How to Master the Financial Fundamentals with Adam Kroener

0:02Who's ready to rock today, Fire Nation? JLD here and welcome to Entrepreneurs on Fire, brought to you by the HubSpot Podcast Network, the ideal destination for business professionals with great shows like Sales Evangelist. Today, we'll be breaking down how to master the financial fundamentals. To drop these value bombs, I brought Adam Cranor into EO Fire Studios. Adam is an award-winning eight-figure CEO, co-founder of Carbless, which has sold over two million cases since his founding in 2019. He's a startup advisor and veteran of the U.S. Army. Today at Fire Nation will talk about becoming an eight-figure company, the financial fundamentals.

0:38We'll talk about a very controversial statement and so much more. And a big thank you for sponsoring today's episode goes to Adam and our sponsors. Imperfect Action, hosted by Steph Taylor, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Imperfect Action is a bite-sized online marketing podcast for business owners who want to get straight to the point. Join Steph Taylor as she answers all your business marketing questions. Recent episodes include five must-knows to sell your online course, program, or membership, and four steps to grow your email list for your next launch.

1:09Listen to Imperfect Action wherever you get your podcasts. Is this your year? Visit thrivetimeshow.com to see thousands of Clay Clark's business coaching testimonials featuring over 2 ,000 entrepreneurs to dramatically increase profitability. It's month-to-month and less money than an average minimum wage employee. Schedule your free consultation today at thrivetimeshow.com. Adam, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Hey, what's up, Fire Nation? I think the American dream tends to revolve around that 30-year mortgage.

1:47And many people then quickly follow it up with, we got the 30-year mortgage, now we need to pay it off super quick. I believe you need to keep your mortgage, understand and manage your finances, and learn to leverage that additional cash or debt to focus on creating either your own business or getting you personally to financial freedom, which is exactly what we've done to build Carbless. And guess what, Fire Nation? We will be diving a lot deeper into that thought, into that sentiment later on in the interview, because we're talking about how to master the financial fundamentals. First off, Adam, what the heck are the financial fundamentals?

2:25I think it's kind of a three-stage process. First, you really need to understand your personal finances. Once you understand where everything's going and obviously what's coming in, you need to be ruthlessly accountable in what you promise yourself you're going to do. Once you've done those steps, then you can take the additional cash that you have or start taking out debt and you can learn to leverage that debt to grow yourself and or your business. So I want to dive deep into the financial fundamentals. What do you think the majority of the population that struggles financially is doing wrong?

3:07I think a lot of it is just paying attention to media and wanting things super quick. I'll give you an example. From the time I made about$14 an hour back in 2008, all the way through the time when I was making six figures in a different business, I would take out$200 a week in cash. and I would spend that on gas, groceries, going out to eat. I smoked at the time. Basically, anything outside of my mortgage or my utilities for my home, I used that money for. So if I went out on Friday with my friends and I spent$180, I literally had$20 the rest of the week. That made me focus on where I was spending my money, how much value that spend was providing for my life?

3:58And did I want to repeat that? I started visualizing the money leaving my pocket because it was cash. And that same applies in business to understand your profit and loss and knowing the value of the money you're putting out and what that's going to come back in revenue. Now, in your current business, you scaled to over 2 million cases sold in just three years and become an eight-figure company in the process. So let's talk about the first, just the first of the three areas of your finances that you prioritized to navigate that rapid growth. Fun fact is I think by the end of next year, we should be at nine figures, which is super exciting.

4:40We're not there yet though, coming. So the first part is just really understanding your finance. And there is a challenge with having, credit cards nowadays where we just swipe it and it goes away. And going back to my story with the cash, I would exchange maybe a cocktail at the bar for$7 and I would watch the cash leave my pocket. Having that understanding and that goes to your profit and loss from a business perspective, we have tracked everything to the nth degree until even when we first started up and did $80 ,000 in revenue. We knew where our money was coming in from. And then each dollar we were spending, we knew very well where it was going.

5:27And that has always remained very important to me. So even now, as we scale the business, our operational forecast is very intense. And every month I review and understand where the money went out to, where the money's coming in from. so we're basically building a machine where we know which levers to pull. So you scaled to over 2 million cases sold in these three years to become that eight-figure company. And as you mentioned, potentially next year, a nine-figure company. What exactly are these cases? How do you come up with the idea? Give us that story. Yeah. So the cases are carb-less. It's ready to drink cocktail in a can.

6:09And each case is 24 cans. but the idea came in 2018 my wife and I were doing keto I was drinking vodka water with lemon and lime pretty boring but allowed me to be sociable seltzers came on the market tried one for the first time and thought it was way too carbonated not flavorful enough and the idea of this fruit flavored drink being in a can that was clear I went back home and started mixing stuff up with vodka. At that time, I didn't know those were like a beer malt base or sugar brew. And very quickly, I had a vodka lemonade. And so the drink that we have is, if you imagine a vodka lemonade, vodka cranberry, margarita, generally those are very flavorful.

6:53They're also loaded with sugar, carbohydrates, and calories. Not keto-friendly specifically. Yeah, no, not one bit at all. So we've taken all those same exact flavor profiles. Our lemon is a vodka lemonade, and it just is zero carbs, zero sugar, 100 calories, and 5 % ABV. Fire Nation, see a problem, solve a problem. Sometimes it's that simple. Now, what's not simple is bringing that solution to market. There was a lot of work that went behind that, and Adam could go down a deep rabbit hole, which we won't right now, because I want to move on to the second area of your finances that you prioritize to navigate the rapid growth that you've experienced?

7:34Yeah. So the second part is one, just being ruthlessly accountable. And I started talking about that a little bit with the budget. From the manufacturing days, I always, in my past life, I always had to know where the money I was spending was going. And so we created a very in-depth budget document that would say, I would literally walk through in my head, okay, how many people in March are going to be traveling. Okay, most people are going to spend two or three days a week. Average Fairfield hotel is going to be about$140. And that's all the math that we're doing to create each budget line item.

8:14Now, then once we go through and create that for a year, we then, after every month, go through line item by line item and understand where we underspent and overspend. And underspend isn't necessarily always good. Sometimes it is, you're saving money, but sometimes you're underspending because your focus went away from somewhere that it should have been. And overspend can also be a good thing if it turned into a higher revenue. So it's having that high amount of accountability. And I think a lot of businesses and even people personally will assume that if they don't have a ton of money or the business isn't doing a lot of revenue, that they don't need to focus on that.

8:54But then if you're, let's say you have$50 ,000, that's your salary. When you win the lottery, you don't know how to manage it. And that's why we've been able to be successful being a small business and scaling rapidly, because we have always known exactly how our finances operate and where the money's going. So let's talk about maximizing your cushion, the risk to reward, what does that really look like in real life? One of the things I love to look at is the mortgage example. So going back to what I said earlier is, you know, many people think that, hey, I got this 30-year mortgage, now I should pay it off because that's what some guru on Instagram told me to do.

9:38When you look at, if you took a$300 ,000 principal loan amount, right? You're buying a house,$300 ,000. Interest rates are pretty high right now. Let's say it's 8.5%. You're going to pay about$530 ,000 for that house on a 15-year mortgage in interest, so a total of$830 ,000. Now, if we flipped it and we looked at the last 30 years in the S &P 500, let's say you took that loan out and you're going to pay$830 ,000 for a$300 ,000 house. If you took that$300 ,000 and you sunk it in the S &P 500, the average rate of return over the last 30 years is about 9.9%. With compounded interest, that would turn into about$4.7 million in 30 years.

10:27So would you rather not make any additional money or would you rather pay that$830 ,000 for a$300 ,000 house and have$4.7 million in the bank at the end of 30 years? Fire Nation, this is just the first two of the areas we're going to be talking about when it comes to navigating rapid growth in your business, in your life, when you want to make sure you're going down the right process. We have a lot more to talk about around this topic when we get back from thanking our sponsors. I remember searching for the perfect CRM when I first launched Entrepreneurs on Fire, and it's tough to know which platform is going to be right for you and your business.

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13:56Adam, we're back. We talked about understanding personal financials and being ruthlessly accountable with what we're doing. We talked about maximizing our cushion, the risk to reward. I want to now talk about number three here, which is leveraging capital and also debt to maximize the cash that you have. Talk to us about this. So this is kind of a twofold piece, right? So in my example, growing a business, when you're growing very, very fast, it is hard to get any cash into the business because the cash is immediately outlaid into either for us, it's inventory and building our team. So sometimes you need to take out that debt in order to have money.

14:36And the two things really play hand in hand. I'll give you a quick example. Let's say somebody makes$70 ,000 a year. I live in the state of Wisconsin. Between state income tax, federal income tax, Social Security, and Medicare, their take home is$53 ,097. And so my salary is$70 ,000. If I want to make$72 ,000, maybe I'm taking home$53 ,500. It's not much more because of all the taxes. One thing that somebody could do to help start break themselves away is take out a$70 ,000 loan. If you were to take out a$70 ,000 loan at a 9 % interest rate over five years, your take home is only$282 less than what you would by making an additional year's worth of income meaning that that nine percent will be about$17 ,000 over five years now the reason I share that is most people get stuck in I can't do anything extra because I don't have any extra money and they spend so much time trying to make an extra three percent four percent or five percent on their paycheck.

15:48But after all the taxes, you're not getting too much further. It's just a few bucks. As where if I said to anybody, what would you do with an extra year's worth of income? Their mind starts racing because they think of all the dollars. Well, you can do that with a personal loan as long as you have those first two pieces we spoke about and you have accountability for yourself, you can use that to start building either, you know, put it into a fund, put it into learning or personal growth. I know for me, about 10 years ago, I actually took out a$40 ,000 loan and learned how to trade Forex. And by trading those currencies, I knew that I could on an average monthly rate be at about 5 % or 10 % on a monthly compounded rate.

16:37I was making a lot more than the interest I was paying. But I think many people get scared of that. We're training ourselves with the fear of the interest rather than the opportunity of the gain. Fire Nation, this is just another way of looking at how you can have your money work for you. A lot of opportunity here because I'm a big believer in the phrase, love me or hate me, there's no money in the middle. I also think we need to be willing to be more polarizing in our businesses, Fire Nation, especially if we truly believe in what we're preaching. And speaking of polarizing and controversy, you kind of have a controversial statement that we hit on at the beginning of the interview.

17:20But Adam, I want to dive deeper because you believe that we should never, and I mean, never pay off our house. Never pay off that mortgage. Learn to love debt. Tell us more. The beauty of debt is it's ultimately somebody else's responsibility, right? When we look at, am I going to take out money from a debit card? That comes right out of my bank account. And what happens if it's a fraudulent charge? How hard is the bank going to work to get my money back? It's going to take a while, right? I have to do most of the work. You charge it on a charge card. It's basically a 30-day loan. That 30-day loan, if you have a fraudulent charge, it is that banking function, let's say it's Chase, they're a very large credit card company, it's now their job to get your money back.

18:12So you're borrowing for each 30 days. And every time we look at that situation, when you take out that$70 ,000 loan that I mentioned earlier, rather than making it, you're not paying any tax on that. So it's basically a tax-free income. And if you're able to maximize that and bring it back within a year, you're not paying any tax and you're lessening the interest rate that you would have paid. And by just focusing on that, it just gives you a great foundation for one exponential business growth. But it is absolutely mandatory that you have self-discipline in order to do that. Fire Nation, again, I hope this is opening your mind up to the opportunities that are right there in front of you, potentially right now.

18:57And Adam, we talked about a lot today. What is something you really want to make sure Fire Nation gets from our conversation about how to master the financial fundamentals? It becomes more and more prevalent, at least from what I see on social media and conversations with friends and family. But In school, we're not taught how to do taxes, how to run a checkbook, how to leverage debt, how to run a business, how to maximize ourselves as humans. But we are generally taught that this idea of a 30-year mortgage is great, and then we quickly get told to pay it off. So if we as a nation are starting to understand that what we are told consistently is not best for ourselves, why aren't we digging deeper into that from a financial perspective and just truly learning how to think for ourselves and maximizing and multiplying each dollar rather than focusing on what we're losing?

19:54So, Adam, if Fire Nation wanted to connect with you, wanted to learn more about what you have going on with your life, with your business, what is your call to action for us today? Check me out on Instagram or Facebook. Pretty active on both of those. I think it's 8craner87 for Instagram. But always happy to help, happy to be somebody to talk with and talk through, mentor a lot of people from 18 up to 60 years old on how to manage finance and how to help maximize and leverage yourself to set you up for long-term success. Fire Nation, you're the average of the five people you spend the most time with.

20:36And you've been hanging out with AK and JLD today. So keep up the heat. For links to everything we talked about, visit eofire.com. Type Adam in the search bar and the show notes page will pop right up. Adam, thank you for sharing your truth, your knowledge, your value with Fire Nation. For that, we salute you and we'll catch you on the flip side. Thanks, JLD. Hey, Fire Nation, a huge thank you to our sponsors and Adam for sponsoring today's episode. And Fire Nation's successful entrepreneurs are great at three things, productivity, discipline, focus. That is why I created the Mastery Journal so that you can master these three things in 100 days.

21:14And we're talking step by step. So visit themasteryjournal.com and I'll catch you there or on the flip side. Imperfect Action, hosted by Steph Taylor, is brought to you by the HubSpot podcast network, the audio destination for business professionals. Imperfect Action is a bite-sized online marketing podcast for business owners who want to get straight to the point. Join Steph Taylor as she answers all your business marketing questions. Recent episodes include five must-knows to sell your online course, program, or membership, and four steps to grow your email list for your next launch. Listen to Imperfect Action wherever you get your podcasts.

21:48Is this your year? Visit thrivetimeshow.com to see thousands of Clay Clark's business coaching testimonials featuring over 2 ,000 entrepreneurs to dramatically increase profitability. It's month to month and less money than an average minimum wage employee. Schedule your free consultation today at Thrivetimeshow.com.