Anna speaks our language, she is a seller. She is also a CPA and really has figured out the right balance to good bookkeeping and the freedom you get from a self employed lifestyle. There is a line and finding the one that works for you is really the key to keeping up with the work. We both believe the prepared seller has the best chance of taking advantage of market and channel changes.
Transcript: (note- this is a new tool I am trying out so it is not perfect- it does seem to be getting better)
Stephen: [00:00] Wanted to take a second and recognize my sponsors this week. You know Gaye Lisby million dollar arbitrage as Edge and list group. That’s a mouthful. It is. But guess what. It’s a great opportunity. You know you can build a big Amazon business you don’t need a lot of capital. When you start I mean we all started you know most of us started selling books and then move into retail arbitrage. That is the place that you can turn your money the fastest and online arbitrage. And so by having that skill set by learning those skill sets you can get the best bang for your buck. And so Gase group will help you learn online arbitrage. It’s more than just a list service they’re going to give you a whole bunch of actionable inventory every single day. Right. Monday through Friday. However there’s also a mentor ship that goes on and that mentor ship is so important because sometimes it’s great to know what to buy.
Stephen: [01:00] But it’s more important to understand why to buy it. And it’s that you know learning to fish or just getting fed. You know you really want to learn because ultimately you want to strike it on your own. And this is a great way to do it. So how about seven days free trial a free trial. Right. Very very cool. So it’s amazing freedom come forward slashes the mouthful the word momentum. You got to use a hyphen and you put in the word arbitrage. So it’s amazing freedom come forward slash momentum dash arbitrage and you’re going to get a free trial in game group. You got to tell her I sent you. Right. I also have the link in the episode. But
Stephen: [01:38] it’s such a great opportunity. She is amazing amazing I’m in that group so you’ll see me there an amazing amazing person who’s there to answer your questions who was there to help lead you and help guide you and that’s what Kay does. She does it every single day. The testimonials are real. Go take a look. You will be blown away.
Stephen: [01:56] And again it’s a free trial. I have the link on this episode. Reachin you know Sellar labs Jeff Cohen and the team they have blown me away with this scope project. We use this all the time for our business. We do a lot of private label we also do a lot of wholesale and wholesale bundles you know or multipack that kind of thing which a lot of people do but we use scope to help us figure out what are the key words. And so it’s really simple. You basically figure out where you’re going to sell what you’re going to sell what category find that like product. Find the top couple sellers and find their keywords. Boom magic. There you go. You copy the best because it’s working. And guess what that’s a proof of concept and scope allows you to do that.
Stephen: [02:42] So it’s Sellar labs dotcom forward slash scope Sellar labs dotcom forward slash scope use the code word momentum and you’re going to get a couple days free trial and you’re going to save a little bit of money and you got to get some free keywords. It’s worth every penny. I’m in that group. Come and check me out. Celebes dotcom forward slash scope again use the word momentum. Solutions for e-commerce. Karen Locher great great great group.
Stephen: [03:11] I’ve been using them for a long time and I guess over two years and I’m in there and pages like everybody else. Yes she’s a sponsor my show but she makes me pay. And I got the same 50 dollar discount that you can get. Oh by the way you’re going to get that through my link and my link only. Oh and you’re also going to get the free inventory health analysis. Great way to start 2018 get your inventory in line and Karen will help you do that. We use it for everything. I mean basically you know long term storage fees coming up. Guess what. She’ll evaluate. She’ll make some recommendations. And also check check check take these out this return blah blah blah blah blah.
Stephen: [03:48] And magically it’s done. I love it. Love it. Love it. I love the fact that they take and get rid of stranded inventory for me. I see it in there. And then next time I go in and it’s gone. Love it love it love it. Got an IP infringement. She’s going to help you work your way through that. This is the kind of service that you get from Karen Lockard that solutions for the number 4 e-commerce solutions for e-commerce dot com forward slash momentum. Right. So you got it forward slash momentum and you’re going to save 50 dollars a month six bucks a year by just clicking that link. She pays me. I want to hide that I never do. I’m always upfront about that but it doesn’t cost you anything additional. And you’re going to get that have been Torri Health Report the only way you get that is through mine link solutions. The number for e-commerce dotcom forward slash momentum. Welcome
Cool voice guy: [04:39] to the e-commerce momentum podcast where we focus on the people the products and the process of commerce selling your host Stephen Peters and welcome back to the e-commerce MMN and podcast. This
Stephen: [04:54] is episode 270. Anna Hill now you know that I’ve had an on my show a couple times and the reason I bring her back is kind of become our annual thing is really to close out the year and start the new year and it started out right. And she’s in such high demand I have to wait to get her on now because she’s so popular because she’s a plain speaker she talks your language because guess what she’s a seller. She’s been selling for a long time. She knows what she’s doing. So she knows the ins and outs and that’s why people want to talk with her. And so we’re fortunate to get her back. And man oh man I think we get to such a cool place in a conversation. I
Stephen: [05:32] think you’re really all going to benefit. Let’s get into the podcast all right welcome back to e-commerce momentum podcast.
Stephen: [05:39] Very excited to have my guest back. She’s a repeat.
Stephen: [05:44] And the reason is is because she’s smarter than I am and she’s a nerd. More of a nerd than I am but she’s also cooler than I am I’ll admit that too and a hill. Welcome back. Anna
Anna: [05:54] thank you so much. I’m looking forward to our conversation today and you’re a nerd also.
Stephen: [05:58] I know I’m a I’m a poser of a nerd. Now I’m retired. You know it’s funny. Somebody was just asking me Steve has you know I’m like I have no clue I’m not into it. I don’t want to know. You know please sell in the business or the building and they were like hey would you come back no interest. But thank you I appreciate it. You know let me know how it goes. So this is the kind of become our annual discussion about kind of closing out the year and starting the new year. So this is a couple of weeks into 2018 with this run. But you know obviously you could still close out 2017 and do things right and really set themselves up for a great great year because this is Steve’s premise and correct me if I’m wrong or if you don’t agree but I believe that the changes that are going on are going to continue to accelerate and therefore the prepared are going to be able to adapt that much easier. Is that fair.
Anna: [06:52] Oh I completely agree with you. It’s always been that way. I think that’s just the truth of business in general. But I think you’re right with the Amazon environment changing the way that it is an online sales in general. You just have to run a tight ship and books are really important part of that.
Stephen: [07:07] Well it’s the foundation. I mean it really is. You know in the same it’s in our shared space and you like I will coach them through. Like here send this to your account. This payment goes here and this does this because you know you really want to set up that foundation right. And to make sure that that your books are fairly represented because when you have a viable business matter fact Liron just approached their group. There was somebody who was looking to sell their Amazon business as is a large now relatively large e-commerce business that’s looking to sell and they want some serious money for it. But it’s got serious sales and it’s a private label business established with a lot of products. And yet if they don’t have a good set of books. Guess what. Nobody’s buying them right. Exactly.
Stephen: [07:53] You want to know what you’re buying is sound and the only way you’re going to do that is by looking at a good set of financial statements. All right. So let’s close out 2017 what what what should people be doing now to close out 2017. I understand this is two weeks too late for some people like oh my God I should have done this. Oh my god I didn’t run my reports and I forgot to run my reports on January 31st. I stayed up till 11 58 but man I just couldn’t. I drank one too many and I fell asleep. Does that mean it’s over my books are gone.
Anna: [08:24] No that is an urban legend.
Speaker 8: [08:26] I know. It is a myth.
Anna: [08:27] It’s a myth. I think it used to be true several years ago and are certain reports that can only be run live. However the report that feller’s me that tells them how much inventory is on hand is available. You didn’t get it. Months
Stephen: [08:41] and months later months and months. It’s there forever. It’s in perpetuity. Do you remember the days. No I don’t know how old of an account you were to go back and do a year end inventory and have to work on New Year’s Day. You
Anna: [08:57] know I I didn’t have to work on New Year’s Day but I did work on Christmas Eve for five years that a client who closed for two weeks. They were having their party while we were counting.
Speaker 8: [09:06] Oh that’s me. That’s just me. Yeah that’s just me. No oh we got pizza for you guys. Oh excuse me I got to get back to caviars. Getting
Anna: [09:14] that homemade strength and presence and it was awful.
Stephen: [09:18] And you were there listening. And I have worked so many New Year’s days for ever in it. You know I mean it literally you’re just getting home from the party and you’re going into account inventory. Don’t miss those days now. I mean today’s day and age you don’t need to do that with Amazon either right. So you can run a report today for what happened a couple of weeks ago. OK. So that myth is broken. Now it’s dispelled. So that’s pretty important though right. It’s
Anna: [09:46] very important and I think it causes people stress because they don’t know what the steps are what they need to do to prepare for year end.
Stephen: [09:53] So hopefully that alleviate some people’s worry and I’ll qualify this upfront I’m going to have links to and his group which is a free group to join where she gives away all the secrets she does have some services she offers that she wants to sell. Right. I mean that’s part of it what she does. However all this stuff she gives away for free. You don’t even need to buy it. You just buy time if you want to buy somebody’s services. That’s what she sells. But outside of that she gives you the secrets for free.
Speaker 8: [10:21] Oh yeah. It’s all in the group for free and that’s you see that journal entries for God’s sake. I do. Sir or like how many. OK.
Stephen: [10:31] So we run our reports we get our year end numbers and that’s the end of it. But that’s not the beginning of it. Right. You kind of need the beginning inventory place to start to right.
Anna: [10:41] And a lot of people think well what if I started this year what’s my beginning inventory zero. There is zero. Yes. Because you started with nothing and you got from there. If you don’t know what you’re beginning inventory wise and you’ve been in business for several years or more than one year you can check on your prior years tax return and you will see it on there. So all is not lost. You can get that number from several places if you don’t have it.
Stephen: [11:05] So that’s your starting place right is really last year’s tax return that was the point in time that was a snapshot of your business. That’s your starting place. Then you look at the activity that happened throughout the year and then you have an ending snapshot. And the differences where you build these profit and losses hopefully profits.
Anna: [11:23] Exactly. Yes because your inventory is either available for sale or sold.
Stephen: [11:28] It’s one or the other one of the things that I saw you point out and it’s a valid thing to think about. You know inventory in transit and it’s one of those things that most people don’t think about right. Where is the point of ownership right used to be. I remember that you know back in the old days when I was an old nerd that was a real issue for us. You know who owns the inventory right. Is it you know back then life or free hoverboard. You know all that kind of jazz Terrell forgot. But that was a big deal. So what’s the point that people want to pay attention to here.
Anna: [11:59] Well I think you know assuming that you have ownership of it when you pay for it that would be the point in time I would recognize that because you have given money for inventory.
Stephen: [12:10] So even though it’s on my way I bought it you know week of Christmas week right. I bought I was drunk from the party. I made a purchase it’s on its way but I paid for it.
Anna: [12:22] Yeah I own it exactly because you have you know what people do when they do that is they’re exchanging one asset for another. You have turned cash into inventory. Or if you put it on credit and you have changed you’ve increased the liability to increase an asset. So
Stephen: [12:39] you just want to reflect that properly and that liabilities are important so even if you paid for it with a credit card right and you didn’t pay the credit card bill you’re still on the hook for it. So therefore we say this is the easiest way for people to understand if your business went out of business today. Do you have to pay that bill. Yes. Therefore you owe it. So therefore it needs to go on your books and I think that’s the easiest way to think about that. Who owns it. Right. You know it’s that simple to me.
Anna: [13:03] I like that. That’s great.
Stephen: [13:04] It’s just always you know used to coach all my employees about that. Like if we went out of business today who do we owe money to. Well guess what we need to make sure that that’s recognized under books that’s fair right. That’s reasonable. So we now have built this cost of goods which is this complicated model that and it breaks down in like five steps since like run this report do this do that. And she gives that to you for free. And again I’ll put a link to it there. How about revenue. You know my I didn’t get it 10 99 from Amazon or eBay or I don’t know if Etsy sells one I don’t know who are sends one I don’t know how that works. Do I have to report my income. You do. Oh don’t.
Anna: [13:47] This is another urban legend to sell. This is great I’m loving this myth busting thing we have going. People have been told or have thought along the way if they do not get it to 99 they do not have any tax liability. And that is not true. You make sales. You need to consider whether or not you have tax liability even if you don’t get it. 99.
Stephen: [14:12] It’s pretty important because you know you bought something for a hundred dollars and you sold it for 150. And Amazon took their third as generous as they are right now. You’re at a loss but let’s say you made a few bucks but you hadn’t paid taxes on it so when you know it depends on you know people margins you know they look at their profit when they buy something. Oh man. It targets uncap and if I buy all these I’m going to make 750 thousand dollars. Business is good. Or then you see the next guy hey I bought all these at Target. I sold some of them. I made a hundred bucks. And then you see the next guy that that says you know why I made 100 bucks but now I’ve got to pay taxes on it now I’m at a breakeven and that’s a real thing to consider tax consequences are real.
Anna: [14:58] They are and they can add up when you don’t expect it. Which is why if you have your books in order and keep up with them throughout the year you will not be surprised you won’t be surprised. And
Stephen: [15:07] you also have an obligation right. So you know if you do monthly financials that’s great even quarterly at least right. Therefore you may quarterly deposits you’re required to and that quarterly deposit taxes. Then at the end of the year you know my account because Steve doesn’t do his own taxes anymore says to me Steve did you make the quarterly deposits we sent you to make. Know I’m like yeah we of course we did. OK. They just verify that and then it’s like OK you owe twenty five dollars in taxes you paid in twenty three thousand you owe two grand or vice versa you paid twenty you know 26 percent. Yeah really takes the pressure off. Yeah. OK so we got ten ninety nines or not. And we recognize our revenue the ten ninety nines are not easy to understand or think they’re not.
Anna: [15:54] And I think especially with Amazon there are certain transactions that are included in your revenue but then they’re backed out as a fee. That’s why I have a guide for that too where we actually take the year in summary report and show you how to reconcile that to the 299.
Stephen: [16:10] So you know exactly how much does that cost. Oh it’s FREE. It’s FREE. It’s FREE. You’re going to get a common theme here. Again this is the nerds of us talking but it’s true and it gives away all the information for free. So it really does. There’s no hidden tricks no nothing. However you do sell services and I’d qualify that again because I’m in a better picture services eventually and Steve doesn’t benefit in any way other than you get to really establish this is really you know I know it sounds so basic but this is really when people grow up their business grows up isn’t it. When
Stephen: [16:44] they get to the stuff they start addressing this stuff isn’t it when they’re like OK now I’m a real business it is.
Anna: [16:52] And the nice thing is when people do this and they start when they’re smaller they can master it on a small scale. And then as their business evolves and grows so does their accounting skill. You don’t want to start learning all of this when you’re a two million dollar seller. I mean that’s that’s just a bad idea.
Stephen: [17:10] When when when they do evolve to a certain point that’s when you do have to get help too. Knowing this in advance you know for example you’ve had people come to you with the shoe box at the old fame shoe box of receipts and it’s like oh dear god what do I do with that right. Or you’ve had people come to you with a really good set of clean books. Either go daddy your quick books or you know zero any of those.
Stephen: [17:35] And that’s when you can start.
Stephen: [17:38] I mean can’t you help coach somebody from that point of view like here’s what you could do next in your business as opposed to the shoe box where you’re just trying to get them to file. Right I mean it’s you can you can either work on your business or work it work at your business. I don’t it.
Anna: [17:58] Yeah I think we’re on it. I work in it. Yeah. Well and I think something that you said about working on your business. I wanted to just mention I also pay a CPA to do my taxes because I don’t enjoy doing it. But it’s a nuanced field and you know it’s forever changing. And just because you can do something doesn’t mean you should. And some encouraging everyone listening please get a CPA to you prepare your taxes for you. If we do it you can do it.
Stephen: [18:25] And I don’t do it. I haven’t done it in years because again I don’t want to learn you know all the things that need that change every year and right now for example there’s some kind of new crazy tax law they changed in 2018. I don’t want to know any of it I’ll be honest with you. I need to know. You know the key things right. And when you sit down with your accountant and go through and you know a good accountant will actually about two or three quarters of a year say OK how’s business this year what’s happening you know what should we be looking forward looking for anomalies anything that’s unusual. Right. Or if it’s status quo. OK great. And then when you sit down with them and go through their invoice because they always an issue and it always here’s a little protip too.
Stephen: [19:06] They’ll mark it up and then lower it and say I’m saving your money. You know that’s a little protip that’s a sales assumed sale I guess I don’t know what it is. I’m always like really is the money anyway. But that’s the place where the conversation is like where what else can I do. Well you could go to UNECE corporation and you can say you know blah blah blah blah blah. Oh really. What are the implications of that. That conversation is so much better than oh my God you know did we get everything in. You know all that nonsense right. You get at that maturity level. All right. So we got to 299 and it’s going to help us try to understand it. How complicated the the PayPal slash eBay 10 99 is pretty simple. It’s just one number.
Anna: [19:51] Exactly. A lot easier. You know you earn what you earned and then it all shed the fees that they the seller was charged for shipping and then a monthly fee for each day it’s all there in a really nice summary report.
Stephen: [20:04] Yeah they’ve done a good job with it. Have you seen from other sellers like an etsy or anything like that. I’m not familiar with that.
Anna: [20:11] Actually I have to Etsy sellers. I work with they are not at the point in time that the 20000 dollar trigger would come into play but I don’t know that that’s the trigger or not. So I’m curious about that too.
Stephen: [20:24] Yeah I don’t know. But you’re still responsible to report it right. So basically it’s here’s what I sold here’s my returns. Here’s my net revenue here’s my expenses are my cost of goods and then starting from there. Then your individual expenses I mean that’s really good. Well one of the other things I’ve seen a lot of sellers do is keeping mileage logs or using mileage apps or any of those things. What could you tell us about that.
Anna: [20:47] Well it’s really important. In 2018 the mileage rate will be going up and you know he doesn’t sound like much but it does add up. One member of the community said he drives. I think he said almost 60000 miles a year which is amazing for his business. And so very excited about it. It’s really important. One thing I want to caution people is if you’re using accounting software the mileage deduction is a deduction. It isn’t. It’s a non-cash deduction. It does not need to go in your accounting software but you do need to track it and then give that to your CPA that he or she can include it on the return.
Stephen: [21:23] So Steve’s the old school guy who used to require you know think about it for 25 years I was in that business and I were always required you know beginning odometer ending odometer number of miles driven location driven and purpose of purpose.
Speaker 9: [21:36] I’ve been doing it. So I this is the old school I keep legal pads. I mean I just can’t break the habit of it. I still do it. And then you know and then at the end of the year I just add them up. You know it’s pretty simple. Somebody is like hey you know did you go yep here it is. And I have them. And what’s cool now is you can scandal that stuff which is really cool but I love it. And it’s just a habit I can’t. I looked at the apps and I’m like oh that’s cool I just had an app guy. I just don’t like it. Well you know that’s such a good point.
Anna: [22:05] People have to develop a system that works for them. You know the requirement is track mileage. It doesn’t really matter how you do it as long as you have a system that works for you. And I think that’s important. People ask all the time was this right or that right. And you know there are some do’s and don’ts but in general when you’re creating an accounting system it doesn’t matter if you’re doing it daily weekly you know whatever the frequency is. I think you’re right. Quarter monthly is ideal Quarterly is best but if you’re working on your books every Friday or every single day for 20 minutes it really doesn’t matter you have to figure out what works for you because if it doesn’t you’re not going to do it. That’s just human nature. Don’t you agree.
Stephen: [22:43] Yeah I do. And I think what you just said you get a schedule one time. I think that that’s such a powerful. So you know Oh I’m only you know the four hour workweek. Yeah right. There’s no such thing that doesn’t exist. Well I mean it can exist and there are some people that are amazing at it but that comes at a cost right if you want to pay somebody to do that and all do it for you. But there’s a fee. Right. And so you can get some of that stuff limited. But when you work on your business there’s something very rewarding too. I mean you know this is going to sound really goofy to people but reconciling a bank statement. There’s something rewarding there. I mean I don’t know what it is.
Anna: [23:18] It’s so rewarding it’s like getting a jigsaw puzzle finished or something people definitely think are nerds.
Speaker 8: [23:24] But it’s the truth. All right.
Stephen: [23:26] So here’s a powerful one that I remember from last time we talked and it stayed with me because it’s so good. I mean this is like this I love your naming convention for handling receipts. You still use the same method.
Anna: [23:37] Oh yes. We were talking about were we talking about using a certain new Date.
Speaker 8: [23:44] Right. I think the way you remember it now this is Steve memory and you know then again remember that male gene. So you know it’s going to be factors right.
Stephen: [23:52] Caution but basically if I remember correctly was basically use the date. So I bought something today. So you have today’s date you might have the store name in there too. However by putting it in by date where am I going to buy five different places. I mean it was just so easy buy that purchase date when when I put it into either skin power inventory lab or even an Amazon wherever I’m keeping that record buy. You could just look that data up and it just immediately allowed you to find the receipt. That was the way it was.
Anna: [24:23] Yes I recall that conversation now because I think less is more and people try to you know put all of these things in it and it’s really not necessary it needs to be a unique identifier so that you can find it easily a consistent unique identifier. Right. But not something so complicated it doesn’t need to be like a vehicle VIN number and I’ve seen them like that. There’s no need for that because then it doesn’t helpful or useful.
Stephen: [24:46] Well and I don’t think it’s sustainable and I think the key is you never build a you never build processes for the for the extremes or the the the anomalies you build the process for the 98 percent right the 98 percent of the time ninety nine point ninety nine percent of the time businesses this. We never want to build for the extremes because you know they happen but they’re so rare. And they can be you know they vary from time to time. Are you still keeping your paper version and I know you’re going to say yes in an envelope with a month on it. I do design do you with your legal pad.
Anna: [25:22] I will be Eidman. I can’t get rid of it. But no one scans you know people can exercise their own judgment as to whether or not that’s necessary. I prefer to but that’s just me.
Stephen: [25:34] Well after your returns are accepted. How many years are you required to keep that.
Anna: [25:38] I think it’s 7 now it.
Speaker 9: [25:40] I could be again. I don’t know. I just gave it to my county.
Speaker 8: [25:43] He holds a lot of them are uncovered no matter what. You have them since this is my return. Like little children right. This is this is the 2002. Look at that. Look at that. Look at the way it’s aging it’s just beautiful.
Stephen: [25:57] Well I think that that’s a very strong practice that somebody can put into place. Now they didn’t do it last year. OK. So I just saw this message. Oh Canada Bay. Chris Lind was talking about something about eBay and he was talking about photos and how you really have to have good quality photos and blah blah blah blah blah. And his point is look don’t go back and fix things let that crap sell through. Fix it going forward and you will eventually evolve into that. That’s really the same message here right. Putting these practices into place today now fixes it for this year. Last year as last year. Don’t go back and try to fix last year close last year and fix this year going forward and make these really part of your practice. The fact that you haven’t changed your receipt process I think is powerful because it works right. You haven’t had to evolve. There hasn’t been a way to reduce a touch point there. It
Stephen: [26:50] just it works. Simple.
Anna: [26:52] Yeah I agree. And you know that’s such a good point that you’re making to people sometimes they are using software now. Do I need to go back four years and my business and put it into the software and my answer is generally no because you’ve already filed the tax returns you have. Just start from the last tax return and build on that.
Stephen: [27:12] I would even expand it to say unless it’s helping you make a decision you know then don’t do it. If it’s not going to help you make decisions you know where you can do it because it is cool when you’re certain software show year over year. That’s cool. That’s cool to look at. But if you’re not going to do anything with it why waste the time right.
Anna: [27:29] Likely if you’re going to sell your business or think you might want to well then you know you could make the different story that you would want to do that so you’re right. Think about the purpose what you what your goal is and then make that decision because there’s no reason to do work for the sake of work. We have enough work already.
Stephen: [27:44] So what would you change. Because this I think is a fair question. What have you done different this year that you or what do you plan on doing different this year because you’re not perfect. Right. I’m you know I’m sure you’ve got you know it’s the auto mechanic who does it work on his own car right neglects it right. I’m sure that you could improve in some areas what have you doing different.
Anna: [28:04] Well I can tell you I changed entity structure. And you touched on that earlier Friday when listening. It’s a big decision. Definitely talk to your CPA about it but it can be a money savings on taxes. But there are only certain points in time it actually makes sense.
Stephen: [28:21] And again you want to see a CPA or dare I say the the. We got our structure down was he was actually an attorney CPA and he very specific on that and that was very cool because he could still argue in front of the IRS to as a CPA but it was also he was unwell or whatever they call they. He does that that’s taxes thing. And so he really helped with the structure of that thing. And so that’s a bill but I think my cost. Somebody asked me what was the cost to get. It was like eleven hundred bucks or something like it was pretty inexpensive I thought that’s about what I paid to. So
Anna: [28:56] that sounds like a super nerd.
Speaker 9: [28:59] Yeah definitely super high strung out to man. So I want to tone it down a little bit get that bow tie off. I don’t like those things. I don’t I don’t like the Botho. I’m not a fan. Anyway they’re not not a thing. Even though in the south they’re not a fan huh.
Anna: [29:14] Well you know I think it’s you either can pull it off or you can’t.
Speaker 9: [29:18] Yeah is zero chance Steve can pull it off. Zero chance. OK.
Stephen: [29:24] So we’ve now addressed the receipt issue we address the mileage issue and I think you’re right. I like the idea of saying it that way what works for you as long as you’re doing it and you’re consistent. I mean to me that’s the right way to do it. Where else have you seen other people improve their business that you thought oh that’s cool.
Anna: [29:44] That’s a great question. You know one thing I’ve seen in this is especially true for people who are keeping up with their books. Another benefit as I’ve seen this trend of people paying closer attention to their margins and reducing the number of items that they’re selling. I know that’s not specific accounting tip but it’s the result of having your books in an order and things in place to be able to make those decisions. So I’ve seen people really starting to use their books more to manage their business managing grow. And I think it goes back to what you said from the beginning that it’s just becoming more and more of a necessity. And I think this last year I’ve seen people really start to use their books you know they’re starting to care about what that balance sheet means and how it interrelates with the profit and loss. And people are starting to understand it’s not just about sales. That’s an important driver obviously but it’s not just about that used to used to be revenue CURE’s all Steve.
Stephen: [30:39] That’s what they used to say to me you know I’d go into I’m like a boy. You know expenses are blah blah blah. Oh revenue. So we need to do some more. Well that’s cool. But what if you don’t you know we’ve got to plan for that. Or what if I could give you you know two more points to the bottom line without selling a dime. That’s huge right because it isn’t what you sell it’s what you keep really that matters. So you’re seeing that more and more is that it is that a surprise. Or again is that a maturity as these businesses start to grow and mature.
Anna: [31:10] I think for me it was a surprise. People weren’t paying attention to that from the beginning but I think that’s because maybe I’m wrong but I think it used to be a little bit easier in this business to make money. There were less people and Amazon is always changing and all these things we’ve been talking about. So it’s it’s a it’s a good thing now that people they seem to actually really care. More people in the group are very active very giving asking all these questions and it just seems that the things people are asking about are a little bit more sophisticated compared to what they were a couple of years ago. Does that mean that basic questions aren’t welcome they always are we all start somewhere but it seems like they’re the sellers are kind of evolving and maturing also which is kind of neat to see.
Stephen: [31:53] It’s very neat to see in fact the fact that you’re just talking about sophisticate. I was just thinking about this too. Somebody was talking about putting a warehouse together. And I thought to myself Hmm. Have you ever owned inventory in a city that charges in Monrovia we’re seeing that where cities charge inventory by the month inventory valuation.
Anna: [32:11] Oh you know what they do that in Georgia actually I have the map but it’s by county I think.
Stephen: [32:16] OK. So what we’re describing is if you hold inventory for a certain period of time it becomes a taxable event and therefore you pay taxes not a lot of tax can be depending on the route. You’re right I think it’s value the valuation. So if you have a hundred thousand dollars worth of inventory and it stays there for X period of time and each place is different how they calculated there’s a valuation charge just like you know you hear this next phrase which I really really don’t want to talk about but it’s the concept that you have you have an asset that’s in our town. Therefore we want peace of that value. That is something you absolutely need this is one of those sophisticated things to find out if you’re in a big city like Philadelphia for example that’s there that’s real. Right.
Stephen: [33:00] And and I don’t know the ins and outs but these are the things that you really again need to start considering this is not something you do and then pull the trigger. This is the conversation you have with that CPA or that adviser in an advisory role as opposed to getting your books done. It’s like OK now I want to work on my business. These are the kind of things you want to have the discussion. Hey what if I did this. Whoa Steve. That creates an event. Oh so maybe it’s not such a good idea because this what you thought was an easy decision. Again you might not end up making money right.
Anna: [33:33] Exactly. An event translates into taxes good they.
Stephen: [33:39] They want to pay too. They used to be the Delaware corporation right. That was one of the big things everybody had created DeLara corporation because I was a tax friendly state still is and therefore you didn’t have to pay state taxes right. They paid the state this goofy. I don’t know whatever. But I think most states have unwound that now. When you say sophisticated what are the things have you seen people talking about that are like whoa that’s that’s pretty high level stuff.
Anna: [34:09] Well I think the more analytical review of financials has been going on you know for example profit margin percentages people at one point in time were very interested in sales minus the cost of goods sold. What’s so gross profit right now people are starting to look at the actual profit margins how am I doing. You know not just what my sales are but like you said not what you make but what you keep people are looking at payroll as a percent as a percentage and people are looking at their debt to inventory ratios which I’m such a big fan of and I’m so glad you know people are really starting to look at these numbers and pay attention.
Stephen: [34:50] Or is there any places that are tracking these metrics that are putting out best practices or something to start measuring yourself against because I think that’s powerful. You
Anna: [34:58] know I wish there were places that were doing that. It is powerful. The part of the problem is there’s plenty of information about retail but it’s usually brick and mortar. And I think because online sales is a little bit different but the same thing I don’t think that the same ratios always apply. There are a good rule of thumb but I think it’s a lot different when you have a brick and mortar versus you know you’re selling on mine.
Stephen: [35:21] Absolutely. But those those numbers are equally important so somebody needs to start doing that there’s an opportunity for somebody somebody would pay for that service right that the old LexisNexis people used to pay for those services. And so therefore hey somebody would buy that it hit somebody Steve’s not doing it and interest you in it. But I think that’s a great idea. I would but wouldn’t you want to know you know relative to others in similar like businesses how you measure because ultimately when you see a discrepancy right you see a plus or a minus and it’s both. You want to understand why. Right that’s where the that’s where the meat is that Delta. There’s a difference. Why.
Stephen: [35:59] What makes me better maybe they’re missing something. What makes me worse. Maybe I’m missing something right.
Anna: [36:06] And that’s really powerful to know it is powerful you know getting them all of that also which I have seen and I think it’s really made people are realizing more sales cost money. You’ve got to have Warehouse and people. And I think sellers are starting to realize it’s going to cost me to get more sales. It may not be worth it to get as big as I possibly can get. It’s not really about that. And I think it’s people learning some even the hard way that if I have more sales I need to have more help more processes that me other and that gets more expensive diminishing returns right.
Stephen: [36:39] So that last that last box sold could be very very expensive and it undoes the beginning what you did so well on some tours and that’s that. I mean that’s the case Mort’s of the world right. You know now they’re looking at how many times have they redone their leases because they know at the time when their sales were you know 50 million dollars a store even if they were that much like 10 million dollars a store 20 million dollars a store it wasn’t an expensive lease. Right now however when their sales are six million dollars a storm oh my god I hate it. It’s it’s a powerful driver and labor costs I’ve seen I’ve seen some of the post from some of the people to labor costs. What makes sense when you’re at one size or what labor arrangement. You know a percentage of revenue.
Stephen: [37:22] That’s good but if it profitable revenue it’s not and you’re only paying on revenue and it’s not on the end. The better model is just to pay based on the profit margin that profit number that was driven because then it’s truly variable right because if Amazon raises their fees. God forbid that might happen some day that will cut in. So you sold an item for ten dollars and now Amazon charges you for dollars instead of three dollars. That’s painful. They might raise their fees. One of these days right. Well I think that’s a big issue. Storage has become a massive massive issue and it’s like accelerating or let me say it this way shipping and storage has become a mass of issues because I don’t know how it’s working in your business. We should qualify this and it is a seller and has been a seller does private label.
Stephen: [38:16] In addition to what else she sells and you’ve been selling for quite a while so she truly understands our business. But in Steve’s world we’re seeing increases on our we do fulfillment don’t fulfill merchant fulfillment.
Stephen: [38:29] So the post office rates are have been adjusted you know dozens of times in the last couple of years by sizes by layers by elimination by all these different things and you’ve got to pay attention to our Amazon stuff. I use to tell this story I used to sell books years and years and years and years ago. And in the old days they used to offer a book rate. So when you shipped via U.P.S. to an Amazon warehouse and it was books it was a medium mail rate you literally paid less than you were sending razorblades to Amazon. And a couple of years ago they changed it and they put that right in with. Then I had to start sending my books to other place and it’s like nah. And so that is it cost increase. And if you didn’t build that into your model on books that you bought 10 years ago that never sold you.
Stephen: [39:19] Now probably underwater. Right yeah. So we’re seeing on that end. And then my freight rates via U.P.S. descend into Amazon while they’re still cheaper than anything else. They are higher. And then on the other end the storage fees that used to be once a year now are twice a year and the monthly fees and then it goes up what four times the rate. I think they figured out and I don’t if I’m right that it’s like 700 dollars a pallet for storage in the month of October November and December.
Stephen: [39:49] Wow. A four by four by four or whatever 64 cubic feet. For some reason I did that math and that came up to 700 don’t like going away did it. But I’m glad he did. That’s really interesting. But I don’t know that I’m right. I don’t know that I’m right. But I remember looking them like you got to figure that out. So those two things to me are related to what should businesses be thinking about here. Well
Anna: [40:13] you know I think really the whole point of a business is to make sure it meets your personal financial goals define what those are and then kind reverse engineer instead of saying I want six figures and fails instead figure out what you want to keep what are you trying to do. What is your why then you can start working into that because you might find one might find that there are other controllable buttons and levers you know the cost and expenses that you can control more so that sales can remain where they are. You can reduce this expense or that expense and still meet your goal. And I think that speaks to what you were saying earlier.
Stephen: [40:51] It’s a very powerful thing. And again these are changes outside of your control. You have no say in the post office Rayson their prices UBS FedEx DHL or you have no say in Amazon raising their prices. What can you do though. Is there anything that you can do or have you seen anybody doing anything to start addressing these things.
Anna: [41:10] Gosh you know one thing I have seen is people who are bigger private label sellers buying larger quantities of things from maybe China. Because if you’re buying more at one time that’s less expensive on shipping to get to you or to Amazon than buying the same amount over a longer period of time and shorter shipment installments.
Stephen: [41:33] Okay. And so and then the other thing that I’ve seen some of the private label sellers do to more so in wholesale sellers too is they’re using outside companies to or themselves to manage their inventory much closer. It’s almost like remember when just in time inventory came in the plan were both about that age and it was just interesting back when they were getting that I think it was from Japan or what have you. And it was like boy you know the stores. You know I remember the doing inventory and they used to be enormous things of inventory and then it kind of went away because you were able to get it. You were starting to manage that so much better. That’s really powerful for a seller from a competitive point of view. That’s a really powerful tool isn’t it.
Anna: [42:17] Oh absolutely. I mean that can really make or break whether or not a profitted product is worth selling or not. It’s
Stephen: [42:23] really important what you were also describing got me thinking about this too is that you know status quo might not be so good when you start looking at real profit loss per item when you’re working on your business at that level because you have good books. There’s stuff that you might not be making money on that used to make money because of changes that were made outside of your control. Yeah and that’s probably one of the biggest reasons to get control of your books. I
Anna: [42:49] completely agree. You know we don’t want to be working for nothing and we certainly don’t want to work. You lose money. And it’s really important to make sure that we understand what’s going on with our inventory.
Stephen: [43:01] I just watched for some reason YouTube Fijis stuff that you know you watch one it’s a rabbit hole and they feed. So it was one on this person bought something from craigslist and it was a dresser they restore it and it was like oh my god it’s beautiful what they did. And she’s like yeah I put fifty five dollars into and I can sell it for 150.
Stephen: [43:19] Then at the end she qualifies I put forty eight hours into it. I’m
Speaker 8: [43:23] thinking about changeroom dollars an hour. Oh my God. I mean I guess if you love it that’s cool but I’m like oh that’s not a good business model. That’s the way to make a living. You know but that’s important to know. Yeah it really is. That’s
Anna: [43:38] a good point. I completely agree. You know I see sometimes people saying I only got four hours worth of sleep and I got this mega shipment out. Well you know that’s not really a badge of honor. Every now and then that’s going to happen. But that shouldn’t be you know the regular operating procedure.
Stephen: [43:54] It used to be the bad oh I worked 48 hours in the last three days. I know. Not anymore. Now it’s like man I’m sorry. I feel bad for you to get old when you get up and just your hands hurt you know stuff starts to hurt me and parts start falling off. So what else can we advise people. And this is advice free so take it for what it’s worth. But what else can we help people think about to work on their business this year that you know they didn’t get to last year. What
Anna: [44:26] would you say. You know I think having a plan for the future not living in the moment like I can’t wait to see what my numbers are for January.
Speaker 8: [44:36] But that’s a bad one. Not living in the moment. And it just went deep. I love that laugh. Think about that sort of nurture.
Anna: [44:43] What are the goals for the year of the quarter. And I think one of the reasons that’s tough in this business is because Q4 sales in general are many sellers are just unpredictable and crazy and you know sometimes bigger than you expect. I think a lot of people aren’t really planning month at a time they’re just kind of thinking. All right Q4 is going to make my year. And my suggestion is for people to have a little bit more holistic view of what they’re doing.
Stephen: [45:09] There are some people that actually only operate in FBA business in one quarter and they make all their profits in one year for the year. And that’s a pretty awesome thing. I mean but I would call them outliers. I mean is that is not an easy test to do.
Anna: [45:23] I would too. But you know what. If people think about what are why is it quantify that they could find out you know what the amount of money that I’m making and the other three quarters isn’t really material to my overall goal. Think of what I can get as far as time back if I didn’t and I only sold in Q4.
Speaker 8: [45:40] And think how many guitars you could strum on that beach sipping a Kolderie dress could redo Brown and make big six dollars right. But it’s true. You’re right.
Stephen: [45:51] That’s a that’s a valid point. So your point is if you know right if you do the work and invest into your books you could tell that you might not like what you find though. I think that’s part of it too. I think that’s one of the reasons people don’t do it. They might not like what they see. I
Anna: [46:07] totally agree. It’s almost like stepping on the scale after vacation. No one likes to do it. But you’ve got to know the number to do something about it. And it’s the exact same with people’s books. You have to know the number to do something about it. But if you don’t know the number. Oh ignorance is bliss.
Stephen: [46:23] So if you like what in saying she does offer services so I’m going to let her pitcher services because a I’ve known him for several years now and I love the consistency. Never charged for all the free stuff you give away. It’s always been there always willing to help people your group is free and it’s an amazing group. There’s so much in what I like is lots of times the advice it’s not even advice. Hey here’s the practice that I use here’s an approach I use or whatever and then the experts weigh in. But it’s just so cool to see like Oh other people have the same challenges and in your group which is called Say It Again account. We will go accounting.
Speaker 9: [47:07] We will go next. It is really actually it should be a book. Someone should make a children’s book accounting we will go a little rabbits and stuff I can see them hold them baskets and I have that vision for some reason nice fabric. By the way that’s an inside job. Yeah.
Stephen: [47:24] So accounting we will go and I’ll have a link to it that’s a Facebook group it’s free. She wants to make sure you’re real. No negativity. It’s all positive. No complaining. These are real world things you do offer services so talk about the services that you offer to you.
Anna: [47:40] You can also find information on my Web site accounting. We will go dot com. The services I offer are I have several courses I’ve developed and the reason I developed the courses is because of the second service I offer which is bookkeeping and bookkeeping as a great solution for many people but for others their business doesn’t support the cash flow.
Stephen: [48:02] And so I have and that’s real that’s important. It shouldn’t start a business and then have all your expenses going to bookkeeping. No no no no no no. By inventory you got to buy amatory. I mean that’s important.
Anna: [48:15] Well and that’s kind of what I’ve done I have the three levels are the three stages one is everything is in the group free you could literally go in there and learn everything you need to. Then the second level is you know what I think I want to learn more about how to do my books but I don’t want to sit through the group and find the answers to my questions and read that. Q So have courses organized. I have a basic accounting where it is foundational and it teaches you everything you need to know about an e-commerce business. Then after that I have a very specific for quick books online. Of course that will teach you how to do your bookkeeping and quick books. Then when people get past that or they feel that they’re ready for bookkeeping I provide bookkeeping services and I always tell people the ideal client that I work with is the type of client I have the best relationships with and the best access with for the seller and for me they need to have be able to afford three hundred fifty dollars a month in bookkeeping.
Anna: [49:10] Anything less than that it just doesn’t make sense for the seller or for me. And you know you might be asking what level of sales would that equal. It’s kind of tough to say because you could have good margins and plenty left over to spend on bookkeeping. But I’ve noticed in general around 100000 thousand dollars in sales it starts to make sense to get a bookkeeper other 100000 a year 100000 a year. Yes. A hundred dollars a year. You know that’s the point in time you need to start thinking about entity structure and it might make sense to invest in a different type of entity structure.
Anna: [49:42] So I think those things go hand in hand. I work with Amazon sellers primarily. I have one seller who sells on five platforms so that’s not a limitation but the primary source of revenue is an Amazon seller and I use quick books online and that’s the criteria that I’ve found that is the most successful for me and the seller is the bookkeeping. I
Stephen: [50:02] mean you’re preparing you’re helping prepare my books and then they’re basically you help create the file run the report whatever the file for the accountant to do the taxes right. I mean that’s the level to you also that bookkeeping fee is there is or consulting. Is there a best practice. Because one of the cool things you do is you get to see multiple versions right because you maybe look at 20 or 30 companies. You get to see who’s doing it right. Is there or do you offer advice to others for that you know not that specific saying hey Steve’s business is doing it right or not right but it’s basically like hey you know here’s an opportunity for you. I see.
Anna: [50:42] Oh absolutely. And I really love doing that. And what’s interesting is a lot of people don’t want to stop and take the time to do that. But I’m always happy in love. Going over financials with people I will tell you that I am proactive though if I see something that’s maybe not heading in the right direction you know the famous bad direction to go in in this business is having too much debt on inventory. And I mean that’s that’s just asking for it you know. So if I start to see these patterns and trends that don’t look healthy I will reach out and say hey let’s have a conversation about this. And I provide services either quarterly or monthly. Some people just really want to get into your quarterly but then some people really want to that monthly what their bottom line is and how they’re doing.
Stephen: [51:26] That’s awesome. And that’s the smartest way. I mean that’s the best place to get to when you know by month byproduct when you get to that level and you know your fixed costs and variable costs and all that kind of stuff. And it sounds foreign. But again if you want all those things and you’re saying how do I do that. In addition to what I’m doing Steve. Well there’s the answer is you hire somebody like you know and you know we say this is like a lawyer or an accountant. Good one will save you more than the cost. Absolutely the end here. You know I went to accounting school and I have a master’s degree. But I still pay somebody and they do save me more money because they keep up on it. And that’s really the key is they keep up on it. Right. It’s not that I’m not smart enough to do it. I’m not willing to do what it takes to know that because it would suck the all the other time that I have to do other things. Right
Anna: [52:14] exactly. And just because you can do something doesn’t mean you should. We were talking about that earlier and you know I always suggest that people value you know try to quantify quantifier time what do you think you’re worth hourly how many hours do you spend on you know bookkeeping or whatever you are considering outsourcing and the answer it kind of answers itself right.
Stephen: [52:34] Right. Yeah. And especially if you don’t enjoy it. I mean if you don’t enjoy it. There are just some things I don’t like to do. Guess what I’m paying somebody else to do so. That’s a lovely family. All right Anna give us give us one thing. All right I’m going to narrow you down to one thing that no matter what it’s 2018 somebody knew or messed up starting over because it’s a new birth. 2018 is a new year. This is a chance to do a do over right to get a do over and it starts. What’s the one thing that people need to do today.
Stephen: [53:10] This week this month to really set themselves up for success this year.
Anna: [53:16] Oh I love this question. The number one thing people need to do and continue to do is please please please know how much you hold and unsold inventory and the value is based on what you paid not what you expect to sell it for. Always know that number. Make sure you know that number just like you know your home address. That is your business and you never want to have too much and you never want to have. Not enough but I’ve found probably 85 percent of the time people are holding far more than they realize they do far far apart. And this Gary thing you know you have to think if you know the business were to close today how much inventory am I holding that I need to figure out how to get rid and you want to be to have too much exposure and that’s a real issue especially if you have a spouse and that’s now looming over their head right now if something happens to you somebody is going to deal with that.
Stephen: [54:08] And we’ve had that in my house many times that discussion is like what do we do. Because that’s an issue. Now the good news is we don’t carry debt. So that part isn’t. But if you had that into it that factor is huge. Now all of a sudden it really changes things because guess what. That doesn’t die with you because you have assets there so no OK. All right. So best place to get so we got accounting we will go dot com. OK. And that’s where we’re going to have all this information. We have the accounting we will go Facebook group. I’ll put that out there too.
Stephen: [54:40] I’m going have links to all this Steve doesn’t benefit in any way other than having you the seller get control of their business and have incredible success in semi notes like oh my god into he’ll is the best thing since sliced bread that bread slicer right there.
Speaker 8: [54:54] And there’s an array next to it just amazing right. And can I put your Facebook contact there too. Yes please.
Stephen: [55:01] Man oh man. It is such a pleasure talking with you again. Episode 98 square her story. She does have a story. It’s a very cool story and it’s very cool that you still sell and you sell a lot to me. That’s what makes this that’s what makes you so important to this business because you live and breathe that you get to experience the same ups and downs that we all do. And I think that that’s so powerful.
Anna: [55:26] Well thank you. I love it it’s such an exciting opportunity for people to make a positive difference in their life and I feel very fortunate to be a part of the online world community.
Stephen: [55:37] We’re fortunate to have you. Thank you so much I wish you nothing but success.
Anna: [55:40] Again. I enjoyed it.
Stephen: [55:42] I’ll talk to you later told you we got to some good places there. Smart lady just a real genuine person and I can’t recommend her enough. I mean I just I really believe in her and can see when I look for consistency. And so I’m now known her for several years and she’s exactly the same today as she was and that’s all positive stuff. So if you can benefit from her I have all those links on the episode. And I just think that again getting to know your business is such a great thing and bringing partners on. That’s what I call these people partners because I have several of them our business that helps us run our business and they just brought us to places that are just so it’s such a wonderful thing. E-commerce momentum dotcom e-commerce momentum dot com. Don’t forget my sponsors.
Stephen: [56:26] So are solutions for e-commerce. Karen Locher she’s just cranking along. She’s gotten so many new customers thanks for listening and listeners sign up for it. But I’ve get so many comments like Oh my God she’s the best thing since sliced bread because she’s helped me do this and she’s helped me do this. We tell you she’s helped me. She’s a portent part. And in February I meet with one of our big distributor companies and we’re planning up the new year for Christmas. Believe it or not we’re actually planning that. And when you get to that level of relationship you get invited in in those conversations right. You become the e-commerce solution. Well guess what. Immediately I’m like Okay Karen here’s the things that we’re going to be doing and she’ll roll backwards like okay I’ll need this and this and this and this.
Stephen: [57:08] And it really becomes part of the team and it’s so cool because we’re all in different places around the country and yet we’re able to do and that’s what that’s what having a partner like Karen has done for me. So solutions. Number four e-commerce dotcom forward slash momentum will save you 50 dollars off her surfaces and 50 bucks 50 bucks. And it’s an awesome thing. And I just can’t recommend enough solutions for e-commerce dotcom forward slash momentum save you 50 dollars. And she still does your inventory Health Report. Start the new year knowing your inventory health. It’s very very important. E-commerce momentum descant.
Speaker 10: [57:45] Take care. Thanks for listening to the e-commerce momentum as all the links mentioned today can be found at combers momentum come under the service. Please remember to subscribe and the like goes on iTunes.