Exclusive Interview: Shannon Simmons on Achieving Financial Balance for Entrepreneurs.

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Exclusive Interview: Shannon Simmons on Achieving Financial Balance for Entrepreneurs

In this interview, we delve into the insightful expertise of Shannon Simmons, founder of Fit for Profit, a coaching and bookkeeping service specializing in helping those in the fitness and wellness industry. Shannon addresses the common challenges faced by business owners in determining their salaries, emphasizing the importance of striking a balance between business growth and personal income. She highlights the misconceptions surrounding reinvesting all profits back into the business and the need for effective communication and collaboration with bookkeepers. Shannon shares a success story that showcases how her solution enabled a client to pay herself during maternity leave, demonstrating the tangible benefits of the profit-first methodology. This interview provides valuable insights for entrepreneurs seeking financial stability and sustainable growth in their businesses.

-Begin Interview-

What is Fit for Profit, and who do you assist?

Fit for Profit is a coaching and bookkeeping service that primarily supports business owners in the fitness and wellness industry. Our goal is to help them effectively manage their cash flow and ensure they have tangible profits in their bank accounts. We want them to experience real financial growth instead of just seeing positive numbers on their profit and loss statements that don’t translate into actual cash that supports a better lifestyle for the business owner.

What challenges do business owners face when it comes to paying themselves?

Determining the appropriate amount to pay themselves is a common struggle for many business owners. It’s not as simple as writing a check or transferring money to their personal accounts, which is what many do early in business. The challenge lies in having consistent funds in the business to pay themselves and maintain the desired lifestyle their business should provide. Essentially, it’s about being able to take a regular paycheck from their business for the hard work they put into it.

Why do business owners often struggle with determining their salary?

Many business owners, including myself as an accountant, face this challenge because we typically lack formal education in business management. We excel in our specific fields but aren’t prepared for the financial aspects of running a business. 

 

Additionally, our decision-making is influenced by psychological factors, such as Parkinson’s Law. This phenomenon suggests that we tend to consume all the resources available to us. When it comes to finances, if we have a certain amount in our bank account to run our business, we often spend the entire sum on business-related expenses (whether they’re necessary expenses or not) without considering our own compensation.

 

As business owners, we’re also prone to distractions and expenses that seem necessary for business growth. Things like new equipment, attending conferences, and shiny marketing tactics seem like something we “need,” and we prioritize these expenses over paying ourselves. This leads to a lack of personal funds. 

 

To address this, our approach at Fit for Profit focuses on paying yourself first and establishing a structure that ensures your personal income is taken care of before other expenses. By creating and using multiple bank accounts, we can compartmentalize funds for profit, owner compensation, and tax savings, ensuring separate allocations for each purpose.

 

Our goal is to simplify cash flow management and alleviate the psychological and mindset aspects associated with it. Using an automated system with pre-determined allocations for each bank account, we take the guesswork out of business finances. This structure allows for spending from the operating expense account while safeguarding profit, personal income, and tax savings.

What is the main goal your clients hope to achieve through your services?

The main goal our clients strive for is the ability to pay themselves from their businesses. When people start their businesses, their intention is not to end up financially strained, yet it’s a common outcome. Therefore, the primary objective is to find a balance where the business has enough funds to operate effectively while also providing the business owner with a personal income that allows them to maintain the lifestyle they want. Our aim is to help our clients in achieving this balance.

What are the common misconceptions you encounter when people approach you as clients?

There are a couple of misconceptions that individuals often have before becoming our clients. First, many believe that to grow their business, every dollar must be reinvested back into it. They think they can’t take any money out for personal needs until they reach a certain milestone. However, successful companies like Google and Amazon started small and focused on operational efficiency rather than excessive spending. While reinvestment is important, it’s not necessary to allocate all funds back into the business. It’s possible to pay yourself and earn a personal income while still growing the business.

 

Another misconception relates to bookkeeping. Some assume they can fully outsource it without any involvement or communication. While bookkeepers handle most of the work independently, business owners need to communicate to their bookkeeper important information about new transactions or specific activities in their business. Bookkeepers rely on this collaboration to ensure accurate and comprehensive financials. It’s important to be prepared to engage with your financial professionals and maintain open communication.

How do you help clients overcome these fears or misconceptions?

To address the misconception around allocating owner’s pay, we introduce clients to the Profit First methodology we follow. When they realize that we recommend putting aside profit and paying themselves a certain percentage of their revenue, they may feel overwhelmed, especially if they haven’t been paying themselves anything at all.

 

In these situations, we reassure them that implementing new financial systems doesn’t require an immediate leap from zero to the recommended percentage. Instead, we encourage them to start small and take incremental steps. We like to start by having them pay themselves a minimal amount every two weeks, regardless of how modest it may be. The key is to initiate the process and establish the habit, even if the initial payment is small. Over time, we work together to improve and increase their compensation. The important thing is to start and gradually build momentum.

Can you provide a specific example of how your solution has benefited a client?

We had a client who wanted to be able to pay herself a salary while on maternity leave. It was important to her to take time off from her business so she could be fully present during the newborn phase. However, she had concerns about managing her finances during this period.

 

We worked with this client for about six months before she had her baby. During that time, we were able to align her percentage allocations in a way that allowed her to pay herself her full salary for the first three months of her maternity leave. How great is it that she could be fully present for her child without sacrificing her personal finances? When we began, her business was already operating at a nearly profitable level. Our focus was on further increasing her profitability.

 

One of the key steps we took was conducting a thorough evaluation of her expenses. We identified areas where we could reduce unnecessary or excessive costs, which allowed her to allocate more funds toward saving for her own compensation during her planned time off. This strategic approach ensured that she was financially prepared to step away from her business and embrace motherhood. It’s one of my favorite success stories, seeing the positive impact our solution had on her life during such a crucial and special time.

What criteria do you suggest entrepreneurs consider when choosing a bookkeeper?

When selecting a bookkeeper, there are several important criteria to consider. First, it’s crucial to find someone who makes you feel comfortable and who you have a good rapport with. Effective communication is key, so engaging in conversations with potential bookkeepers via Zoom, email, or phone calls is essential. Your bookkeeper should be understanding of where you’re at right now and be willing to help you build new habits to create new financial systems.

 

Additionally, the software that your bookkeeper is important. We recommend reputable online software like QuickBooks Online that allow both you and your bookkeeper access at any time. 

 

Another thing to consider when looking for a bookkeeper is the frequency of communication you’ll have with them. Clearly establish the expectations for how often you will meet with your bookkeeper and when. At Fit for Profit, for example, we typically have quarterly meetings with our clients, although this can vary depending on specific business needs. Regular meetings allow for report reviews and discussions about financial matters and questions you might have. It’s important to find a bookkeeper who not only has the right expertise to help your business but also acts as a teacher, explaining the meaning of reports for you as a business owner. This educational aspect adds significant value to the services provided.

 

By considering these criteria—communication, software used, meeting frequency, and the bookkeeper’s willingness to educate—you can make an informed decision when selecting a bookkeeper who meets your needs and helps you effectively manage your business finances.

How can individuals find out more information?

To learn more about Fit for Profit, I invite you to visit our website at fitforprofit.com. You can also find us on social media platforms like LinkedIn, Facebook, and Instagram. If you’re interested, we have a downloadable overview of our cash flow management system available. Simply go to fitforprofit.com/trendsetter to access the overview and gain further insights into our approach and how we can assist you in effectively managing your cash flow.