Mark and Jesse discuss their most recent read, Never Enough: From Barista to Billionaire by Andrew Wilkinson, a one-time barista and co-founder of Tiny, a holding company that buys and holds businesses for the long-term (like Berkshire Hathaway). At the age of 36, Wilkinson found himself owner of a company worth over a billion dollars, and in a new stratosphere of wealth he had never experienced before. What he found, though, was that the same problems which pervade life in the lower economic classes are still there in the upper crust. The presentation of the problems are different, sure (the middle class aren't generally obssessed with yachts), but the nature is the same -- jealousy, covetousness, ego, etc.    Jesse shares his own experiences dealing with business and financial success while trying to stay genuine and honest.... while cracking some terrible puns in the process.     Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Good gardens require good soil, and good soil takes compost and plenty of time. Jesse shares his experiences composting soil for his garden, and how it applies to business.      Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

The algorithm has come to rule media, and it is a voracious beast. It consumes as much content as people can create, as often as they can create. The ones who rise to the top seem to be those who create the most content, on as many platforms as possible, but what do the economics of this look like? Mark asks the question whether playing the content game is worth it for a business, and if so, what kind of business?   Many would agree that making content purely for quantity's sake, to appease the algorithm and get in front of as many eyeballs as possible, can be a soul sucking endeavour, but not all businesses seem to benefit equally from this type of marketing effort. Some businesses, espcially highly skilled service providers, do just fine relying on word of mouth marketing, and in fact, the more ubiquitous content creation becomes, the more special and valuable word of mouth referrals become.   Books referenced in this episode: Anathem by Neal Stephenson   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse shares one of his recent experiments, inspired by a guest on the Art of Manliness podcast. The challenge was to delete the apps on your phone, especially the ones you feel a "pull" from -- a pull to open it and check it every time you see it (most social media apps would meet this criteria for most people). As Jesse explains, phones don't just suck up your time, they suck up your attention, which is arguably even more valuable. Deleting your apps creates a barrier between your brain and that instant dopamine hit, which can restore some balance to your attention span over time.   It's a simple experiment to try, and the stakes are low. If you really need to access an app, you can always reinstall it, use it for a given task, then delete it again. Chances are, you'll find many apps that you don't need that often.   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

On previous epsidoes, Mark and Jesse have discussed the importance of scarcity, and how limitations drive creativity. Mark even goes so far as to argue creativity can't exist without limitations! YNAB, then, is a tool for viewing reality through the lens of money -- a reality mirror if you like. By understanding the tradeoffs you are making with your money, you can see the truth of your financial situation. Instead of saying "it must be nice" to... fill in the blank -- make more money, spend less on X, etc -- YNAB helps you undertstand the choices you have made and, eventually, ask you the question "am I ok with this?"   As Jesse explains, this is the real magic of YNAB: enabling people to look at their money and see future possibilities, to make decisions firmly grounded in reality, and actively shape their life into what they want it to be. It all starts by taking a look in the financial reality mirror.   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss YNAB's recent price increase, and the psychology of customers around pricing. You can't make everyone happy, whether you justify the price increase by citing your own increased costs or by plainly stating your price increase without explanation or caveat. Jesse points out that some customers that have complained about the price increase have moved to competing software, which has copied (read: stolen) YNAB's look, feel, and functionality.   Jesse's primary lesson is this: it's important for a business owner to know what is and what isn't important. It seems rational to get worked up about copyright violation and intellectual property theft, but that path leads to headaches and large legal bills, if anything can be done at all. In this case, he chooses to ignore the competing software becasue, in the end, they are focused on different audiences. The audience that wants a YNAB clone for less money is a small segment of the market that is very price sensitive. On the other hand, YNAB focuses on the segment of the market that isn't doing anything to manage their money, to help them get their finances under control and deliver value.   As Mark points out, tweaking a product or service solely based on customer feedback can be a slippery slope. You think you are satisfying everyone by responding to various demands, but there's a danger that you end up building a product customized to a small segment of the market that's already bought into your business, and losing the appeal to the broader market that isn't a customer yet.   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse reminisce about the early days of YNAB, and a conversation over lunch in which Mark gave Jesse (what he thought was) sage advice -- to raise prices. Genius right? Jesse recounts how they raised prices in the earliest incarnations of YNAB's product, from spreadsheets to software to software-as-a-service. He also candidly breaks down a price increase that was poorly communicated to the YNAB team and to customers, and which tarnished the brand for a time.   Meanwhile, Mark kicks around the idea of lowering prices in his business!   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

After a conversation about using ChatGPT to organize the weekly recipe calendar for the Mecham household, Mark and Jesse talk about the concept of letting go of control in a business. Mark posits an idea: you can have control or you can have growth, but not both. And Mark hates it! Jesse draws a distinction between control of the business -- that is, controlling the mission of the business and the goals employees are striving for -- and micromanagement, where the business owner retains control over not only what things get done, but how they get done. Micromanagement, they both agree, is bad for both the employee, manager, and the owner.   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the role of customer service in a business, and how the alignment of customer expecations with the business owner's strengths (or working genius, if you like) is crucial to customer satisfaction and avoiding burnout. Mark shares an example from his virtual CFO business, which was highly profitable but making him miserable as his promise of what he would deliver was out of alignment with the type of work he enjoyed and thrived on. Jesse recounts a months-long ordeal getting his new car repaired, which ended on a good note -- a shop manager that took accountability for the mistakes of the business and personally took steps to re-align his customer service with Jesse's expectations.   Mark Butler The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss Patrick Lencioni's The 6 Types of Working Genius, a book exploring various personality types and the kinds of work most suitable to each. It's more than a personality test however! Lencioni's model assesses people according to their genius, competency, and frustrations in six areas: Wonder: The natural gift of pondering the possibility of greater potential and opportunity in a given situation Invention: The natural gift of creating original and novel ideas and solutions Discernment: The natural gift of intuitively and instinctively evaluating ideas and situations Galvanizing: The natural gift of rallying, inspiring and organizing others to take action Enablement: The natural gift of providing encouragement and assistance for an idea or project Tenacity: The natural gift of pushing projects or tasks to completion to achieve results   Mark and Jesse share the results of their assessments -- their areas of genius and their areas of frustration -- and how they have seen these things manifest in problems in their own businesses. They also discuss how understanding your genius and frustrations (notice the word frustration is employed, not weakness) helps to focus your efforts where you will be most impactful, and ultimately build better, more effective teams.   The 6 Types of Working Genius Assessment: https://www.workinggenius.com/?gad_source=1&gclid=Cj0KCQjw0ruyBhDuARIsANSZ3wriydJmSn6fd5XTmzV-EF7jo6HeJf5swq4XvPmOtW7fzv2REGhNlcAaAt9oEALw_wcB     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

In today's episode, Jesse discusses his net worth tracker, a basic spreadsheet in which he records the balances of his investments and other assets quarterly. For Jesse, net worth is the scorecard of personal finance -- it's a way of keeping track of what direction you are going with your money. However, scorecard is an impersonal way to describe net worth, perhaps even suggests that one's value is tied to net worth. This could not be further from the truth! There's a lot more to a person than their net worth, but net worth does tell an important story about a person's money, and money is a vital part of a person, even if it's not their whole self.   As Mark has observed during his time coaching people to manage their money, people that routinely spend beyond their means -- that is, accrue negative net worth -- have allowed their desire for consumption to exceed their ability to consume. Their net worth represents a person who is out of touch with their tradeoffs. As Mark has mentioend in previous episodes, YNAB is all about making your tradeoffs crystal clear, and learning to love the choices you make to bring your money in alignment with your priorities. In short, learning to love your spending.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

In today's episode, Mark and Jesse discuss money as a concept, why it exists, and how trade (using money) has created tremendous value for humans throughout history. On the YNAB Podcast, Jesse has spoken about money being far more than a tool, however, and really an extension of one's self -- one's energies and desires. Mark and Jesse then attempt to connect the dots to our modern monetary system, where debt and inflation loom large. What exactly is it about money is essential to human flourishing?   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark kicks off today's episode with a handful of words, hoping to weave them into a broader discussion: vision, goal, strategy, plan, and tactics. Mark and Jesse discuss how many small business owners look for tactics first, various tasks focused on operations: posting on social media, starting a YouTube channel, building an email list. These may or may not be worthwhile activities -- you really need a strategy to understand the big picture of where the business is going (or needs to go), and then select the activities that will get you there. But even then, strategy is hollow, Mark argues, unless there's a why behind what you do. Unless the company has a clearly defined core identity, it will struggle to adopt a good strategy.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

In today's episdoe, Mark and Jesse discuss the importance of developing good systems, not just in business but in life! Mark shares a recent experience in which his wife left for a few days on a retreat, leaving Mark to handle her usual duties. Mark was faced with a lack of systems in day to day tasks, and enough friction to sit her down after the retreat and have a talk about family systems. Kate agreed, and, within a few weeks, became a systems expert, looking for every avenue she could find to create better processes.   Good systems aren't just for increasing business profit, they're for improving quality of life, relationships, and family harmony too!   The Goal by Eliyahu Goldratt and Jeff Cox https://www.amazon.com/Goal-Process-Ongoing-Improvement-dp-0884271951/dp/0884271951/ref=dp_ob_title_bk     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse ponder the question -- what do you do when growth slows and the business plateaus? Mark recalls a story about a successful businessperson who failed at several ventures before striking gold, and notes that the "gold" business was never hard. It grew a lot early on, and continued to grow steadily from there. He juxtaposes this result with some of his clients who spend hundreds or even thousands of hours working on a business, yet never really take off. There were signs of sucess early on in the good business, and likewise there were not signs of success in the failed ventures. Looking for signs of success is a good indicator of whether a business has legs or not. If you don't see any, it's a good indicator that your time is spent elsewhere!   Antifragile by Nassim Taleb https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto-ebook/dp/B0083DJWGO/ref=sr_1_1?crid=JMRX5RI5RNZ8&dib=eyJ2IjoiMSJ9.C3e4IagEiQHRzgC0W8S0KkU1s2tYPbhDWivIreUIOtwe2xEXBRSw7sYgY8vGAZxpOF13z-5F3MCQJ00OZnI2iuM5RFHBnnqqX5yeUs348hp-T297HGOx2e0-cQ-XPjqTBF2D8WYJx5Kt0LCnHhsFfmbdwGDgxb3pwniTQYHi71ahb0q4CkhWvUHmByV0dJqUkoIHy2PEFt18GVXgLjePclPH4zK4uOKDXX14x9cdoAc.MlGqTaeOx35qrIkulkswcuGJuF4GOAXfSoFOGSpA4z8&dib_tag=se&keywords=antifragile+by+nassim+taleb&qid=1710465424&sprefix=antifragile%2Caps%2C102&sr=8-1     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

People have been hemming and hawing over the value proposition of college for years now, and in 2024, the value that a bachelor's degree offers is more questionable than ever. Mark and Jesse, both with teenagers staring down the barrel of college (or not) in the next few years, share their thoughts on the subject. As Jesse argues, the purpose of education is "to learn how to do something, when you don't know how to do something." As Mark points out, the resources for self-education are more prolific than they've ever been, meanwhile critical thinking in school appears to be as low as ever.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

We usually talk about stress as something you need to reduce, or recover from. But there are different types of stress -- good stressors and bad stressors -- and sometimes stress drives us to accomplish things and innovate when we otherwise wouldn't. To that end, Mark and Jesse discuss Morgan Housel's book Same As Ever: A Guide to What Never Changes, in which Housel outlines the way stressors and risk taking drives us to grow achieve new things. Mark also shares a recent story about how the stress of a bookkeeping sprint at work provided the spark for him to write new software to automate a key process in his business, and save a lot of time as a result.   Other books mentioned in this episode: Endurance by Alfred Lansing The Psychology of Money by Morgan Housel     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse defends the New Years resolution, and offers up of his own resolutions for the year, namely being kind. Mark resolves to try really hard, and be a better friend.   Harvard study on men's happiness (started in 1938!): https://www.health.harvard.edu/blog/the-secret-to-happiness-heres-some-advice-from-the-longest-running-study-on-happiness-2017100512543   Musical interlude courtesy of Kevin MacLeod: "Investigations" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 4.0 License http://creativecommons.org/licenses/by/4.0/     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark shares a trend he has become aware of in his business: his highest revenue clients are also his least time-consuming clients, and thus his most profitable clients. On balance, the clients who pay the least under his sliding scale fee structure end up taking the most time to process. This discussion begs the question -- when do you fire a client?   Jesse hashes out some ideas for a new fee structure so that Mark can retain higher-touch clients while incentivizing them to comply with the best practices that make them easier to process. They discuss the importance of focusing on the client's emotional state and how changing their behaviors to comply with Mark's system (such as opening accounts at banks that are easy to query for data, and minimizing the total number of accounts) can bring them value by reducing stress and increasing insight into the trajectory of the business.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark shares a recent conversation with a client fixated on "diversifying" her business, which to her meant expanding her coaching services from 1-on-1 to group coaching. Diversification is one of those concepts that sounds wise (of course you should diversify!) and is a bedrock concept of investing. However, as Jesse points out, what most people think of as diversifying is really just expanding -- expanding product and service offerings, introducing new price points. The expansion still serves the same market. True diversification is decoupled entirely from the product or service, like using excess earnings to buy Treasury bills. The value of T-bills is independent from the performance of the business.   There is nothing wrong with expansion! It's natural as busineses grow and accumulate more institutional knowledge to seek out new opportunities to leverage that knowledge. But it's not diversification. That prompts Mark and Jesse to ask the question, why? Why do you want to diversify? What's the thought behind the thought? The answer can reveal the true nature of the problem -- maybe the business owner is worried about some risk exposure in the business and is trying to sidestep solving that problem (or perceiving the problem to be bigger than it really is), or perhaps the owner is simply bored and looking for a new problem to solve.   Whatever the answer, before you take steps to diversify your business, understand the why behind the motivation so you don't end up merely distracting yourself from the core business.     Acquired Podcast on Costco: https://www.acquired.fm/episodes/costco     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse shares a conversation he had with the YNAB executive team about spending (and giving) with joy, and Mark relates how many business owners struggle with this problem. Mark also shares a recent talk with a client agonizing over an upcoming vacation, which he believes will require him to make poor financial decisions. As Mark has coached him through the process of planning for the vacation and saving cash beforehand, he has been able to navigate through his all or nothing feelings -- the idea that you either enjoy life or be financially responsible (at the expense of enjoyment). There is a middle way!   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse actually read the book (almost)! After completing most of the book recommended by a listener, 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less by Dan Sullivan and Benjamin Hardy, Mark and Jesse share their thoughts on organizing your business and your life to harness your "unique ability."    Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

A listener requested Mark and Jesse comment on the book 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less by Dan Sullivan and Benjamin Hardy -- and they happily oblige! Except... they haven't read the book. Yet. Nevertheless the title is thought provoking, and they debate the merits of growing a business slowly vs growing quickly, as well as the difference between doing it as a startup vs a mature business. Jesse shares his experience 10x'ing YNAB over the years, and how the challenges of the business scaled with his own vision and expectations for the company.     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse share a snippet of a long conversation about the nature of opportunity cost in budgeting. They broadly divide people into two different personality types: the accumulators who diligently follow the rules of budgeting and amass cash, and the spenders who focus purely on what that cash can buy them -- experiences, memories, mementos, etc.   Both camps face a hard challenge in budgeting. The accumulators may have a lot of cash, but at what cost to their relationships? What opportunities did they miss or forego to continue accumulating wealth? On the other hand, the spenders face a very concrete cost, that is, the money that they spent to acquire the things they wanted. Perhaps they lack financial stability, or safety, as a result of their spending. Either way, the hard work in budgeting really boils down to understanding what cost you bear in your spending decisions. The above examples are the extremes of a spectrum, but wherever you fall on the line, there is a cost to your current behavior, and understanding that cost -- and aligning that cost with your values and priorities in life -- is the key skill to a fruitful financial life.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark explains his unique system for managing his day to day tasks after years of struggling with ADHD. For Mark, it's all about managing his energy and honoring his mindset in the current moment. If the "dirt pile" calls (his affectionate name for an ongoing earthmoving project in his backyard), then that's what he does, whether or not it's the "best" or most important use of his time in the moment. Over the years, Mark has learned that allowing himself space to indulge in physical tasks often has the benefit of settling his mind and, therefore, putting him in a good headspace to tackle bigger, more stressful business challenges. For Mark, productvitiy follows his headspace.   Jesse, on the other hand, has a very different style for getting things done. Jesse is a man of systems, and he's also a man with a long to-do list. He mentions how in the past he has been called out for letting tasks slip or needing reminders to follow up on things. So for Jesse the priority is making sure that tasks don't live in his head, but are organized in a good system. He likes David Allen's Getting Things Done (GTD) productivity system, which asks a person to first organize and sort through their list of tasks before tackling them. With a good categorization of tasks in place, it becomes easier to execute tasks at the time and place when you can do them, rather than relying on your mind's own reminder system which often reminds you when you can't do anything about the task! Jesse adds a weekly review to his process, to make sure he's working on things that matter -- in business and personal life -- and not avoiding challenging tasks by filing his day with low-level admin work.   The takeaway? People can get things done with very different approaches. One key to figuring out what will work for you is to recognize and honor who you are. As Mark's mentor says, you can't will yourself to be the kind of person who systematically categorizes and organizes tasks if that's who you are by nature. Once you accept that, then you can find the system that works for you.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse answer a listener question about how to run more effective meetings, particularly for introvert-heavy groups. Jesse talks about the importance of ice breakers (although you don't have to call them that) and standardized meeting structures across the company. Mark and Jesse also discuss some new books on their reading list, including a book about the keys to longevity.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark poses a question -- how much knowledge about money does someone need? As in, how much time and energy should one devote toward investing, planning for future needs and problems, and other future considerations? Jesse offers some examples of how people often seek assurances, guarantees that their future income (and circumstances) will be safe. The reality, however, is that if you are in business, or even if you are an employee in a business, you are taking risk, and that risk cannot be mitigated to zero.   One takeaway from this conversation is that when you live within your means and create financial cushion in your life, you leave yourself open to take advantage of future opportunities. And as Jesse points out, the personal bleeds into the business. Business IS personal. So the same thing holds true for both the business' balance sheet and the business owner's balance sheet. When there is ample cash on hand and the owners live well within their means, the business can take more risks and take advantage of opportunities that would have been closed otherwise.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark provides an update on his son Charlie and his budding mechanic career, and voices some concerns about his continuing to work at the auto shop. Charlie made some good money replacing brakes on a family friend's vehicle, and is considering making the jump to a mobile auto service business (as Mark and Jesse first discussed in Episode 79).   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the process of setting compensation, salaries, bonuses, and communicating those effectively to the team. Compensation is a touchy subject. Businesses want to incentivize employees to perform at a high level and reduce turnover by compensating them well. Employees need to feel like they have space to grow their skills and capabilities in the organization, and be compensated accordingly. And many business owners want their employees to be happy and feel fairly compensated, out of care for the people they have grown close to and relied upon to build their business. Therein lies a minefield, however!   Jesse argues that compensation, including salary, benefits, and bonus, carries a lot of information and expectations. Business owners should set compensation based on market rates for a given role, discounted to what the business can afford (both what the business can afford to pay and what amount of turnover the business is willing to accept if they pay significantly under market). Business owners should NEVER compensate out of a sense of charity, generosity or to "share the wealth," epsecially with unplanned bonuses. While these things can seem great in the moment, they can cause serious confusion for employees. Why did I get this? How do I get it again? Should I expect this every year? If I don't get it next year, does that mean I'm performing poorly, or the business is doing poorly? There are many pitfalls to basing compensation on something other than the cold hard facts of market rates and clear job descriptions.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

...probably comes from doing more of what you're already doing, not a new venture or even a new product. But Mark and Jesse have talked about digging trenches already. Today they ask the question, is it enough for a business owner to put their head down and just dig more trenches? When do you look around, observe broad trends in your industry, and react to those? It's a balancing act, with risks on both sides of the question.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse dissect the culture of striving that pervades American society, in businesses and consumers alike. There seems to be a tacit assumption that all business should be about more -- growing more, making more money, etc -- and you don't have to look far to see the same mentality in consumer culture. In fact, it's the heart of the economy! The desire for more is endless, a hole which can never be filled. So, how do you figure out what is enough?   Mark and Jesse have encountered peers struggling with this question, and have noted that limitations can be freeing. If you simply tell yourself that what you have is what you will have forever, you create boundaries and limitations which actually spur creativity and help you figure out what you really want (not just want other people say you should want). Mark uses the house as an example on the consumer side. What if you said to yourself, this house that you are currently in is it -- this is the house you will own and live in until you die. With no possibility for moving in the future, or building something else, you're free to think about what you don't like about your current house, and what you would change. Maybe there are some things that you dream about having in a future house, like a pool, that you discover you are fine without. Or maybe you can't live without one and must find a way to put one in!   It's a useful creative exercise to get closer to answering the question -- how much is enough?     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark shares a difficult personal situation he and his family have been dealing with, that has signficant financial ramifications. Recently Mark's wife was diagnosed with cancer, and she has undergone chemo treatments and a litany of medical tests. As the medical bills continue to pile up, Mark finds himself having to float tens of thousands of dollars in costs while he waits to be reimbursed by their health sharing plan.   While this can be a very scary proposition, he has found peace and security in the YNAB process. Most importantly, Mark says, YNAB tells him the truth about his financial situation, neither catastrophizing nor softening the ramifications of unexpected large medical bills, and that clarity has been critically important to making good decisions and maintaining sanity.     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

It's happening! Mark's son is taking the step toward business ownership. His plan is to leave his job at the auto shop behind, and start a mobile oil change business. Mark and Jesse discuss some of the challenges of pricing his service, establishing a recurring revenue model, and marketing to the most influential groups he has access to.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse shares a recent situation that would have sent shivers through most owners. Following a revision in the tax code regarding software R&D costs, YNAB discovered it would be facing down a huge tax bill, over triple what they anticipated for the year. While this might bankrupt some companies, Jesse and the executive team were able to take the news calmly, and use the company's cash reserves to easily handle the tax bill.   It's a triumph of cash over the unexpected, and a YNAB success story!   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

What if all your spending... was actually borrowing? Ok, well not ALL your spending, but those situations in which you pull money from one category of your budget and apply it to another. Jesse gives the example of going to a special dinner at an exclusive restaurant. Reservations are very difficult to get, and you finally get one when someone else cancels -- but it's tonight. And you don't have the cash available in your restaurant category! So you move money from another budget category to cover the expense, because this is your only chance to go to dinner. We all run into these situations from time to time. Maybe it's not a fancy restaurant, but situations arise where you have to spend money now or forego an opportunity forever.   YNAB does a good job of making you aware of the tradeoffs. When you move money from, say, car repairs, to cover the restaurant expense, you must acknowledge that your car repair category is now underfunded, and that you'll have to replace that money later. Essentially, you're saying that "future you" will figure it out and generate the cash needed to replenish that fund. Jesse takes this a step further. Really, even though you "had the money" because it was in your budget, you still borrowed from future you -- because you created a liability which future you must take care of.   You didn't actually take on debt per se -- you didn't charge a credit card or take out a loan -- but you did borrow the money, from yourself. In that sense, everything is borrowing. Mark and Jesse explore the implications of this line of thinking, and how YNAB could better illustrate this concept.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse answer a question from Beginning Balance listener Allison (thanks for listening Allison!). Allison asks: what do you do when you get paid? How much should you set aside for taxes and retirement savings?   It's a great question, and many business owners struggle with this. Mark and Jesse explain the concept of "profit first" and why the business should pay you first, then take care of bills and expenses. As it turns out, using YNAB makes this process easy to implement in your business, but profit first does require some patience and discipline. Starting with a small percentage of profit (Jesse offers a few ways to calculate a good profit percentage to distribute) and slowly increasing that amount over time keeps you from overreaching and distributing too much money, which you might have to contribute back to the business in the event of unforeseen expenses. A slow and steady approach also gives you time to dial in your budget, and plan for future expenses as well as build up reserves for unforeseen expenses.    Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com  

On the previous, Mark shared a recent experience about letting an employee go. Not long after, another team member left for a great opportunity at another company. On a small team like Mark's, the loss of two employees back to back poses a big problem, as the workload gets spread to the remaining employees (a BIG increase) and some institutional knowledge is lost. Even with great systems and documentation, there's always some amount of institutional knowledge lost when an employee leaves, not to mention it takes time for their replacement to get up to speed.   This experience of picking up the slack, including both high and low skill work, got Mark thinking -- the curse of a small team is that skilled labor can leave for better opportunities, in which case the remaining skilled labor ends up doing a blend of low and high skill work. Ultimately, the business ends up paying skilled wages for work which is not entirely skilled, cutting into margins.   With this new revelation, Mark describes his plan for moving all low skill tasks in his business to lower skilled, lower wage employees, and why it's critical that businesses strive for this efficiency.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

It's not a fun part of the job, but sometimes you have to let employees go. Mark discusses a recent experience, and why, in retrospect, he should have acted much sooner. Jesse shares his thoughts on when, and why, you should let go of team members, when it's clear they aren't a good fit with the organization.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse consider the wave of AI technology that is rapidly being deployed in a number of industries. Whether it's the dreamlike collage-art of Midjourney or ChatGPT's pedantic essays based on conversational prompts, AI seems to be on everyone's lips these days. What remains to be seen is how quickly -- and broadly -- it will impact businesses. Mark and Jesse both agree, though, that now is the time to consider how it might impact your business and how you could make use of it.   Jesse offers a simple exercise to get started -- write down (without Googling!) every way you can think of that AI could replace or perform some aspect of your business. Write each idea down on a sticky note, and as you amass a lot of sticky notes start to organize them, arrange them into categories, and see what patterns appear. At the very least, this exercise can help you start to understand better what your business is, where and how AI can help or hurt your processes.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse and Mark return to their credit card debate from episode #69 (recorded last year in 2022) and discuss how business is going with using a credit card. Jesse went cold turkey and stopped all use of credit cards, while Mark kept a card for just a couple recurring transactions, but greatly reduced his usage.   The consensus? Even though YNAB attempts to treat credit card spending the same as cash, because you have to set aside cash to cover the credit balance, it's NOT the same as cash. Even if you diligently set aside cash to cover your credit card expenses, until you actually pay off the card... well, the card isn't paid off! There's mental overhead in having to set aside cash for purchases as they occur, while also remembering to pay off the card. And while it may seem small, Mark and Jesse were surprised at the impact it had on their thinking and emotions around money.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse share their New Year's resolutions for 2023, and why their goals and plans are getting simpler as time goes by. One common goal for 2023? Mark and Jesse are recommitting to YNAB, and ditching the credit card.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse have discussed the advantages of being cash focused since the beginning of the show -- such as episode #3: Your Cash Is Your Strategy -- and part of being cash focused is not being focused on debt, or using debt to fund business operations. Most followers of YNAB can agree with this outlook, however credit cards fall into a grey and sticky area.   Jesse contends that credit cards actually pose a number of problems, even for people who use them "responsibly," that is, pay them off regularly and never carry a balance or pay interest. His main problem is the fact that banks push them so hard -- there must be an incentive to have people transact with credit cards rather than with debit cards or cash. Of course, banks and payment processors make money with every swipe, about 3% of the transaction value in fact. As credit cards have become ubiquitous, this transaction cost has been baked into the price of goods, too.   Jesse also cites some research that revealed spending with credit essentially provides you with a dopamine hit similar to what you get just buying things. Credit is an appeal to the lizard brain, the idea that you are getting something without giving something. Of course you are giving something, just not yet. It's the "not yet" part that short circuits our brain. And this psychology often leads us to simply spend more than we would otherwise when we use credit cards.   So, can you stop using credit cards in your own business and personal life? Mark and Jesse are going to give it a try in 2023, and see what happens...     Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

The beginning of the year brings for every business owner a familiar feeling... worry and fear about taxes. Even for those putting in an honest, good faith effort, it's not always clear that you've done things 100% correct. There's also the lingering worry that somehow, the IRS is going to show up in dark sunglasses one day and start tearing through your records.   Jesse's strategy for managing this is simple. Do your best with your taxes, then stop worrying. The only absolutely wrong move is not to file your taxes (which tax lawyer Casey Murdock stated in episodes 16 and 17). In the instances in which Mark and Jesse have been involved in IRS situations, the agents have been helpful and open to finding a quick resolution -- they are human after all.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

There's a lot of doom and gloom in the media these days, more than usual, that is! Inflation, recession, war... there seem to be many reasons to be negative about business outlooks in the coming year. But what are you going to do about it? Is it even helpful to think about this stuff too much?   Jesse relates a recent experience talking to a reporter about business conditions, generational finance issues, and predicting the future, which kicks off a discussion with Mark about the futility of ruminating on the negative.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the idea of "moats" in business, that is, the things which both give your business a competitive edge and also make it difficult to replicate. Too many budding entrepreneurs become enamored with building apps and software tools for their business, thinking that the app is the thing that makes them unique.   Software is very rarely a moat, however, or even unique. It's usually just a tool for aiding the real business, and focusing too much on the tools without executing the business plan is a recipe for failure. Mark and Jesse discuss the moats in their own businesses, and analyze some of the mistakes they've seen other entrepreneurs and business owners make.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse answer a listener's questions about whether Jesse knew that he was onto an idea that would positively impact so many people when he started YNAB. They also discuss what new projects -- in business and in life -- they have on the horizon for the coming years.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse ponder the question: what makes (and keeps) employees happy? While Jesse doesn't like the term "happy," there are definitely some strategies to keeping employee morale high and making jobs more fulfilling. Jesse references Dan Pink's book "Drive" and his concept of AMP -- autonomy, mastery, and purpose. If a job can offer these things to an employee, chances are they are going to find fulfillment and satisfaction in their work.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the idea that all businesses really transact in information. Whether the business sells goods or services, no matter the field or industry, ultimately there is information behind all products -- how to make the product, how to market and sell it, how to support it, etc. With that revelation, the concept of standardization becomes very important. Standardizing processes and protocols lowers the cost of information transaction, and increases the profitability of the business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the importance of preserving institutional knowledge when employees inevitably leave and new ones join, and how that can (and should!) be baked into the normal functions of the business. As Jesse puts it, nothing in business is ever "one and done." Every process requires regular updating lest it fall prey to the law of entropy and important business knowledge gets lost.    Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss a new term that is making the rounds on social media, and recently got the Wall Street Journal treatment as well. "Quiet quitting" is the so-called trend of dissatisfied and disillusioned workers exerting bare minimum effort and working as little as possible to keep their jobs, without actually quitting. The employer side to this has been dubbed "quiet firing," that is, keeping an employee but giving him less work, fewer hours, and generally making the work experience worse in hopes that he will quit of his own volition.   Mark and Jesse discuss whether this is a "thing" or just a spin on the victim mentality, which is unforunately all too common among employees and employers alike. Jesse references Jocko's Extreme Ownership, and why it's equally important for team members to "lead upward" as it is for managers to "lead downward."   Wall Street Journal article: https://www.wsj.com/articles/quiet-quitting-firing-productivity-paranoia-11664390490   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse set their sights on Rule Four as they contemplate the first principles, or the foundational ideas, behind YNAB's Four Rules. Rule Four has evolved over the years from pay today's bills with last month's money to, simply, "age your money." But the age of money, while a useful statistic, can be confusing.   When you spend money on things that you've budgeted and saved diligently for, your age of money goes down. You are punished for doing the very thing that budgeting is for, in a sense. So while an increasing age of money is a good thing, it's not the point of budgeting. In fact, if you're age of money only increased, then you have missed the entire point of budgeting, which is to spend money on the things you value!   As Jesse puts it, age of money represents increasing options. But at some point increasing your options more and more (by accumulating more and more cash) becomes never making a decision. So, Jesse instead posits that the age of money is a separation between desire for something and fulfillment of that thing. By separating the desire from the spending, you become aware of your options and are thus better equipped to make good decisions. Age your money... age your desire!   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse ponder the philosophy behind Rule Three -- roll with the punches. At the end of the day, it's just flexibility! Jesse also takes issue with the concept of "overspending."   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse continue their philosophical musings over the Four Rules by considering the essence or first principle of Rule Two -- Embrace Your True Expenses. Some people have taken YNAB's position to be "we don't forecast," but Rule Two is all about forecasting. The idea here is to forecast your expenses, while only allocating dollars you have right now to those expenses.   There's a great reason for this. The dollars you have right now are real; they exist in your bank account. The known expenses you have in the future (like your water bill) are real too, you will owe them and they can't opt out of them. So it makes sense to budget with those numbers. Dollars you will make in the future aren't realized yet, so we don't budget them. YNAB does have targets to help budgeters plan for future dollars, but they aren't budgeted until they come in.   So, Rule Two is indeed about forecasting, and the first principle of Rule Two is forward thinking. Rule Two requires you to imagine yourself in the future, paying bills that you are racking up today but have not been billed for yet, and plan for those today, in the present. Doing so helps train your mind to then consider future expenses which have not been incurred yet, so you can make better decisions about allocating your dollars today.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse revisit YNAB's Four Rules to explore whether there's a deeper, more universal concept underlying them. It's often been said that Rule One -- give every dollar a job -- is about aligning your money with your priorities. While that is true, there's a deeper truth. Rule One is really all about tradeoffs, or opportunity cost, in that when you give a dollar a job, it then ceases to do every other job which it could have done. The tradeoff reveals the priorities, or value set, of the budgeter.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Thinking about taking the plunge and running your business on YNAB? Mark and Jesse covered the many benefits of doing so on the podcast in first episodes of Beginning Balance. Today, Mark goes deep into his onboarding process for new clients in his bookkeeping business, which uses YNAB for every client's financials.   As Mark details, if you get the onboarding process right, once you get to "maintenance" mode with your financials it's so smooth and fast to generate financials and know exactly where your money is at. The key to onboarding is in the details, getting your bank transaction import working smoothly (this may require changing banks!), setting good payee rules, creating expense categories for tracking different revenue streams (yes expense categories!), and choosing appropriate categories to feed into your P&L.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Data from annual PWC-led surveys, as well as YNAB's own surveys, make it clear that employees carry their financial stress into the workplace with them. In some cases, it simply results in less-happy employees; in other cases, more requests for paycheck advances and payday loans. Either way, it's a drag on workplace morale and relationships between employees, their employer, and their family at home (family relationship stress is often tied to money stress).   YNAB has developed a solution to workplace financial stress, called Financial Wellness. Financial Wellness allows businesses to provide YNAB to their employees as part of the benefit's package, with all the usual support, workshops, and other budgeting training that YNAB offers to direct customers.   Jesse discusses the Wellness service, the feedback received during the pilot program and beta testing, and how YNAB is positioning itself in B2B sales.   Financial Wellness by YNAB: https://www.youneedabudget.com/wellness/     Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse ponder the question, "when should you retire?" While many sources float out the 4% Rule, or some variation of it, that states you can pull out four percent of the value of your retirement portfolio each year without running out of money. The debates about the validity of the rule in current market conditions, and the withdrawal rate, are endless, but as Mark and Jesse observe, the decision to retire is an emotional one. At the end of the day, life is uncertain, and a person has to decide that they are comfortable enough with the value of their assets, their lifestyle, and their prospects to wake up one day and not go to work on Monday morning.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse field a question from listener Jose, who asked what he could do to improve the communication between his team during meetings.   Revising Prose by Robert Lanham https://www.amazon.com/Revising-Prose-5th-Richard-Lanham/dp/0321441699/ref=sr_1_1?qid=1656859182&refinements=p_27%3ARichard+Lanham&s=books&sr=1-1&text=Richard+Lanham   The Five Dysfunctions of a Team: https://www.amazon.com/Five-Dysfunctions-Team-Leadership-Lencioni-ebook/dp/B006960LQW/ref=sr_1_1?keywords=5+dysfunctions+of+a+team+book&qid=1656858556&sprefix=5+dys%2Caps%2C68&sr=8-1   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Let's say you needed some money, and you wanted to start a business with minimal lead time and startup cost. What would you pick? Mark and Jesse discuss the scenario, and lay out a strong case for starting a service business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Businesses are concerned with profitability, and rightly so. If the business can't turn a profit, it can't stay in business very long! Calculating bottom line profitability is a fairly straightforward operation, but what about calculating the relative profitability of individual product lines or services? This is where things get complicated, and interesting!   Every product or service costs something to make or provide. There are fixed costs, such as machinery, tooling, and computers, as well as variable costs, like raw materials. These are fairly easy to measure and track for each product and service. But making different products or services also has additional costs, such as time (for setting up tooling and equipment to make a product, or for executing the tasks required for a service), as well as opportunity costs -- i.e. time and materials spent making this product are time and materials not spent making other products. So, how do you account for all that and determine which products and services net you the most profit?    Enter managerial accounting, which uses several processes to help you measure profitability in a variety of ways, including contribution margin and breakeven analysis. It turns out, accounting is pretty awesome!     Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss the "curse of the superstar employee," that one person in your business that you can't imagine living without. The employee that does every task better than everyone else (probably faster too), with enthusiasm. While these are great people to have on your team, they can become bottlenecks for growth -- especially when they take on too many tasks, and too much minutiae in the business. Of course, there's a major operational risk to allowing superstar employees to "own" too much of the business' process. If that person leaves, or is out on vacation, there may not be anyone who can fill in the gap.   Mark and Jesse identify signs that you may be working under the curse of the superstar employee, how you can hire a stronger team with better processes, and develop your superstars into higher-level thinkers and managers.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Employee theft and fraud happens in the business world all the time, from theft of office supplies to slipping cash out of the register to massive multi-million dollar embezzlement schemes. Most of it happens, unfortunately, to small businesses, which often lack the sophsitication and manpower to prevent and detect fraud.   Jesse has a few easy to implement strategies for preventing most common fraud that could occur in your business. Controls, authorization, and review custody of assets and accounts, or ARC for short. Setup your employees with good controls for spending company funds, proper chain of authorization so that no one person controls company assets and expenses, and periodically review those expenses.   With a few steps you can not only prevent fraud in your company, you can also be kinder to your employees by not putting them in situations where their actions could be construed as potentially fraudulent.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Can you imagine it? Mark and Jesse discuss Cal Newport's book A World Without Email, which urges workers, especially knowledge workers, to rethink their work in terms of process and systems. Good processes make us more efficient, but more importantly they allow us to engage in deeper work and be more creative as a result.   Good processes and systems don't just happen, however. Typically they are emergent, and it is so easy to fall into a mindset of "it's working, and I always do it this way, so let's keep doing that." If you can develop a mindset that process improvement actually results in better and more impactful work, however, then you can start to see all the processes in your business as opportunities for growth.   A World Without Email by Cal Newport https://www.amazon.com/gp/product/0525536558/ref=as_li_qf_asin_il_tl?ie=UTF8&tag=stuhac-20&creative=9325&linkCode=as2&creativeASIN=0525536558&linkId=b21bad29be593b14442630aa5d3e5612   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse answer a question submitted by a listener wanting to know if he could run his coffee shop books in YNAB? Jesse has recommended in the past that businesses with inventory run YNAB in parallel with their normal bookkeeping software, but he and Mark agree that a coffee shop, although it has inventory, is a great candidate for YNAB.   Question for Mark or Jesse? Email the show at [email protected]   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark shares his practice of taking quiet days, quiet weeks, and (eventually) quiet months to find clarity and focus on bigger questions and problems. Jesse explains why YNAB recently decided to implement a four day workweek, and how scarcity of time can actually drive productivity.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark recounts a recent conversation with a client in which she wanted to create a profit sharing arrangement with an employee who had previously only worked for a standard hourly rate. The idea was that the profit sharing would incentivize this employee to do a good job, since the better the product sold the more money she would make, thereby "aligning" her compensation more closely with the company's goals.   While in principle this is a good idea, Mark and Jesse both point out the dangerous precedent this kind of arrangement can create. For better or worse, hourly employees that receive extra compensation in the form of a profit share will come to expect that extra money. When it doesn't come, or the amount is less than normal, employees may be left wondering whether it was their fault, their work was not up to par, or perhaps the company is in trouble. At the very least, once some form of bonus compensation (whether it's an actual bonus or a profit share) is paid out regularly, it becomes difficult for a company to NOT pay it out going forward without upsetting or confusing employees. It's a precedent that is difficult to walk back in the event the company can no longer afford it.   However, the principle of the idea is still sound, and in the right situation it can be a great way to align employees and business partners with the interestd of the business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark explores his anxiety around staying in the same business for several years, and why he has finally come to peace with staying in one lane and executing his book keeping business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Thinking about a business partnership? Well, think long and hard about it, because entering into a business partnership is a lot like entering into a marriage. Good partnerships require effort, resources, and a high level of emotional intelligence. Put simply, they add a lot of complexity to the task of running a business. This doesn't mean they aren't worth it, but Mark and Jesse urge extreme caution before getting married to your partner!   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse explain how you can incorporate YNAB and the Four Rules into your business without changing your accounting software and without making your accountant grumpy!   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

At some point in their growth, most businesses will need to hire additional help. Often businesses begin by hiring contractors to offload some of the operations from the owner, which are paid as contractors and issued a 1099. As the business continues to grow and the need arises for full-time team members, those contractors sometimes become defacto employees, and therein lies the trap!   It's vitally important to understand the difference between a W-2 employee and a 1099 contractor. The tax consequences are too great to guess and potentially make a mistake! Mark and Jesse break down the differences, and offer some thoughts on the pros and cons of employees and contractors.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com      

Mark points out that liabilities on the balance sheet don't necessarily reflect all the liabilties a business (or an indivudal) has. Following Rule Two (Embrace Your True Expenses), there are known long-term, non-recurring expenses that will come up in a business. Operating with no debt on the balance sheet is a wonderful thing, but without sufficient reserves for those non-recurring expenses... Mark argues you are still carrying debt. It's just unrealized debt.   It's not on the balance sheet yet, but it will be without running a surplus and creating reserves to pay for the expense. This concept  lies at the heart of the YNAB budgeting philosophy, but many businesses fail to embrace their true expenses and end up creating future debt liabitlies for themselves. Mark and Jesse discuss strategies for identifying these true expenses and building appropriate reserves for them.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse share their personal investment asset allocations, and discuss the role of risk, risk tolerance, and emotions in the investing life of a business owner. Jesse explains how his personal risk tolerance has changed alongside the growth of YNAB, as his net worth became more and more tied to the value of the company, and how that has influenced his ultra low risk investment portfolio.   Books mentioned in this episode: The Little Book of Common Sense Investing by John Bogle The Four Pillars of Investing by William Bernstein A Random Walk Down Wall Street by Burton Malkiel How I Invest My Money edited by Joshua Brown and Brian Portnoy   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse tackle the common business saying: "if you're not growing, you're dying!" Is that really true? And what exactly does growing and dying mean exactly?   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Do you cringe when it's time to close the books? Are you frequently frustrated by an accounting problem, or certain tasks your bookkeeper is asking you to do? You've got messy books, and as Mark and Jesse argue, it likely means you've got a messy business as well.   Accounting should be boring and repetitive, Mark says. When onboarding new clients for his bookkeeping business, he spends a lot of time upfront gathering information and creating systems so that, a few months in, the accounting process is fast, accurate, and as painless as possible. There's two lessons in this: 1.) accurate books indicate that the upstream process of the business -- marketing, sales, pricing -- are tight and well defined, and that the business is not taking on too many custom or one-off orders, and 2.) for the service provider, in Mark's case his bookkeeping service, a streamlined system leads to more profit, less frustration, and less burnout. Even service providers are in the business of manufacturing, Jesse says, they are manufacturing a service or experience. Edge cases and messes clog up the manufacturing process and create frustrations.

Gather round folks, let's have a meeting... about meetings. Many people hate them, but they are a necessary part of business communication... and unfortunately meetings often become disorganized and bloated, leaving employees frustrated and less willing to invest their time in preparing for and participating in meetings in the future. Jesse thinks meetings get a bad rap, however, and offers some suggestions on how to run more effective, efficient meetings in your business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss the hiring process at YNAB, where the stacks of cover letters are deep and competition is fierce. How do they differentiate candidates in the first round? How do they weight employee referrals? What's the most important factor in finding the right "fit" in the final round of applicants? Jesse answers these questions and explains why hiring managers should be excited about every hire they make.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

There are some common sayings in the business world -- "if you're not growing, you're dying" or "innovate or die" -- that suggest business owners must always be looking for the next big thing that will propel growth. The truth is, it's HARD to find things that will move the growth needle. Whether it's new menu options at a restaurant, new services or products, or ancillary things like customer educational resources or new marketing initiatives, there are any number of "new shiny" things that businesses can do to try to grow.   All of these things take resources, however, and Mark and Jesse discuss how to determine which things are worth doing and which things are resource-wasters.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss the best indicators for determining why your business is growing, and how to grow it in the future. These are very different from trailing indicators, things like the P&L which summarize what happened in the past. Understanding what actually drives growth in your business is difficult work, but it's crucial work. Too often, business owners end up spending lots of time and energy on projects which are easy to measure and easy to implement, but don't actually drive business growth.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

A lot of companies are fond of saying this about their employees and their work culture -- "we're like a family here." Usually it's coming from a good place, wanting to emphasize the bond that employees have in a collaborative, productive work environment, but Jesse argues it's misleading and potentially harmful language that business leaders should avoid.   Mark Butler CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

If the title sounds like a philosophy paper... well, maybe it is. A philosophical discussion at least! Jesse has been reading Four Thousand Weeks: Time Management for Mortals by Oliver Burkeman, a book which poses some deep questions about human mortality and weighing what we choose to do against the seemingly infinite choice of things we could do.   Four Thousand Weeks: Time Management for Mortals by Oliver Burkeman https://www.amazon.com/Four-Thousand-Weeks-Management-Mortals/dp/0374159122   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss the value of forecasts, operational and financial models, and annual planning in general, as well as the pitfalls of putting too much faith into the numbers and not enough scrutiny into the assumptions.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse ponder a question -- is there anyone who doesn't need a budget? What about a person in the upper, upper crust, that has hundreds of millions or even billions to their name? Or what about someone who simply has very few desires, that are easily covered by their existing cash flow? The discussion quickly gets philosophical!   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Whether or not the successful admit it, luck plays a role in making things happen. Having the right at the right time, a chance meeting with the right person -- these factors could be called luck, and they matter in the world of business. But is that all there is to success? There's a saying that "luck is the residue of design," a nod to the influence of luck but also a reminder that without intelligent planning, execution, and effort, luck is wasted.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss some of their favorite books... and some of their not-so-favorite books. They both love to read books, especially about business, but they also admit a danger in the practice. It's easy to confuse reading books, or blogs, or listening to podcasts, as an act of creation, as if doing so is actually improving or advancing your own business. Occasionally they may offer insight, but even that is not an act of creation for the business -- it's only useful if you use the information to inform your next move in the business.   So, a word of caution! Be careful what you read, but more importantly, be careful that you are balancing your reading with action, actually going out and doing.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com  

Business owners have a variety of reasons for starting and then continuing to operate their business. For many, it's to make money, or to make more money. Or, perhaps it's the security that comes with being your own boss. The desires that drive business owners can change and evolve, too. Some people endeavor to solve complex challenges, or to move the needle on a large industry or societal problem. Whatever the reason, Mark and Jesse argue that business owners need to be in touch with their reasons for owning the business, and continuing to own it, or risk falling prey to the three lies about cash discussed in the previous episode.     Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

There's something about business spending that seems special, more important or impactful than personal spending or at least worthy of some exemption from normal budgeting practices. Maybe it's the large amount of money that typically flows through a business (large compared to the business owner's personal salary or distributions), or perhaps it's a believe that any ROI business spending generates is better than mere spending. Whatever the reason, business spending often gets less scrutiny than personal spending, and business owners need to be aware that the same mental gymnastics they use to justify personal spending can happen in the business. Budgeting is for businesses too!   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse answer a listener question: how do you pull the trigger on a big ticket purchase? When you've budgeted for a large purchase, and accumulated the cash, it's hard to see that cash flow out of your bank account. Mark and Jesse discuss the psychology behind large cash purchases, and how to manage your emotions as a business owner.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark Butler and Jesse Mecham discuss how much business owners should share about the company's financial position, and more importantly, why context for the information is vital to fostering trust and goodwill with employees.

Mark and Jesse discuss the concept of "margin of safety" in a business, that is, building in cash reserves to your operating plan for when things inevitably don't work out like you forecasted. Whether your business has to absorb unexpected costs, or revenue is down for a period, or some other "unknown unknown," having a margin of safety in your business ensures that you have the resources to survive the business cycles and thrive over the long term.

It should be no surprise that a business with 100 employees has different management challenges than a business with 10 employees. At some point, managing the business becomes less about the idea that founded the business -- creating something that people like and want, product market fit, etc -- and more about solving the logistical challenges of scaling that business to grow. As Mark and Jesse discuss, those are two different skillsets, and few people excel at both. Understanding your strengths and weaknesses and building the right team around you can make a huge difference.

There's plenty of firms and consultants out there selling strategies and solutions for customer acquisition using partner programs, referral codes, and other internet based referral tools. They promise to be the "gasoline" that accelerates the fire of growth in your company, but do the results hold up to the promise? Is it possible instead to build a business where your main source of customers is simply referrals from other customers? Mark and Jesse discuss.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

It's easy enough to convince ourselves that personal wants are "needs" that we just have to have. In business, the temptation is even stronger -- after all, it can probably be expensed, there are plans for growth, we have to keep up with the competition... However you spin it, most "needs" are really just wants, and our cash is a scarce resource. Recognizing our wants, however, can free us from the feelings of FOMO, the stress, and the tunnel vision that often accompanies strong desires, and open our minds to alternative solutions.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

It's a word that inspires yawns and sends meeting participants to their phones. But, it's something that strong leaders and strong teams do well -- process. Mark and Jesse discuss what it means to have good processes in your business, what they look like, and how to develop good processes. Process improvement doesn't happen overnight, in fact it often happens in tiny, incremental improvements over long periods of time. Learning to work on process as part of your normal business operations is the key!   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse chat with their long-time tax advisor Casey Murdock about the importance of tax strategizing throughout the year, what to look for in a good tax advisor, when it's appropriate for businesses to do their own taxes, and more!   Casey Murdock https://www.wealthguardadvisors.com/team/casey-murdock  

Mark and Jesse invite their long-time tax advisor Casey Murdock, or Wealth Guard Advisors, to talk about common myths and misunderstandings business owners have about the tax code as well as legitimate tax saving strategies. Tax can seem like a tedious field, but having good tax strategies can result in big savings. As always, having cash on hand opens up options for tax planning.   Stay tuned next week for more tax myth busting with Casey!   Casey Murdock https://www.wealthguardadvisors.com/team/casey-murdock  

Cash basis accounting works for a lot of businesses, and it has a lot of benefits being simple, easy to understand, and a relatively "pure" way to evaluate the cash position of the business. But for some businesses it may make sense to switch to accrual accounting, where things start to get a bit complicated. Mark and Jesse set out to demystify accrual accounting and break it down into YNAB-equivalent terms.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse take a break from talking about cash to focus on the "softer" aspects of running a business and, more specifically, a team. But, as these things tend to do, it turns out core values are everything about running a business, and they directly impact how your day to day business operations proceed.   While very important, core values can be hard to determine, because they are emergent, not aspirational. You simply have them, or you don't. You don't aspire to have integrity, you discover that you already do things which reflect your integrity -- like, you do what you say, you overdeliver and underpromise, etc. The same is true of employees. The people you hire have the core values, or they don't.   Jesse shares some exercises for discovering and refining your core values, as a business owner and as a team leader.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss the role of forecasting in a business' budget, and why many businesses get stuck on "tracking" their finances, for tax purposes, rather than truly budgeting.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Jesse and Mark answer the questions -- when do you start paying yourself from the business? How much? Should you take distributions or draw a salary?    Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Jesse and Mark ponder the question: when has business done enough? Enough revenue? Enough profit? When has the business owner taken enough in salary and distributions? The answer may lead you to some uncomfortable questions and answers.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

How you manage your financial systems is an indicator of how well you manage the rest of your business, says Mark Butler. Long lists of bank accounts, complicated credit card payment schemes... as businesses grow their financial systems becomes more complex, but without careful management, it's easy to let become a jungle that accounting has to hack through every month to close the books. Simplifying these things leads to less stress, less hassle for your accounting team (and less cost), and importantly, more clarity around how profitable your products and services are and the resources needed to sustain them.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

It a fussy word, and almost sounds archaic nowadays, like "balancing your checkbook." But reconciliation is critical to ensuring that your bank account actually lines up with the jobs you assigned to your dollars in Rule One!   Basically, reconciliation is a process in which you compare your actual bank balance to your balance in YNAB. This serves two purposes. First, it ensures that you are entering expenses in YNAB correctly; mistakes happen, direct import occasionally throws an error, or you manually enter a transaction twice by mistake. By reconciling your accounts regularly, you can catch these errors and discrepancies quickly. If you reconcile infrequently, it can be very frustrating and time-consuming to track down the source of the error.   Secondly, reconciling ensures that your YNAB account matches reality. In order to give your dollars a job and assign them to handle future expenses, you have to know that the dollars are actually there in your bank account. It's the reality check. Reconciliation is a simple process, but if you neglect it for long periods of time you can end up with very different balances in your YNAB account (or whichever budgeting system you use) and your bank accounts. And at the end of the day, what really matters is that you have the cash in your bank account!   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com  

Jesse and Mark wrap up their review of the four YNAB rules as applied to business with Rule Four, age your money. This rule is a consequence of following the first three rules, and it refers to the fact that once you have embraced the rules you will find yourself paying for this month's expenses with last month's money. Maybe even money from two months ago. That's called aging your money, and it's crucial for being strategic in business.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse continue analyzing the problems of small business finance through the lens of You Need a Budget's "Four Rules." Today they explain that Rule Three -- roll with the punches -- is a call to actively, and continually, budget for the business.   The budget is not a static document that gets set once a month, or once a quarter, or yearly, then measured against. Budgeting that way is a good way to feel continual frustration at not meeting numbers, because all budgeting involves guessing at what you will spend. And guesses are usually wrong!   Rule Three encourages business owners to roll with the punches instead. You do this by adjusting your budget as you go, throughout the year, using the categories you've established as your guideposts. Did you overspend on travel and entertainment last month because an unexpected opportunity to pitch a product to an out of town client? That's ok! You simply move money from another category to cover the overage in travel and entertainment. It's not a budgeting failure to have overspent in that category; in fact it may be a very wise business move. In traditional historical budgeting methods, that overage would be a big red number on a spreadsheet. In YNAB, it's just called rolling with the punches.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse expand on Rule Two, or "embracing your true expenses." When Mark onboard a new client, he helps them import six to twelve months of prior expenses into YNAB for analysis. With these numbers, Mark and the client can get an idea of the true expenses of the business, including expenses that occur infrequently, whether it's annual insurance premiums or unexpected costs related to operations. Often during this process the business owner will point out how the expenses during the historical period were a fluke and not representative of a normal operating cycle. But the reality is, unexpected expenses are a normal part of business, and what we perceive as flukes are really just unexpected expenses that we can learn from, and prepare for, in the future.   Some entrepreneurs feel that saving up cash today for expenses that will happen in the future hamstrings them by limiting their opportunities for growth or competing with peers in their industry. But as Mark pointed out in the discussions about Rule One, having cash on hand ultimately gives business owners options.   If a business owner saves a pile of cash for an expense that never occurs, they can simply decide to reallocate that cash to do other jobs. The reverse scenario is more dire. Not having enough cash to handle an unplanned expense, or an irregular expense that hasn't been saved for, usually involves taking out a loan of some kind to pay for it. That's going backwards!

Mark and Jesse discuss how YNAB's Rule Two can help business owners sleep better at night, by setting aside money for their known (and some unknown) future expenses like taxes, insurance, future hiring, and more. No more sweating during tax season wondering what your tax bill will be and how you are going to pay for!   Mark Butler -- the Virtual CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com  

Mark and Jesse conclude their discussion of Rule One -- Give Every Dollar a Job -- for businesses by exploring how it can help anxious owners gain control over their emotions around money, cash flow, and what to do with the company's excess cash.   Mark Butler CFO https://markbutler.com   You Need a Budget https://www.youneedabudget.com  

Mark and Jesse continue their deep dive into YNAB's Rule One -- give every dollar a job -- as it applies to businesses. Jesse says "show me your outflows, and I'll show you your strategy." The things a business spends it's money on, is a proxy for the businesses strategy, just like the things individuals spend money on is a reflection of their values.   Mark takes this idea a few steps further, insisting that all of a business' cash is wrapped up in it's strategy, or lack thereof. Inflows, outflows, cash in the bank, debt... they all play a role in determining the strategy and direction of the business.

Mark and Jesse discuss Rule One -- give every dollar a job -- for businesses, specifically around the concept of scarcity. There are only so many dollars available at any one time, and often not enough to do everything an entrepreneur wants to do. Mark argues that this scarcity is actually the entrepreneur's best friend, as it drives businesses to get creative about reaching their goals with the resources they have, rather than put themselves in financially precarious positions by borrowing money (resources they don't have).   So instead of thinking of "scarcity" as a bad word, start thinking about it as the key to unlocking your creative potential.    

Jesse Mecham, founder of software budgeting service You Need a Budget (YNAB), and Mark Butler, a virtual CFO who helps a businesses of all sizes manage their finances, join together to talk about the money issues many small businesses face, and strategies for addressing them. Today, they apply YNAB's four rules of budgeting to the small business, starting with Rule #1: Give Every Dollar a Job.   By giving every dollar a job, businesses can not only create reserves for unforeseen expenses and avoid cash crunches in difficult times, they can also plan more effectively for growth. Without a clear job for the dollars in your business, it's easy for business owners to fall into the trap of never thinking they have enough cash in reserve. Whether it's hiring a new employee, buying new equipment, or making some other large capital expenditure, many businesses get frozen in the mindset of thinking they need just a little more margin of safety in their reserves before making the next growth move. By giving your dollars specific jobs, as Mark explains, it becomes much clearer when to execute growth plans.   Look forward to more Beginning Balance shows every Friday!

Jesse Mecham and Mark Butler are launching a show all about small business finance. They will help you solve your cash flow problems, budget effectively, and increase your profits.