Managing Money with Robert Gauvreau: An EOFire Classic from 2023

0:01Light that spark fire nation JLD here and welcome to entrepreneurs on fire brought to you by high level, the all-in-one sales and marketing platform. On today's classic episode, we'll be breaking down making money. And to drop these value bombs, I brought Robert Gavreau into EO Fire Studios. Robert is the founder of Gavreau Accounting Tax Law and Advisory, an eight-figure professional services firm working exclusively with entrepreneurs to save tax, make more money, and build wealth. And today we talk about how to spend your money on what's truly necessary. If you have kids, put them on payroll.

0:32They deserve it. And how to be strategic with timing, with spending, or reinvesting. It can save you a ton on taxes and owe so much more. And a big thank you for sponsoring today's episode goes to Robert and our sponsors. Here's something most of us don't think about until it's a problem. Our phone service. Cape is a privacy first mobile carrier built from the ground up with security as the priority. If you care about protecting your digital life without giving up your smartphone, Cape makes that possible. Visit cape.co forward slash fire and use code fire for 33 % off Cape for six months today.

1:06Are you ready for the ultimate all-in-one platform for entrepreneurs, marketers, coaches, and agencies? Build funnels, automate follow-ups, manage clients, and even white-label your own software. Say hello to our featured partner, High Level, and visit highlevelfire.com to start your free trial today. Robert, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Good morning, Fire Nation. Absolutely. One thing that people will probably challenge for me is that making money is the most important thing that you can focus on in order to get the results you're looking for in your business.

1:52A leaky bucket never gets filled with water, Fire Nation. Something we'll be talking about today when it comes to managing your money. Now, Robert, Art, as you know, Fire Nation are entrepreneurs, small business owners, and we make lots of mistakes. But what are the most common financial mistakes you see entrepreneurs make? Well, I would say the biggest mistake, which is easy to fix, is that people don't have optics in their business, financial optics of how their business is performing. And I like to think of this as going to maybe a basketball game where there's lots of moving parts. The score is really high.

2:30There's lots of shots taken. If you were to enter into a stadium, you know, 15 minutes late for a game and you were to look up and see that there's no scoreboard there, how would you know what's going on in the game? Who's winning? Who's losing? And what the right strategy is for the team to win the game? And I feel it's the exact same for small business owners. So many of us, me being one of them as a small business owner, don't have financial optics in our business. And if we don't have financial optics, we don't know how to win the game. We don't know how to be financially successful. We don't know what strategy to implement right now so that we can realize that financial freedom we're looking for.

3:09So that would be probably number one. And then, you know, I could probably I could go down the line with a whole bunch more. I would think paying too much tax is a big problem because it's wasted money, mismanaging cash flow, huge issues inside businesses. and if we're happy to dive into those, I'd love to share a little bit more. Yeah, share a little bit more because I really think this is the kind of stuff that our listeners need to hear. Absolutely. So let's start with cashflow, right? Because I'm predominantly a CPA. I've got 80 employees. We work with just entrepreneurs alone, right? It's our focus, our market.

3:52One of the biggest questions I get every single year is, well, Bob, this is great. you're showing me that I made$100 ,000 or 60 or 500 ,000 or a million dollars, whatever that is, but we don't have any money left. So we're really confused as to what has happened to that money. So profit is not equal to cash flow. And it's a huge challenge for a lot of business owners is the mismanagement of cash flow. Now, there's a lot of, like you said, as we kick this off, the leaky bucket, right? We can have profit of a couple hundred thousand dollars and still run out of cash. And 82%, 82 % of business owners are on a cash flow basis of week to week making payroll, right?

4:39It's terrifying. And I worked with Tony Robbins for a few years at his business mastery events, and we really focused on cash flow. Now, I'll give you maybe five tips for the small business owner, the entrepreneur, to rectify maybe some of their cash management issues. Number one is stop taking all the money out of your business. I know as business owners, it seems great. We might be collecting a whole bunch of cash up front. You think of gift cards or deposits up front for work that we're going to deliver in the future. And we look at our bank balance and we think, isn't that great? This is all our money.

5:19But we essentially, when we go to deliver those services, there's costs associated with it. If that money is gone, we get into cash flow issues. So stop pulling all of the money out. Let's focus on a long-term plan to reinvest in our business. The second major cash flow issue that I always see inside a business is that individuals go and when they do have cash in their business, they go and they reinvest in equipment, they take it right out of their cash flow or vehicles. How many business owners have we talked to who said, oh, I just paid cash for my truck or my car this year. And you go, well, that's great, but that's all of your operating cash flow.

5:59Why don't we, instead of doing that, which is a silly thing to do, why don't we finance the vehicle or lease the vehicle, keep all that cash inside our business to reinvest instead of drawing it all out for this asset? And yes, we have to pay a little bit of interest when we focus on that. But what this allows us to do is when we have this equipment or this vehicle and we're using it for business purposes, it's generating revenue for us in the future. That income can pay for itself instead of taking all of our cash out of our business right now and spending it on investing in those assets. So I would say those are two big ones.

6:41The last one, and this one always drives me crazy and I've never been great at it, is going after people who owe you money or eliminating the transaction that allows you to deliver a product or service for your customers without getting paid at least at time of delivery. So one of the focuses for small business owners needs to be, how do we push that cash transaction value from after delivery to way before so we're collecting money up front? That will be a huge influence in positive cash flow in your business. Fire Nation, there's some really important things you need to be really thinking about with everything that Robert's sharing here.

7:19And I love that first sentence that he started off with is that profit is not equal to cash flow. I mean, we really need to hammer that through our skulls, that profit is not equal to cash flow. So we really need to think about that and understand the functionality of what it is to run a successful business. Now, Robert, I lived in California for a stretch, so I'm well aware that paying too much tax is a big issue. I mean, I'm one of those people that was making seven figures a year, also paying seven figures in taxes a year. So at the end of the year, I was looking at my bank account saying, where'd all the money go?

7:58So let's talk about some strategies to ensure Fire Nation is paying the least amount of tax legally possible without, of course, just doing what I did up and moving to Puerto Rico in 2016. Although that is a great job, John, like I can appreciate that move. For sure, I can focus on some strategies that, again, Fire Nation can implement now to make sure we're paying the least amount of tax possible. But although I completely agree, and my focus and my profession is built around the idea of paying the least amount of tax, I want to maybe just deal with one misconception before I jump into that. Because a lot of people will come to me during the year and say, Bob, what is it that I need to spend money on right now in order to save the most amount of tax?

8:46And typically, as a joke, or, well, probably true, in most cases, I say, spend it on me, right? If you want to give me$10 ,000 to give you a really good strategy, great. I can definitely save you a lot of money. Spend it on something that is necessary though, because I think a lot of people look at it and go, what do we spend money on right now so we're not paying taxes? But let me just do a quick calculation for you. In North America, not in Puerto Rico, because John's smarter than all of us, but in North America, our tax rates are somewhere between 12 and if we include personal, let's say 55 % tax.

9:24Okay, so for every, let's use 50 % just as an easy calculation. For every$100 that we have, and we say we want to spend it to save tax, we're going to save$50. So if we're spending something just to spend money, we're saving 50 and we're out 50. So we started with$100 and we're left with$50 because we're just saving that tax money, but we've wasted it. So why not invest that money on something that is going to help grow our business, spend it on marketing. You know, if we're going to spend$100 on marketing, we're going to get the tax deduction, but it's going to help us build and create more income in the future.

10:05So what I don't want to see is people are just spending frivolous dollars just for a tax deduction. It's got to be for a business purpose. Otherwise, we pay the tax as necessary, but there's ways to get that lower. And that's what I want to share with you guys right now. So a couple ideas. This is my favorite one. If you have kids, pay those kids. They deserve to be on payroll. Oh, yeah. Right? So one of the things that we focus on, you know, I've got a 14-year-old and a 12-year-old, and they're on payroll. And how are they on payroll? Well, they're being paid a reasonable wage for reasonable work in exchange.

10:46Now, I pay them about$12 ,000 a year strategically. Why? My business gets a full deduction for that payment. So that's$24 ,000. I get a full tax expense. But because their personal tax rates are below the exemption, they don't pay any tax on that either. So that is a 100 % complete deduction. we do have to make a business case that they are providing value and equal exchange value to the business in order to put them in there. But I think that's an easy argument for us, our kids can push brooms. They probably know social media more than any of us do. I know my daughter is a master on TikTok. So let's make sure that we're paying them, we're getting that deduction, and they're not paying any tax.

11:31I think that's an easy, quick win for so many people. A second maybe component is looking at strategic timing. So for example, let's say we're paying tax on a calendar year and we've got some equipment or some repairs and maintenance that we have to incur in the next six months. Strategic timing says let's pay for that in December. So we pay for it in December. We get access to the tax deduction now as opposed to a whole year from now. So timing in how we invest in our expenses or in our equipment or reinvesting back in our business, that timing can really save us a lot of tax money up front. And then maybe the third one, because I want to give you three, is to look at bonuses.

12:19So for you as an individual, and maybe any of those family members, we're allowed to issue bonuses during one tax year and pay out those bonuses in a subsequent tax year. And I know specifically in Canada, if you're a Canadian entrepreneur, it's very similar in the US, if we declare a bonus for our December 31st, we get access to that full deduction then. We don't have to pay out that bonus until June 30th, the following year. So it gives us a really great upfront deduction, saves us a whole bunch of tax money, and we deal with the payout of that in a future period. Fire Nation, I hope you're taking notes.

12:56I'm over here typing away because this is some critical things that we need to know as owners, as entrepreneurs, because if we're going to work hard, let's also work smart when it comes to keeping the money that we make. And we have a lot of things to talk about around this topic when we get back from thanking our sponsors. Let's talk about that level up mindset. You know, the one you need to take your business from comfortable to next level amazing. In this stage, the basic stuff matters, like how you communicate with customers, which is why today's episode is sponsored by Quo, spelled Q-U-O, the modern alternative to run your business communications.

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16:23Seriously, every question that pops up, they will have your answer waiting. And if you visit my special partnership link, you'll get a free trial. So visit highlevelfire.com to start your free trial and see why thousands of businesses are switching. That's highlevelfire.com, where marketing, sales, and automation finally come together. High Level, join the revolution. Bob, we're back. And this is definitely something that you and I both resonate on because a lot of people say they want to have a bigger impact on this world. Okay, that's awesome. And you and myself as well, believe that making money needs to be our number one priority if our true purpose is to maximize impact because more money allows for more reinvestment and growing and of course, helping more people.

17:12So share some of these top tips that Fire Nation can implement to help us make more money. Absolutely. And, you know, I think it is a very key topic. And that's how I essentially kicked off. You know, what's one thing that people disagree with more than anything? And I would say that the primary focus needs to be making money, right? If we don't have a financially viable business, then there's no way for us to grow it. There's no way for us to engage more team members, impact more employees' lives, deliver more services to new people, expand globally, have a greater impact on the world. If we don't have a viable business option, then we can't reinvest in that.

17:56So the goal is to continue to maximize that income. So here's one way that we can definitely maximize the income. And once again, I'll give you three. My favorite is looking at our pricing and our pricing strategy in our business. The reason pricing strategy is the most important element for me in maximizing our profits is that when we increase our prices for our consumers, for our services, our goods, there's no extra cost that goes into that when we increase our prices. So what happens? We sell something for$100. It costs us$50. We've got a profit of$50. we can reinvest that$50. But if we sell it for$110, we actually have$60 of profit.

18:43So not only we're just doing a 10 % increase, but it's a 20 % increase in our profitability, which is huge, right? So the number one thing we need to focus on is our pricing and getting it right. And I think Dan Kennedy says, raise your prices as high as you can without cracking a smile, right? We want to be able to push prices up where people still feel like they're getting more value in exchange. But we don't want to underprice ourselves because that restricts our ability to impact the world globally, right, in what we do and how we offer it. Two other areas that I want to focus on for maximizing the profits in our business, and really in our lives, we can incorporate these into our lives too.

19:27There's two types of costs that we have in our life. One is considered like a cost of good, cost of delivery. I call them direct costs. So for every dollar of revenue that you're generating inside your business, you have costs to deliver that. So one of the ideas would be, of course, pricing helps increase our profits. But if we can find ways to decrease our cost of delivery, we can also maximize our income. So here's a couple ideas for you. Right now, obviously, we're in a time where there's last few years have been crazy economically. There's opportunity here to leverage our relationships with our suppliers.

20:09Everyone should go out and ask for reduced pricing. Here's an example, contractor, electrician, right? We go in and we get materials to install the electrical for a new house. And we go back to our supplier and we say, listen, we're going to be here for the long term. In actual case, we're going to expand our business and our investment in supporting you. In exchange for that, we want to get a better pricing. And right now, because the suppliers are all fighting for that limited business that's there and they're watching some of their customers sort of fade off, not this community though, but we're watching some of those customers fade off.

20:48We now have more power in that relationship, especially when we start talking about how much money we're going to make them in the future. So by getting decreased pricing, we're going to increase our profitability on delivering all those jobs. Other items that are in there, you know, costs, cost of delivery are labor costs. How do we continue to create more efficiency in our labor? Is it creating better systems? Is it more performance incentives? but really looking at decreasing the costs of delivery are massive. The other area that we need to touch on is those fixed expenses. So those are the items that don't really change month to month.

21:30If we have a million dollar revenue business or a two million dollar revenue business, the fixed expenses are the same. So we're talking about rent, insurance, dues and subscriptions, anything that's fixed on a month to month basis. And I can tell you, embarrassingly enough, as a financial professional, I have had dues and subscriptions that are sitting in my business that I'm not using, right? Apple and other companies who get us on memberships, it's easy and it's a great business model if you're selling, right? I have memberships and subscriptions. It's great because people have to consciously reduce those membership costs.

22:10I've had multiple CRM platforms in my business that I continue to pay for and I'm not using. So we need to review those fixed expenses in our business, in our life, anything that we're spending money on that we don't use, we need to eliminate it. That goes straight to our bottom line and allows us to reinvest in growing and impacting more people. All right. I mean, Fire Nation, this has just been so much value throughout this entire episode. And I really want to end with a bang because this is for sure. I mean, having interviewed over 3 ,700 entrepreneurs now, I know that the long-term goal of almost every business owner, of almost every entrepreneur is to achieve financial freedom.

22:48Because once you have that, then the sky's the limit. Then the world is your oyster. How do we get that process started? Bring us home, Robert. Absolutely. This is one of my favorite topics because this financial freedom is essentially what most people are looking for, right? We want to make sure that we maximize our impact, but we want to make sure that we get financial freedom. Financial freedom meaning that we no longer have to worry about money because our income that's coming in is supporting our lifestyle, right? So let's all get there. Here is the number one tip that essentially everybody needs to put in place.

23:23We need to talk about creating an automated savings plan. Now, I want to say There's lots of different types of investments out there. I love real estate. I love stocks. I love a ton of different investments, insurance products, different funds, index funds, right? I love those different elements. And everybody's got to find their right fit and right portfolio balance. But in order to get there, we have to alleviate the funds. So aside from our business maximizing our profits, which I think we already talked about, what we want to do once we have those profits going is we want to automate a savings plan.

24:01Now, what does this mean? This means that in our business, every single week, we know that we have a little bit of a surplus that comes in there. For some people, it might be$10 ,000 a week. For some people, it might be$100 a week. instead of leaving those funds in our account, in our personal account, inside our business account, psychology of spending says if it's there, we will spend it, especially around the holiday season and those types and times of year. We want to make sure that that money gets out so that we don't see it as available to spend. So let's set up an automated savings plan.

24:37We can set it up through a quest trade, a wealth simple. You can have a broker or an investment advisor pull money directly from your account on a weekly basis, which starts snowballing, compounding, and creating wealth. Even if you start with$100 a week, which would be$5 ,200 a year, you'll be shocked at how quickly that continues to add up and grow. Now, why do I love this so much? One, we are the biggest obstacle in our own way of starting to build that wealth. So when this can happen without us having to do a transfer, it happens automatically. We get out of the way, we get out of our own way, and we start building that wealth.

25:18Second, once we get that into a savings plan, once we accumulate enough, that can be a deposit for real estate. It can be choosing different stocks at strategic timing. It can all go to an investor, Whatever is the best fit for you. But what happens is once this is automated and we continue to reinvest in this, we start building passive investment income from those investments that support our lifestyle. And once we get to the high enough point, that's when we achieve financial freedom. Start small and get big. Robert, I want Fire Nation to connect with you, to learn more from you. Give us a call to action you have for our listeners here today.

25:59The best ways to connect, and then we'll say goodbye. Absolutely, and this has been an absolute pleasure. I love supporting entrepreneurs. Feel free to reach out to us on our website, govrocpa.ca. Would love to connect with you guys. Follow us on Instagram, Facebook. However you want to connect, we're there, and we love working with entrepreneurs and maximizing that impact and creating financial freedom for business owners. Fire Nation, you're the average. Of the five people you spend the most time with, you've been hanging out with RG and JLD today, so keep up that heat. If you have any direct questions for Robert, find this episode on the podcast listening app, Podopolo, post a comment, ask a question, get the conversation rolling.