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Most shop owners don’t have a profit problem. They have a clarity problem.
Under the Hood CPA is where we break down the numbers, decisions, and strategies that actually move your shop forward. No fluff. No theory. Just real-world financial insight for operators who want to build something that lasts.
Hosted by Eric Joern, CPA, and advisor to high-performing automotive repair shops, and Partner at Kaizen CPAs + Advisors. This podcast pulls back the curtain on what is really driving profit, cash flow, and long-term enterprise value inside your business.
Each episode is built around one question:
What would I do if this were my shop?
Alongside solo breakdowns, we bring on top operators and experts each week to give you clarity across the areas that impact your business and life most:
Personal finance and wealth building
Retirement planning for business owners
Technology and operational efficiency
Lending, capital, and growth strategies
Tax strategy that actually moves the needle
You will learn:
How to read your numbers like an operator, not a bookkeeper
Where profit is leaking and how to fix it fast
How to scale without losing control of your cash
What top-performing shop owners do differently
Whether you are an established shop owner or an aspiring operator looking to make the leap, this podcast will give you the financial clarity and perspective you need before making your next move.
If you are tired of guessing, reacting, and hoping your numbers work out, this is for you.
Because the shops that win are not the busiest.
They are the ones who understand what is under the hood.
[Lucas Underwood] (0:00 - 0:31)
There were no securities in place to make sure that somebody couldn't take money. They did take money, lots of it. They did things that were illegal, they didn't pay taxes, they didn't do the right thing.
Meanwhile, my dad had faith in somebody and was sitting there listening, waiting on them to say, hey, red flag, something's wrong. And the only red flag he ever got was like, hey, I think you should check on that. I get that we need financial professionals in our lives and we need those people there.
But I also think it's extremely important for us as business owners to have that base knowledge so we know what we're looking at.
[Eric Joern] (0:32 - 1:11)
More revenue doesn't always mean more profit and more profit doesn't always mean more cash. A better shop starts with understanding your numbers and making better decisions. We bring in experts to turn complex financial issues into answers you can use.
This is Under the Hood CPA. All right, welcome to Under the Hood CPA. We have David and we have Lucas on the podcast today.
This is actually our first podcast. I'm super excited to get things rolling here. Fellas, what are you guys hearing out in the industry?
Why do we need this podcast?
[Lucas Underwood] (1:13 - 3:46)
You know, there's a lot of reasons we need this podcast, but primarily because everyone thinks they have clean financials. But they don't clean financials. You know, it's really funny.
I just came back from hanging out with my family at the pool and this older gentleman was walking around at the pool and I sat down and started talking to him and he said, I asked him, I said, what do you do? And he said, well, I'm semi-retired. He said, but I'm a business consultant and I help furniture businesses and lighting businesses sell their businesses.
And I said, well, how did you get there? And he said, it's really funny story. He said 2007, 2008, he said, I was traveling around the country because this lighting business paid me a lot of money to help reinvigorate these lighting businesses.
And he said, here's the situation. He said, I go up and I sit down and I talk to him and I would say, okay, what's the plan? What's the strategy?
How are we going to get through this? And he said, every single one of them, except for maybe three said, well, we just hope we're going to get through it. And he said, I determined something at that point in time.
Hope is not a strategy. He said so many business owners that he had worked with had hope as a strategy. They didn't understand the financials.
They didn't understand the numbers. They took and dropped off their financials at the, at the accountants office at the end of the year, it was always, Oh my God, I can't believe I owe this. Or Hey, they gave me this P and L and it looks like I'm in trouble.
And he said, they never ever had good numbers. So it's not just specific to automotive, right? It's specific to business as a whole, but these privately owned companies, I believe are at a disadvantage.
The mom and pop companies are at a disadvantage because they don't have that financial expert in the business. And when they started, they weren't big enough to be able to afford that financial expert in the business. And so I think the reason the industry needs your show is because we need somebody out here sharing with them just the basic tidbit information.
So at least they know where to look. And then later on, they can say, Hey, I need to hire Eric. I need to hire somebody to help me manage my finances so we can get this dialed in, so we're actually going somewhere.
Um, I think it is, it's not complex. I don't mean to make it sound like it's super complex, but I do believe that starting out, if you don't know where to look and you don't know where to put the data, you don't know how to categorize. You don't know what a P and L should look like.
You don't know what a balance sheet should look like. You don't know how to read them. That's overwhelming to try and learn early on.
And so I really believe that it's important for you to be here because you can help those people get a basis on that.
[Eric Joern] (3:47 - 5:17)
Love it. One of my inspirations for this is I follow all these Facebook groups on mostly the shop groups. And unfortunately, while a wealth of information exists there to wealth of mixed information, I mean, how many comments do you see, you know, oh, just, uh, just go ask a CPA or go at, right.
They don't know what to ask, right? I mean, yeah, I, we did a two day financial intensive with the Institute. One of the sections that we taught was how to work better with your CPA or your accountant, you know, one of the biggest issues we normally find is just that there's such a misalignment because me as the business owner, I don't know what to ask and them as the accountant, right?
They don't generally run business models. They don't run their businesses, a business model, right? They know a lot about tax, accounting, finance, whatever it may be.
And they're just a practitioner, but they don't understand, you know, Hey, how to ask them where they're at, where they need to be and create a map for them to get there, right? They lack that intentionality that really needs, needs to exist. And, you know, so while, Hey, that honestly, I do love the fact that half the people give really crappy advice and half the people say, go ask a CPA, right?
At least half the people are saying, go ask a professional to answer your question, not just a bunch of us on a, on a chat board, but they need the next step, right? They need a little bit more than that of just go ask the CPA.
[Lucas Underwood] (5:18 - 5:54)
You know, years ago, Rick white came to me and he said, if you're waiting on your accountant to tell you something's wrong, something's already wrong, and I think I don't want to share too much, but I think that what we've been through with the family business is a perfect example of that when I came back and got involved with the family business again, my dad's exact words were, if something was wrong, the accountant would have told us he's taking care of all of this. I don't have to worry about any of it. He just takes care of it.
Now you've looked at the financials. Can you tell me if something was wrong?
[Eric Joern] (5:56 - 5:58)
Mmm. Yeah.
[Lucas Underwood] (5:59 - 5:59)
Yeah.
[Eric Joern] (5:59 - 6:00)
Definitely wrong.
[Lucas Underwood] (6:00 - 7:15)
Exactly. And, and so the thing was, is not only was it wrong in that way, it was wrong because there were no protections in place. There were no securities in place to make sure that somebody couldn't take money.
They did take money. Lots of it. They did things that were illegal.
They didn't pay taxes. They didn't do the right thing. Meanwhile, my dad had faith in somebody and was sitting there listening, waiting on them to say, Hey, red flag, something's wrong.
And the only red flag you ever got was like, Hey, I think you should check on that. And so like, I get that, that we need financial professionals in our lives and we need those people there. But I also think it's extremely important for us as business owners to have that base knowledge so we know what we're looking at, right?
If you don't understand it, if you don't know what to look for, man, you, like, you can get yourself in trouble quick because exactly. I mean, you're, you just, it can, you can lose so many millions of dollars so fast. It's not funny.
What, what do you see? Like when you're looking at these businesses, because I do see exactly what that guy earlier was talking about. It's like, Hey, it's, it's a hope strategy.
What are you seeing the big mistakes that these guys are making? Like, what are they?
[Eric Joern] (7:16 - 8:59)
Yeah. Yeah. Oftentimes the issue is exactly like you brought up, right?
They're waiting for somebody to give them the answer. Yeah. And that's usually the number one, right?
I just lack intentionality. I, I just take whatever the business I guess gives to me or whatever happens that happens instead of addressing with intentionality. I think that's the most important thing is, Hey, I'm going to set up, this is what we're going to do every month.
These are my expectations. My financial statements are my measurement of did we meet those expectations? And if I don't look at it like that now, all of a sudden I'm just accepting whatever happened happened.
And like you said, right, they're just kind of wandering aimlessly and they get the, they get the result of, of what it is and that's, that's operational now from assistance, a systems and measurement process. Right. Well, we end up seeing the first iteration is a cash in cash out type accounting system.
Hey, it helps. It's a, it's a better place to start than nothing. And that maybe is another path that we see people go down is, Hey, these gotta be, these gotta be perfect financials.
Well, guess what? No fortune 100 company has perfect financials, right? They get audited and there's always some sort of notes on that audit about issues in the financials.
Right. So somebody gets lost on the rabbit hole of, Hey, I'm, I want a perfect set of financials. Well, it'll never be perfect.
Hey, let's, let's go for directionally. Correct. Meaning if I want to use my financials to make a decision, I know that I relied on enough good data to make a good decision.
It doesn't have to be reconciled down to the penny. And I hear that phrase all the time. They, you know, we're trying to reconcile this down in the penny, but you're reconciling it from six months ago.
[David Roman] (8:59 - 9:00)
Yeah.
[Eric Joern] (9:00 - 9:58)
That's long gone. Somebody's still in the honey for me is from six months ago. That money's long gone and probably is accumulated pretty significantly.
Um, and then cash in cash out, right? Well, cash in cash out just says, here's my cash flow. Right.
That's cash flow only. What I'm not accounting for though, is those standards, those metrics and those intentionalities of how I need to run my business from a financial standpoint, right? So I'm not measuring then parts, gross profit, labor, gross profit.
I mean, we're, we're, we're onboard nearly a hundred shops this year. Um, and what we see is a variable amount of different things where maybe, maybe a P and L looks okay. Balance sheets a mess that, I mean, a age, the lack of understanding around balance sheets, which is the truth teller of a financial, right?
A P and L can look super clean, super pretty over the balance sheet. The balance sheet doesn't feel, look and feel the same way. I can't rely on that information.
[Lucas Underwood] (10:00 - 10:35)
Yeah, absolutely. Well, I mean, here's the thing. It's like, there's so many people that they don't know how to read it in the first place, right?
They don't know how to look at that data. And then on top of that, look at the number of people who come in the groups. They come to you and say, Hey, I need to enlist you for your services.
They come to us and they ask for advice in their business. The only data they have is what's in the SMS. And I'm like, but that's not enough. Like you can't run the business with the data in the SMS. It's not, they have an SMS get into that discussion too.
[Eric Joern] (10:36 - 10:39)
I don't know somebody they're doing everything out of QuickBooks.
[Lucas Underwood] (10:41 - 11:04)
Dude, it is not made for that. Okay. Can we just, can we just settle that right here and right now?
QuickBooks is not, I did it for a long time, but it's not designed to track the mileage. It's not designed to track the information about the vehicle. And it's not designed as in service history.
It was designed for service businesses, but not the type of service business that the automotive repair shop runs. It's not designed for that.
[Eric Joern] (11:06 - 11:23)
I mean, quite frankly, it's designed for veer very, it's like anything, right? If you want to do, if you want to be super intentional about your business, run it like a business and run the best business you can, you need the best, the best of the best, right? And QuickBooks is I'm going to provide a simple product for anybody and everyone.
[Lucas Underwood] (11:24 - 11:24)
Yeah.
[Eric Joern] (11:25 - 12:07)
From a billing, you know, a billing and invoicing and intake process, a shop management system is table stakes at this point, you know, and we might hear something like, Oh, well, my shop's different. I don't have enough car count. I don't, you know, I do restorations or I do diesel work or something like that that requires something, no, there's a product out there for each one of those situations that, that will, I mean, shoot, you know, what is a baseline shop management system from shop where tech metric for a few hundred bucks a month?
I mean, yeah, exactly. You can't scratch that somewhere in your business and you know, it's going to make enough money to pay for itself.
[Lucas Underwood] (12:07 - 14:34)
Right. And, and like, I just want to point out that like all the car companies, right? One of the things that, that I talked to people about sometimes that I've talked to lots of folks from car companies themselves, and they said, you know, we're, we're kind of phasing out of the car production world and selling cars and repairing cars, the core of the business is doubt now a data management company, right, like we're, we care way more about the data than we do other stuff it would seem some days. And that's what you're seeing in the world.
We live in right now. Data is where the money's at, right? No matter how you look at it.
And I get that all these technicians I talked to, it really frustrates me because they don't understand the business and they're going in their starting repair shops without understanding how the business works. And then they, that like, they're so mad at the current owner of the business. And then they go and they commit all the sins that I was committing just worse because they have to, to survive financially later on, right?
They don't understand it. And, and the key behind it is, is that it takes good data to be able to run the business and data is where the money's at. I understand fixing cars is what the business does, but to make the business viable, to make the business to where I'm not just like working a job.
I have to have data and so many of them lack that basic data, right? And, and look, I'm going to tell you right now, until I had a business coach, dude, I just went into all data manage and I clicked some buttons and I came up with a repair order and the GP at the bottom looked like what everybody said it needed to be, but then he's like, no, no, no, you're not billing this right. And this needs to be itemized and this needs to be put over here.
And this needs to be put over there. And then I moved to shop where, and I would do, I'm going to tell you, I was ready to choke the man out at one point or another, cause he's like, we're, we're four days into categorizing at this point. And he's like, no, this needs to be mapped over here.
This is going to the wrong account and this needs to be mapped over here. Nope. You need to change that account type.
This is an expense account. That's an income account. No, you need to move this.
No, you need to do that. And then it was like, okay, he would sit with me for an hour a day and we would go through line by line by line, all these transactions. I'm like, this sucks.
He's like, right. But like, this is how you're going to get the business to where it's management, right? And, and to my detriment, the majority of the issues with my financials are because I hate doing it so much.
I kept trying to find somebody else just to do it for me. Right. And with that, you've seen the results of that.
[Eric Joern] (14:34 - 14:46)
But that, but not, that's not necessarily an issue. And that's another plight that, that we hear is for them to understand, they think they have to do.
[Lucas Underwood] (14:46 - 14:47)
Yeah.
[Eric Joern] (14:47 - 15:11)
Right. So that means I have to go in. I have to categorize, I have to reconcile, I have to do this.
Well, no, you can outsource the doing of it, but they better teach you along the way, they better teach you what they're doing, explain what they're doing, and then show you the results and explain the results, right? And you have to hold them accountable to that.
[David Roman] (15:11 - 15:12)
Right.
[Eric Joern] (15:12 - 15:19)
You know, again, that's where that disconnect to the relationship is, right? If you say, I want you to do this for me, they're just going to do it for me.
[Lucas Underwood] (15:20 - 17:16)
The problem is most of them are little old lady, granny accountants, man, and bookkeepers. And I feel bad. I like really feel bad being mean to them and telling them that this ain't working.
You know, that's hard. It's hard going to them. And I think what happens is a lot of these business owners get into that situation and then they go to that person and they ask a question or they hear, Hey, this may not be right.
And they go to them and they're like, Oh, sweetie, that's the way we've always done it. It's okay. Right.
And I had that situation happen like two weeks ago. I had been talking with a gentleman who had a bookkeeper slash accountant, and it was just a little hometown organization. And I said, all you have is income, cost of goods.
And one, one chart of accounts account for expenses that says expenses was like, there's literally like five lines on your P and L. This isn't right. And so he goes to her and says, Hey, listen, I'm being told that this is incorrect.
And she's like, no, sweetie, they're wrong. This is how all the businesses do it. This is how the big businesses do it.
And I'm like, look, dude, I can show you hundreds of P and L's, right? Like I can literally get on any investing service you want, I can show you P and L after P and L. Well, it's 477 pages long.
Right. Exactly. Exactly.
And so I think that they get called into this cycle where they really do feel like they, they don't know who to trust or what to do. How do you, so let, let me ask you this then all these people listening and they're saying, okay, fine. You're telling me there might be an issue with my books.
There might be an issue with my accounting. I want, this is a two-phased question, right? Phase number one, I want to know how do I look at my books and know something's wrong?
If I don't know anything about financials. Part number two is what do I say, or what do I do if I don't think my financials are right? Like what are the two steps I take?
[Eric Joern] (17:16 - 20:06)
Yeah. Yeah. Well, we'll start with how do you look at your books yourself and see if that, see if they're reasonable.
One, you could take your tax return that you filed and your books. Do they look anything like each other? All right.
Does revenue match? Does profit match? You might have to look at a balance sheet.
I know balance sheets are scary. It's just what you have, right? It's cash assets.
It's what I owe, payables, credit card, payables, loans, and then equity is what I have left over. So one of the things you need to do is look through that balance sheet and say, do those things really look like they should exist? Do I actually have that cash?
Do I actually owe that money? Am I actually owed that money? Do I have that amount of inventory, right?
I mean, these don't have to be big, scary, mythical things. It's simple. It's what do I have?
You look at the balance sheet and did I have that at the end of the year, at the end of this month? Did I owe it? And do I own that much, right?
I mean, theoretically we all kind of have a good sense of, of what we may have and what we may owe. I mean, we talk to business owners with bad financials all the time, but they have their hands at least wrapped around what they have, what they owe. They can, they know, hey, hey, I know we're going to have to pay 40 grand for our payroll expense or our parts vendor bills, 10 grand for the, for the month or for the week.
You know, they know all these things off hand. Well, the things that you know, then should jive with your financials. Yeah.
So that's a good place to start. Right. And if that doesn't make sense, that's the point in time when you say, okay, I'm going to, I'm going to either go find an accounting firm.
I mean, there's a handful of us that specialize in the automotive repair space, all of us do good work. It's all specialized. You'll get a tailored product and you'll get an explanation that jives with you as a shop owner.
Talk to one of us or go to your co if you have a business, if you have a shop coach, ask your coach. I mean, I just talked to somebody and just yesterday his coach found that the accounting firm didn't capture $80,000 in credit card expenses on a return that they had prepared and that was sitting on the, those credit card fees were sitting on the balance sheet as, Hey, we didn't get those credit cards deposited because they started impounding fees, right? Every, at every, every deposit from the credit card vendor, they took their cut off that instead of you haven't, haven't paid the one amount that lived right on the balance sheet.
Right? So if you don't look at a balance sheet and say, Oh my God, do I really have $80,000 in credit cards outstanding? I think your, your, and almost everybody's answer is going to be no, then there's a problem with your financials.
[Lucas Underwood] (20:07 - 20:07)
Yeah.
[Eric Joern] (20:08 - 20:18)
And, but hey, a coach, a coach could be, could be financially astute enough to figure that, that out. And in this case, they see it. No.
And look at it. A hundred percent.
[Lucas Underwood] (20:19 - 21:50)
I think the key is having somebody in your corner. Right. That, that you just feel comfortable enough with calling and saying, Hey, can you look at this with me?
And, and most of the professionals, the coaches, the accounting firms, whatnot can look at it and just say, Hey, man, this is a mess. I can't really give you advice on this because I don't think it's, you know, and I, I think that, you know, I'll look at P and L sometimes and just basically say, Hey, you need to call Eric and talk to him about this, or you need to, I'm sure you get tons of telephone calls because of that, but like, you know, hey, this is beyond my capabilities. And it was, it was almost like, um, when, when all this other mess happened up here, I went to the accountant very early on and said, Hey, we need to start a new QuickBooks file.
Right. We need to start fresh. This is not usable.
It's not going to be made usable. We can't do this. And I, dude, I should have known there were red flags because the first thing that came out of their mouth was is it doesn't matter because as long as I start inputting everything fresh right now, it's going to clean everything up and it's not going to matter.
And I'm like, I know better. You know what I'm saying? Like I know it will put it in from now on, on the P and L correctly, but it's not going to change the balance sheet.
It's not going to change the cashflow statement. Like it's not going to fix the mess that's behind the scenes. And I should have known right then, but like having somebody that's willing to put their foot down and say, no, this is not working.
You need to do something different. I think it's key, you know, a hundred percent.
[Eric Joern] (21:51 - 22:39)
Yeah. And that, and that's really truly what's key, right? Is somebody that can come in with authority and say, this is how it needs to get done.
Yeah. And this is how we're going to do it. If somebody says, Hey, how did you do it before?
And that's, and we're just going to keep on doing it. Well, if you came to them with an issue, if your financials aren't good and they're just going to keep doing what was happening. That's probably not going to result in a successful process ongoing, right?
If you come with a problem with your financials, the process needs to be torn down and rebuilt from scratch. And that's what, that's what we do, right? We're, we're not, we don't accept, Hey, this is what we've always done.
We, we turned, we actually turned somebody down, right? We looked at their financials. They said, Hey, I don't understand why I'm not making money.
And we said, Hey, from looking at your financials, I don't understand why you're not making any money.
[David Roman] (22:39 - 22:40)
Right.
[Eric Joern] (22:40 - 23:31)
And then we talked about our process and he's like, well, I don't want to do it like this. And I don't want to do it like that. And I don't want to do it like this.
And this is how I need to look at it. And I'm like, you came to us saying, I don't know why I'm not making any money, but you don't want to change how you measure your, your shop. I don't like, it just doesn't make sense.
So we said, you know, Hey, guess what? We're not going to be the right fit, right? You'll be frustrated with us because if we just continued on doing what you're doing, we'll never solve your problem and we'll never, we'll never get you where you want to be.
So we parted ways. Um, I don't know. Uh, well, it was just a prospect, right?
We have lots of those conversations. Um, and a lot of times that just, Hey, I don't want to change how I'm doing things. And if they don't, if they're not, if they don't have that growth mindset, that they're willing to do that.
I don't see how we get from A to B.
[Lucas Underwood] (23:32 - 24:38)
How important do you think it is that we share financial data with our teams? Right. And, and here, like this is a gray area for me, I've always shared my financial data with the team, mainly because like, I have a vision in my head that one day either we will help them own their own shops.
There'll be part of management in this shop. We may sell them this shop. I don't know what the future looks like, but I want to, I want my people to, to learn and grow and develop from their time in this business.
Right. And I'm talking to a lot of technicians who genuinely don't even understand, and it's not their job to understand. I'm not saying that they should necessarily understand, but a lot of them are going out and starting shops.
And if you've never looked to the P&L and, and can't understand it at all, you should not be in business. I hate to say that. Like, go watch a video, read a book, do something, get some help first, but you shouldn't be in business if you can't read a P&L.
Correct. How important is it, is transparency you think in financials?
[Eric Joern] (24:39 - 25:34)
Yeah. Yeah. So we, this is a very polarizing question, right?
Because everybody's, most owners are afraid to share what they're doing with their team because they think their team is going to, you know, think they're rich and greedy and all those things. But to me, it's the absence of willingness to share that information. That causes that, right?
Hey, people, people will come up with their own, they'll come up with their own narrative if you don't give them the information or you show them the narrative. Here's what we did. Here's the bills that I'm paying.
I'm providing livelihoods for all of you. I'm, I should be rewarded for that as a business owner. I took, I take the risk, right?
If I can't pay my bill, my bills here at the shop, I'm now responsible for you guys having to go find a new job. Likely I've leveraged my home and all my personal assets to start this business. You have right to make a profit.
[Lucas Underwood] (25:34 - 25:35)
Yeah.
[Eric Joern] (25:35 - 26:23)
And you should teach your team. That's how businesses, business works. And let's be honest, if you're a high performing shop that's making a healthy profit margin, you're probably providing really good working conditions, top tier training, delivering an excellent product for your customer are probably a really good cornerstone for the community.
You're doing a lot of damn good out there where there's a lot of really bad. And I don't understand why you wouldn't share it, right? People want to work for winning organizations, right?
They don't want to work for somebody that's not making money, right? Because working for somebody that's not making money is not a fun place to be, right? If the owner says, hey, can we push your payroll a few days because I don't have money to make payroll.
Yeah. How are you going to feel about that?
[Lucas Underwood] (26:23 - 29:13)
Right. And I'm telling us some like, hey, dude, you can, you can go get another job. I can't believe this crashes and burns.
I'm in trouble, right? Like everything I've worked for, everything that you have, everything like that we're doing here is gone if something happens. So, and you just go get another job.
You walk away scot-free. And they're like, yeah, but like, and, you know, it's these conversations I've been having. And, and last night there was a long drawn out conversation.
We, we talked to this gentleman. He's, he's in the comment section of a video and he's like, I'm in, I'm in Iowa and Nebraska, like kind of somewhere on the line. And he said, typically a technician here makes between 60 and $70,000 a year.
And he's like, that's not fair. It's not enough. And I need to go start my own business.
And I'm like, hang on just a minute. Let's, let's run through the numbers here. Let's talk about the numbers for a minute.
Because in Iowa, you're in the top like 10th percentile of income earners at $70,000. And he's like, yeah, yeah. But like, not all technicians make that not all this and not all that.
And I'm like, right. But like, let's go through the numbers then of a business owner. Because like, you're going to go own a business.
You're a one man band. Let's say that you have four hours of production. You have four hours production at 1.85 parts to labor ratio. The average in Iowa right now is $110 an hour. That's what? $203,000 a year or something like that.
And so now we're looking at this and we say, OK, well, then I have to, you know, pay myself that 30 percent. So that's, you know, $33,000 a year that I'm going to make as a technician because I only turn four hours a day. And then let's break that down even further and look at the expenses.
Well, you need because you're working by yourself. You need long term disability, short term disability. You need to be paying workers comp on yourself and oh, by the way, yourself employed, that's 15 percent tax.
You're only paying, you know, half that now. And so like, I'm walking through the numbers with him and he's like, wait, wait, wait. But if I do that, I'm going to earn less than the $70,000 I'm earning now.
I'm like, exactly. That's the point. You're taking all this stress and liability.
Not saying don't go start a business. But if you're going to start a business, start it intentionally, right? Start it to where it actually makes money and understand what the numbers need to be for that to work.
See, we're starting businesses with this idea. I want to earn a lot of money. OK, what is a lot of money?
Where do the numbers come from? Like I'm I'm learning now. Businesses don't start like that.
Businesses start from the numbers back. Like we have to take the numbers and plot and project and decide where do we need to be for this to work financially? Because the numbers, I'm not going to say they don't lie, but the numbers give you a pathway.
Otherwise, you're just like jumping in this thing saying, let's go fix cars. Fixing cars doesn't make money. Fixing cars probably makes money.
Don't ask me.
[Eric Joern] (29:13 - 30:03)
It costs you money. It becomes a labor of love. Yeah, this is 100% wide non-traditional entrance into the automotive repair space, right?
Somebody comes from a corporate background or some sort of other type of background. Why their shops are performing at a such such higher rate than our traditional entrants who came through the technician service advisor, service manager route. It's because a lack of understanding or well, a one one intentionally is saying, I want to go start a business and I'm going to go run a business.
The other one says, I think I deserve to make more money. So I'm going to go take a pathway to go make more money or I don't like working for somebody else. And it's our that it's it's our opportunity as leaders in the industry to level the playing field for those more traditional entrants into the space.
Yeah, absolutely.
[Lucas Underwood] (30:03 - 30:05)
And I think that's that's our responsibility, right?
[Eric Joern] (30:06 - 30:07)
I really do feel that way.
[Lucas Underwood] (30:07 - 32:46)
That's why we've been doing what we've been doing. There was a huge debate. Lots of hurt feelings.
A big content creator has been messaging back and forth with some members of the change in the industry group and had been saying, I don't think it's right. What y'all are charging? I don't think it's this, that and the other.
And you shouldn't be doing this and you shouldn't be doing that. And they were saying like, hey, like we're running the numbers. The numbers don't work doing what you're saying.
Like they just don't work. And because you're good at fixing cars, doesn't make you good at running a business that fixes cars. And we say that all the time.
But like some of these guys come in with this level of arrogance, this attitude. And and you begin to talk to them and you understand they don't know the numbers, right? They're speaking from a place of knowledge.
They're speaking from a place of authority. They're speaking from a place like they know what they're talking about. And this guy is a massive creator.
Hundreds of thousands of followers. Mm hmm. Think about that.
Like two people pick up on what he's teaching and say, hey, I'm going to go run my business like that. He's right. We should stick it to the man.
We shouldn't charge that much. You can make all the money you need at 20 percent, you know, gross profit on parts. And and we shouldn't be, you know, we should be paying the technician 70 percent and all this stuff.
And it's like, right. But but then they go do that. And what did you do?
You destroyed their economic potential as a human being. You cause damage to their family. You cause damage to their stress, right?
Like you can seriously call harm to somebody's well-being by giving them this bad advice. I think it's very important that these people get good advice. And these guys were trying to give the best advice they possibly could.
And this guy got infuriated by, you know, and so, like, some people are unwilling to listen and we can't change those people. But if we could just get like the base level of people who are trying to start shops, the technicians who are interested in like, hear me say this, a lot of you technicians are going to see the name of this show. You're going to hear some information in the show and you're going to say, that's not for me.
No, this is for you. I promise Eric show is for you. And it may not be the coolest, most engaging fun, like, oh, my God, it's about cars content that you'll ever watch.
But it's the difference between your financial success in the long run and where you're at right now, because the world runs on numbers. Whether we want to admit it or not, whether that's what we want or not, that's how the world works. And so if you can at least understand how those numbers work in regards to your career, in regards to a business, you'll have a leg up on everybody else.
And I think that's what so many people miss, man, I really do.
[Eric Joern] (32:47 - 33:44)
Yeah, you know, I mean, you nailed it, right? It's we have the opportunity to lift that, you know, right now, maybe 10% of the industry is what I call high participative or performance driven. And that's a whole lot of shop owners, right?
Can we change the thinking of that 90%? That's that's a challenge. What we can do, and this is really what works well with any change management, right?
There's always going to be new entrants coming into the into the field. Can we start them off into that 10%? Yeah, and next thing you know, now we're working with 15 or 20% of the industry.
And there are setting the standards. They're setting the expectations and we're giving them really a platform to be a lot more successful. And that's what I'm so excited to bring this topic.
I know finance, accounting, tax, not sexy subjects.
[Lucas Underwood] (33:45 - 36:51)
I'm telling you, that's why they made the movie the accountant and dude was autistic and crazy and was a murderer and all the things, right? Like, I have never met any accountants like that. So I'm just saying like, y'all aren't living up to the expectations here, but you know, I'm just every day, you know, like it gets a whole lot sexier when you come home and there's money in your bank account, right?
When you can understand your finances and you can understand where you're at. And that like, I see so many people that I think they miss it entirely. They get busy doing the thing that they do in life and they get tied up with that and they never, ever, ever learn about their finances.
The number of people, I've got a friend who is a janitor, right? For a local school system and retired with something like three and a half, four million dollars in a bank account. And I'm like, okay, how did you do that?
You were a janitor for all these years and dude's like, I just consistently invested in the market. I put money in my 401k. I didn't live beyond my means.
I ate at home. We didn't take lavish vacations. We did things that we could afford to do.
We budgeted for them. We planned for them and all the frustrating things that I really don't want to do in my own life, right? But he lived a intentional life when it came to his money and he retired and he left generational wealth for his kids, right?
Like that's what we should all be striving for, whether we want to admit it or not. I get that, like you said, it's not sexy. It's not exactly fun.
But these guys are out here. I'm going to upset some people. These guys are out here living a life saying, I can't believe you're not paying me $150,000 a year because that's what is going to take me to survive.
I have $150,000 in tools. Why do you need $150,000 in tools to work on cars as a technician as a shop owner? I get that, right?
Like I need special equipment, things like that. Well, the shop wouldn't buy the tools. Also, I bought beef jerky.
I bought sunglasses. I bought jackets. I bought socks.
I bought flashlights. I bought, and by the way, I financed it. So 70% what you're seeing, there's probably interest, late payment fees, the whole nine yards.
And you talk to people in these tool companies and they're telling you like, hey, we're a finance company more than we're a company. We've got the system set up, buddy. And I just, I worry about these guys because it's like, guys, you're telling me why it doesn't work.
But some of this is your personal responsibility. Like you have to be a good steward of your finances. And if you're going to do that, that means you can't live beyond your means.
And they say, you just say that so you can pay as less. No, I'm saying that go find a job that pays more. I'm saying go work two jobs, whatever you have to do, because ultimately, you're the one paying the price for this, not me.
It doesn't matter what some dude on the internet says. Exactly. You're the one that's paying the price for not living within your means.
A hundred percent. Can we do who doesn't live within his means?
[Eric Joern] (36:53 - 36:59)
You can figure that out. So let's talk about the format of the show.
[Lucas Underwood] (37:00 - 37:01)
Yeah, for sure.
[Eric Joern] (37:01 - 38:23)
Yeah. So obviously, if you've made it this far, you heard about all the different things that we can talk about, right? And our goal is to deep dive into those themes and run many series of them.
We're going to release an episode every week. And we're going to deep dive into all these, right? Hey, what's making a non-traditional entrant into the automotive space successful?
How about a traditional entrant? How about the scratch versus a properly financed? How about how do we prevent fraud inside of our shop and embezzlement?
I mean, that's a, I mean, huge. And those are just really basic themes. I mean, how about, you know, let's talk about finance for marketing, finance for how to get more or make more money utilizing your shop management system.
I mean, everything ends up pointing back to the numbers on your P&L and your balance sheet. And that's what the show is going to be about. So we're going to release a new episode every week.
We're going to be on all your same traditional platforms. If you're a Spotify, if you're a YouTube, if you're an Apple podcast, I know there's probably a million different other ones that will release this on. And the goal is to bring on either to share knowledge or bring on other people who can share some knowledge and to how to control each one of these things better as a shop owner.
I love it.
[Lucas Underwood] (38:23 - 39:08)
And I think it's going to be huge. I think it is going to shift so much of the industry. And I think that within our little circle and like I recognize that we're going to change the industry one person at a time, right?
This is not by getting every single person that's in the automotive space to listen to this show while that would be nice. If we can take two or three people in our direct circle and they can change something, they can make an impact, they can make a difference, they can go help somebody else make that impact and make that difference. That's how we're going to start moving things in a better direction.
And that's better for technicians. That's better for service advisors. That's better for business owners, service managers.
That's better for the consumer at the end of the day. And so I think this is going to be a really great thing.
[Eric Joern] (39:09 - 39:24)
I love it. I'm so excited. I can't wait to jump in.
Hit on all these subjects. And like we've talked about, let's all lift the industry better. Let's change it.
One piece of knowledge at a time.
[Lucas Underwood] (39:25 - 39:34)
For sure. Absolutely, man. I do have one question for you because I want to, I guess, how long do you want to go?
You want to close it here? You want to go for a full hour? I'm like, what you got?
[Eric Joern] (39:38 - 39:40)
Let's give them a little bit more knowledge.
[Lucas Underwood] (39:41 - 40:15)
Okay. Let's give it. All right.
Because I wanted to ask before I asked this question, because this is a big one. It's very near and dear and personal to my heart. My dad always said, that'll never happen to me.
I trust the people that are working for me. I trust that these people in place would never make decisions that would harm the company or myself because that would not be in their best interest either. How many cases of fraud or embezzlement or mismanagement do you see?
In businesses right now?
[Eric Joern] (40:18 - 41:16)
It is extraordinarily common, right? It's not a lot of odds, right? And I think all of us think that, right, as, you know, I have the same opportunity to win the lottery that I do to have somebody stealing from me.
And stealing comes in all sorts of shapes and sizes too, right? It's not just embezzling cash from you. You know, it's somebody not putting a part on a repair order throwing something away that could be returned or resold.
Stealing time off the clock. I mean, that right there, right? I guarantee if we took some stats and measurements of how much time is being just stolen off the clock.
Extraordinary. I mean, we've seen it in our, we've, I mean, I'll be candid in some things that we've seen in our firm, right? We've had somebody that bartered our services for a year for a kitchen remodel.
[David Roman] (41:16 - 41:17)
You're kidding.
[Lucas Underwood] (41:19 - 41:20)
That's crazy.
[Eric Joern] (41:21 - 42:09)
Yep. Yep. And that was part of our systems and processes that we had 20 years ago.
Right? Right. Hey, you know what?
And unfortunately, that's a learning lesson. Yeah. Change the process, update the process, right?
Now we, we've always been a little bit more duties. It's, it's wild, man. It's wild.
It's wild. All the little things that can happen within a business. And that's, that's a simple one.
I mean, you know, situations of an accountant. We acquired a firm and there's the financial advisor son was embezzling money from the clients. Some people, a lot of people ended up in jail in that situation.
Holy cow, dude.
[Lucas Underwood] (42:10 - 43:10)
And that's one of the big liability things that I don't think we think about when we talk about embezzlement. One of the things, so there's been a lot of conversations. I can't go into all the details, but there's been a lot of conversations around this situation.
And part of it was, is the number of people who came to us and said, you fell victim to a common thing. Like what? Well, you didn't end up with trust taxes paid because that was something that the people embezzling money had control over.
And because they needed more money to embezzle, and if there's no money there to embezzle, they can embezzle. And so they just looked for the easiest place to not. And it's like, well, yeah, the TFRP can be assessed against other people.
But guess what? That money that they didn't pay and that they took the proceeds by it not being paid. You're paying that come hell or high water, right?
There is no getting out of that. You can declare bankruptcy. You can do all the things you want to do.
You're going to pay that money or they're going to take everything you got at some point, right?
[Eric Joern] (43:12 - 43:24)
TFRP, for those that are that are still hanging on here with the trust fund recovery penalty, especially assessed on payroll taxes, you know, and payroll taxes are one thing you can never walk away from.
[Lucas Underwood] (43:24 - 43:26)
That's, you know, your relationship to the grave.
[Eric Joern] (43:27 - 43:37)
When you register your business to pay payroll or to get an FBI in and say, hey, I am going to run payroll. You say I am a responsible party for this.
[Lucas Underwood] (43:37 - 43:37)
Yeah.
[Eric Joern] (43:38 - 43:50)
And you're now accessible for that trust fund recovery penalty. That that means that that needs to be either negotiated or that needs to be paid. There's no like that, right?
There's no bailing out of that situation.
[Lucas Underwood] (43:51 - 44:01)
Yeah. And it's not little amounts, right? Like you miss a couple months.
Like that bad boy is getting is getting steep quick, right?
[Eric Joern] (44:03 - 45:09)
Man, and that's it's not just intentional, right? It's not just intentional. I've seen the unintentional cases, right?
I'm a business. New business owner, you know. My shop management collects some sales tax and I hire some people.
I don't understand the processor system that I need to to go and file a sales tax return or payroll tax returns and remit the money. And, you know, sometimes the people that we talked about that that say, hey, I'm going to go make more money. I'm going to open my own shop.
They don't understand the responsibilities that that come with that. For sure. And that's why oftentimes sometimes people lead blindly and say, hey, you handled this.
Well, who's most likely to you completely hand that off to somebody and they control the books. They control the payroll. They control the sales tax.
They control the money movement. And it's just one guy. That's a whole lot of power and responsibility.
I mean, it's wild in our sales process. We are able to collect largely enough data to go pull a loan from somebody.
[Lucas Underwood] (45:09 - 47:46)
Yeah, let alone. Unbelievable. Unbelievable people I've talked to that somebody's gone and got a loan in their name and move that money around.
You know, another thing that I've heard and I don't know if you've ever seen this, but, you know, with the advent of Bill.com and some of these other payment systems, I was talking to somebody a while back and he said, man, he said, I got a call one day and they said, why are these bills not paid? Why have you not paid us? And he said, but look, you can see all the payments I've made.
And they said, well, we don't have that on the statement. And so they went in and they dug and they said, we didn't get any of this money. Like, we don't know where this money came from.
Well, when he set up permissions in Bill.com, he gave a bookkeeper the authority to enter vendors. So when he was seeing on his vendor bill, that name came across every single month when that bill was paid. But the bookkeeper had gone in and entered different bank account information under a new vendor.
And that money was being put into their bank account. Now, like you say, well, that's stupid. Why would you do that?
You're guaranteed to get called at some point. But that, like, when you're dealing with an addict, when you're dealing with somebody that has behind the scenes issues, they're not thinking logically or reasonably. And so they can load that money up and take it out.
And they're not thinking about the consequence, but the money's still gone. And like, something I've learned from all this is like, yeah, just because it's let's talk about the loan thing for a minute, because one of the things that I learned was that, okay, somebody got a loan fraudulently in your name. If that money moved through your business at all, you can have an unjust enrichment claim against your business.
Did you use that money? Maybe you didn't use any of it, but there's a Liber calculation that they use to determine whether you use that money or not. Or was it within a certain balance?
At any given time, and they will use that to determine that you owe that money, even though you didn't use it, didn't take it. It wasn't you. And you said, well, that's not fair.
It was fraud. Great, but that's what the law says. And so I just think that there's so many ways that these people get into trouble.
They never even thought it was possible. They even thought that this was a thing and you trust the people around you. I get it, but like, that'll never happen to me.
Buddy, that's not how you can run a business. You have to have the data. You have to have somebody helping you monitor this and watch this.
You have to have systems put in place so you can track it. A hundred percent again, right?
[Eric Joern] (47:47 - 48:53)
If you don't have those measurement expectations and measurement numbers for your business, what are you benchmarking against? Right? You know, just it is what it is, is the worst answer you can ever say or rationalizing something.
Hey, I didn't make any money this month because of this. Yeah, and I'm just going to make money again next month and accepting the results as they are. Is it, you know, it goes back to that mindset shift, right, of you have to be so hyper intentional about what you're doing.
I mean, think about it, right? If you're going to go into business, you are creating a presence in the community, a business in the community. You're employing people and providing their livelihoods.
And you're taking a massive risk on of yourself. If you're doing all those things and you're not super intentional about what you're going to do and instead you're passive and you're accepting the results for whatever happens, whether it's a performance issue, whether it's a fraud issue, no matter whatever the issue it is, man, you're not taking your responsibility seriously, are you?
[Lucas Underwood] (48:54 - 49:22)
And look, if you didn't want that, then you didn't want business. You did not want to be this in a business. If you're in that situation, that's not what you wanted, right?
You wanted something different. You wanted a job. Great.
Go get a job. And it's like the E-Myth, right? Because he talks about that with the lady at the bakery.
It's like, hey, if you want to bake cupcakes, for God's sake, go get a job baking cupcakes because owning a business that bakes cupcakes is not the same job as baking cupcakes, right? And I think that's where we get it wrong.
[Eric Joern] (49:23 - 49:27)
Are you reading that now? Or did you already have, you've already read that book before?
[Lucas Underwood] (49:27 - 50:41)
I've read that book like three times. I have to remind myself. I love it.
Tom to Tom. You have to rub it in a little bit. Yeah.
Let me ask you something and this may not be in your area of expertise, but I do think it's something important and it's something that I've learned through all this. But when we talk about giving authority in the business, how important is it to lay out what that authority is? I'm considering right now creating a document for everybody that works for us.
And that document says what they can do and what they can't do in regard to finances. And it's more of just a MOU or a statement that says, hey, you can write the checks, but you can't sign the checks. Here's what you can use company expenses for.
Here's what you can do with this. Here's what you can do with that. The reason I ask is because there's been a lot of legal discussions on subjects, not related to any of this, but on subjects where we come back and we say, okay, there was no explicit authority given, but there was also no documentation that said explicit authority wasn't given.
How important is it for us to make sure we're setting that standard with the employees that we have?
[Eric Joern] (50:43 - 53:22)
Yeah. So you're talking about implementing internal controls at a micro level down to the specific employee. You can make that a very high-level overarching document that says these specific roles are the only people who could execute x, y, and z to simplify that much more.
So if I want the only person who can sign checks inside of the business to be the owner, the high-level company document can say that. But the more specific you get, the more the law can either favor in your way or against you. Because the more in depth that you get, and again, now I'm starting to step into some, I don't go to court, I don't litigate these things, but we hear things and we read things and we see things.
And what you put on paper means you must follow that process as well if you wanted to hold water on paper. So there's a fine balance between being very specific and being overarching. Because being too specific might tie you into things that you don't think you can execute consistently once you stop executing them consistently.
Now you have an opportunity to have the whole thing thrown out. Whereas if you can be more larger overarching, simplified, now you have a little bit more control over it. A little bit of flexibility in the process.
A little bit more flexibility in the process and you know you can execute those things consistently. So again, if I'm the owner is the only person who can sign checks, then there's the only one who can sign checks and that's what it states. Once you narrow it down, if you tell somebody that they can't sign checks and then you're in a pinch and you need a check sign and you haven't signed a check, well, guess what?
Now you're not following the standards that you created. That opens up the door. Yeah, be careful.
Be careful with that. But that's a great process or at least exercise to go through. Even down to, you know, hey, who spent the time to take stock of who does what and who has what authority?
Right. We like using FinTech programs as much as possible because they're designed really well. We use a software internally for our firm called RAMP which allows people to have credit cards and e-payment ability limited to certain vendors with certain dollar amounts and can be shortened to a specified period of time.
So we use the tools and the software to do a lot more governance. But a document can help protect you 100%. Awesome.
[Lucas Underwood] (53:24 - 54:14)
Well, I know we're wrapping up here. Is there anything else that we should cover? Because I mean, I think that this is, it's eye-opening for me.
And these discussions are, the discussions that felt boring 10 years ago feel extremely relevant today. And I hope that we can get folks to engage and listen and be part of this and be an active listenership. Right?
Because I think that if they can be active and engaging in this and helping you create content by asking questions, putting the stuff out here for them to engage with will not only be a lot easier but it makes that data a lot more relevant. And I think that we can move our industry in a big way. What do you hope to accomplish and what would you ask of your listeners?
Yeah.
[Eric Joern] (54:15 - 55:59)
Well, first look at the high performers in the industry and very high performers. And what are they probably spending a lot more time thinking about and listening to and doing? You know, one of the best performing owners that I know he's got a sticker on his laptop that said that could be in another Excel sheet.
Yeah. I mean, as you rise up, as you grow a scaling organization, finance becomes more important. So if we want to emulate success, one of the things we should do is look at how do they learn what do they want to know about?
What do they want to understand? And let's emulate that. Like, let's put some time and energy and effort.
I know it's not exciting. I know it's not as much fun as a Diag course, right? Go listen to Matt.
I know you want to go listen to Matt Fanslow and he's awesome. He's great. And he's fun.
He's going to talk about things that you really are passionate about. But ultimately, if you are either wanting to own a shop or you do own a shop, you have to tune it. It's not just my show.
There's a million finance shows out there. We're going to be one of the few tied into finance and automotive. So we have the opportunity again to lift the industry, right?
Change one shop owner or future shop owner at a time. Give them the opportunity to have a platform for success. So if you've liked what you've heard and like, you can subscribe to this channel.
You'll get all the new episodes. You're going to get this wealth of knowledge. Stick with it.
I guarantee you, if you learn a little bit at a time, you're going to end up better at the end of the day.
[Lucas Underwood] (56:00 - 57:20)
Absolutely, absolutely. And please consider sharing the show because it may not be that big of a deal for you right now, but somebody might be going through something at any given point in time. And if you share it and they can pick up and learn something from the episode, learn something from the show, you might change somebody's life.
And, you know, 5% can make a huge difference. Trust me, I know 5% can make a huge difference in somebody's bottom line and somebody's survivability, right? And as we've talked, this is livelihoods.
This is people's lives that you're dealing with right here. And it's the lives of the technicians. It's the lives of the shop owners.
And so you technicians like, hey, be listening and be sharing this with the shop owner, right? Be sharing this with them and say, look, I've learned a ton about automotive repair finance. You should listen to this, right?
Because that's how we're going to make things better in your shop, right? If they have this date, if they have this knowledge, they have this information, it's life changing. And so many of them, like, I don't know about you, Eric, a lot of folks put on this hard shell, right?
And they try to puff up the chest and look like they know what they're talking about and look like they're tough and try and really sound like the professional. But deep down inside, there's a lot of them that that shell is just a cover. It's not really what they know.
It's not really who they are. And so if we can help get them a little bit of information, even if they seem like they got it all together and know everything might be worth a share anyway.
[Eric Joern] (57:21 - 57:54)
Man, we are under the hood on shops, a lot of shops that that look like they know what they're doing. MSOs, high revenue, high car count, all these interesting things. And we get under the hood, man, and you will see.
And if they're willing to be vulnerable, there's a lot of work left to do, a lot of learning left to do. So it's important, man. Pop the hood, take a look at what you have, learn something.
Underhood CPA, I love it. Thanks for having us on. I had to do a plug eventually.
[David Roman] (57:54 - 57:55)
That's it, that's it.
[Eric Joern] (57:55 - 58:11)
Love it, love it. Well, Lucas, David, thank you guys for your time. Looking forward to doing many more episodes together.
We have a lot of interesting subjects. We'll definitely have you guys back on. We'll capture that and lots of other really smart and brilliant folks.
[Lucas Underwood] (58:11 - 58:17)
Maybe we can catch David on a day when he's had good pre-workout. Looks like today's pre-workout didn't do it for him.
[Eric Joern] (58:21 - 58:27)
Didn't get one in today. Next time, next time. We'll make sure it's on your calendar next time.
[Lucas Underwood] (58:27 - 58:29)
That's right. There you go.
[Eric Joern] (58:32 - 58:32)
Thanks, guys.