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Building Trust, Financial Literacy, and Business Growth with Heather Starke on the Koolers Lifestyle Podcast #82

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00:00:00 Matthew Kuehlhorn
Like how many businesses are currently running that are not profitable?

00:00:06 Heather Starke
I would say I, I mean I don’t have a statistic for you, but a lot. And the problem with that is many of those businesses don’t know that they’re not profitable because they have money in the checking account. So yeah, you can have, you can have an account that has, you know, a ton of deposits they’ve taken, but they haven’t done any work. They think they have a ton of money and they’re doing great. Really.

00:00:37 Heather Starke
You don’t have any income?

00:00:39 Matthew Kuehlhorn
Welcome to the Kooler Lifestyle Podcast. I’m your host, Matt Kuhlhorn, and I’m excited to have you join me as I interview community members and business leaders from the communities in which I live, work and serve through my business Kooler Garage Doors. We’re going to bring you highlights on characters in our communities. Why? Because community matters, and I want to know more about who is behind our business and leadership in order to understand and support the community fabric that our relationships make up.

00:01:08 Matthew Kuehlhorn
And collectively, we can build stronger communities that support our lifestyles, our youth and our health. Ladies and gentlemen, welcome to the Kooler Lifestyle Podcast. I’m your host, Matt Kuhlhorn. Today I’ve got my friend Heather Starke. She is a business owner and partner with Kare CFO.

00:01:28 Matthew Kuehlhorn
Also running her Starke business services helping business owners gain clarity on their numbers, bookkeeping, optics. I’m really excited for this conversation. Heather, thanks for joining of.

00:01:40 Heather Starke
Course happy to be here.

00:01:42 Matthew Kuehlhorn
Yeah, Telly, where are you beaming in from right now?

00:01:45 Heather Starke
All right, well, I am in a tiny town in upstate New York called Fort Edward, and I moved to this bustling metropolis from the next town over where I grew up, a little tiny town called Argyle, New York. And bonus points to anybody who’s ever heard of it, because they haven’t.

00:02:04 Matthew Kuehlhorn
Wow, so small town growing up.

00:02:08 Heather Starke
Oh, absolutely. We we have, Let’s see, 4000 people, 10,000 cows, no traffic signals and one school for kindergarten through 12. If that gives you a picture of, you know, the Country Life, yeah, did.

00:02:24 Matthew Kuehlhorn
That give you a lot of freedom as a kid? Like, were you an adventurer? Did you just leave the house and come back?

00:02:30 Heather Starke
I mean, there was not really too many places to go when you left the house. So your your nearest neighbor’s a country by the way, and the town was 2 1/2 miles from where I lived. So that was quite the quite the walk if he wanted to get anywhere. But we did. We did all the things, you know, we were we had so many farms that there’s just so many things you can do on a farm, whether whether it be, you know, go around, explore, play with animals, you know, for your yard, whatever.

00:03:03 Matthew Kuehlhorn
Yeah, yeah. Right on. All right. Well, we’re going to, you know, for the listener, kind of frame this out at a little context. I’ve been working with Heather.

00:03:11 Matthew Kuehlhorn
She’s been amazing assistance in getting us clarity on our numbers. And I want to talk about bookkeeping and and get into some of the nitty gritty here. Before I do that, Heather, can you give us just a little context to your journey? Like how did you get here? What?

00:03:27 Matthew Kuehlhorn
What brought bookkeeping? And you know this skill set into your realm?

00:03:33 Heather Starke
So I went to school for Business and Technology Management and I also have a random other degree in English literature like who does that but use the business and technology management degree in accounting all the time. So when I graduated from college, I actually went into medical device design. So that was a little little off from the the path that I thought I would be on, but I wanted to go into sales. So I was actually an inside sales for a medical device company. And from there I moved on to outside sales with oddly enough went from medical devices to sand like sanding machines, industrial sanding machines for metal and wood and abrasives.

00:04:32 Heather Starke
So I sold sandpaper for a while and from there I actually hooked up with the Chamber of Commerce and I was at the Chamber of Commerce in membership sales for quite some time. And that allowed me to build an extensive network and I kept hearing from business owners that it was extremely difficult to understand their financials. Then after on maternity leave, I decided to start my business. So I started Starke Business Services and that was a small bookkeeping firm and I focused on zero to 500,000. So the people who were either just starting out or in an early growth phase of their business.

00:05:19 Heather Starke
So helping a lot of people with a lot of things, and I was able to utilize that network from the chamber to be able to provide them resources other than bookkeeping. So basically, if you need something, do not consult Google. Talk to me and I will refer you to someone that I’ve sat down with that I know that I trust. I bet the good weirdos from the bad weirdos. So I have an entire tribe of good weirdos.

00:05:46 Matthew Kuehlhorn
I love that. So yeah, I guess one thing I didn’t recognize was a little bit more of the holistic value that you can bring like based on your background, a lot of sales. But I’ll just really wide network. What I know about you is just a super friendly human that likes to get to know people.

00:06:08 Heather Starke
Charismatic accountant. That’s like a Unicorn. Or it seemed big.

00:06:12 Matthew Kuehlhorn
Charismatic accountant. Yeah. So, you know, let’s, let’s talk a little bit for business owners. What have you seen, you know, when you’re hearing from folks that say, you know, I’m struggling with my numbers, what does that really mean? What have you seen on a practical basis where business owners are maybe falling short or not paying enough attention?

00:06:34 Matthew Kuehlhorn
Like what are? What are some of the pieces there?

00:06:36 Heather Starke
It’s funny because I we actually call that living out of the checking account. So instead of instead of paying attention, doing proper bookkeeping, doing forecasting things of that nature, most business owners are too busy to focus on that themselves, especially as they’re growing. So you’re trying to run your business, How are you going to sit down and do all the accounting for your business yourself as well? So essentially living out of the checking account is, do I have enough money in my checking account to pay my employees and pay my expenses, pay my bills? If the answer is yes, usually the detailed bookkeeping and accounting goes by the wayside until tax season when everybody.

00:07:21 Heather Starke
So with, with having, with having somebody dedicated to the bookkeeping and accounting for the business, the owner is able to focus on the business and not get to a point where they’re like, Oh my gosh, I’ve been living out of the checking account. Now there’s nothing in the checking account. What do I do? Because nobody wants to be in that position.

00:07:45 Matthew Kuehlhorn
Totally cash versus accrual.

00:07:51 Heather Starke
Oh boy, this is a good one.

00:07:52 Matthew Kuehlhorn
We have we have to open this container because you know honestly in to add some context like I thought I was running books on accrual. I’ve had bookkeepers in my in my past and what was the, you know, the light was shined on my books when you came in and I was also bringing in Kare CFO at that time and I wasn’t running on full accrual. Maybe some of it is like a hybrid.

00:08:23 Heather Starke
Yes. So most, most businesses under 2.5 million will run on a cash basis. And I’ve seen larger businesses that are still running on a cash basis, a cash basis is essentially the equivalent of living out of the checking. So it’s just more carefully tracked. So that’s the actual money exchanged in and out on the day that it happens and that’s how most people think.

00:08:52 Heather Starke
So you know, you’re saying, Oh well I paid it on this day, obviously it’s going to get logged on this day. That’s not how accrual works. So accrual works with unpaid invoices and unpaid expenses recorded on the day that they come in and also spread out over time. So let’s say January 1st you get a bill for $1200 and that’s for the year. Cash says that’s $1200 on January 1st.

00:09:27 Heather Starke
Accrual says that is $1000 a month over 12 months, so it’s forecasted over high rather than $1200 on on one date.

00:09:45 Matthew Kuehlhorn
Why does that matter?

00:09:46 Heather Starke
That helps you to project how much you’re actually spending. So if you had kept it on that cash basis, that would look like $1200 a month expense rather than it’s actually $1000 a month because it covers that span of time and it also works the same way with income. So say you, you take a deposit for a job that’s a couple months down the road, you haven’t actually earned that yet. That job could cancel and you don’t want to count that as income. That’s what we call unrecognized revenue.

00:10:24 Heather Starke
So that doesn’t actually belong in your forecast because you haven’t earned it yet.

00:10:31 Matthew Kuehlhorn
Right, right. That one is a big one. And I think I could speak to a lot of listeners, especially if they’re in home services, which I know a few folks are. But I think this applies anywhere, especially if there’s a larger ticket sale where deposits collected. And my experience has been early on, you know, I had the Fortune ability to scale pretty quick, but that also uses a lot of.

00:10:56 Matthew Kuehlhorn
Cash. And I was using deposits to run my operations, which is putting the business at risk because you’re right, those could cancel. That’s not earned revenue. And so by going to a true accrual, it’s a more refined system that can track the money accurately, so you know what is earned and can be touched and what should not be touched.

00:11:25 Heather Starke
Just because that money is in your checking account does not mean that it’s going to stay there and that you can that you can actually use it.

00:11:34 Matthew Kuehlhorn
Right, right. OK. So you mentioned that business is under 2.5, you know a lot of times typically run as cash. I mean should they should always be other?

00:11:54 Heather Starke
People’s opinion. My opinion is that everybody should be on accrual no matter what size they’re size they are because you can’t accurately do projections on a cash basis. Cash. Cash does work for small businesses because that’s that’s how the owner’s brain operates. So you’re a solopreneur, you are probably on a cash basis because, well, that money came out of the checking account.

00:12:22 Heather Starke
That money went into the checking account.

00:12:25 Matthew Kuehlhorn
Yeah, yeah.

00:12:26 Heather Starke
But as far as as far as future planning goes and actually knowing what you have in your business, accrual’s the way to go.

00:12:35 Matthew Kuehlhorn
So accrual, I would say you know not to not to diss any small solopreneur by any means, but it’s the more professional financial literacy layer like it’s it’s it is financial literacy that’s ultimately worth talking about. So as we as we gain the acumen of business of financial literacy, accrual is the game that the big players play. If anyone’s building to get acquired or looking at acquisitions, accrual’s going to be the game. If anybody wants to take their numbers and look at a comparison of an industry benchmark, that’s got to be accrual.

00:13:14 Heather Starke
Right. And also depending on what what software you use, I’m a QuickBooks shop, so I I use QuickBooks Online. You’re actually able to pull cash reports even if you’re on accrual.

00:13:27 Matthew Kuehlhorn

00:13:28 Heather Starke
So that’s even if you’re on accrual and you want to look at cash reports, you still can, yeah.

00:13:35 Matthew Kuehlhorn
And a cash report is.

00:13:37 Heather Starke
Is also your bank statement.

00:13:41 Matthew Kuehlhorn
Right, right. Yeah. I think the other thing you know from my perspective for accrual like we have, we have lead time. So I’ll make a sale in January and not have everything go through until June at the very latest, let’s just say contrast. But I might have material expense landed March and if I have my stuff running on on cash, it might look like I’m losing everything in March because that’s when all my expense went out and I’m winning the whole farm in June because that’s when I’m realizing everything.

00:14:21 Matthew Kuehlhorn
Yet it’s not giving me an accurate picture. There’s no way I can do job costing with that.

00:14:26 Heather Starke
Yes. And it also it also helps you to kind of plan what, what expenses are coming up.

00:14:36 Matthew Kuehlhorn
That’s right. What else have you seen in your journeys working with small business that would be of value? Like what are some maybe low hanging fruit or maybe some mid hanging fruit that you’re like oh if more small businesses did this or knew about this?

00:14:58 Heather Starke
Well, hire Bookkeeper at the very least. That’s like the number one thing. I actually, I I see startups that the first thing they do is say, hey, you know what, I’m not ready for a full service financial person. Can you teach me how to do this? Can you be on call for any problems?

00:15:22 Heather Starke
Can you do a review? Like, yes. Just because you’re not ready for full service doesn’t mean that you can’t ask for help and ask for people to review what you’ve been doing. I always encourage people to, you know, have somebody else look at your books. I have other people look at the books that I do just to make sure.

00:15:45 Heather Starke
I mean, you get, you get tunnel vision. I did it. Of course it’s right. No, no, I’m going to have a couple other people look at this as well, just to make sure that I didn’t, I didn’t overlook something or somebody has a different perspective on it. So it’s very, very important to actually review your financials and make sure that everything is aligned and that you understand education is key.

00:16:10 Heather Starke
So like I said, a lot of times owners get busy and things get overlooked and the finances go by the wayside because as long as they have enough money to pay the bills, they’re good, right? Right. So yeah, definitely having another set of eyes is always good as far as as far as financials go. And on a side note, your network, network, network, network. The more people that you can meet and the more people that you can have as a resource not only for yourself but for other people that comes back.

00:16:47 Heather Starke
So as an example, I networked all the time. I met as many people as I could. I never ever networked for clients. I always networked for resources. I networked to find out how I could help other people and how other people could help other people.

00:17:05 Heather Starke
When I started my business in the 1st place, I didn’t know me as a bookkeeper. Nobody knew me as a bookkeeper, but they knew me as a person. They knew what I they knew that I was going to do what it took and that I would do an excellent job for them no matter what. So I never advertised. I reached out to my network that I had developed relationships with and I told them, hey, you know what, here’s what I’m doing now.

00:17:33 Heather Starke
I’m just starting out. If you know, if you know anybody who needs any help, let me know. And I was able to actually replace my salary within the first three months with new clients that people had sent to me on referral, which was amazing. Like that’s unheard of. I’m so grateful to my network and I’m so thankful that I spent the time to do that, like just get to know people and have a have a coffee meeting.

00:17:59 Heather Starke
Like, we all love coffee, right? Maybe tea, but we get to know as many people as as possible and and network for resources. Don’t network for clients. The clients will come if you treat people correctly.

00:18:14 Matthew Kuehlhorn
I love that. I love that perspective. Great tips there. Do you have any top of my resources for the owner that’s looking for that financial education?

00:18:25 Heather Starke
Yes, depending depending on size. A lot of bookkeepers are a great resource and also CF OS. So depending on the side of the size of the business, whether they need CFO services or not, but the CF OS are going to elevate to the next level of understanding your business and being able to come up with come up with those KPIs and projections. So that’s definitely key to a business that’s in a that’s in the next stage of growth for sure.

00:19:01 Matthew Kuehlhorn
Love that real quick. So Bookkeeper, if I was to define it and I’m, I’m bouncing this off of you. So correct me where I’m where I need it. But Bookkeeper comes in, really gives clarification and optics and the right bookkeeper is going to put the right things in the right place. The CFO is going to be able to come in at a time where a company wants to grow maybe past that first seven figure zone into multiple 7 figures.

00:19:27 Matthew Kuehlhorn
To be able to project this is like looking at benchmarks and cash flows and and really putting some projections in play to kind of map out the next level.

00:19:41 Heather Starke
Yep, and you actually kind of just described the signature process. How?

00:19:46 Matthew Kuehlhorn
About that.

00:19:48 Heather Starke
So I have a partner, she is ACFO. We have a business, it’s called Care Accounting CFO. And what that does is exactly what you just described. So we we’re looking for a solution for businesses in like the second stage of growth. So they’re making revenue over $500,000.

00:20:17 Heather Starke
They are looking for financial clarity. They want to be able to make informed business decisions based on their financials. So what happens with the signature process? It’s called the Profit Pathfinder and the Profit Pathfinder. We start with me.

00:20:38 Heather Starke
So we come in and we take a look at the books and see where they’re at. Sometimes books are books are good, need a couple of little tweaks. Sometimes we need a full scale clean up to get to where we need to be. We need to switch the account from cash to accrual and make sure that all the numbers are in order. So, yeah, everything, everything starts with the books.

00:21:03 Heather Starke
From there we write policies and procedures and make sure that the the policies and procedures are in place so that the bookkeeping and accounting can be consistent. Then from there we take over the bookkeeping and do that daily, do that daily work that needs to be done to keep the books maintained. Then we educate, right? We sit down with business owner, we have regular meetings. We teach them how to understand and know their financial statements, give them that, give them that education that they need to be able to make those decisions.

00:21:43 Heather Starke
And from there, the CFO work starts. So this is a whole. This is a whole journey.

00:21:52 Matthew Kuehlhorn
It is a journey.

00:21:54 Heather Starke
And the CFO works on the KPIs, the growth strategy, the projections things of that nature. So definitely an elevation of just understanding to make informed decisions. We’re actually planning growth. We are, we understand our books are good, we understand what we’re doing and then we move on from there how are we going to grow. So it’s definitely, it’s definitely something we’re we’re excited to do.

00:22:28 Heather Starke
I mean, it’s a comprehensive solution for for businesses who want to take it to the next step.

00:22:36 Matthew Kuehlhorn
Well it’s it’s absolutely critical right. Like I from my experience, you know for for the last several years like I had mentioned I I skilled quick, I got to 1.21.5 level and I got stuck there. I couldn’t figure out how to get beyond right, and part of that is a capacity, like I call it the the Bermuda Triangle of business. Like for a home service at 1.5, like that’s danger zone. That’s just where things are.

00:23:07 Matthew Kuehlhorn
Big enough to provide some resources, but almost too small to be able to get all the resources.

00:23:15 Heather Starke

00:23:16 Matthew Kuehlhorn
And and stuff got just really wild and wonky and it’s forced me to get really clear and that’s all super, super healthy. I think my journey is is beautiful for that. And then in engaging your services and getting some real clarity and real optics has helped us move beyond that. And I think we’ll see this, you know, play into 2024. We’re just on this path going forward and it feels really, really good.

00:23:43 Matthew Kuehlhorn
What I’m hearing out of this is, you know, for a business owner simply to be humble enough, be like yo you know, in order to scale my business, it’s financial literacy that I need. It’s not necessarily operations like I know how to turn this wrench on the door. I need financial literacy in order to utilize my resources and track my resources in an optimal way that I can allocate projections and and put a path forward. And I guess I’m.

00:24:15 Heather Starke
Just I find that it it’s kind of hard for some business owners to relinquish that control because you start a business to try to generate a profit. So to to have somebody come in and tell you how to do that after you’ve spent, you know, however many years building your business is, is kind of a difficult thing to grapple with for some people. What we try to do, we try to, we try to talk to people like their people and let them know, like, hey, we’re here to help, Like this is our area of expertise.

00:24:51 Matthew Kuehlhorn
Here’s a question for you with your chamber background and and what you’ve seen like do you have any stats? You can make it up if you want, but like out of the number of businesses, there’s stats in there that says you know the majority are not going to go past one year, the majority of the majority are going to go past five years and be in business. Like how many businesses are currently running that are not profitable?

00:25:19 Heather Starke
I would say I, I mean I don’t have a statistic for you, but a lot. And the problem with that is many of those businesses don’t know that they’re not profitable because they have one checking account. So yeah, you can have, you can have an account that has you know a ton of deposit they’ve taken, but they haven’t done any work. They think they have a ton of money and they’re doing great. Really you don’t have any income because you haven’t earned it yet.

00:25:55 Heather Starke
So it’s it’s things like that that we look for. And another issue that I see with businesses is payroll. So some businesses in their growth phase are super excited about it. Like awesome. I’m on board with being excited.

00:26:12 Heather Starke
I’m excited all the time, but they’re super excited about their growth and they hire people before they actually have the income to support it. You’re like, Oh yeah, we’re projecting that we’re going to make gajillion dollars this year. We better, better hire to support the business for a gajillion dollars. Well, no, no. So that’s, that’s something a CFO will help with is making sure that you are taking those steps correctly, that you’re spending the right amount of money, that you’re investing in the right places for your business.

00:26:53 Heather Starke
And I get a lot of, well, I know my business, I know what I’m going to do and I know how many people I need to do that. OK. Have you done it yet? So these are, these are kinds of things, strategic planning things that we do to make sure that the income that we’re going to generate is actually on par with the amount that we’re going to spend.

00:27:17 Matthew Kuehlhorn

00:27:18 Heather Starke
We don’t want to pick. We don’t want to pickle.

00:27:22 Matthew Kuehlhorn
Right, right. Now I get it because I mean, it’s so it’s a fascinating topic because you’re you’re bringing in logic and a lot of this decision making can be really emotional for especially a founding type of owner, right? And I’ve done all the mistakes. I I know I’ll make more, but I’ve done a lot of mistakes in my 8 year journey. I’ve hired people too quick.

00:27:50 Matthew Kuehlhorn
I’ve hired more than like crazy. However, with the humility, with the honest conversations and clear optics that preps me for making you a difficult decisions and patience, like I’m learning patience right now. Like I’m not a naturally patient person. I want to grow quick, but I got to be patient because it’ll come, but it’s got to kind of restructure the foundation a little.

00:28:18 Heather Starke
Bit well I always, I always tell everybody that therapy is included in accounting services because a lot of the time I have to walk that fine line between so you know having the having the entrepreneur before we’re thinking a dreamer if you will and also delusions of grandeur. So we have to, we have to know when to bring that in and how to have those conversations. A lot of it has to be very candid. So the relationship between yourself and your accountant should be a absolute trust relationship, and one that you know you can bounce ideas off of each other. You listen to each other’s opinions and you take that into consideration in conjunction with the data.

00:29:04 Matthew Kuehlhorn

00:29:05 Heather Starke
So, yeah. And people, I can’t tell you how many times I’ve had the conversations with clients where they’re in a complete panic and I have to talk them off the ledge. That’s the thing. Because I mean that’s the number one stressor for most people is financial.

00:29:22 Matthew Kuehlhorn
Yeah, yeah, I get it. Whether for business owners that want to reach out to you, maybe contract services or at least learn more, have a conversation how people get a hold of you.

00:29:34 Heather Starke
Do you have a place to put contact information?

00:29:37 Matthew Kuehlhorn
We do.

00:29:38 Heather Starke
All right. So definitely shoot me an e-mail and I’m, I’m pretty responsive actually both both Starke Business Services and Kare CFO We both have generally a 24 hour turn around time for emails. Even if it’s just me going, I swear I will get back to you. I got your e-mail, I’m working on it.

00:30:04 Heather Starke
But yeah, being responsive is one of the number one things that we value because I’m your financial professional, like you need to be able to trust that I’m going to get back to you in a timely manner. I’ve had a lot of had a lot of people to say to me, you know, I haven’t heard from my bookkeeper, my accountant or you know my CFO in three months and I’m like that’s a that’s a problem. But yeah, I’m, I’m sewer responsive. So shoot me an e-mail and I’m I’m happy to happy to set something up.

00:30:41 Matthew Kuehlhorn
I love that. Well, we’ll definitely include some website URLs in the show notes. So if you’re interested, check those out. I’ll have your e-mail in there as well. Do not hesitate to reach out to Heather.

00:30:51 Matthew Kuehlhorn
I will say that you know I think along business journeys there’s going to be times where the businesses certainly outgrow certain services. And making my transition in this past year to connecting with you, Heather, and utilizing your service has just been a refreshing, refreshing experience. And so I can’t refer you enough. I I really appreciate the work that you do and the professionalism that you bring. We’re.

00:31:23 Heather Starke
Certainly. We’re certainly happy to help and we like you. That’s a bonus, right?

00:31:29 Matthew Kuehlhorn
It’s important to like the people you work with.

00:31:31 Heather Starke
Absolutely, absolutely. And it’s it’s the same thing about your your financial professionals as well. Like, yeah, we’re not, we’re not your stuffy, dry accounting people, that’s for sure.

00:31:44 Matthew Kuehlhorn
Yeah, yeah, yeah. It’s awesome. Heather, I really appreciate the conversation today. I think there’s some good value in here. And again, if there’s a business owner thinking about their numbers, financial literacy, if you have some humility, like reach out to Heather.

00:32:01 Matthew Kuehlhorn
She’s she’s awesome. And yeah, thank you so much.

00:32:05 Heather Starke
Yeah, absolutely. Thanks for having me.