around.

Then we step on from that when we talk about growing a business and we talk about the components or the attributes or the key competencies that are unique to a particular business that you then focus on in terms of your action plan to cement your position in a marketplace. Let’s just say, if we were online marketers, then your positioning is pretty much going to be around a particular group of service offerings. You might have 3-4 service offerings and to roll out those service offerings, you’re going to have 3-5 core competencies or attributes that mean that when you roll out those services, you’re really good at what you do. Really, growing a business is about growing those core competencies or those attributes. Most business owners can’t identify them, so we work with that 5 ways formula and then the business model of core competencies basically to grow businesses.

Brendan Tully: Is that different to USP, or that’s really, that feeds into the USP?

Lisa Reed: Do you know what? You’re spot on. The USP (Unique Selling Proposition) actually, when I draw it on a whiteboard, I draw the USP or the business purpose in the middle, like in a circle, and then I put the core competencies around that and those core competencies are what we then formulate action plans around. We’re always focusing on strengthening those core competencies so we maintain our USP or our business purpose.

Brendan Tully: That’s a good approach. I like that.

Ed Keay-Smith: Lots of gold nuggets, Lise. Lots of gold nuggets.

Lisa Reed: I’m glad to share. I hope someone out there listening gets some benefit.

Brendan Tully: This is like a private consult.

Our ideal clients and getting in touch with us at A Little Ray of Sunshine

Ed Keay-Smith: This is. Look, there’s nothing ultimately, like someone sitting down with you to talk about their 1-on-1 with you about what it is their business is or their ideas are or what they’re doing. This sort of stuff that we’re sharing is fantastic, but ultimately, they’re not going to get anywhere near the degree of input and outcome unless they go and speak to you. Do you do consultations only in person, or do you do them over the phone, or when you’re working with clients, workshops? Give us your preferred methods of dealing with people and who your ideal customer is so that people who are listening to this can go, “Hmm, there’s no point in contacting Lisa because I’m not her ideal customer.” We don’t want scores and scores of people who are out there listening to this podcast, all those millions of people, coming to you and annoying you and wasting your time. Who should contact you and who shouldn’t contact you?

Lisa Reed: Okay. I’m a speaker and a drawer. As I’ve been speaking to you guys this morning, I’ve been drawing in the air because I’m so used to having a whiteboard in front of me.

Brendan Tully: I do that, too.

Lisa Reed: I do, do a lot in person, but I actually do a lot via phone and Skype and internet. What I tend to do when I’m working via Skype is I’ll draw in a notepad and then put it up to the camera. That seems to work equally as well. I find that most people like to meet with me, which for me, works really well, too. I’m really happy to meet over the internet, as well. I have a number of people who live remotely, so we do work via phone and Skype and then when they’re in Perth or when I’m where they are, we’ll do a face-to-face session. Typically, the way that our services are broken up, we do business coaching, which are 2 hour sessions with business owners and really on an as-needed basis. Business owners can call the office, talk to Claire, and schedule a time.

Usually, there’s a 6-week lead time, so just I’ll put that out there. That’s pretty normal for us because we’ve been around for so long. It actually gives business owners time to get their list of questions together and I always ask for information if I haven’t worked with a business before so that I can get a feel for the business before I actually clock on to talk to the business owner or the business owners for 2 hours. We have those 2 hour business coaching sessions which can be in person or via phone or Skype.

Then we have a different offering for the bigger businesses where we work with the directors and the management teams and they’re our consulting services. We have different service levels that we offer each month. That ranges from the strategic plan to management meeting facilitation to HR advisory. It could be brand strategy and marketing execution. It can also be leadership coaching and mentoring for the executive team. That’s tailored pretty much for each business and that’s on a monthly basis. They’re typically businesses that are $5,000,000 turnover or more, usually $5,000,000 to around $100,000,000 turnover and I’ve got a team of people that help me with that. I direct it and then we have providers.

The third thing that I do is I do a private advisory for business people, and some of those people are in government roles, publicly listed companies, where they need an external sounding board, a confidential sounding board, somebody that’s not in their normal peer group at work, just to test their business ideas on. A lot of those people will have big teams. They’ll be making decisions with large amounts of money that perhaps they’ve managed before, so I do that private advisory work, as well. That tends to be more … That’s actually not as structured. It’s always based on what the person needs. Again, it’s a bit like the business coaching. If they’ve got an idea of what they want to talk about, they’ll contact me and set up a session. Most of those sessions tend to be about every 4-6 weeks unless there’s a crisis; then there might be 3 sessions in a week.

They are 3 offerings that are pretty core and then in addition to that, I just deliver workshops for other providers that already have their workshop material prepared. I’ll do workshops for, there’s a program called Curtin Growth Program at the Curtin University in WA and also for our Small Business Centre in Perth, some of their small business workshops. I do the online marketing, the business financials, business plan. What else do I do? Social media, which is an intro course. Yeah. Other than that, speaking for special events, so depending on the audience, I can usually put together a presentation that’s tailored if I’ve got enough information. That’s pretty fun, too. That’s the gist.

Ed Keay-Smith: That’s brilliant.

Brendan Tully: Busy lady.

Ed Keay-Smith: Yeah, that’s … I’m exhausted just hearing that, Lise.

Lisa Reed: It is actually a lot when you talk about it like that.

Ed Keay-Smith: I’m feeling very lazy, all of the sudden.

Lisa Reed: I don’t do it all myself.

Ed Keay-Smith: The best way to contact you with your new website, which is still as we speak probably under development. It’s not fully live, yet. I think you’ve got a holding page at this moment for www.alittlerayofsunshine.com.

Lisa Reed: We do. We do.

Contact Claire, not Lisa!

Ed Keay-Smith: What would be the best email? Would it be lisa[at]alittlerayofsunshine.com.au that allows you to get in touch or something else?

Lisa Reed: No.

Ed Keay-Smith: Okay. It’s just a script. Scratch that one.

Lisa Reed: Honest?

Ed Keay-Smith: I’ll edit that out.

Lisa Reed: Ed, honestly, do you know that’s one of the most interesting things to me, is that 10 years in, I actually don’t look at email and I don’t answer the phone?

Ed Keay-Smith: Anyone listening, don’t contact Lisa. You’re not going to get her. Everything she just said …

Brendan Tully: Complete fax only.

Ed Keay-Smith: Yeah, fax only.

Lisa Reed: Do you know what? That’s one of the rules of actually growing that you need to get out of the daily detail. I’ve got a fantastic Business Coordinator, Claire, who is actually our officer of first impressions and she manages all incoming calls and incoming emails. You can get to her via email, so it’d be info[at]alittlerayofsunshine.com.au or by phone: (08) 9339 7755.

Ed Keay-Smith: Fantastic.

Lisa Reed: She will be the best person to talk to first place because she coordinates all of us and she knows exactly what’s in my calendar.

Ed Keay-Smith: Claire’s a legend.

Lisa Reed: Yeah.

Ed Keay-Smith: This was the perfect lesson. That in itself was a very, very powerful lesson for anyone listening, is that you are not the person that everyone wants to contact, and that is a really important factor. That’s something we’re doing with the new business we’re rolling out now. I’m not having my name anywhere on it. It’s going to be a complete standalone business that doesn’t mention me. There’s no emails to me. I’m not anywhere in it. That is a wonderful thing to think of because sometimes we just want to go and hide, don’t we?

Lisa Reed: It’s liberating, and do you know what honestly I am … Claire has me scheduled from when I start to when I finish, so I honestly don’t look at my laptop more than for an hour a day. She pretty much manages my inbox and tells me who’s screaming. We do have people that are in situations, so there are people that I deal with usually first. We triage everything that comes in and honestly, I don’t get much of a chance to return calls. The calls that I do return are for our consulting clients where we have a commitment to a service level agreement, so they’re always my priority. Then if I can fit anything else in, I will, but usually at the end of the day the way that it works is I look at my calendar when I’ve finished my consults and Claire will have added 3-4 calls that I need to return and I tick them off and then I start the next day. I look at what she’s put in my calendar and then that’s pretty much how it works. If you ask me what I’m doing next week, I honestly can’t tell you.

Ed Keay-Smith: That is a good way to be, a very good way to be. Unless there’s anything else, Brendan, I think what Lisa has shared with us today has been absolutely awesome and those who are listening who haven’t got that don’t go and start a business because you probably shouldn’t be in business. If you have any more questions, contact us or put a comment. Thank you very, very much, Lisa, for your time.

Lisa Reed: Guys, it’s been an absolute pleasure. Thank you.

Ed Keay-Smith: Thank you for all your help in the past with the projects we’ve worked on. You’ve been a legend. Anyone who is thinking of using Lisa, you could not get anyone better. Make sure you give her a call, or send an email through.

Lisa Reed: I’m sorry.

Ed Keay-Smith: At some stage in the next 40 years, she may get back to you.

Lisa Reed: Claire will always get back to you.

Ed Keay-Smith: Only kidding. Thanks again. Thanks, Brendan. It’s been fantastic.

Brendan Tully: Thanks, guys.

Ed Keay-Smith: We’ll speak to you all on the next episode of the Business Marketing Show. Bye.

You’ve been listening to the Business Marketing Show. You can find us at businessmarketingshow.com or on iTunes.

 

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