This episode of the Sage Advice podcast features Dawn Fotopulos, an associate professor of business at The King’s College in New York City and the author of Accounting for the Numberphobic: A Survival Guide for Small Business Owners. Dawn is the CEO of Hidden Profit Academy whose mission is to double small business survival rates. Below is an edited transcript of our interview.
Talk about how you help translate the lingo between a small business owner and their accountant or bookkeeper.
Dawn Fotopulos: Ten years ago, I gave a talk at 7:30 in the morning called, “I Hate Numbers: Accounting for the Numberphobic.”
As part of the marketing piece I asked:
- When your accountant calls do you break out into a cold sweat?
- Would you rather spend the weekend with your mother-in-law than read your financial statements?
I think I hit a nerve because we had fire code restrictions. I mean, it was like the receiving line at a wedding. So, what came out of that talk was the manuscript for Accounting for the Numberphobic: A Survival Guide for Small Business Owners. It’s the guide to everything you should have known before you opened your doors but never didn’t. It’s a tutorial designed to empower small business owners and get them up to speed so they can have an intelligent conversation with their accountant.
Why is a small business owner numberphobic?
Dawn Fotopulos: Most people go into business because they’re really good at something. They’re a great photographer, a wonderful interior designer, or a great car mechanic. They figure, “If I’m really good at what I do, I’ll make money,” but it doesn’t work like that.
The back of the house stuff is every bit as important as what you do for clients.
A lot of small business owners are caught in what I call the “doom loop.” When they are having problems paying their bills, they say to themselves, “I’m going to grow my way out of the problem.” What are they growing? Revenues. How are they going to do that? By offering deep discounts to attract more clients.
There are two problems with this solution. First, it attracts price-sensitive customers who may not be your ideal customer base. Secondly, you may buy yourself five hours of extra work every day, but you are killing your gross profit. The small business owner is then stuck in a dual loop conundrum of doubling down on a bad strategy.
There are roughly 27 million small businesses in the US. Approximately 75% of them have less than 30 days of cash on hand . And, about 5 million have less than 14 days. That’s not a problem. That’s an epidemic.
How can the accountant or bookkeeper translate their knowledge to the small business owner?
Dawn Fotopulos: Lead with questions, not answers. The whole accounting community understands the drivers of gross profit and the bottom line. They know it intuitively and, as a result, they tend to lead with answers.
But you’ve got to lead with questions.
The very first question you should ask is, “Two years from now, if everything in your business and personal life came true, what would your world look like?” Because ultimately your business is the engine to get you there. So, the first thing we have to do is understand the destination. Once the business owner and the accountant get a really good handle on that, then the accountant can say, “Okay, now let’s build a road map to get there.”
Want to hear more from Dawn Fotopulos? Listen to the full podcast interview.
From cash flow challenge to smart money management
90% of business failures are caused by cash flow problems. Discover how to go from having a cash flow challenge to smart money management.