Be your own CFO - Money and Flow Podcast Interview
Check out the “Hermanas Series: Be your own CFO”. This was my very first interview for the “Money and Flow” Podcast by Eugenie George.
***Transcript of podcast episode below***
Eugenie: Hey, Welcome to the Money and Flow Podcast. Carla, it’s a pleasure to see you.
Carla: Thank you for having me. I really appreciate the invite.
Eugenie: Yes, yes! You know, it is our Hermanas series, so I’m very excited to learn about your company. Now you started Wealth and Worth Within, which I love that. It's a very powerful and impactful business name. Would you please tell us a little bit about how you started your money story?
Carla: Yes, Hola Hermanas! This is the Hermanas series after all. My money story really started when I was a kid. I have a mom who was an accountant/CPA, so you can just imagine what it's like to grow in a household like that. We did talk about money a lot! We would go shopping and she would make me calculate discounts. I remember getting money and saving it away, so I was always really good about saving money for the future or to buy something bigger that I wanted. Because the basics were provided, but anything additional I had to purchase for myself - like the name brand jeans or the cool backpack or whatever it was. That all had to come from me doing odd jobs here and there. I feel like I've always been an entrepreneur. Then later in life I became a mother, about two years ago. I have a 2-year old who I love to pieces and love to spend more time with him.
I've been in corporate finance for about 6 years now and I felt that it was time to go pursue my passion or to pivot to create something that I'm very passionate about. Something that I could share with others and help them on their journey to learn about Finance, which is normally something people don't talk about; they don't teach about it in school. And a lot of people get in trouble with that really quickly when they become adults and go out into the real world.
Part of what I do at Wealth and Worth Within is I help educate people on Personal Finance, especially business owners because I do offer full Consulting Services as well. I like to apply my corporate experiences and apply it to their businesses, because what is that with people not getting paid? We want to change that. And make sure that whoever is chasing their passions is also getting paid and sustaining themselves through that passion of theirs.
Eugenie: Gotcha, gotcha. So, you are the CFO meaning you go in and you look at someone's business and you're like “I'm going to be their financial officer and I'm going to look and see where they can save money.” Is that correct?
Carla: Absolutely. We’ll assess all the expenses. Make sure money is flowing in the right places. Make sure they don't run out of money, because that’s an issue especially with small and medium-sized businesses. And I’m just an augmentation of their team. They don’t need a full-time CFO, they don't need to hire someone on payroll to do this kind of work yet because they're still small. I think that outsource works for them. I work with them on a monthly retainer or an hourly basis to help with those questions and that path they’re trying to craft from a financial perspective.
Eugenie: Gotcha, that makes sense. Now you said you had a bunch of odd jobs when you started so I'm very curious. I asked someone the other day, “What's the oddest job you had?” and I think they said a Movie Theater and I thought that's not really “odd”. I had one job where I babysat someone who was an adult and had Alzheimer's or Dementia, and she thought I was going to poison her. I was like, 15 years old!
Carla: That’s pretty hardcore!
Eugenie: It was very hardcore! It was ridiculous. She looked at me with these eyes like “Something’s wrong with you. You’re gonna kill me!”
Carla: I will say that mine were nothing like that! I did do babysitting, which is the standard for high school jobs. I did math tutoring because I was very good at math and there were a lot of people out there that were struggling with it. Their moms would come to me and ask “Can you please teach my son?” and I thought, sure I'm going to get paid; this is awesome! That was kind of the few starting ones. But as I grew older or even as I was younger, I would do things like buy pens and sell them for a profit in school.
Eugenie: Me too!
Carla: My mom would encourage that. My mom would say “I'll let you borrow the principal and you can pay me back once you sell all the pens”. That was totally her pushing the entrepreneur path on me, but I thought it was the coolest thing that I could make my own money! That just carried on to my life today and this passion of mine.
Eugenie: Fast-forward in a couple years and let me know how it is with your kids. Because I used to be a teacher and we could always tell when kids had that sense. I had a student who was out there selling chips and pencils and she would do deals, like a two-fer. Like you could get chips and a pencil that was already sharpened. She would even do a pencil that wasn't sharpened. I was very impressed.
Carla: That’s amazing! Well as a parent, I want to pass this knowledge on to my son in a way that he takes it in and builds wealth for himself so he can have options and freedom in life to do what he wants to do. I already started with my two-year-old. He puts coins in his piggy bank. That is one of the activities he loves to do and he'll sit once a week for 15 minutes and do that. We know he has no idea what he's doing, but we're so proud.
Eugenie: You have to start somewhere and that's very, very important. So that's awesome! So, you just talked about being a mom and I know you work with mompreneurs or women. Can you talk a little bit about your experience with switching over from the corporate which is very nine-to-five and you get a paycheck to becoming your own business owner and what that looks like?
Carla: Yeah, I started this business back in January of this year. I have worked with various types of clients in many industries. But I do still work with solopreneurs or mompreneurs and it's really rewarding. Because I see a lot of these women are shifting from their nine-to-five and their full-time jobs to being a mom, but also, they don't want to give up on their career. They are achievers, they want to continue to accomplish things in their life. I work with them to figure out how they can pay themselves a salary out of what they're doing. If they're not there yet, how do we craft a plan to get them there within the next three to six months? Because it has to be quick; the longest is a year. I mean, you can't go on that long without getting a paycheck. People have responsibilities, they have little ones to take care of. At the same time, they have to limit the amount of time they work or even raised their prices, if need be. That way they can work less and make more. That’s the end of goal. Managing their schedule to have the free time to be with their kids and raise them at the same time that they're growing a business sustainably and profitably. That is really the focus that I work with mom-preneurs on is how do we shift that scale to make sure their business is not just an expense but that it's also a profit center for them.
Eugenie: So, can you give me an example of that? In my mind, I’m visualizing: I just had a kid and I started a little Beachbody experience to where I'm working and I'm putting money into this Beachbody thing, I'm paying to do all the seminars. How would you help me, as a mom, to pay myself first. For some of you who don't know what Beachbody is, it's like Avon, it's like a business within a business. So how would I be able to pay myself forward?
Carla: First you have to understand who your client is, what they call an “avatar”. That is defining who you are speaking to, to make sure you know what that target market is for your business. You can have all the language on your website, all the information around your business, targeting a specific demographic. You don't want to target everyone because then you're too broad and nobody wants to talk with you. You have to narrow it down to the audience you’re speaking to. You are kind of putting yourself in their shoes, like from my perspective I have this problem and there's someone coming to fix that problem which is you. Once you know who your target market is, you need to find clients and start developing a Client List and building a pipeline on who you're going to sell your services to. What problem are you solving for them? That is key, because you could have the most amazing service in the world, but if it doesn’t solve their biggest pain-point, nobody is going to want to spend money for it. They want to hire you to come solve a problem for them. Define the problem that you're trying to solve for them and how painful it is. Because honestly based on that you can assess your pricing to see if their price sensitive or not. Maybe you can charge more than you thought because to them it’s such a big pain-point that you’re going to It's worth it for them to pay stub trying to solve it themselves. That's saving them time money and effort. They'll hire you once you have a pipe light and you know your ratio of every 10 prospects, I can close 2 clients. That way you know more or less what your closing ratio is going to be for your business going forward. Then you figure out how many clients you need and how much you need to make per month to hit your target revenue. Once you have that, let's say it's $4,000 a month that you’ve determined is your target revenue, you're going to break it down into pieces. You're going to use a percentage of that to cover your taxes which is around 20% to 25% of what you make. Set it aside for when that tax bill later down the road.
Eugenie: Right, right. So, let’s say I have a business. I'm making $40,000. I would use my calculator and then you multiply by whatever the percentage is, then that's the money that goes toward taxes. Now do I put that money in my personal savings account or do I put it somewhere else?
Carla: Oh, I love this question! No, do not put it in your personal savings account. Ideally what’s you’ve done by now, and if you haven’t it’s okay, but I need you to pay attention because this is super important. You need to file an LLC which you can do through your current state, it’s all online. And the reason you file that, it is a “Limited Liability Company”, which is essentially separating your personal from your business. Because you don’t want someone coming after your personal assets because you had a business mishap. Stop, and that's what the LLC creates. It creates a shield against your personal assets. You have the LLC structure. With the LLC structure you can now get a business account. You walk into the bank and say “Hey I am registered with the state of ____ (whatever state you’re located in) and I would like to open a business account”. They will ask you for the registration number and then you can open it through your current social ID. You don't need to get an EIN number. That's an IRS identification number to tie to your business, but that's optional. Once you have your business account, you should filter all business transactions through that account. That separation of personal and business is key to make sure that nobody comes after your personal assets. It's so important. Make sure you're not commingling your personal and business credit cards or using your personal account to pay off business expenses. Make sure you keep it clean. This also helps with your bookkeeping. Your Bookkeeper will be thankful and your accountant will be too when you're trying to file your taxes and you need to submit your record of transactions. It will be so much easier than having to pull two statements from two separate accounts that you can't explain.
Eugenie: So just to recap, let me make sure I've got all this. I'm a mompreneur, I'm at home thinking you know what, let me get a little side business, let me start something. My first step would be to get that LLC, which probably won't cost that much, right?
Carla: It varies depending on the state, but I think mine in Oregon was about $100 per year.
Eugenie: Okay, so mine didn’t cost much either, but as a sole proprietor it was like $15. But you don't get all the benefits. I'm a mom, I'm going to get my LLC, and then the next thing I'm going to do is make sure I open up a separate business account and I'm not going to buy diapers using my LLC account. I'm going to use my personal account. Okay, we got it!
Carla: You asked how do you pay yourself, right? By this point, you have opened a business account for the purposes of separating your tax money and you’ve possibly also opened a business savings account. Out of the $40,000 you made this year, you put away about $8,000 for taxes to go to your business savings account. Then in your business checking account, you want to have the remainder. What you want to do is make sure you pay yourself at some point. Calculate how much it is you're bringing in monthly, then take payroll which is 10% to 20% of those monthly earnings and start paying yourself on a regular monthly basis. That can be every two weeks or once a month, but the calculation needs to be consistent based on your average business revenue. One month, you might make $10K, another month you make $20K, another month you make $5K, so you take 20% of whatever the remaining 80% after you’ve deducted taxes. Now your revenue is down 40% that’s allocated to taxes and paying yourself. The rest you can use for expenses, you can use it for profit, you can reinvest it back into your business. Whatever you'd like to do with that remaining percentage is up to you.
Eugenie: Okay, I love this! Because I think what happens and I think you can probably speak on this more specifically, is that sometimes we’ll forget to pay ourselves first because we want to create a community and create all this stuff. So, this is very helpful. So, I get my LLC, I have my money and take out 20% for taxes plus I put 20% away for myself. The rest I can just use to put back into my business or network or whatever it is I want to do.
Carla: What happens is by you separating and prioritizing that, what you'll find is you’re spending less or you'll spend just what is left. You are prioritizing you and your taxes as the first order of business instead of the other way around where you prioritize expenses first and at the end with what’s left, we try to pay ourselves and that’s zero. That’s where you get into trouble. Your expenses will also shrink because there's not much left to spend on. And you will also scrutinize your expenses much more, because you're thinking if you pay $200 for this course you take, is that really worth it to you? What is this going to give to you as a return on investment of $200? Maybe it will save you six months of work. Great! That will be worth $200. Maybe it's something you don't really need for your business, but something you would like to have or want. That's okay, but I would encourage you to think and assess whether or not that is money you want to spend on that or can it wait? But maybe you do want to splurge and spend $200 on whatever that is because you think it is worth the investment.
Eugenie: I think that's really beneficial. My mishap, or financial hiccup, it's when I had the 95 I was completely fine, and then when I did my business I was the knucklehead who didn't pay myself first. People would tell me go out there and live your dream, then I was hanging out with all these entrepreneurs and forgot the logical side of my brain. I was spending all of this ridiculous money. I lived in Austin for a bit and it’s like, I love tacos but I know how to make my own tacos. How come California this is ridiculous. But I was out there buying all these tacos and didn't realize how important it was to pay myself first. I think the two books that were beneficial were by Ramit Sethi called I will Teach You to be Rich which is like the young folks version, and then The Automatic Millionaire by David Bach. Once I read those, they were very life-changing for me.
Carla: Very beneficial books. For business professionals, I always recommend Profit First by Mike Michalowicz, because they talk about the structure and how you break it down, to make sure you're paying yourself and prioritizing making profit above everything else. I think that’s super important to make sure you have a profitable business.
Often times, financial planning is kind of like an aftermath for once we run out of money. We're spending so much out of our personal money to fund our dream or business and then we think “Wait, I should be making money on this. How do I do that?” That's where some people get into trouble. I always like to encourage everyone to set up a free consultation with me. I'm happy to walk you through the things we can accomplish together to make sure we turn around the equation and have profit first instead of profit last if there's anything left. Because that doesn't help anyone. I started my business with $0. I do financial consulting and virtual CFO services, so there’s no overhead for me. But every time there's an expense that comes through that I could potentially take on my business. Is it a fixed expense or a variable expense? Fixed, meaning I will keep it even if I don't make any money this month and I have to pay it out of something because it’s not going to go away. Variable is going to scale with my Revenue up and down. Meaning if I make more money the more, the expense will be more or the less I make the less of the expense will be. I take that into consideration because I try to keep my fixed expenses very low, if any at all. Then when I make money, I start investing back into my business to buy courses, to go to conferences, but not until I have the money first. I don't want to start in debt, I don't want to start in the negative as much as possible. I know there's businesses out there who have inventory and stuff so they're going to have expenses, but try to turn that around as quickly as possible.
Eugenie: That makes a lot of sense. The goal would be, and I just want to make sure I'm paraphrasing this correctly, to look at fixed expenses and say “Okay, my fixed expense has to get paid and that's monthly, or my phone bill which is part of my business has to get paid and that is non-negotiable because it helps my business keeps flowing. However, the marketing is the variable expense.”
Carla: Yes, because you can control that expense.
Eugenie: So, for example, in the beginning I'm out here typing up my own Instagram posts, but once I make my goal, I can pay someone to do it.
Carla: Absolutely, you can always choose to take on more expenses as your business grows. But at first you just want to scrutinize to make sure expenses like zoom or your phone that will be there whether you make money or not will stay low, so you're not in the red every single month after you start.
Eugenie: Now, we're going to talk a little bit about the fun side because I know you have kids. And kids are a blessing, and sometimes a challenge.
Carla: Yes, they are!
Eugenie: I didn't want to say anything else, but yes sometimes being around children you can definitely learn a new side of yourself. I don't know if you knew, but I was never sensitive or emotional until I'd been around children. So, can you talk to me about the freedom of starting your own business while taking care of your children?
Carla: Yeah, it's great! Because I can set my own hours, I can work around their nap schedule or work very early in the morning. It's not easy, it's definitely challenging. For whoever out there who wants to start a business and thinks “Oh I'll just quit my day job and do this on the side”, it takes time. It takes time to get a business up and running that is profitable, that will continue to generate revenue at a certain level consistently. You have to give yourself some time and lots of patience. Because you're pretty much birthing a new child. It takes time for them to develop just like they do your own children. You don't just get pregnant and give birth the next day, you get pregnant and wait 9 months for them to develop and then they still have to grow after they’re born. It's the same thing with businesses. They don't just happen overnight. You don't just go from 0 to a million dollars in a year. That is very very rare to find. They happen, but that's not going to be the majority of people. I want you to temper your expectations and understand that it takes time to develop a business. Give yourself some leeway. Give yourself some Financial Runway. Put aside some savings. Don't just jump into it blindly thinking you're going to make millions of dollars the first day you're open for business. Make sure you have some initial runway so you don't stress out your finances and your family. 6 months to a year is totally normal for a business to get up and running and generate revenue at a level where it can allow you to pay yourself. Having children and having the flexibility to have a business is great, but don't kid yourself. I work harder now than I did before because now I have to juggle my kid and my business and it feels like you're working 24/7. Sometimes you are. You have to set boundaries early on and know what you are and are not willing to do and stick by them. Because there's always going to be more for you to do and you need to make the choice. And sometimes the choice is your children and spending quality time with them. It means putting the phone down. I have to do that sometimes and my husband reminds me. He's like “You need to put the phone down and color with your child.” Most of the time now, I leave my phone in another room so I’m not tempted to be on it and distract myself from quality time with my son. Also, Mom's don't ask for enough help. We take on too much. We don't have a house cleaner. We don't have a house manager. Like, get all of that. Because it's so important to have support. The only reason I'm able to do this business is because I have a supportive spouse at home who takes care of our child and makes sure the house is running. I have a house cleaner. Where I can, I'll hire virtual assistants to do some tasks for me. Because everyone can't do everything themselves. Give yourself some slack because you're already doing a lot mamas. Do not pressure yourselves.
Eugenie: That's one of my business goals. People crack up and they ask what I want my business go to be. In my current business, I only take on two clients because I'm in school and I'm trying to do all this stuff, so it's few and far between. But my clients are helping me with my future cleaning lady or cleaning man. Because I can't keep cleaning.
Carla: And it’s true because you could use that hour or two for your business! Or just to chill, which is so important! Because if you just want to kick back and watch Netflix or something, it’s totally okay to let the cleaning person handle it. My dream is to work half as much and makes twice as much. If you're not striving for that as a business owner, I'm not sure why you would choose this path. Otherwise you’re working twice as much and making half as much. That doesn’t sound great.
Eugenie: True, true. Before we sign off, there's two really big things I want to ask you. One - and this may be a silly question - but because you have a business, is there any type of insurance that you use to secure your business?
Carla: Yes, that's a really good question. I don't because I provide financial services and part of my contract and disclosure is that I'm not held liable for any insurance claims. Because it's just advice and the business owner is responsible for choosing according to their situation. I provide the consulting and expertise and knowledge, but at the end of the day they have the decision-making power and I don't. Therefore, I refrained from any liability. But that is clearly stated in my contract before I get started with my clients.
Eugenie: I love that. I was reading the other day that a couple people I know that are personal trainers have personal training insurance. And I thought “Oh my gosh, that's amazing”. Because if you write down your contract, when it comes to people's bodies and they say they fell or something, it says “Nope, you signed this”. I think that's great that you have a contract that's binding. That's awesome.
Carla: That's something that I think every business owner should have, even if it's a basic one. It's worth the time to hire an attorney for an hour to draft that for you. It's totally worth it considering what you're going to get. Because you're going to use it over and over again.
But my contract also says that I work in good faith to help the business become profitable. They know that I'm coming in to help them and not trying to damage their business. It just helps them to know that we're trying to work toward a common goal.
Eugenie: So that was the first question. And the second thing is:
What sort of things do you do to relax?
Carla: Oh man, with all the free time I have left after being a Mom and Business Owner and spouse? Haha! I like to go out dancing. I do swing dancing. That's kind of my relaxing activity. I know it’s a physical activity, but it’s relaxing to me and I really enjoy it. It’s a way for me to express myself artistically. Because I do a lot of math for my CFO services, so I have to use my other side of the brain too!
Eugenie: Oh my goodness, YES! I actually like to sing once a week because it's very therapeutic for me. So, I one hundred percent agree. In order to always be doing math, you have to be creative too.
Carla: Definitely. And, of course, my child pushes a lot of creativity on me too because we do activities together. He's very imaginative as you would imagine a two-year-old is.
Eugenie: Yes, yes. So where can we find you on the webs?
Eugenie: Awesome. Cool, cool! Well I’ll make sure we put posts of everything we said on the link. Thanks so much for joining us! I really appreciate it. I learned a lot today and I also learned in terms of myself to make sure I pay myself first. I always have to remind myself of that.
Carla: That’s right. Always remember that and make it a priority!