Lil Roberts - Xendoo, Reshaping Bookkeeping, Accounting and Accountability

Today, we talked to Lil Roberts, CEO and founder of Xendoo, a cloud-based fintech company that specializes in online bookkeeping and accounting designed to give businesses of all sizes complete transparency with their financials, leading to actionable strategies throughout the entire year and not just tax season.

Xendoo is a platform built both for their customers and internal customer, which is their team, to help them do their work quickly and efficiently. Lil also emphasized the importance of setting up and integrating the apps you have for your business properly, as this is dangerous and will cause problems which can result to companies overpaying their taxes.

Lil's passion to solve a big problem particularly small business owners with financial disabilities — the impetus of Xendoo

Lil Roberts: So entrepreneur, I have built eight. This is the eighth. And so I started out, my background was I started out in engineering and I installed ATM machines at NCR. And then I did sales and I sold commission on copiers and fax machines. And then I combined, the two of my first business was a systems integration business. And from there I did product businesses and into manufacturing.

So you're saying, so how do you have a FinTech business doing online accounting and booking? So it means that you're not a CPA. Right. And that's exactly right. I'm not a CPA, I'm not an accountant. I have an incredible team that are so dosa for me. When I exited my last business, I did a scorecard because as entrepreneurs, and I'm sure you hear this over and over and same for you. We ended up happenstance what business, where we see a problem, we've got to solve the problem or passionate about it.

And then all of a sudden we're in that business. And so I wanted to do my next business was in 2016. I wanted to make sure it was intentional. So, you know, it's kind of like the saying that everybody looks good at the bar at three. So, for entrepreneurs, everybody, every business looks good. Right? And so I said, you know, I want to really solve a big problem. I want to work with people that I love to work with. And I'm passionate about that small business owners. And I wanted to reshape an industry and I wanted to scale it to a hundred million in ARR, which is annual recurring revenue. And I want to help a lot of people have financial disability.

So that was the impetus of Xendoo. And because I felt the pain firsthand that I couldn't understand. And I'm sure you must feel this as well. Why you can't get your numbers from the accounting industry in a timely manner, right? The world moves digitally. Why has that industry not making the transition and so identity? That's what we do. We deliver people through. 65% of them get them by the fifth business day. 

Joseph: And one of the things that I think, you know, every business, especially ones that work so prominently in the e-commerce space is have to be ready to adapt on the fly. And, and I think one of the issues that stems from not receiving the, that those vital vital information as in a timely manner is because the system itself is even if it's like a 2015 to 2014 system, by this point it's archaic. So that to me seems like something that has been worked and integrated well into your software, into your, what we say.

So FinTech, this is actually the first time that I've heard it. Luckily I figured it out what it was pretty pretty quickly. Tell us about the adaptability side of it. And you know, what kind of changes that you found even in the span of the last five years that you've had to reconcile with?

 

Lil Roberts: Well, it's an archaic industry because there were many players in the digital side of it, especially for bookkeeping accounting. And so what we did is we built a platform, where both our customer and our internal customer, which is our team, to be able to do their work quickly.

So on the external platform, if you're a customer in the palm of your hand, you have your tax return, your monthly financials, balance sheet, profit, and loss. You have a lifeline to your accountant into a CPA. And that's like unheard of for small business owners. Right? So that's software that we wrote to be able to have that access just using today's current day rails and then on the internal customer, which is our team. We built that a platform that they feel like they're running downhill instead of climbing up hill every day. And so that's all through digital.

And then the other side of it for ecom customers is that what we hear over and over again is that they, they say that they came from an accountant that doesn't understand the business, that doesn't understand how you connect interface with Shopify or interface with PayPal.

And, you know, it's dangerous because if the integrations aren't set up, right, you can overstate your income and have yourself a problem. You can overpay taxes.

The importance of maximizing tax savings and the biggest minefield, not knowing you are not maximizing your tax savings

Joseph: I just want to ask about really like some of the mines that people have stepped on over the years, like in cases where somebody has overpaid the taxes, underpaid, weren't aware that taxes are even a thing. Just off the top of your head, what are some of the minefields that people have stepped on over the years? 

Lil Roberts: Yeah, absolutely. You know, they, well, a couple of the major minefields. That people don't realize the benefit of doing monthly financials. So it is never flying your business blind. If what you do is you get up in the morning and you look at your bank account and say, oh, I have money and I can live another day. And then you only look at the revenue coming in through your mobile app, you know, for Amazon or Shopify or any of the others, you have to look at the whole picture holistically. You have to understand your expenses and where the minefield is is that they don't do don't do any tax planning.

So the end of the year happens in rent and March of the next year. And that's when we decide to do your taxes and you've missed all the money that you could have kept in your pocket, or you could have used instead of paying the government, you could have used to invest in your business. So biggest mine field, not knowing your numbers and not maximizing the tax savings. So that's number one.

Then second biggest would be that so many people, you know, they live chat or they call or email and they say, hey, you know, I'm behind, I can't buy a house or I can't get alone because I haven't done my books in two, three years. Can you help me out? And of course we can help them out and we help them out really quickly. But you know, it's a hard way to live, right? Like, why do that to you? 

Joseph: Right. So when we were looking at the, the services, there is what I would imagine is, you know, the mainland service, and then there was a specific one, which is the getting caught up. It's a catch-up, the service that you're offering that we're talking about here.

So this is one thing that I've wanted to understand because when I hear something like, oh, their books aren't updated in two or three years. And, you know, being the paranoid guy that I am, I think, man, the fed must be knocking on their door any second now. So somebody reaches out to you that says they need to get caught up on what does that entail? And then what are the patterns and what are the reasons why you're finding people end up being behind on this? 

Lil Roberts: Yeah, totally. So let's start with the reason why they're behind. Small business owners are juggling a million things. So working 12 to 14 hour days. And the last thing that they want to do is sit down and do their books. Right. And so they don't do it. And then they feel. Hey, where do I find somebody that I can trust or more importantly, in the ecom space? Where do I find somebody that understands my business? Cause the ecom business is so unique, right? And we can talk about other industries that they all have their own anomalies.

So the main reason is they hit behind because they think they're going to get around to it. They don't get around to it. Life happens and small business owners for the most part feel like they're just on that treadmill of life, just constantly work and trying to balance family, trying to find a little sliver for themselves. So that's the main reason why it happens. And then the other pieces of it is that then they reach a point where like they're a year behind year and a half and they. So what I'm going to behind, what am I going to do, where to begin to dig out. 

Joseph: And you know, it's not just an individual entrepreneur, who's guilty of kicking the can down the road. You can go to any institution or a large companies. And in each one of these are all facing different issues. But what I think is especially problematic for, you know, the individual entrepreneur, let's say whatever your current patterns are or whatever it is you're doing. And that's all going to scale with you. So yeah, your profitability might scale with you, but your issues are going to scale as well. And it goes from being a numerical problem to a multiplication problem where now these problems have actually like the balloon out of control. 

Lil Roberts: A hundred percent. Great, great analogy. You're right. It becomes an exponential problem. And the small business owners and entrepreneurs, they do what they do. I mean, we all do what we do because we're passionate about it. So accounting may not be your expertise. It's not mine, I'm not an accountant. You know, my team tells me that I'm an honorary CPA because I know a lot about tax, but I know that through all my years of owning businesses and educating myself about it. A mentor of mine said to me one time, for the very best for the areas that are not in your skillset. And if you do that, you're going to make life a lot easier for yourself. And I think there's not enough people that do that. 

Lil's work balance — raw paperwork vs people management

Joseph: I'm chambering the hiring people question because here's some that I want to get your take on it. Prior to this position, I was largely doing audio editing and producing. And at once in a while, I would catch wind of, you know, an AI algorithm that can do the editing for me. And there's a side of me thinking, ah, shit. I love listening to the flow of conversation, deciding what to cut, what not to cut. And I didn't believe that there would be enough money left for me to make if the AI took over I've since well, for one, I don't necessarily rely on editing anymore, but I've since come to realize that let's just say I were in that position, it would give me the ability to scale up my operation because now I can still do a listen through, but there are certain things I know that are just going to get cut.

Like for instance, if somebody said it would say, there's different, everybody has different vocal habits. People are, as people are, you know-ers. Somebody says what's a well-er? I say, well, a well-er is somebody who starts with saying well. I'm a massive well-er. And I'm a stutterer too, I was reading a previous transcript from another episode, just to try to like, you know, warm up, back to the near the accounting and finance sector. And there's a line where if out of context, it looked like I was having a stroke. So there are things that need to be fixed up. Right. But, you know, if we resolve those things and then what it allows is to really focus more on the artistry of it and focus more on flow and being able to work more as a producer and as a creative mind and help clients understand how to move their show forward because I want them to succeed.

So I get working for them in your situation. I think this is the same thing that happened where, you know, by finding ways to automate and digitize a lot of these slow going things, you've been able to sort of relieve this amongst yourself, amongst your staff and focus on what it is that you really enjoy doing and working with with customers.

So, I'd like to hear about the lifestyle of this and you know, what is like the work balance before. You know, how much of the raw paperwork that people doing versus how much of the connection with people and guiding people. 

Lil Roberts: Great question. Thank you. So thank you for really great question. So one of the metrics that we track is we track how, what percentage of their customers are customers, right?

But there are particular customer do they communicate with and the 30 day period or rolling 30 day. And so we want our team to be at a 90% communication. So we have the technology do the, the repetitive mundane stuff and everything we do is digital. So it's not like a, you know, a customer sends us a box of paper. We wouldn't accept that everything we do is digital. Why wouldn't we accept the box of paper? Because if you have a human key in numbers and it's easy that they can transpose numbers and that's bad for the customer, right? So everything comes through digital. And then from there, the repetitive steps are taken out and then the humans can do the highest level thinking, which is helping solve problems for the small business owner and to educate them and to make sure that they have their numbers and everything is accurate.

So I love the analogy that you used about editing because you're a hundred percent, right. Have you leveraged technology to do the repetitive stuff? You allow humans to be the highest level thinking. And I think that there'll be a paradigm shift. Where we go back to communicating with people old school, we communicate with our customers four ways. We tell them five ways. We said, well, look, we will text message or email we'll call, we'll live chat. And we say, and if you want to send smoke signals, we'll answer those as well. And because we just want to talk to them and help them. And so for me, the passion is leveraging technology to one lower the price.

So the customer has more economical price that they can pay my experience in all my businesses is the more money I make. The more the accounting company charged me. And that's not. Right. That's not fair. It's fair if there's more work, but if it's just because they see more money in my account, that's not fair. I would never know what kind of bill I'd get on my text some years before 5,000. Like, are you freaking kidding me? So we do tax returns starting at 850 bucks. And typically they're between 850 and $1,200. And that's it, you know, you have F bars and all kinds of other stuff. So the big thing is communication, touching the customer, helping the customer, you know, some of the, there's a new wave in technology right now. And that is low-code no-code. Have you heard about it? 

Joseph: I have. Yeah. Kausambi Manjita. She's from Mason, it's a interface platform where she connects different, softwares together to simplify the entrepreneurs dashboard. So the no-code movement is something that I've thankfully familiar with as courtesy of the show. 

Lil Roberts: So if you think about that, software's here disrupting everybody, right. And changing the world and changing somebody's business models. And it's also disrupting itself because it's low code, no code is that. So think about it, then developers are being disrupted because they wrote this low code. No code. 

Understanding the human dynamics and that everybody in the business has different skill sets that they bring to

Joseph: And then it comes back to what you're saying about the high level thinking, which is if somebody can just work out the logic, obviously there could still be holes, poke and logic as always, but once the logic is worked out and you just feed that through a computer and then the computer works the software out on its own. And it speaks to, I think, a larger issue. Cause I'd love to hear this is more like the unfortunate side or the dark side of this movement is, and it comes from my own personal experience too, which was that fearfulness or that reluctance of these are skills that I, that I have and that they might be lost in time.

And I mean, it's happened ever since I think the emergence of agriculture and it's always been about the forum momentum. But I'm wondering if you've encountered this, whether maybe a client's or even among your own among your own staff, if there has been pushback, when it comes to people having to really like pivot and readapt to a new way of thinking? 

Lil Roberts: It comes down to this glass half full or half. And so I think that people have a natural predisposition predisposition to be half-full or half-empty. And so that's something that they chat that they're challenged with, no matter what, we're a startup. And so for us, we hire, we look for that skill that people that you know, are used to constant change.

And so I think at the core of, it is the human use of constant change or not, or, you know, what's their appetite level for change. And I just wanna, I just want to make a note that you started out as an and you move to a well-er. You were a Weller. 

Joseph: Yeah. It took me a second there. I was like, oh no, did I? That I contradict myself on there. Oh, but I see what you're saying.

Lil Roberts: I think that you have to say, what's the skill set needed for the what's the skill set needed for the environment, not necessarily for the job, but for the environment. And so, you know, as a tech company is going to be is typically more startup, right? And so startup means that you have to have that mindset that you're used to constant change, maybe a little bit of chaos, you know, startups go from total chaos to control chaos, to scale and to scale, right? And so you have to love all those phases.

And that's why some founders will exit at a certain stage. And some founders will only come in at us or some high-level executives will only come in at a certain stage because. You know what they're used to or what they like, what's comfortable for them. Like, you know, one of my interview questions I make Joseph is I'd say if I come to your house and I look in your closet, what would I see?

Joseph: So the way I have my shirts set up is that I always go based off of what are the ones that I've worn the most recently and the, and the least recently. So on my left are the shirts that I haven't worn in a while. And I try to put them that way so that I'm encouraged to wear the shirts that I don't use as often.

And then the stuff that I don't wear, that I wear the most commonly I put on the right to remind myself, look, don't wear out your favorites, try to mix it up. Like a year, goes by some of those shirts and left. They haven't moved at all. I was like, all right, that's enough. They're going to value village.

That's what my closet is like.

And then I have drawers for underwear and same thing as I was a grocery boy for a year and a half. And what are the things you learned is like, you gotta take the stuff from the back, put it in for. Take the stuff that you're handed on the trolley, but then the back cause otherwise of the stuff in the backstage in the back goes, well, it expires and that's not good. They start losing money that way. So that always stuck with me. So like say with my underwear and my socks, I always put like the old stuff, at front to try to rotate through everything.

Lil Roberts: Wow. I have to tell you, I've interviewed hundreds of hundreds of people and I've never gotten a question answered that way. And so that's amazing. Usually what I'll get is my shirts are here and then you'll find out that somebody organizing a subset, that they start on a light color and go to a dark color.

And so what it tells me about your value system is number one, it tells me you have a value system. I would probably say that you save. That you're somebody that's cognizant of, of putting you probably have a savings account. Whereas a lot of people only have one account. They just put everything into the counter spending, but you have a, you're a forward thinker. So you're thinking about that, you know, what do I use most? How do I balance? And which is a really unique skillset. That's amazing. I've never ever heard that. 

Joseph: Well, I appreciate that. But you know what I want to say in response to it as well, is that this is where I do struggle somewhat in the chaotic, forward moving, nature of e-commerce it's, it's definitely like working here is taking me out of my comfort zone in, in leaps and bounds is because, you know, my energy comes from optimism and it comes from like, okay, I know what tomorrow looks like the day after the day after.

And I build into words that, so to show up to work, and basically every day there's been some sort of interrupt that's taken a lot of getting used to. So what I ended up doing after about a year of this was like, okay, now, I'm optimum. I'm looking forward to the idea that every day there's going to be a disruption. And so I've figured out a way to get to that controlled chaos, but point.

Lil Roberts: That's very unique thinking. Good for you. Yeah. It's easy. The answer of that when you ask that question in the interview, and another way to phrase that question is, you know, if I look in the refrigerator, what am I going to say?

And so you probably rotate your inventory in the fridge as well. And so, because that's probably, that's like part of who you work part of your fabric. And so what happens is, is that if we are interviewing somebody and I don't interview anymore, that rarely do I love to interview don't have is that if somebody comes in and the, in their closet is so organized, right? That person is not going to be good for customers, customer service, and the reason why they're not gonna be good for customer services, customer services, chaos, and you don't know what each call is going to bring.

So if we're interviewing somebody and they, and they say, yeah, my closet, oh my God. Didn't want to see my closet. It's everywhere. I have stuff everywhere, but I know where to find everything. That's a great customer service person, because they're used to spontaneity and they're used to finding it, but somebody who says, no, no, no, it's gotta be in this order. And I have all my blues together, all my age together and this and that. They don't want surprises. So they have to be on the job that's no surprise. 

Leadership, management, and working as a "family"

Joseph: We transitioned into the hiring discussion. I'm glad we did. And I can tell, you know, it really is something that means a lot too. And so it seems like. Not every business deals with this in the way that your, your business deals with it, where you really want to make sure you have people suited for the front end, you know, dealing, working with customers, dealing negative connotation, working with clients.

And then on the other hand, you have, you have the people in the backend who are, you know, working through the algorithms and are, and are completing the tasks. What about the middle ground and making sure that both of these two opposites are, you know, are getting along with each other. How are the lines of communication between the front enders and the back enders?

Lil Roberts: We're family. So for me, that comes from leadership. It comes from management. It comes from people understanding each other's roles and what the functions are of that and the benefit. You know, I think that where, where you get the separation, right, you know, in companies is that nobody is bringing the family together as a family.

Right. It's no different than the dynamics in a work environment are the same dynamics that you have in a family environment. You know, they typically say the middle child, does he get the attention? Right? And all of this is responsible and takes the brunt of the parents, not understanding that it's okay for them to, you know, run into a wall and get money.

And I think that the same thing happens in business. So clear communication, mutual respect, you know, our people that we hire, I hire a heart led people. So that's a bit of a differences. I don't know if there's many companies that, that look at it based on if people are heartless first. So I want heart led people. That means that they understand the human dynamics and that everybody has different skillsets that they bring to the party. 

Joseph: I think that's a wonderful answer to the question. And I will say that, you know, being in different job positions in the last 20 years, you know, some, some businesses, I think they use the family term as a cop-out and there's a bit of cynicism. Oh, we're a family. Are we? Oh, okay. Yeah. Yeah. I can't wait to come to the, you know, the retail store family where, you know, we're working hours and doing all of that. But, I think in order for that to really take shape, it starts from the ground up. I see it in you a hundred percent. So when you say it, I believe.

Lil Roberts: Thank you.

The importance of running a business in a way that gives their team stability and the opportunity to continue learning

Lil Roberts: I think it's important, you know, just to touch on business owners in general, you own your business. We all own businesses, right? And a lot of the people listening are entrepreneurs. And they own businesses that, you know, if we're blessed with the opportunity to own a business and to run a business and build the business, I think that we have a responsibility to make sure that we provide an environment for the people, for our team members to have a continuous path of learning.

If they choose to have a continuous path of learning and that we have to build our businesses to where we don't take the, the constant stress that we all have as entrepreneurs and owners and that they feel it, you know, they shouldn't, to me when you're providing an opportunity for people to, to come to work everyday, they should have stability.

They should know that they don't have to worry about the paycheck hitting on time. There should be common respect that you don't yell and scream at people in front of people. And the reason that I say that Joseph is that the ripple effect, a lot of people don't understand the ripple effect. And the ripple effect is say, you have a kid and you're working for somebody that is just constantly stressed out and screaming all the time.

You're going to come home from work and at the dinner table, you're going to talk about how much I hate your job and you hate your boss. And now, instead of spending the time and saying, Hey, tell me, tell me what you learned today in school. So instead the kids learn, oh my God, it's horrible to work for people. This is just bad. And then it's horrible, right?

If we could, we can change the dynamics and we can all help each other. If us as business owners just realize we need to run our business in a way that gives our teams, stability gives them an opportunity to continue to learn and that. Have that we ourselves know when to take things off of our plate and give it to others. So then that way we don't have as much. 

How sales have changed in the digital world

Lil Roberts: So what happened was, I'll tell you how I arrived at south. So I was working for NCR and I was installing ATM machines and I'm going to date myself a little bit. And this was back in the eighties and NCR. I was field engineer, so I'd go out and I didn't sell the ATM machine and I repair it, take care of it and do all that. And it was cool because Ron Bard would meet me out there and people back then didn't realize how much money was in those ATM machines, then so NCR said, well, when the machines are up and running and we want you to go out to sell surge, suppressor, protectors on panel protectors and all that.

And so I'm like, so I'm a field, I'm an engineer and I'm going to go do sales. Well, if I'm going to go to sales, why don't I just make sales money? Because everybody knows that the highest people paid in the world really are salespeople because there's no ceiling. So if you're really good at sales, you know, the thing about sales is you're not building equity. Right? And so I had a friend that was like 21 years old and he was making a hundred thousand plus. And again, this is the least. And so I sat down with him and I sized him up in some copiers and I'm like, his name was Louis and I'm like, this have anything I don't have. And so that was it. I took the leap and I wanted to sales commission, and it took me two weeks to sell my first deal.

And for the first six months I lived in credit cards, so you have to have guts. And so the difference between the four and the forties, Scott's right, we're all doing the same thing, the differences, you know, are you willing to put it all on the line? And so that's what I did. I went straight commission, and I would do strike commissioned if I wasn't building businesses, I wouldn't have a problem doing straight commissions today.

There's a difference between hunters and gatherers. So sales is a really broad term. And so gatherers are, are not true sales, right? Gatherers are more customer success. They're equally important. So no judgment on each side. Right? But gathers are typically it's inbound sales. It's the deals are coming your way. And it's more like you're gathering things.

And then true sales is hunter. Like you wake up, you got blood on this morning. You go like that ladders across the wall. That's hunters. And so if you, you know, hunters want no ceiling and they, and if you it's like taking an animal and it's, if you get them a little bit. Then they're not going to hunt as much because they're not going to be as hungry. So true hardcore sales. And this is a loss.

There was an article in wall street journal recently about that people coming out of school now don't want to be true hunters. And so sales is changing because of the digital world and so true hunters don't feed them anything. They shouldn't straight commission. You give them a little taste of that. And if they want a little taste of that, they're not a true, it's one thing to give them like a draw. Two three months, but if they don't want to be straight commission, they're not that tiger. 

Joseph: That's a fascinating analogy. I will just, you know, full record based off what you're describing years that that would have put me in the gatherer category. Although, you know, for me, I do, I love spiders. They do have an artistic quality about them, and I didn't know this for the long time, but there are hunters, spiders. There are the ones that they go out, they seek their food. They, they, they tackle on the pounds. But the spider that we mostly know of because of the mess they make are the weavers.

There are ones that they don't have any like artistic quality to them. They just make a mess in the corner and then flies come in and then there's ones that they really appreciate their craft. And, and it's like, they, they make a snowflake and it's a night guy would walk through the park and I see a bridge and it's like an art gallery.

And what my philosophy on it is, you know, my, the way I viewed sales is I feel like the product really is doing the work for me. My job is validating the sale to the customer, helping them understand the lifestyle, helping to understand, you know, make the choose, choose this option over this option.

So that's just how I view it. And I will say, I don't think I would have enemy to be a hundred like that. It's a hell of a risk to, to get into. So I commend you for doing it, but let's just say hypothetically, someone is like going to go for it. Where do they even look for that kind of work?

Lil Roberts: Yeah. You know, it's hard to try to find that kind of work. So go to straight hunters. You know, if you go on indeed and you go to all of the different, you know, boards, career, career fair, all those different things, there'll be jobs that were there. The way that you're going to know is is this, if somebody's paying you a salary, then you're, and you're getting some, some commission then you're probably going to be kept somewhere between 60 and a hundred thousand.

If you take the whole risk, they're going to pay you more money because they're there. They don't have to average you. Right. So you're not averaged out. And so if you're paid, paid no money and it's all commissioned, you can. A hundred, 200, 500. There is truly no limit and true hunters. They won't go to work Monday to Friday. They'll figure out where they can find customers and they'll work, whatever hours fit their customers. 

Joseph: I love that. I didn't really know what exactly they'd be able to, to besides just bringing it out and the nature of this conversation. But I think it's really fascinating. 

Lil Roberts: Well, I tell you, I love your analogy, spiders, and you know, in that analogy, you have the hunters and gatherers, and then you have the consultation and there is a consultation approach to sales. You can be a constipated salesperson. If you're a gatherer, if you're inbound and gatherer. And also if you're a hunter, you can also be consultated the differences is that hunters eat what they kill. So they're going to go hungry if. If they don't kill anything.

So every day they gotta get up, you know, and it's the old saying of, you know, the gazelle, the gazelle and the lion, right? So, you know, the slowest lion knows that it has to run or the gazelle rather knows that it has to run faster than the fastest lion in the slowest line knows that it just has to run faster than, than any gives us. 

Joseph: I got to get your take on this too, just for the sake of it. But there is a third kind of spider, which are called the borrowers. So you have the ones that are open they're on display. You have the hunters that burrowers, they just go underground and they just, and they just wait for food. I was thinking maybe there's like a, a degree of relationship between that and the consultation, but I don't think it's a very clear connection. So that does strategic. Okay. They find the right spot.

Lil Roberts: They find the right spot and they wait for it to come, right? 

Joseph: Yeah. So you could say it's a form of hunting where, but it's more just like passive hunting rather than active hunting.

I'm gonna switch gears. So we're going, we're going to jump back onto the broad reaching macro subject that we've been discussing. I'd have to sleep on it to try to figure out exactly what to characterize it as anyways, let's do some stuff here for people who are just starting their businesses out.

I want to leave the audience today with some good habits that people can work on for the starting process. What point do people set their bookkeeping up properly early? Like, just so you understand, you know, a lot of the people that we, that we help out on the show, a lot of people were in dropshipping.

So they're testing their products. They're trying to find what's a product that they can really work with. If the product starts to go well, then they're feeling good about it. Then they say, okay, you know, I can make a business out of this. And then of course you have people. You know, their craft Depot, they're building their products from, from scratch by hand. We've had a lot of great guests on the program who have gone that route. So what are some of the habits that they want to develop early on? 

Lil Roberts: So can we take it as, can we go 30,000 foot view first and then come in to enter the bookkeeping if that's cool? So when people go to start a business, you know, I always say to people that I mentor a lot of, a lot of entrepreneurs and business owners, and I always say to them, I understand what you want from the business.

So are you building a business, sell a business? Are you building a business for a lifestyle business? Are you building generational business? So it's really important for people to, are you building a starter business that you're going to kind of test everything out, figure it out, and then sell that business off or sunset it and then go start the next business.

So I always encourage entrepreneurs to really think through, you know, what do you want the end result of this business that you're doing. Right? And so I think start there. And then from there is. How you then set up your timeframe and your structure of the business. And so in the early days, US-based cause I don't know, Canadian tax law, but US-based you want to, you don't want to commingle your funds.

One of the big, big mistakes that we see people make that they have to unwind is co-mingled with co-mingling the fonts. So what does that mean? It means that you set yourself up as a sole proprietor and then you go in and you have the same checking account and you're writing business expenses and personal expenses. You're never going to figure it out and you're going to miss out on tax savings. So set your business up, you know, started as an LLC, have a separate credit card and a separate bank account for your business. So don't start as a sole prop. And then from there, run it as its own living, breathing entity don't feel.

You need to know, is that business going to be profitable? What do I mean by steal from it in the early, early days, don't run everything under your business because how do you know if the business is profitable, you know, on our website under e-commerce, we have calculators that can help you figure out what the profit margin is based on the buying price of a product and the selling price. Because a lot of people think if I buy a product for a hundred dollars and I want to make 30% on it, they sell it for 130, but that's not 30%. You have to sell it for $144 in order to have a 30% margin. Right? So a lot of people miss out when they're starting out in business and understanding the true profit margin, and then from an LLC, once you make more than $30,000 in profit, you want to then make it the tax filing as an S selection. So that way you can run more money through it and have better tax write-offs.

So what I would say, separate bank accounts, separate credit card. When you bring you an online bookkeeping account, if you've been in business three, four or five times, and you're just starting out, you already understand all that and you already have the money that's back in love. Go ahead and bring in accounting right away. Bring in somebody that's fun line accounting, whether it's us or another player in the market space, and get it done and get it off your hands. If you're bootstrapping your business, then you know, maybe you stay doing the books for six months or you don't do the books the first six months, and you hire us around six months, depending on what your situation is, you know, how much cashflow do you have and how much money do you have that.

Does that answer it for you? 

Joseph: It does. It does. And, and it leads me into two things. One, which is hilarious because I did want to ask about like, you know, your take on soap propriety, because it's been a very consistent thread everybody I've talked to. Sole propriety, I mean, charitable, when I say it's a death trap, like it seems like there's, has it not been this thing a good reason for anybody now I've set up a sole propriety, years ago. I did my license is due to expire pretty soon. So we'll see where I go after that. And it seems at this point, really, the only good thing is like, you know, baby's first business just to understand, I know I have to register, oh, I have to do this. Oh, I have to do that. Just so that they really get those first steps down. But then like when it's ready to actually move into something serious, it's just not going to, it's just not going to fly. 

Lil Roberts: So all of your personal wealth in nature. 

Her take on responsible usage of write-offs

Joseph: Yeah. That's crazy. If anybody listens to the Alan Chen episode, I did a whole rant about that and I'm not gonna repeat it here, but people know how I feel about it. There's another part that I was, that I was curious about is, you know, in, in e-commerce the variances of you know, products and services, people sell is quite, quite drastic. You have people who are selling goods, they're selling services, selling physical product or selling digital product. When you're onboarding these people, are there variations to how you would work with somebody who is selling physical media versus someone who was selling just like, you know, like eBooks online versus someone who's, you know, selling their time. Like if they're doing consulting services? 

Lil Roberts: The first fork in the road, when customers come on, are they selling a product or a time? So if they're selling time, that's a different situation than if the, on the front. And then other than that, it's pretty much the same. Like all, you know, if you have cap X, so you have to buy equipment to do like, say you're a pizza shop owner, right. Pizza ovens up 50 grand. So if you have equipment like that, then you need to write off. When's a good time to buy new equipment, use the money. You would be paying in taxes to buy new equipment. So when you get into a product business, it comes down to high cap X or low cap. You need equipment. But you know, so our two largest cohorts are e-com and professional services. So one selling product and the other one's selling. 

Joseph: I noticed there was a pattern there, you know, between, bringing on people who work heavily in the front end, who had worked heavily in the backend, I'm going at the same time and the clientele as well, a variance in having opposites in the products and the services that they sell.

And this is really the first time that anyone has broken down, you know, whether you're selling a product or you're selling time. And if, and those I think are the two most fundamental ways that you can look at it. Maybe there's a third tier, I don't know, but most things seem to fall within one of those two categories.

Lil Roberts: So thank you. So if you, if you go to our website, right, it's a xendoo.com. And there's a white paper there that I wrote and it's called the power of three. And so if you're somebody who's selling a product and you put the power in 3d to use, and what the power of three is, this is that you affect one side of the business venture 80% and the other side, the opposite side of it by 3%. Right?

So an example, you're selling a product. If you sell in ball caps, if you increase the price of your ball cap, by 3% said, the ball cap is 30 bucks and 3% is negligible, right? 3% is 90 cents. So somebody is not going to walk out of your store or click off of your site because you're selling a ball cap for $31 for $30. So there's 3% then on the other side, if on the cost side, if you reduce your costs by 3%, so for instance, you don't get ahead of your inventory.

And so you're always ordering second day, but what if you get ahead of your inventory and now you save in shipping costs, or what if you can buy close out clearance because you understand the cash flow and you cycle your inventory fast enough that you have cash flow, to be able to take advantage of that you reduce your costs by 3%. How do you think that that affects your bottom line? Do you think it's three times three, do you think it's three plus three? Do you think it's 6%, 9%? What do you think it affects your bottom line? 

Joseph: I don't think the effects are immediate, but I think that they become more noticeable. The more the business scales. 

Lil Roberts: Effects are immediate and it's exponential. So in a product business, you would affect your, your profit by 35. You will increase your profit net profit by 35% by employing our three increase one piece, which is the price by three. Decrease the cost by 3%. Right? And there's other ways you could do do that.

There's other examples of increased one side, the other side, if you're a business, if you're professional services in your silent time, say you're selling digital marketing. So if you do digital marketing and you normally charge somebody 1400 a month, 3% of 1400 is 1,440. They're not going to balk at you to go 1450. They're not going to leave you if you're that good. Right. So now you just increased by 3%. Now you have to figure out how do you decrease the opposing side of that is your cost of labor. So how do you decrease your costs of labor in a, in a professional services? Well, do you have your people with three monitors? Because people that work on three monitors have a 30% more throughput on their work, right? It increases the productivity by 30%. Do you have the latest software for people?

So by giving your team that you're going to get more throughputs of bear out how you can now be able to push more work through with the same people, or you can reduce how much you have to outsource on that. And so on a professional services side, it increases it by 15%, not as much as on the product side, but still 15% lift for doing nothing. Just tweak in two things with. So that white paper, if you wanted that white papers on our website, put in your email. 

Joseph: Well, I think one of the most important takeaways to this too is you know, it's not just about increasing prices for the sake of vanity, prices also have to increase for any number of logistical and justifiable reasons. My favorite word in the whole wide world inflation, I mean that alone, you know, you have to increase your prices. Otherwise your value actually does decompose over time. So none for if, for no other reason that one, right there is an absolute necessity. 

Lil Roberts: A hundred percent, a hundred percent, and 3% is not really a price increase. If you think about it in the scope of things, especially nowadays, but it's just, it's the concept of how you think about your business. And then, you know, when you're a business owner, if you're not thinking about how are you going to be profitable, then you're not serving your team.

Well, you're your internal team? Well, you're not serving your customers fall because how are you going to have enough money to invest, to stay relevant? Right? So maybe a blockbuster would have invested more in our business where would have been more effective. Netflix. 

Her take on responsible usage of write-offs

Joseph: There's another question here that I wanted to ask. This is more about, write off. So we, you know, having talked to other people, in the sector, you know, we have discussed in the past, like, yeah, there are things that you can do. There are ways to save money, but what was, what was sinking in today with this conversation is it's almost like there was more of like a lifestyle adjustment or like a write-off lifestyle.

So one of the questions I wrote down, but we'll, we'll kind of make this like the last major subject and then we'll wrap this bad by yet. But when it comes to ride offs, is it possible that you can like, actually harm yourself in the long run? Let's just say, you know, you're using write-offs and you're in your state and you finding savings. But then you're compelled for, to make sure that the business is actually like, you know, improving year after year so that the IRS doesn't come knocking and wondering like how many times are you going to, you know, watch a movie and write that off. So it's a bit more nebulous of a question then perhaps I should have asked, but I would love to just get your take on like on write-offs and how people are handling this responsible usage of it. And if it's possible that it go, it can actually, somebody can overuse it and started using it. 

Lil Roberts: You have to have the fine line. It does need to be a business write off in some form.

Right. And so we can go through a couple of examples of, you know, what could be in the gray area. So first let's do the disclaimer. I'm not a CPA, I'm a fellow entrepreneur. And so we're just having a conversation about tax write-offs in the US so, so you bet, so your bookkeeping that you do monthly is so you understand the scorecard of your business and the health, the financial health of your business.

So it's important to do monthly bookkeeping. So when you look at your profit and loss, you can say, hey, is everything in line is a business trending in the right way. It's like pricing, you know, if you have no profit, you have to look at, are you charging enough money? Do you have the right profit margin on your goods and products, all of those kinds of things.

So that's the monthly side of that. Then what happens is that taxes are annual. So when it comes time for tax time, you have to write off everything. You can write off. You don't want to pay any tax, right? So in vendors what's called add backs. So for instance, if you have ODI under discretionary, so if you're running your car through the business, you're running your phone through the business.

If your business is in the house, or if your business is in an office and you have a kitchen and you're buying groceries for the business that your staff has, has snacks. Right. You understand what I'm saying? And then that's all right.

So if you're shopping at Publix, because you're buying snacks to the office, it is a business, right. And then, so you need to be able to do that pop away. If you take a vacation and on the vacation, you having to wrap some business in, because you're out in Vail and you have another e-commerce that you're meeting, let's discuss best practices while there's part of that, that trip that's part of a business check. Correct? 

Joseph: Right. Yeah. And it continues on with what Alan Chen said too. It was like, you know, you can even set your vacations up so that, you know, Hey, I'm going on business. I might as well make a vacation out of it 100%. 

Lil Roberts: So it's you know, what's the old saying with the stock market, right. Pigs get fat and hogs get slaughtered. So use some discretion in what you're writing off. If you show the IRS, you know, a hundred thousand dollars loss every year and all of a sudden you, despite, you know, a Lambo and something's not going to add up and there's going to be an issue. So it's just about the car. 

Joseph: I appreciate that. I really wanted to get your take on it. Because I think with putting a lot of time and money and energy into businesses, I think being able to write these things off, it alleviates some of that, you know, personal stress as well as somebody can still, you know, enjoy their life on a day-to-day basis.

Still find ways to add value to themselves that are not as direct as, okay. I'm starting to get money coming in now. So I think it is important for people to be able to do this. You know, I mean, taxes, you know, hypothetically taxes they're collected by the government, so the government can provide services and everybody agrees, hey, I paid my taxes because it was a good thing to do, but people are going through the extra efforts to run a business because they want to provide services for other people. That's also a good thing to do.

So in that respect, I think that's where I think the, you know, the it's morally sound and justifiable and am encouraged. I, myself am also not a certified CPA. I'm just guy doing a podcast, but that's where that's kind of like where I get off on the subject totally.

Lil Roberts: At the end of the day, find a CPA that matches your. Who you are. Right? So if somebody is, you know, super nervous, super afraid, then maybe they want somebody that is, that doesn't see gray at all, strictly black or white. If you're somebody that, hey, you want to maximize your write-offs find somebody who's great. Who loves, you know, their favorite color is great. That happens to be a CPA. So, but you know, at the end of the day, what I love about podcasts is that you're helping to inspire. We're not helping you are inspiring entrepreneurs and business owners. And I think it's really important because, we didn't talk about this as we're wrapping up, but it is lonesome.

It is a lonely place to be. It's hard to find your tribe when you're a small business owner or an entrepreneur. And lots of times what I hear over and over is that people feel like they're alone. They feel like they don't know where to turn for answers and things like that. And so it's just about, you know, seek out people like you. So seek out people that are, are sharing all the different areas of business tips, tools, tricks, and inspiration. So thank you for having me on today. 

Written by

Joseph Ianni


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