In This Episode:
In this episode, we’re talking about making bookkeeping work for you, the business owner. It means less hassle and better reports for running your business. Before you panic, we’re not going to try and turn you into a bookkeeper. This will be the busy business owner’s guide to making sure the bookkeeping happens.
Show Notes:
Grab a free copy of Ben’s Quick Profit Hunt worksheet HERE
Get download Nathan’s FREE Ebook 10 E-Commerce Bookkeeping Mistakes HERE
Full Transcript Below:
Ben McAdam (00:01.162)
Welcome to the Business Numbers Podcast. In this episode, I’m interviewing Nathan Hirsch from EcomBalance and AccountsBalance. With these interviews. I’m hoping to bring in other experts to share tips and tactics to help increase your business numbers directly or indirectly.
In this episode, we’re talking about making bookkeeping work for you, the business owner. It means less hassle and better reports for running your business. Before you panic, we’re not going to try and turn you into a bookkeeper, this will be the busy business owner’s guide to making sure the bookkeeping happens, I guess.
My guest is Nathan Hirsch. He’s the CEO of EcomBalance and its sister company AccountsBalance. They take care of the bookkeeping for online business owners, and they’re especially good at e-commerce, which is a tricky thing to get right in bookkeeping. Uh, he and his business partner are also co-founders of Outsource School, which helps business owners get better at hiring, retaining, and scaling using VAs.
Ben McAdam (00:57.89)
They also sold a previous eight-figure business, FreeUp Marketplace, and also their own e-commerce business over the years. So these guys are amazing entrepreneurs and I have worked with them and I recommend EcomBalance and AccountsBalance, and I know they do a great job.
Welcome Nathan. Thank you for joining me.
Nathan Hirsch (01:15.602)
Ben, thanks so much for having me. I’m glad we finally got to do it right before I go on paternity leave too. It’s good timing.
Ben McAdam (01:21.526)
Yes, congratulations, and good luck.
How was my intro? Would you add or tweak anything?
Nathan Hirsch (01:30.97)
Nah, that’s perfect.
Ben McAdam (01:32.698)
Awesome. Great. So there’s a few topics you know about. Quite a few. We could have a very long podcast on this. And if it’s useful, maybe we’ll have another one if the listeners let me know…
But the main thing I wanted to get your input on, your advice, your tips, your experiences, is mainly about bookkeeping. But we’ll see where the conversation leads. That sound good?
Nathan Hirsch (01:56.902)
Sounds great.
Ben McAdam (01:58.222)
Awesome. All right. Let’s start with the probably most important place to start. Like why should we care about bookkeeping as business owners? Like, especially when there’s so many other things we feel like we need to have to do.
Nathan Hirsch (02:13.346)
Yeah, so I mean, there’s a lot of reasons to care about bookkeeping.
Just a few; If you ever wanna sell your company, very tough to do without clean books, or get funding, or get investment. Obviously, you wanna pay your taxes on time every single year and hopefully not make tax season super stressful, so that’s another reason.
But the main reason, over everything else, is making decisions based on what the numbers are actually telling you, not just waking up one day and hiring someone based on gut or firing your marketing agency based on money going into your bank account.
You wanna look at the income statement, balance sheet, cash flow statement, and make decisions based on what they’re actually telling you. And while all the other things like selling your company is great, most entrepreneurs don’t end up selling their company, but you have to make good decisions every single month. And even if you’re a new entrepreneur, you’re probably not going out of business because of your bookkeeping expense. If you’re new and small, it’s relatively cheap.
But you will go out of business by making poor decisions or by not knowing the numbers of your business. So that’s kind of the starting point.
Ben McAdam (03:15.854)
I like that. I really liked the point about paying for a bookkeeper is not going to be the reason you go out of business as a new business owner. I think it’s, it’s an important point. And it’s one of the things I’m always balancing when I’m advising clients or teaching workshops or something. This is a common question that comes up, like when should I hire a bookkeeper? Or I see that they should hire a bookkeeper. And there’s always a part of me in the back of my mind that’s going, I know it’s worth it. I know when business owners starts it’s a relatively small expense when the business is small, but being able to point to this part of the podcast and say, go listen to that. Nathan says that’s helpful. Thank you.
Nathan Hirsch (03:55.822)
Yeah, and I’ll kind of take you through my trajectory. So I was a 20-year-old running a million-dollar business out of my college frat house selling baby products if you can imagine that. And I had no idea about bookkeeping, and my parents told me I should probably pay taxes. So I created a QuickBooks online account and was just doing it every single month myself.
Well, I’m not a bookkeeper, and that not only was like creating a mess, but it just took my time away from what I should have been doing in the business.
Then I tried hiring college kids for 10 bucks an hour to do it. And they weren’t bookkeepers either. So they just made a bigger mess. And then I tried just dumping on my CPA at the end of every year. And it would just be super stressful. I would dread every January and February and get a large invoice from him and barely file my taxes on time and not be able to make decisions.
Then I tried to save money and hire a bookkeeper to do it quarterly, and I realized that by the time I actually knew what was going on, it was three months too late because I would have to wait till the end of the quarter.
And finally, I realized, okay, I need to do bookkeeping monthly, and that helped my Amazon business. Fast forwarding ahead, the single best decision we made when we started FreeUp, before we were profitable when our revenue was super low, it was just an idea, was hiring a bookkeeper from day one. And every single month, by the 15th, we would get our books, we’d go through, we’d make decisions based on what the numbers were telling us and that helped us really scale the business.
And then fast forward to when we went to sell. We had four years of immaculate books going back to day one that helped us pass due diligence. And I think a lot of entrepreneurs kind of go through it because they’re trying to save money or kind of cut corners whenever they can until finally realizing once you become a veteran entrepreneur, you’ve got to hire a bookkeeper from day one. And that’s why we’ll even get clients who, sure, their revenue probably says they can’t afford us, even though our minimum is not that bad, but they know I’m not going under because of my bookkeeping expense. I just have to put a good bookkeeper in place from day one.
Ben McAdam (05:53.694)
Yeah, absolutely. There’s, there’s a lot of things that when you’re looking at the numbers in the bookkeeping, it tells you a different story, and it’s completely a different perspective than just like, how much money do I have in the bank account right now? Um, yes. Okay. There’s tons of money in the bank account. Spend. Oh no, there’s not much money in the bank account. Don’t spend. And like being able to see where the money’s going, um, where the money’s coming from, uh, in the books is really, really helpful.
And then you can do things like a cash flow projection. You can see into the future a bit and make more sensible decisions. But that bookkeeping is such a foundation. Thank you for sharing the story.
It’s, um, you’ve been on a bit of a journey there… and four years of immaculate books, I would definitely. Not only does this mean that the seller has the books when they’re asking for them, but that will tell them something about you and how you run the business well, the fact that you’ve got the books done for that long. So that’s awesome.
So we’ve decided, okay, yes, we should care about bookkeeping. The next question I’ve got is, how much should we care? Like, obviously, as I said, in the beginning, we don’t want to turn people into bookkeepers. This is definitely a have someone else do the bookkeeping kind of a thing. So without becoming a bookkeeper, like how can a business owner make sure the books are done well?
Nathan Hirsch (07:20.162)
Yeah, it’s a good question. And I think when we were doing market research for econ balance and accounts balance, what kind of blew our mind a little bit is you had these bookkeeping companies selling courses on how to do your own books, where me, the entrepreneur, I’m like, you should never be doing your own books. It’s a terrible use of your time, and most of the time, you’re doing it wrong. You just have to pay someone to do it over again. So there’s definitely, you do wanna know enough to be dangerous, but you don’t necessarily need to know what buttons to click in QuickBooks or how to reconcile an account or anything like that.
If we’re talking about e-commerce, there’s things you can look out for. For example, if your bookkeeper has the top line of the income statement, the money that’s deposited in your bank account, it’s probably a pretty quick sign that they haven’t dealt with a lot of e-commerce businesses and aren’t using the connecting tools in there. Honestly, you want to find a bookkeeper that is relatively experienced in whatever you’re into. If you’re running a marketing agency, you want a bookkeeper who has ten other clients who are marketing agencies. E-commerce, ten other clients.
A lot of things don’t carry over, especially when you start getting into the online space and when you’re dealing with older bookkeepers, older CPAs that don’t understand what’s necessarily going on there.
You also, what tools they use is a big factor. I mean, you and I know that if you’re going to be running an e-commerce business, you gotta have an A2X or Connectbooks or LinkMyBooks, whatever you choose to connect to the marketplaces in order to get accurate numbers.
So really kind of quizzing them on the ins and outs of your particular industry is a quick way to know if they have experience there without you actually being a master bookkeeper in order to vet them.
Ben McAdam (08:59.506)
Hmm. Excellent. Uh, I like that. The industry experience is a big thing. When I started a, co-founded a bookkeeping business many years ago since sold it. And one, uh, like, we grew really fast by just saying, hey, we’re bookkeepers, but we actually understand what your business is doing. And we just had lots of people like flooding across because CPAs had no idea that traditional bookkeepers had no idea about this online business nonsense. And e-commerce is particularly complicated with how you account for stock and discounts and Shopify fees and all those different bits and pieces.
So it requires a different, you know, level there.
So finding the right bookkeeper can be a bit of a challenge. For me, I’m constantly seeing posts and people asking me questions, and even my clients might need a new bookkeeper at different points. And I had trouble finding good bookkeepers because, like there are some bookkeepers out there, but like the good ones are usually full.
And, you know, I find a bookkeeper when a new client signs up, and I’m like, wow, your books are done really well, intro me to your bookkeeper. I give them a few referrals and then they’re full and I’ve got to find another one. I was really pleased, um, when I found out about you guys, cause like, I know you run businesses really well and can scale because of FreeUp and Outsource School, like, you know, how to scale a team and I was really excited. They’re like, I’m never going to fill them up. I can never have to find another bookkeeper again, like I can give them referrals. They’re not going to grow too fast or blow up or fill up. So that was particularly exciting for me.
But apart from me telling the listeners, go work with you guys. What are your general tips for finding a good bookkeeper? You gave some good tips about how to vet them so they got the industry experience, but like, where do you find the good bookkeepers?
Nathan Hirsch (10:49.586)
Yeah, so you kind of have to decide what you’re looking for. You’ve got different options. You can go with the CPAs who also have a bookkeeping service, right? That’s probably the most expensive option. The downside there is a lot of times the CPAs are doing bookkeeping in a way that is probably right for taxes, hopefully right for taxes, but not necessarily putting things in a way for you to understand them, right? Like you could put all expenses together and it’s right from a tax perspective, not so helpful when you’re trying to do your books.
On top of that, it’s always good to kind of have two minds. So I’ve always set it up where CPA over here, bookkeeper over here, they can communicate and get on the same page. But the highest option is CPA that also is bookkeeping. Then you’ve got the bookkeeping services. EcomBalance falls in there. You’ve got the huge ones that are kind of a numbers game in there, whether it’s pilot, bench, whatever it is. You’ve got the smaller ones where the pro to them is that you get a little bit more personal touch, hopefully with that kind of care there and that smaller teams. And then below that, you’ve got those freelance bookkeepers, which there are great freelance bookkeepers out there. The problem is a lot of them are not good at the things around bookkeeping, whether it’s billing or marketing or scaling or hiring. So they max out very quickly. And then the lower route, where you really have to be a hiring expert, is the bookkeeping virtual assistant, where you outsource it to one person in the Philippines. Hopefully, they’re a bookkeeper or CPA equivalents in the Philippines. And you have to either really know what you’re doing, or you have to have your CPA really help you vet them, or you’re going to run into a lot of issues there.
So those are kind of your choices. I’ve always kind of felt that kind of in between, between like the freelancer or the small bookkeeping firm that can actually understand my numbers, I’m working with the same person, they’re not constantly switching it up on me. That’s always where I’ve tried to stay and how I’ve tried to position e-comm balance.
Ben McAdam (12:25.666)
Mhm.
Nathan Hirsch (12:42.97)
Those are kind of your different options across the board.
Ben McAdam (12:46.108)
Mm-hmm. Hmm. Makes sense. I like it. Um, all right. So you found a good bookkeeper, you vetted them, and then they’re doing the books, uh, for, for the business owner here. How does the business owner tell that the numbers have been done right? That the bookkeeping has been done right? That they’re not like being overcharged.
So, for example, one of my clients a couple of years ago, uh, had a bookkeeper, um, who was billing more than 120 hours a month. This was a freelance bookkeeper, and I’m like, they have other clients, you told me, so when are they doing all of this work, and why is it 120 hours? That’s insane for the level of business. And so he saved a bunch of money with that. Um, but he didn’t know that the bookkeeping shouldn’t take that long.
So obviously, business owners need some way to tell that the bookkeeping is being done right. Not taking too long, not overcharging, and the numbers are right. Do you have any tips for the business owners around that?
Nathan Hirsch (13:48.342)
Yeah, so first of all, you want a bookkeeper that’s gonna be on time every single month. If your due date is the 10th or the 15th or the 20th or whatever you agree with the bookkeeper and depending on your business, you might have a certain date you want it done. That’s kind of the benchmark. If they’re late every single month, usually a sign that you wanna switch bookkeepers.
Fixed pricing takes care of a lot of the hourly stuff because then whether they spend 30 hours or 10 hours or 15 hours or you have a Cyber Monday week where you crush it, your price doesn’t really go up and down unless they raise prices on you. If your business grows, that’s a good problem to have, and your price probably isn’t increasing too much relative.
Going about it when you’re vetting the bookkeepers, getting some different pricing quotes, always a good idea. Not necessarily that you wanna go with the cheapest option, but you’re at least gonna see if there’s anything extreme out there that’s just completely out of your mind. And if you think of kind of that accounting circle, when you say accounting, and you’ve got your CPA, you’ve got your bookkeeper, and then you’ve got either your CFO or your coach, I don’t know what you’re calling yourself these days, Ben, but whatever they, whatever they kind of fall into that category, um, you, you come, you want to use the other two to, to make sure the bookkeeper is in line.
Like my CPA for FreeUp, for example, and we were hiring a bookkeeper in the Philippines who did a phenomenal job, one of the best hires ever made. We had our CPA on top of him for those first few months. I would pay him extra to just go through the books, and make sure we’re not going to create some disaster that we have to go back and fix later. So, use those other pieces that are experts to come in and make sure your bookkeeper is on track and that it’s reasonable.
I kind of related to when we hired developers for the first time and I’m not a developer and neither is my business partner, hiring a long-time senior developer as a consultant for a few thousand dollars was a pretty good investment to help me vet people before I actually started diving into some huge projects. So you kind of have to take the same mentality there.
Obviously, you go through your books each month. You should have a monthly finance meeting on the calendar every single month where you go through line by line income statement, balance sheet, cash flow, and hopefully, you know something about your business where you can point things out that seem off and at least bring them up to your bookkeeper or up to your CPA. And they might have a logical explanation that you don’t understand or that you need explaining to, but there also might be something off that either needs to be corrected or is a red flag that you’re not working with the right bookkeeper.
Ben McAdam (00:00.798)
Hey, quick interruption. Uh, I know you’re probably enjoying the episode. A lot of great stuff from Nathan so far. Just want to let you know that there’s another thing you can do with your bookkeeping apart from making big business decisions as you can go through and you can find a lot of profits in it.
I have put together a PDF that’s like 10 or 15-minute exercise. Very simple. That helps you quickly find a whole bunch of profits. I call it the quick profit hunt, and you can download a copy at profitscollective.com/QPH.
We’ll put the link to that in the show notes. Now back to the episode.
Ben McAdam (16:11.626)
Hmm, absolutely. I like that, going line by line, relying on experts. Yeah. I generally find that the first couple of months of working with any new client, there’s some changes to the bookkeeping that need to be made. This, you know, it was okay for tax purposes, but not necessarily for managing the business, understanding what’s going on. And yeah, communicating directly with the bookkeeper is definitely helpful for my clients if they’ve got, you know, an expert communicating with the bookkeeper, and it all just kind of happens without them having to worry about it. They generally tend to appreciate that kind of thing.
Okay, so more specifically, I guess, than that good advice on how to tell they’ve done it right. Like what are some common mistakes and specifics that people can look out for in their bookkeeping? I know you’ve got…
Nathan Hirsch (17:00.494)
Yeah, I mean, commerce-
Ben McAdam (17:02.61)
Sorry, I know you’ve got like a top 10 mistakes ebook, and we might not necessarily really have a chance to go through all 10. Um, we can put a link in the show notes with that. Um, but yeah, e-commerce or otherwise, uh, common mistakes in bookkeeping.
Nathan Hirsch (17:16.686)
Yeah, so keep in mind, I’m approaching this from an entrepreneur’s perspective. So me being like, “Hey, this is a common mistake when reconciling accounts,” is not really what I focus on. I mean, some of the biggest stuff that I see from a client standpoint is not having the proper setup. But if you go through, let’s start off with accounting software. So you’ve got the big two, QuickBooks Online or Xero. There’s other softwares out there that are free or cheaper, and they’re free or cheaper for a reason. You’re probably gonna outgrow them. If your bookkeeper drops you, it’s gonna be really hard to find another bookkeeper that uses that software, and you’re probably gonna have to migrate over to QuickBooks Online or Xero anyway.
And then you’ve also got the benches of the world, the companies that use their own software that no one else uses their software where you’re kind of stuck with them no matter what they do unless you migrate everything over. So making sure that you use a bookkeeper that uses either QuickBooks Online or Xero, not QuickBooks Desktop, unless you’re actually hiring someone to go into your office. That’s step one.
Nathan Hirsch (18:15.95)
Step two, if you’re an e-commerce business, is that connecting tool. We did a lot of testing, A2X kind of checked all the boxes for us in terms of accuracy and customer service and the least amount of bugs, but some connecting tool that’s getting you accurate data.
And then the last piece is the right bank account and credit card setup. Making sure, obviously you’re not intermingling personal and business accounts, but even if you have two personal accounts, one for business and one for personal, you’re not gonna be able to give you only access from your personal account.
So every month you’re gonna have to download statements, pass them over to the bookkeeper, it’s manual work on their end that could lead to errors and it might even cost you more just because it takes more time. Make sure you have a business checking account, business savings account, business credit card with a bank that allows view-only access. That way it’s just gonna save you time and effort and everything’s gonna connect to QuickBooks and all that.
So that’s kind of the baseline setup.
Ben McAdam (19:09.006)
Hmm.
Nathan Hirsch (19:10.97)
I don’t know what your opinion is on profit first. I personally find it a little crazy. Like I don’t need to have 15 bank accounts for my business. As you get bigger, you can always add accounts and stuff like that. But for the most part, simpler is the better. And you can even be strategic about it. Like we’ve got clients who have two credit cards, one’s for inventory, one’s for all other expenses, makes it pretty easy. Stops a lot of back and forth there. So I like to focus entrepreneurs on kind of the right setup before they actually get into bookkeeping, which down the line will get them more accurate books as well.
Ben McAdam (19:42.327)
Mm-hmm.
Ben McAdam (19:45.746)
Love that. Love the setup tools and having things done the right way. It definitely, yeah. Don’t be spending personal expenses out of your business account and vice versa.It’s such a big improvement. And for those of you who are doing it already and getting your CPA to do the bookkeeping, please change. It’ll save you so much money and hassle.
I like the idea of the separate credit card for the different type of expense, so that it saves questions from your bookkeeper. I like that. Um, so that’s a good setup.
And these are good questions, as you were saying, like vetting a bookkeeper, like in your quizzing them on the industry knowledge, like ask them about this stuff. Like what are they used to connect QuickBooks online to your Shopify store to save time and get them to tell you about that. So these mistakes are good things to look out for and also good vetting questions for a bookkeeper. So that’s set up. Any other tips? We’ve got time for a couple more.
Nathan Hirsch (20:44.082)
Yeah. So we, in terms of vetting a bookkeeper, have them send you a sample chart of accounts. I know whenever you send us a client, that was one of your first questions. Like what does your chart of accounts actually look like? Make sure that you, the entrepreneur can actually understand it and that it’s not like 20 pages long. It should be a reasonable length that’s broken down in a way that makes sense for your business. And if you’re working with a bookkeeper that specializes in property management or e-commerce or agencies, they should have a standard chart of accounts that they use for that particular agency. Now, that doesn’t mean that you can’t make tweaks to it. That doesn’t mean you can’t hire someone like Ben to come in and say, hey, can we move this around? Hey, I have a chart of accounts that I use. But there should be some standard that’s very easy to read.
And off of that, segmentation is huge. If you’re selling on Amazon US and Amazon Europe and Shopify, and Walmart, you wanna know how each marketplace is doing. What the profit margin is? Are you losing money and wasting time in any marketplaces? You don’t want it just all sales put together.
And that could be the same if you’re running an agency and you sell five different services. You want to know, are you wasting time selling PPC or is SEO making more of your money?
So whatever segmentation makes sense for your particular industry, that’s a great conversation to have with your bookkeeper and also an easy way to proofread it and correct your books. If you know that your Shopify sales have been going down and the sales numbers are going up in QuickBooks, if it’s segmented, you’re gonna be able to pick that up a lot easier as an entrepreneur and point that out.
Ben McAdam (22:14.622)
I like that. Yeah. Splitting the revenue is very, very helpful. I’m often recommending people do that because overall, their revenue might be stable or it might even be increasing slightly, but something is going, you know, it could be like Shopify US is growing amazingly well and Walmart is tanking, and you’d make a different business decision. You’d focus differently. You’d reinvest your marketing differently. Maybe you’d pull out a Walmart entirely. If you could see that level of detail versus just, “Oh, yeah, revenue is kind of going. Okay.”
So yeah, I love that idea of going into a bit more detail. Let’s do one more. And then I’ve got a couple of other like software-related questions and maybe some exiting of business questions to hit you with.
Nathan Hirsch (22:54.882)
Yeah, so a big one that’s kind of come up that when we came into the space about a year and a half ago, all the brokers came into e-commerce, and they said, if you want to sell your business, you have to be on accrual, all e-commerce businesses should be on accruall, which can be true, not always true. The real answer to should you be cash or accrual is that’s not a question for your bookkeeper. That’s a question for your CPA and they should be the one to advise you whether to be cash or accrual. And it’s not always black and white.
An accountant might say, hey, do your books in accrual, but I’m gonna toggle it to cash and file for cash, for taxes, depending on how much you save. Or hey, do cash for the first two years and then switch over to accrual down the line. For most of our clients, we’re doing accrual for sales and cost of goods sold, but they don’t have enough expenses to make sense to accrue everything else, and it would cost a lot more, it’s not really worth it for most of them.
So this is a conversation to have with your CPA. It’s a reason to have your CPA and your bookkeeper communicate. The last thing you wanna do is have your bookkeeper do your entire year in cash only to talk to your CPA, who needs it in accrual. So that’s something that you should be on top of in a conversation you should really have with your CPA almost every single year because it can change depending on the setup of your business, your profitability, stuff like that.
So you shouldn’t make that decision. Your bookkeeper shouldn’t make that decision. That’s a CPA and really a tax question. Just like the formation of your company should be going to your CPA as well.
Ben McAdam (24:21.526)
Yep, absolutely. I love that. So for people who are curious about what accrual means, uh, versus cash, how would you explain that to them?
Nathan Hirsch (24:31.482)
All right, so my non-bookkeeper explanation. So cash is when you, pretty much when you pay for something, that’s when it goes on the books. So like, I own a property that I rent out. And if it’s on a cash basis and the person pays their rent one day late and it goes in the next month, it would go on the next month’s books. Let’s say January to February. So if they paid February 1st, it would go on to February’s books. If you pay a vendor, the day you pay the vendor, that’s when it goes on to the books.
With accrual, you can spread it out to when the action is actually taken. So if you’re an agency and you land a retainer for, let’s say, $30,000 to use these even numbers, but you’re fulfilling that service over the next three months, you might spread it out where it’s $10,000 a month revenue for each month. And then you’re, you’re paying your team, let’s say $5,000, and you’re spreading it out over those three months as well. And that gives you a much more accurate picture of how your business is doing. You don’t wanna show a huge loss one month because you bought a lot of inventory or whatever or did a lot of fulfillment for one client when really you’re selling those products over a period of time, and that’s gonna give you a much more accurate picture.
Ben McAdam (25:39.606)
Yeah, absolutely. Love that explanation. You did well for a non-bookkeeper. It’s like you’ve got a bookkeeping business or something.
Um, so, okay. So there’s a few common mistakes. There’s a few more in your top 10 mistakes in the bookkeeping. I love the list. I’ll put a link to that in the show notes where people could grab those so that they know they can then look at their bookkeeping, see if the bookkeeper is doing it right, and they can also use that to vet bookkeepers. Um, I want to ask, uh, one last kind of bookkeeping related question and then go on to talking about exiting in business.
Uh, another common question I get from people there’s that which bookkeeping software should I use? And I always say, you know, QuickBooks or Xero don’t go with one of those free ones.
Um, and another question is about payroll. Like how should people do payroll? There’s a lot of different options. Like they can do it themselves. They could get a bookkeeper, they could get someone on their team to do it. Um, and then there’s some software options like Gusto or ADP that people can use as well as, like, when they got a bigger team, they could pay a payroll firm that specifically does payroll.
Do you have any recommendations or things you’ve seen your clients use that are popular or seem to work for them?
Nathan Hirsch (26:58.342)
So personally, I’ve used Gusto for years. Now with that said, I actually got an email from my CPA recently saying that they’ve had a lot of issues with Gusto, and I’ve noticed that too. It seems like as they’ve grown, their customer service has kind of lagged. Now keep in mind, I’m running a lot of businesses that are mostly VAs or mostly people outside the US and the Philippines. With the bookkeeping, we’ve got US people as well, but it’s a hybrid, but I don’t have like 50 US employees.
And so, Gusto is still a perfect solution for if you’ve got that five to ten employee range. I think once you get above that and issues come up, you might get annoyed and struggle with their support.
My advice is not to do it yourself. Definitely, as the entrepreneur, don’t spend time on it. I wouldn’t just pick a random person on your team and assign them to do it. If you have an internal bookkeeper with payroll experience, that might make sense, but I would go with one of the bigger companies, ADP. I think Paychex is another one. They’re not expensive enough to, in my mind, I would rather pay their fees, which is $100 a month, or maybe a little bit more if you have more people, and know that it’s getting done right, and know that if something is filed wrong or the state contacts me or something, that I can just send it to them, and they will handle it. And it’s one less thing I have to do than to kind of add something to my plate.
So that’s kind of my advice is use one of the bigger companies, use someone who’s going to handle it for you. And it’s just one less thing that you have to do and sometimes as you grow, they offer other things, whether it’s like benefits and HR stuff like that, that might be helpful as well.
Ben McAdam (28:31.302)
Yeah, makes sense. All right, so let’s talk about exits. We got at least a few minutes left here on the interview. So you’ve exited two different types of businesses and one business.
Nathan Hirsch (28:43.386)
Just one business, we didn’t sell the e-commerce business. Yeah, yeah.
Ben McAdam (29:00.25)
Oh, sorry, apologies. So, but you had a decent size to exit for FreeUp. That was pretty good. I do want to hear like what your tips are for people who are starting a business or early in their business who want to one day exit it. Like how should they be thinking differently if they do want to exit the business from the beginning?
Nathan Hirsch (29:11.094)
Yeah, so we always build our businesses to be sellable in a sense that we could if we wanted to, although we have no plans to sell the current businesses that we run. And it comes down to a few things. So bookkeeping, which we already talked a lot about, hire a bookkeeper from day one, have clean books for the whole time. I’ve seen people who are going to sell their business, and then they hire a bookkeeper to clean up three years of books.
That’s crazy. I mean, selling our business was the most stressful six months of my life. And that was with clean, immaculate books. I can’t even imagine going through it without that. So that’s part of it.
The next part is you need a good team. The team that we had on FreeUp was incredible. We had team leaders for customer service, for bookkeeping and billing, for recruitment, for day to day operation, and in our case, fulfilling tickets, we called it for freelancers and teams underneath them.
No one wants to buy a business that’s completely run by you, or they’re going to buy it on the cheap and you’re not going to get that, um, that well of an evaluation for it.
Now, the, the one thing I will say for, for the four years of FreeUp, um, I heard from different people like, “Hey, you’re not going to be able to sell FreeUp” because I was the face of the company, right? I was the one going on podcasts. Um, people associated like my name with the brand. Now, the thing that ended up being true is I was out of the operations of the business. I usually start my first few years of any company in the operations, figuring out, hiring the right people, and then step out, and then Connor, my partner and I, handle most of the marketing and drive traffic, and obviously make sure clients have a good experience.
But it’s actually fairly easy for a company like the Hoth that bought us to come in with a better marketing plan to replace me as the arm of marketing, as long as the operations and the fulfillment are running without you and the owner.
And we were out of the company within 30 days. We were still there to, if they had questions or anything, but we were out of there pretty quick because it’s not like I was fulfilling orders or doing the actual work, they hired two marketing people to replace Connor and I and came in with their own marketing strategy. And and that was that. So that’s kind of how I would look at it.
I think we kind of live in a time with social media where you can hang on in marketing a little bit longer than, than maybe, uh, maybe in the past, although we do build marketing teams eventually as well, and that was part of the sale.
But the operation is something that by year two, you got to be out of fulfillment, or that business is not really sellable and clean financial as well. And so that’s kind of how I look at starting at any company.
Ben McAdam (31:34.751)
Mm-hmm.
I like that. I like that perspective. And, and thank you for addressing the, you can’t sell it if you’re the face thing. I was going to ask something about that because, yeah, I know you’ve done a lot of podcasts.
Another question about exiting a business, whether there are any things that surprised you about the process of selling either like starting it during the process or were there any things that surprised you after you’d sold?
Nathan Hirsch (32:02.97)
So the single best advice that we ever got, and I tell this to everyone I talk to that comes to me for advice before selling their business, was to vet the buyers the same way that they were going to vet us. So.
The due diligence was long. Like it was surprising how long. It felt like every day, they were sending us over 30 questions, and we were quick. They told us we were the fastest people that ever responded due diligence questions because we had SOPs for everything. We had numbers for everything. We were incredibly organized. Like every canned response that a customer could or every question a customer could ask, we had a canned response for. So when they were sending us due diligence questions, we had everything ready to go. But the advice that someone gave me to vet the buyers, we would send them 30 questions right back. We wanted to know everything about them. We want to know their net worth, their past success, their past failures, how they treat people, their plans for FreeUp. With FreeUp, we wanted references to other people they bought companies from because they have a little conglomerate of businesses. And we wanted to sell it to someone who had the same values that we did.
Now, there’s a difference between having the same values and making the same business decisions. If you’re going to sell a business to someone, they are going to make business decisions that you disagree with. That’s just going to happen, everyone’s different.
You could even look at it as they have more experience than us, so some of those decisions might be way better than any decision that we could make. But we wanted to sell it to someone that believed in treating people well, honoring their word. We didn’t want to end up in a lawsuit down the line or fighting with them for years. We wanted our team to get taken care of. We negotiated $500,000 to go to our team in the Philippines. We wanted to make sure they got every penny. We obviously wanted to get every penny, and we wanted to have a good relationship afterwards, whether good things or bad things happen. And we couldn’t have sold it to better people.
Keep in mind, we sold the business in November 2019. COVID hit months later. So bad timing from them, but they handled it in the way that we would have handled it, where it’s not our fault. It’s no one’s fault. No one could have predicted it. We all made the best decision based on the information available. And we’re gonna move forward with the best, move forward making decisions based on the best information available.
So that was kind of the best advice that I got. I would have rather taken less money and sold it to a better person than get top dollar and be fighting with someone for years. And to their credit, like they honored every word, they’re still running FreeUp, our team’s still there, Connor and I got paid every penny, and thank God it finally worked out.
And even after we went through like all that due diligence, you’re still kind of crossing your fingers and hoping you sold it to the right people because you never really know until things start to take place, you know.
Ben McAdam (34:43.382)
Hmm. Yeah. Excellent advice. Thank you. All right. So we’re getting towards the end here. So final tips, any last piece of advice you want to give people could be related to bookkeeping could be related to exits, could be related to hiring. What’s the, if the last chance you’ve got to help with people listening, what would you, what would you tell them?
Nathan Hirsch (35:04.866)
Yeah, with bookkeeping, focus on having a good, repetitive monthly process. It should be the same thing whether you’re in January, March, whatever, November.
It should be the month ends by a certain day. You get your books. You’ve got a monthly meeting on your calendar, uh, with your, your CFO, with Ben, with, um, your, your business partner, your husband, your wife, whoever it is. You’re going through all three reports. Uh, you’re looking at trends. You’re comparing this month to last month, this month to the same month last year, and you’re making decisions based on what the numbers tell you. And then you repeat next month, and you repeat next month.
That’s what it should be like as an entrepreneur. You shouldn’t be getting too busy once one month, or your bookkeeper falls two months behind, or whatever it is. It should just be on autopilot. And this is the same meeting that Connor and I have been running for every month for six-plus years now, and it’s been a game changer for our business, and it makes everything else easier. I remember the, the first call we had with the people buying FreeUp they asked us a lot of questions about the numbers in our company. And we knew those numbers really well because we had that meeting every single month for four years. And not only did that build a lot of trust, but when we got to due diligence, and we actually opened up our books to them, everything we told them on the phone matched everything in the books. And that right there made it move forward. And there’s a lot of situations where you hear one thing, and you actually get in the books, and you see something completely different, and that ends a deal right there.
So have that meeting on your calendar every single month, work with a bookkeeper that has a good monthly process, and that should just be part of being an entrepreneur.
Ben McAdam (36:35.83)
Awesome, great parting advice. I love it. It’s also good to hear someone other than me saying it so that people believe me a bit more and are more likely to do it as well.
Okay, so that was really helpful. You’ve got a lot more knowledge, a lot more advice that you could be going, we could be here for quite a long time, but that’ll have to do it for now. If people want to get in touch with you or get more good tips, where can they find you on the Internet?
Nathan Hirsch (37:01.434)
Yeah, follow me on LinkedIn, Nathan Hirsch. I post daily tips on the boring parts of business, hiring, and bookkeeping. And you can check out outsourceschool.com and ecombalance.com if you’re interested in either of my ventures.
Ben McAdam (37:13.818)
Awesome, sounds good. All right, thank you, Nathan for sharing valuable knowledge and tips, and thank you, everybody for joining us.
Before you go, don’t forget to like, subscribe, rate, share all the things, spread these helpful ideas that Nathan shared to more business owners.
And I’ll see you all on the next episode.
