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Welcome to Leading With Force — a podcast where seasoned entrepreneur Brian Force shares the invaluable lessons he's learned on his journey through this crazy, wonderful life. Having built several multimillion-dollar companies, Brian dives into the nuts and bolts of building successful teams, scaling businesses, and leading with passion and purpose.
Each episode offers practical tools to effectively cast your vision, build your team, boost productivity, and become the leader you were meant to be. Brian's mission is to inspire you to unlock the incredible power within yourself, achieve your goals, and make a meaningful impact on the world. Join us as we explore how to find your inner leader, empower others, and embrace your journey.
Oh yeah, I signed up for that thing last month. I haven't even installed it. I 📍 haven't even implemented. I haven't even deployed it yet. I either need to do that or if it's not important, I need to get rid of it.
And so it's not just about reviewing your P and L, it's about challenging yourself to ask the questions that will help you make prudent financial decisions going forward. Hey everyone, thank you again for joining me for another episode. I really appreciate you being here with me. If you're finding value in this content, please do me a favor and go ahead and subscribe on whatever channel or platform that you're listening to and then head on over to brianforce. com and go subscribe to the newsletter over there.
I spent a lot of time making sure that we put out actionable guidance and insight into how to grow your business and lead your team with purpose every single week. I would love it. If you would subscribe, I appreciate you being here again.
Let's get back to the episode. 📍
This has been a hot topic lately, and I want to talk about it. I don't mean hot topic, the golf store. I mean, this has been a topic of conversation generally. In our society. And that is the idea of spending and efficiency and waste and all these different buzzwords that are all over the news right now with everything that's going on.
We're not going to make this a political episode. It's just something that is a topic of discussion right now because it's happening in our society. But the reality is spending and excess and waste and return on investment, return on capital. What we're doing with our money. Is the most crucial aspect of running a profitable business, a healthy business day in and day out.
And it's probably the most key area where small business owners fall short. Probably the biggest killer of what could be healthy, profitable, sustainable, longterm businesses is excessive spending, poor expense management, Now it's really difficult to get good data on this type of thing and you'll see why in a second but OnPay did a study where they estimate that around 70 percent of small businesses don't have a dedicated accountant meaning their owner or operator or maybe no one Is really doing the financials on a deep level.
Now there's a difference between a bookkeeper and an accountant, but my gut tells me if you don't have a dedicated accountant, you likely are the dedicated bookkeeper as well, or no one's keeping your books again. It's hard to get hard data on these things because if you're not reporting those types of things, it's really difficult to know.
What those percentages are, but let's just go with that because I think anecdotally, that seems pretty spot on to me as well. Just based on my own personal experience around seven out of 10 businesses, let's just say, just don't really keep formal, dedicated, dialed in financials. And that's really a shame because being in business is yes, so much about having a great quality product or service, great marketing, the passion and drive to get up every day and be an entrepreneur and forge your own path and make your mark on the world.
But maybe the most crucial aspect is how you manage the money that you make running your business. And if you don't do that well, you can't survive. This is rampant across many industries, . Food service industry really comes to mind. It's very difficult to run a restaurant because there's so many moving pieces.
And that's why you see so much turnover in that industry. That's why you see turnover in a lot of industries. It takes a lot of specific knowledge about a particular industry to know how to manage the financials well. And if you don't know the industry very well, when you get into it, it's really important to be really focused on the financials.
Because you're going to learn a lot of lessons really quickly as I have in my experience as well. But since we're spending so much time as a society, talking about financials and spending in those types of things as well, I thought it would be fun to talk about spending and expense management in your business.
And I'm going to make it really interesting. It's not going to be a boring episode about dollars and cents and line items, just general guidance on how to keep an eye on your books, measure where your money's going, the return that you're getting on it, And more than anything, give you a valuable framework of questions.
You can ask yourself to make prudent financial decisions for the long term health and sustainability of your company. So let's dive in and just get right to the actionable stuff right away.
The number one reason that most businesses don't keep a good handle on their financials is because they don't have a formal schedule of doing regular financial reviews And probably because they don't have a lot of their financials automated.
You need a good bookkeeping software, depending on your business. You can use something as simple as QuickBooks online. If you're running something a little bit more market specific, you probably have software that's dedicated to that particular industry, but you need a way to manage and track the expenses in your business in an automated fashion every single month.
in 2025. This is about the most affordable expense you can have in your business. Solid bookkeeping should cost you no more than a couple hundred dollars a month for a really large scaled business and less than 50 if you're a solopreneur or just getting started. So there's really no excuse to not have a formal automated bookkeeping system set up in your business to really cut down on the noise and the time that it takes to manage your books month in and month out.
This will free you up. To do regular audits of your books. You must be reviewing your P and L at least once a month to really have a handle on the financials in your business. Not only because that cadence will help you get eyes on what's going on financially in your business right now, but it will give you an idea of how your business is trending financially over time.
You will start to recognize patterns instinctively with regular profit and loss reviews.
A lot of business owners that do undergo formal profit and loss reviews, they do them so infrequently that they almost become useless because a single profit and loss statement just shows where the business is at for that one period of time, but it really doesn't show the trends.
Overtime and how we got from one place to the other. You need to regularly review your profit and loss statement because that's how you're going to create that intuitiveness inside your brain that says we're spending more here than we were three months ago. I know it, I can feel it. Why is that? And you start to avoid that creep and expenses that comes with an increase in revenue.
So first things first, get a regular cadence of reviewing your profit and loss statement on the books and don't deviate from it. My wife and I do a very good job of this. Every week that the books come out, usually we finalize books from last month around the middle of the next month.
That week when the books come out, we will go through the entire profit and loss statement. And this is a good little tip for you as well. You don't want to be the only person reviewing your P& L unless, of course, you are the entire business.
In that case, you might want to find a trusted friend or confidant or outside source to be your devil's advocate. The reason that we have at least two people reviewing our P& L in this scenario, it is my wife who works in the business with me and I, or at our management company, it is our managing partner.
When you have just one set of eyes on your P and L each month, it's easy to get tunnel vision. You're just kind of seeing the same things over and over
and not enough is changing that those slow little incremental rises expenses or falls in revenue, they can just kind of get past you. And then over the long term, they add up and you miss things. That person that's reviewing the P& L with you should be your devil's advocate of choice. We've talked about this in previous episodes when we talk about managing risk and things like that in your business, having your devil's advocate of choice this is a trusted person who's going to challenge you to explain yourself in the business.
So if you're looking to take a big risk in the business, they're going to challenge you to justify it. They're going to play Devil's advocate. You need a devil's advocate for your P and L as well. My wife has always acted in that capacity for me. What will happen? Our cadence is very simple. She will print off the PDF of our P and L for our business, and she will highlight.
Every line item that she wants an answer for, and she'll do this because one, she wants explanations for things that are new, that she doesn't quite understand things that have changed that she wants answers on. And then sometimes just to play devil's advocate. She'll just randomly highlight something so that I am challenged to explain it.
And that's how the exercise goes is that once she highlights everything, she gives me the P and L and my first order of business is to justify and explain to her all of the highlighted line items and what they are, why there are new ones, why the amounts on some have changed. And just for fun, She'll highlight some that we all know what they are, but just to see if I'm paying attention.
So you want a regular cadence to review your P& L. You want a P& L in the first place, and you want a devil's advocate who's going to challenge you to look at it with fresh eyes and stay frosty around your P& L so the expenses and revenue creep doesn't get past you.
And your second action step is very simple. When you have a regular cadence of reviewing your PNL, you want to make sure you don't just start spending excessively as your business starts to generate more revenue. This is a huge. Killer of what could be and should be profitable businesses. Revenue picks up, you're generating more business.
Everything seems great. And so you sign up for this next thing. You sign up for this next marketing Avenue. You sign up for this next software. You sign up for this next thing. That's going to be your piece of leverage, whether or not you actually use it. Or whether or not it actually moves the needle forward in your business.
And so when you're doing these P and L reviews, some of the things that your devil's advocate is going to highlight are the new things that you're spending money on each month. That's why it's so important to have this devil's advocate person in your life, because when you sign up for something new, or you take on a new expense in your business, it shouldn't be more than a month that goes by your next P and L review, where that devil's advocate challenges you to justify that expense again.
And it might be an expense that's going to take a little while to show a return until you can justify it that way. But it's also going to remind you, Oh yeah, I signed up for that thing last month. I haven't even installed it. I haven't even implemented. I haven't even deployed it yet. I either need to do that or if it's not important, I need to get rid of it.
And so it's not just about reviewing your P and L, it's about challenging yourself to ask the questions that will help you make prudent financial decisions going forward. If you just sign up for things and you let those expenses creep up and you never do a P and L review and you never have your devil's advocate challenge you, you start to look at your balance sheet and
you start to look at your bank statement and wonder why it's not going up. Even though you're busier than you ever have been, you're not making any more money. And that's because that expense creep is real. So having that devil's advocate is incredibly important to help you make sure that you don't start getting in the habit of just recklessly spending money like so many business owners do when their revenue increases.
And the third thing that you really want to master when it comes to your P& L is you want to get ultimate clarity around the difference between costs of goods sold and actual expenses in your business.
This is a tremendously important difference because one is going to ever increase as your revenue increases and the other doesn't have to. This is where protecting your margins can become very tricky because if you don't have a good handle on your cost of goods sold, you can generate more and more and more business, but your margin will continue to shrink and shrink and shrink.
So let's get really clear, first of all, on those two definitions, your costs of goods sold. Your expenses are essentially your hard costs. The things that you're going to spend money on in your business, no matter what, just to keep the lights on like your office rent or your phone system, things like that, things that you have an expense for, whether or not you sell.
A dollar's worth of goods or services that month. Those are your expenses. Your costs of goods sold is everything that goes into actually marketing, advertising, manufacturing, and selling your product. Meaning these costs only come into play when you sell something. It's a cost of goods sold, meaning I don't incur that cost unless I actually sell that good.
This is important because your cost of goods sold is going to continue to increase each month the more that you sell. And so if you're trying to future cast your business, you're trying to goal set, you're trying to figure out how much business do we need to generate To accomplish X, Y, and Z, but you don't understand the difference between your costs of goods sold and your expenses, you might start to think, well, I spent 40, 000 this month total on the business.
If I double my business and I'm still only spending 40, 000, my profits are going to look like X, Y, and Z, but that's not reality. The reality is that 40, 000 is going to increase because whatever portion of it that was costs of goods sold. Is going to go up the more that you sell. So that's why it's so important to have that number down because that's how you calculate your margin.
Your margin is calculated by taking your top line revenue, which is all the money that came into your business, subtracting your cost of goods sold, which gives you your gross profit, your gross profit is your revenue. The amount of money that you made. Minus your cost of goods sold, which is the amount of money you spent to sell all of your goods and services to make that revenue.
And then what you have left over is your gross profit. Then you have your expenses and then you have your net profit, your margin. Is the percentage of net profit to gross profit, meaning your gross profit minus your actual hard costs and your expenses, but you don't even get to gross profit until you subtract your cost of goods sold.
And so if you're confusing cost of goods sold with expenses, you might not realize how much your cost of goods sold will continue to creep up the more that you sell. And so it's very difficult to financially plan for the future in your business if you don't have those two differences figured out.
So you need to get really clear on your P and L. What is a cost of goods sold? Meaning what is going to increase the more that I sell? And what is an expense? What is mostly going to stay stagnant? Unless I make the decision to invest in something new in the business. I invest in a larger office space. I have to bring on more people, more payroll, uh, things like that.
What is going to stay the same unless you deliberately expand and what is going to expand on its own simply because you sell more of your goods or services. The fourth thing that you need to get really familiar with and you can do this by regularly reviewing your PNL is your cash flow cadence, meaning how much money comes into the business and at what interval and how much money goes out of the business. And at what interval you can learn a lot of really hard lessons in this business by not managing your cash flow.
Well, meaning on paper, you can have a lot of money coming in and a lot of business coming in. But if you're fronting a lot of costs, In that business, meaning your cost of goods sold or going out the door well before you're realizing that revenue, you can get into what's called a cashflow crunch. We have seen this in our businesses before, and I've learned a lot of hard lessons about managing cashflow through our construction business and in some other similar businesses where you have a lot of cost of goods sold up front.
Because you have to buy materials, you have to pay contracts, you have to do all kinds of stuff before the client pays you. And if you don't manage that cash flow well, what can happen is you can get halfway into a job that you will eventually get paid a lot of money for. But now you have no money in the bank to finish the job.
And so it's really important when reviewing your financials every month to review the cadence. Of the cash in and the cash out. What do you need in the bank each month in the form of operating reserves to be able to have that cash outlay before you get paid?
It's really important to understand that in your business, your PNL probably won't tell you that specifically, but having a regular cadence of reviewing your PNL and knowing the difference between your accrual PNL and your cash PNL are really going to help you understand how much money you need in the bank
to successfully manage your finances and make sure you're never getting into a cash crunch. This is really, really important with labor and material heavy businesses. Businesses with high costs of goods sold need a higher level of operating reserves because you're usually going to have a large cash outlay.
Before you get paid. And depending on the timeline, the sales cycle, you could have a lot of money out there for a long time. And in theory, you're doing very well. But if you can't survive until you get paid, then it's kind of all for not
so regularly reviewing your financials is really going to help you understand that ebb and flow.
Last word of advice I have for you on P& L management is to protect your margins at all times as your business scales like we talked about before your cost of goods sold is going to scale with it And so you need to understand that over time, your margin will likely start to shrink organically, but you can control that.
You can control your cost of goods sold. You can control your expenses and you have the ability to set a target margin and protect it and you want to protect it at all costs. One of the best ways to protect your margin is to streamline your expenses as your cost of goods sold increases.
For example, if you have a large software subscription that will continue to increase in monthly subscription fees, the more data that you add to it, then one of the best ways to control your cost of goods sold is to go to that provider when you're at scale and start to negotiate bulk discounts.
You can do this with all kinds of service providers, vendors, things like that. As your business scales, your expenses per unit. Should drop if you're running your business properly. And so if you have all sorts of vendor contracts and relationships and things like that, people who you're providing more business to,
you can negotiate those contracts and relationships. to reduce your cost of goods sold on a per unit basis. When we don't have a ton of revenue coming in or a ton of units sold, it's very difficult for us to get our cost of goods sold down on a per unit basis.
As we scale, it should take less and less on a per unit basis to produce your product or service. But if we don't regularly review our P& L, we never really look back and go, Oh my gosh, how much money are we spending on software from the same providers right now? We need to call our account rep. And talk about bulk pricing.
Look at your material costs and go how do we just buy this in bulk. Right.
That will tremendously bring down your costs of goods sold. And if you're reviewing your P and L regularly, you'll start to see those opportunities, you'll start to see, wow, my cost of goods sold is really high because now we're at scale and I'm still paying market pricing for All of my materials that could have a massive ripple effect in your business.
But if you're not regularly reviewing your P and L, you could be just sending money out there at the same price that the smaller businesses that you're competing with are, and you have no competitive advantage. I get really fired up about these things, because this is where some really simple decisions and some really prudent investigation could save you a ton of money in your business and therefore make you.
more profitable and your company more valuable.
So if you're not already following these best practices, please get in the habit right now. Get a regular review of your PNL on the books every single month. Identify Your designated devil's advocate, who's going to challenge you on the numbers, start to watch your cost of goods sold and understand the difference between that and your regular expenses.
And I would love to hear what types of decisions you're making in your business based on the investigation you're doing of your P and L. You will start to notice patterns and 📍 trends and the future will become brighter and brighter as you realize that you can increase your profitability and the health of your business with just a few key decisions. Thank you so much for listening to this episode.
I hope this was helpful. I appreciate you spending the time with me and I'll see you next time.