How to Use The Profit First Method To Get $$$ as an Entrepreneur

Kathryn Finney: Welcome back to Build a Damn Thing, the podcast where we help underestimated founders use entrepreneurship to build the life and legacy you deserve. I'm your host, Catherine Finney. Thinking of leaving your nine to five to start your own business? Well, before you leave, let's talk money. Today's guest is Sherry Rash, Money Mindset Expert. Let me do that part over. Today's guest is Sherry Rash, Money Mindset Expert, Financial Advisor, and host of the New York Times ranked podcast, Everyone's Talking Money. Sherry helps people navigate financial decisions with confidence and zero shame. So if you're looking to make the shift from paycheck to profit, this is the episode for you. Welcome Sherry, so great to have you. Shari Rash: Thanks for having me. I'm excited for our conversation. Kathryn Finney: So money as an entrepreneur is always a particular challenge, right? It's something that you're always trying to figure out how to get more of, how to manage what you have and how to really think of your resources. And so if you're someone who's thinking about leaving your full-time job to start a business, which many of our listeners are, what are some of the first money moves you should be making? Shari Rash: And one of the first money moves you should be making, I think, is one, figuring out how much you need to leave, right? How much you need to be earning from your side hustle that's going to become your main hustle. And I think a mistake people make is, I just, need to replace my income. That might be a little bit too much. Like that might be putting too much pressure on yourself or staying in your job longer than you need or want to. So looking at like what are the basic and I quote unquote basic expenses to cover, right? And once you have those, you could start to make the leap because you don't want to go into it thinking, well, I'm not going to take any money from my business because that's just taking money away from my business. You have to have the mindset right away. you are gonna pay yourself, you are gonna receive something for your effort. Because I think if you don't and just like every dollar goes back into your business and you deplete your savings, it just creates this stress and it's unnecessary. So accept the fact that you are gonna take some type of salary, you are gonna have some sort of paycheck and just have that expectation and set that foundation right away. And I think that would make the transition and the whole process. a lot easier and less stressful. Kathryn Finney: How do you figure that out? Like, how do you figure how much you should pay yourself? Shari Rash: So just looking at basic spending, right? say we, I just want to get a handle on my expenses, whether you are looking to switch and go full time with your gig or not, looking at your expenses and categorizing each of them. Now, I'm not talking budget categorizing like utilities and this and that. I'm talking a need, a want, or a wish. So looking at every expense and going, do I need this? Did I want this? And a wish, if you look this up, everyone has a different word, but a wish to me is something that builds your net worth. So either it's saving or reducing debt. Reducing debt has just as much of an impact, sometimes an even better impact on your net worth than just traditional saving does. So by looking at your expenses and saying, is this a need? Do I need this? And again, needs are not just basic expenses. I need Netflix in my house. I need because I have four children and that's all they watch. If I took away Netflix because someone told me online that it's frivolous, all hell would break loose. So I need that in my house because that's a main form of entertainment. I need to get my hair done every six weeks. because it makes me happy, I'm in a better mood, I look better on camera, all of these things, right? So that's a need. So being honest with yourself with what your needs are, and if you look at the needs, and ideally, your needs are about 50 % of your income. That's not gonna happen overnight. Like if you just do this exercise right now, your needs, if you end up at 50%, awesome, like gold star way to go, that's great. If they're not, we need to figure out how to reduce them and get there. But then the wants, the wants are all the extra stuff. The wants are the stuff that makes life better, but if push came to shove, we could live without. Those, when you're looking to transition to working for yourself and building your business, the wants are the things we're going to go without. Shari Rash: because that's the push came to shove that just made my life better. I'm still getting a lot of things for my needs. Remember, I'm still getting my hair done. I'm still getting Netflix. So I'm not totally, I'm still maybe eating out once, going through the drive-through once a week. So we're not as if we're restricted, but the once is where maybe that's where we have the flexibility to remove. And that's where you get the flexibility of, well, my needs are. $3,000 a month, my wants are 1,000. I could probably get rid of a lot of those wants and still be pretty happy and content for a while. Kathryn Finney: I think that's one of the ways that I think people get a bit caught up, right? Because they're told that you just cut everything and not taking a very systematic approach like you shared to thinking about what you cut and why you're cutting it. So it's not cutting everything across the board. It's really aligning your expenses, your expenditures with who you are, what you do and what you need to get through the days. But there's another question that I have for you that comes up from entrepreneurs. How do you do that when your cash flow is changing each month? That each month is different, particularly in the early stages of entrepreneurship. Shari Rash: So I like a lot of the profit first thinking, the methodology of profit first. And what that does, because so often when we're entrepreneurs, yeah, so the methodology is usually what happens if we're just going at it on our own, money comes in, we pay our bills, and then whatsoever leftover is left for us or left for the business. Kathryn Finney: What is that methodology? Shari Rash: or anything else, it's just leftover. So we're paying our bills and everything first and we come last as the entrepreneur, as the business owner. Profit first, all it does is it switches when the profit comes out. Revenue comes in, a portion goes to profit, and then what's left over is what goes to expenses. So it's always making sure you pay yourself. first or you're at least setting aside some money. Now the profit could some of it go to you. Some of it you could just have in a kitty because business is lumpy, right? Being an entrepreneur, your income is going to be lumpy. So you could use some of that money in the kitty to smooth things out when times are lumpy. So that to me is a game changer because you are controlling your money because as There's so many things we feel out of control of, right? And, but by having control of our money and paying ourselves first or paying our profit account first, that helps to keep expenses at bay as well. Kathryn Finney: think it's also a good way to still stay connected to the business. think, you know, when you're an entrepreneur, things are so challenging and paying yourself first, it's almost like you're giving yourself a reward first. And it's in it. I could see how that could help you continue on with the business and times are tough that you're getting immediate reward. It's not delayed gratification necessarily. And so on that, you're paying yourself first, how do you budget then, especially when you have this inconsistent income? How do you how do you build a budget? Shari Rash: So obviously in a perfect world, you have enough coming in from the business that's covering your needs ish, right? And that's probably at the point where you can make that transition, I think, is do you have enough revenue coming in to cover at least your needs? whatever we're determining our needs are, does it cover our needs? So when the money's inconsistent, That's where we, one, think operating lean as a business is super important. think also realizing that not everything, just because you can write it off doesn't mean you need to spend the money. I think that's a mistake so many business owners make is they go, well, it's a write-off. Yeah, but you're still paying for it. You're the one paying for it. It's not as if you have a corporate account somewhere and someone some phantom. It's a phantom bank account. It's still your money. So I think it helps you operate a very lean business as well. If you're paying yourself first and to your point earlier, it by paying yourself first and getting that reward for your work, that also helps you to not hold animosity towards the business. Like imagine you're working and you're hustling and you're grinding and your blood, sweat and tears are going into your business and you're draining your savings or potentially going into debt. You'll start to hold this resentment against your business, but by paying yourself, you're giving yourself something for your hard work, which you deserve, and you're not getting that resentment built up and that fatigue, the financial fatigue built up. because you're taking care of yourself. You're putting that oxygen mask on yourself first before helping everyone else. Kathryn Finney: It's so interesting you bring up this point of resentment, because that's not something people often talk about a lot when it comes to entrepreneurship, is that as an entrepreneur, sometimes you can start to resent your business, especially if you're not getting a return or a significant return from the business. I mean, even in myself, some of the things I've built and led in the middle of it of started to get a little angry at it because it just wasn't the return. I felt that was at the level of the effort that I was like putting into it. And so, and that's really interesting too that you bring up the question about separating personal from business. And that's another challenge that a lot of entrepreneurs have of separating their personal money from their business money. What are some ways entrepreneurs can think about? Shari Rash: The first is having separate bank accounts. And that might sound like, duh, but that doesn't happen for everyone. If the money comes in, it's all going into the same checking account. So one, having separate bank accounts, and then even creating the profit account, that kitty, for your business separately, and doing the same thing for your personal. That could be your savings account, your emergency fund. But just by having separate accounts, that creates a line. between personal and business. And then when you pay yourself from the business, move the money from your business account to your personal account. So again, you're paying yourself. So you can see the money's coming from the business to you. Also, if you are loaning, if your personal account's loaning the business money, document it again. move the money from your personal account to the business account to pay the credit card or pay it. Don't just use your checking account to pay the credit card. Move the money over so you can see and there's, you know, a paper trail of the money moving over and you giving yourself that loan. Kathryn Finney: And why is that important to have that paper trip? Shari Rash: It depends on how your business is set up. Most people set up LLCs. Now, LLCs, it all reports to the same tax return, right? So it all comes together, but you do want to show the separate transactions. don't want to get them intermingled. It makes it much cleaner accounting-wise to keep everything separate. And so everything has its paper trail. But then again, also it's a mental thing. It's a mental thing of the business and I are separate. I own it, I run it, but it is not me. It is not my household's finances. It is its own self-sustaining organization that has its own expenses. And I'm one of the expenses as the owner. So that's why I need to pay myself. Kathryn Finney: So thinking of yourself as one of the business expenses. I think that's a really important point. One of the big questions we get asked a lot is about when, at what point do you bring on an accountant and or bookkeeper? At what point should you think about that in the early stages of your business? Shari Rash: You know, it's funny. I'm in like these female entrepreneur groups and local groups, business owner groups. And there'll be so many conversations of I'm going to make my business like legit. I'm going to take it over full time or it's growing. And the first question is always who can recommend a CPA or who can recommend me an accountant? And it's like, We put a little bit too much pressure on these CPAs and accountants as like this magic end all be all know everything about my finances when it comes to my business. The fact of the matter is, and I've said this to CPAs that I've had on my show and I've said it personally in personal conversation, so I'm not upsetting anyone here. A CPA is not going to be your crystal ball to everything financial when it comes to your business. And we put that pressure on them. We think that they're going to give us all these strategies and this, and what can I do to reduce my taxes and all of this stuff. When the fact is their job is to look at what happened last year and file your taxes for last year. And that's it. You know, they may be able to give you some insight. If you ask, but likely they're not offering it because that's not necessarily their job. CPAs accountants, they look in the rear view mirror. They look at what happened and you can't change what happened. Right? So it's like, well, why am I paying so much in taxes? Reduce this, it's done. There's, there's some finagling that can be done to pay less than taxes or what have you. But the It's done. There's nothing we can do. The past is in the past. They're looking at what happened in the past and, and filing your taxes for the past. What you need is to look in the rear in, in, the windshield, look forward. So take what happened in the past, learn from it and build a strategy going forward. And that's where an advisor can help you. And a bookkeeper, the bookkeeper is super important because Shari Rash: They can tell you what's happening like right now as it's happening. as they're categorizing your expenses, they can say to you, hey, you got really high in whatever it is right now. You're high there, and you can make that adjustment right away. By the time you're talking to your accountant about this, the year's over. It's already happened. There's nothing you can do about it. So I think as a bookkeeper, super important, for your business because they can give you real time, hey, this is what's going on with your money in the business as it's happening. then a financial planner can help you going forward to create strategies. Kathryn Finney: It seems that a lot of the challenges around sort of bookkeeping, accounting, sort of these external financial professionals that you bring on, maybe connected a little bit to our fear of money, right? Like of, you often talk with, or often, I often talk with entrepreneurs who are really afraid to talk about money, which is really interesting, because you're in a market-driven business. Like you're asking people to pay you for a service or a product, but you're afraid to talk about money and money coming in and money coming out. How can entrepreneurs get more comfortable around that discussion? So it's not such a barrier. Shari Rash: So the first thing you have to realize is you can provide the best service, the best product, the best everything. If you don't have a handle on your money, it doesn't matter how good it is. Your business is not going to last. So we just have to accept that. why are you starting your business or why are you expanding it? Money is an element of that, right? whether it's the freedom, being able to work on my own terms, making more money, not being tied to a salary, whatever the reasons are, money is a part of all of that anyway. So we need to accept that, that money is, that's gonna make us or break us. And if we stick our heads in the sand, it's more than likely gonna break us because we're not paying attention to what's going on or our business is running us and we're not running it. So just because you focus around money, it doesn't make you a bad person. And it doesn't make you greedy or selfish. It's the fact of the matter. And I think that that's where having outside resources, one takes it off of you. So then you can just have the meeting with your team, have the discussions with your team. They can present to you the facts. They're not going to call you a bad person. They're not going to say you're terrible at running your business. This, that, the other thing they're going to show you the facts. And then if things need to be improved, give you ideas on how to improve it. But it's what, but why, and I think first thing is why don't you feel comfortable talking about it? What junk do we have to get rid of first to make you even comfortable talking about money? Because if we don't talk about it as entrepreneurs, that's going to. really hurt us. Kathryn Finney: What other money mistakes do you see entrepreneurs making? And how can people avoid them? Shari Rash: Well, yeah. So I mean, the biggest one is not managing it, right? Or not looking at it, not having a plan for the money. Another mistake is as soon as revenue comes in, you're just paying all of your bills and you have no plan for it. In turn, that means you're not paying yourself. You're not setting aside money for when business is slow or it gets lumpy. Using someone that is not qualified in finances to run your books or to manage your money. So I'll speak to women that have their own businesses. They'll say, oh, my husband does it all for me. And it's like, that's great. Is he a bookkeeper? he a CPA? Is a financial planner? Is he any of those things? So having people in your corner that are qualified that can help you with this. is what you need and kind of not doing those things is the mistake. We're saying it's not worth it. that paying a bookkeeper is not worth it. Paying a planner is not worth it. When they could end up saving you a lot of money and not only saving you money, saving you the headaches and the heartaches that that money can cause the stress on business owners. Kathryn Finney: And so what type of financial systems can you put in place to sort of manage the stress? Like what type of tools or apps that entrepreneurs could use? Shari Rash: We don't have to even get fancy. mean, I have two businesses. I manage all of my finances on Google Sheets. Like, we don't need to get super fancy with it. bookkeepers. Kathryn Finney: And Google Sheets Shari Rash: It does. I just made my own that I've shared with some of my clients. But you have to find what works for you. What works for one person doesn't work for someone else. And trying different systems to see what works for you, but getting your hands wrapped around the money of it, the money in, the money out, and however you want to do that, whether it's getting an app or using some sort of software like my accountant was like, you have to use QuickBooks. And the reason why she wanted me to use QuickBooks is because it made her life a lot easier, but I hated it. It was, it's in my opinion, it was super hard to use. was not user friendly. The reconciliations and all of that. like, I can't do this anymore. Like, I'm sorry, this is not adding value to my life. This is not making my life easier as a business owner. So I'm getting rid of it and I found what works for me. But then there's bookkeepers that think QuickBooks is the best thing ever. Yeah, because that's their language. That's what they speak. So you have to find what works for you, but we don't have to make it over complicated. We don't have to pay the subscription. Don't feel obligated that just because you're paying for it means it's the best option out there. Like I said, I run two businesses on Google Sheets. Because that's just, that's the way my mind works. I see the money in, I see the money going out, I see my profit account, I see what I pay my employees, I see all of it, and it's super easy to understand. So we don't have to make it too complicated. And I think if you start looking at your expenses, if you start looking at your bank account, you look at your statements, you look at your transactions, you'll start to get a feel for what is easiest for you. And I think that that's we over complicated or we try to implement what works for someone else and we assume it's gonna work for us. Kathryn Finney: still start with a Google Sheet, essentially. Start doing something. Yeah. Shari Rash: Do something, Export your expenses. if you use a credit card, export your expenses from your credit card, copy and paste them into the Google Sheet and start categorizing them. And again, same thing with personal budgeting. Let's not go crazy with the categories. Let's keep them simple, like marketing, payroll, cost of goods sold, all of it. Keep it simple. Have maybe five, six categories. So then you can see what takes up the bulk of my expenses and should it take up the bulk of my expenses. And an interesting conversation I had with a bookkeeper was you should be able to look at your expenses once they're categorized and you should be able to see what that business's focus is. So if a business's focus is growth, you should see a lot of out a lot of expenses in marketing, right? Or if it's automations or simplifications, you should see a lot of expenses in software, right? So your expenses should tell the story of your business as well. Kathryn Finney: And I think too, there's a next step that has recently popped up, which is you can use AI to help analyze your budgets now. So you can take your beautiful Google spreadsheet that you put together and you can put it in a chat GPT. I don't know if Claude would be that great, but probably chat GPT or perplexity. One of the ones that are a little bit more advanced. And it can actually give you information. can do graphs for you. It can give you some thoughts on trends that are happening. You could use it almost as a consultant. And so I think that's a really interesting sort of next step that people can also do too. So you work a lot with people and individuals and sort of coaching them through their mindset. And so how would you coach a new entrepreneur to sort of get into the mindset of profit first and this mindset of managing your expenses on Google Sheets and all these things that seem kind of intuitive to folks like yourself and myself who've done it for years, but for new folks, this might seem overwhelming. So how do you coach them in getting into that mindset? Shari Rash: So first we got to work on your personal, everything personal, because anything personal you have going on with your finances is going to carry over into your business. So it's not as if someone in their personal life doesn't like money or doesn't like talking about money or grew up in households that heard rich people are bad or something like that. And they go to their business and they're like, I'm going to make as much money as possible and I'm going to have this high income. It all carries over. It's all connected. So we need to first understand what your money mindset is. And we can achieve this rather quickly. I asked my clients a couple of questions of when I say the word money, what comes to mind? And those words will quickly tell me where you are with money, if it's stress. nervous, anxious, overwhelmed, like that's going to tell us right away what we're working with, right? Also, what was your first money memory? And this will also tell us a lot of where your mindset is with money. So if you grew up in a household where your parents argued about money, or even if they didn't argue all the time, if you heard that argument, you heard an argument once that can stick with you, right? So What is your first money memory? And that again will tell us what we're working with when it comes to your mindset. And my goal is never to get you to love money. Like most people don't have a great relationship with money. My goal is never to take that going from a bad relationship to I love money now. Did you lose me for a second? Kathryn Finney: We did, but I think our internet connection has been really bad. Of course, note to editors when they see this, they will edit this part out, but we have a storm coming to Chicago. it's, I mean, we've had tornadoes, we've had all sorts of things here. but I know it's, I mean, this is a little digression, but we have actually had two tornadoes in the city of Chicago. Shari Rash: Sorry. Shari Rash: goodness. my goodness. Wow. Kathryn Finney: like downtown Chicago, there was a funnel cloud going over the loop. I don't know how much you know about Chicago, but the loop is quite large, right? So, and I live very close to Lake Michigan. So it is always an interesting adventure with the weather here. It could be a blizzard, it could be a tornado. Who knows what we'll get today. But anytime there is a storm coming, particularly if it's going to be slightly electrical in nature, Shari Rash: Wow. Kathryn Finney: and living so close to the lake, sometimes the internet is not quite as fast. The good thing I love about Riverside is that it's all uploaded locally. So if something was to happen, we don't lose 30 minutes of conversation because it's all being uploaded as we talk. So there is a delay, but once it's live, it's not going to be a delay when it's on, you know, when we push it out. But anyway, I know as an entrepreneur, are the things that we have to navigate, including weather. Shari Rash: I noticed a delay. That's right. That's right. That's right. Well, I noticed the delay and I'm like, that's it. You know, I figured. And then it just said trying to reconnect. So I'm like, let me at least stop talking to let it reconnect. Okay. Okay. So I'll, I'll, I'll go. okay. For your editors, three, two, one. My goal is never to make you love money. That's never the goal. It's too. Kathryn Finney: Which is not something... Kathryn Finney: I mean, it is kind of what it is. Kathryn Finney: Yeah. Kathryn Finney: But I think this is really important. mean, even... Kathryn Finney: Let me see if I can do something here. Kathryn Finney: think you can, Sherry, if you can hear me, I think you can keep talking. There is a delay. So what I'm being told is you can keep talking. So don't worry about the delay. It is recording it. And that the problem, well, not the problem, it's the good part of Riverside is that it's recording and it's also uploading at the same time. And so if there's any sort of network issues, that's because it's doing two things at once. But because it's doing two things at once, we still capture what you're saying. Shari Rash: No problem, no problem. I'll keep on talking. think then you started talking so I stopped, but I wasn't sure where you wanted to interject, so no problem. Kathryn Finney: Yep, you can just continue. They'll see all this in the transcripts, so they'll handle it. Shari Rash: Okay. So my goal is to never get you to love money, right? To go from, don't really like it, I don't have a good feeling about it, to love, like that's an impossible task. My goal is to get you to understanding what money is and it's a tool. It's a tool to help your business. It's a tool that we need to function, right? We need money to function for our bills, for our groceries, for everything. So just getting to that point. So acknowledging kind of the junk that we have in our head about money and working through it. And it'll be there, you know, it's not gone poof like that, but acknowledging it because oftentimes we've thought this way about money our whole lives, but no one's ever like checked us on it. No one's ever talked to us about it because We don't talk about money. So we never even realized, that might not be the best way for me to think about money. So just by having the conversation, just by talking about it already, like your heads and shoulders above where you were before. working with entrepreneurs and taking them from, you know, running their business and being involved in it, we need to handle the personal stuff first. We also need to make sure your personal finances are where they should be. And that's where the needs once wishes come in. So we need to make sure, you know, we're spending on needs. We're not overspending. We have a handle on our expenses because once we've relieved that pressure, it then takes a lot of pressure off of us as the business owner. And then when we, when, when we put on our entrepreneur hat, again, we're just, we're looking at this money as numbers. is a, it, is a tool. It helps us achieve things. So. What the numbers are not good or bad, right? You may say, well, I had a really bad month, but on paper it just is. It is what it is. So, but by consistently paying into your profit account. And again, this doesn't have to be fancy. It could be five, you know, 5%. So we just set a number and like, you know, ideally if it could be like 15, 20%, like that's great, but that's not maybe realistic at first because revenue is going to be lower. Shari Rash: expenses might eat up a good bit of revenue. So first starting it off at like 5%. 5 % of every dollar that comes in is going into my profit account. And I'll use that to pay myself more or reduce debt. Like those are the two goals of the profit account, pay myself more or reduce debt. Personal debt or business debt, whatever you whatever, whatever makes more sense to get rid of business debt. Kathryn Finney: And this is personal debt, right? Shari Rash: You know, the interest is a write-off. So that is one pro of getting rid of your personal debt first. But it, does then come down to what hurts more, right? It may really hurt as the entrepreneur to have these loans for your business. We can talk the math all day long on what makes more sense financially, but like at the end of the day, if your stomach doesn't feel good about it, you know, it kind of doesn't matter. So whatever makes, makes the most sense. financially and what feels good. And that's what we're going for. Then over time, as you grow, as more revenue comes in, as you have a good handle on your expenses as the business owner, you can then increase that profit amount. Take it to 7%, then 10 % and creep it up bit by bit. So then you're having like a healthy sum of money because likely, you your expenses are going to smooth out at some point. aside from like if it's a cost of goods sold type of situation, if you need inventory, but your expenses are gonna smooth out at some point. And then if you keep on having more revenue, that's just more profit, more money in your pocket. Kathryn Finney: So one of the questions and one of the things I've had to explain to entrepreneurs that I've invested in, particularly Angel invested in, is this idea of a balance sheet, which I think is a term that strikes a lot of fear to entrepreneurs. Can you explain a bit, like what is a balance sheet and why as an entrepreneur should you care about? Shari Rash: Yes. So the balance sheet is what gives you a snapshot of your business at a certain period of time. So a balance sheet, its goal is to be balanced, right? Just like the name says. So you have assets or what you own. Liabilities are what you owe. And then shareholder equity. So the Assets go on one side and liabilities and shareholder equity go on the other. the balance sheet is balanced when it all equals the same amount. So again, the liabilities, when it doesn't get balanced is when maybe you have more liabilities than assets. You owe more than what you own. And that's when the balance sheet gets out of whack. But the balance sheet will show you everything that's coming in. categorized and everything that's going out and then the shareholder equity, the equity portion, what you own of it. Kathryn Finney: also things like, you if you own like a building that's a part of the business or a car, also at least could be a liability too. So all of those things. And so as an entrepreneur, knowing your balance sheet, it gives you a fuller picture, right? Of the health of your financial health of your business. And so how do you use a balance sheet to sort of project and budget and think about your business and where it's going. Shari Rash: So you can use the balance sheet to, you can see one, it's all on one piece of paper. You can see everything, right? So it's nice, it's a nice and neat little report. And what it shows and what you can learn from it is how much money do I have going out? How much did I spend on advertising? How much money did I spend on office expenses? How much did I spend on rent? How much did I spend on employees? And where do I have, what do I have coming in? And ideally we want the liabilities, what you owe to be less than what you own. And I was having a conversation with the business owner the other day and you mentioned like the lease on the car and all of that. And everything was under the business and everything was being reported to the business. it put a tremendous amount of stress on the business because well, it's a write-off. Let me let the business take care of it. but the business wasn't strong enough to handle an $800 lease payment and all of these things. and the answer, you when you look at it, it's like, well, that's, and that's what happened. He started borrowing from his personal and it all got very like mushed up, very mangled his personal expenses and his business expenses and his personal money and all of that. So I would say be, don't just. slap the business's name on it or put it under a business expense because it's a write-off, be gentle on your business, be easy on it. You can always add that stuff later on because is that only, is the write-off worth what it's going to, with the stress that it's causing? It may or may not. So, but this, balance sheet will show you where all of your money is going. Kathryn Finney: What's the difference between a balance sheet and a profit and loss statement? Shari Rash: So the profit and loss statement is where it shows what you've made and essentially what was going out. So it shows the health of your business. Is your business sustainable? Is it healthy? What I like better is the income statement, which that just shows the money going in and the money going out. Shari Rash: Sorry, I just need to get a visual of them so I can, I have them in my head, but I wanna make sure. Shari Rash: So. Shari Rash: The income statement, well, let's, go back to your first question about the profit and loss. Well, it's this, so the profit and loss or it's also an income statement. So that is showing the financial performance over a period of time. So whether it's a quarterly statement or an annual statement and the profit and loss statement will show the revenue. So money coming in then. the expenses, cost of goods sold. And then it creates this thing called a gross profit, which is just revenue minus cost of goods sold. So that's the profit from business operations. And then you have another layer of expenses, operating expenses, interest in tax. But what we care about though is the net profit. We need to, we want to have a positive net profit because that's what's left. But the profit and loss statement does teaches us the opposite of profit. First, the profit and loss statement is teaching us while you have your profit, you take out expenses, then you have another profit, then you have take out more expenses. And then what's leftover is for you. want to flip that on its head and, and, and in action, take out the profit first. So it's like you already know your profit and loss statement. You already know your income statement because you know what your profit is already because you're already taking out that five, 10 % of revenue first before the expenses come out. Kathryn Finney: So for someone listening who has been listening to this entire episode and it's like, okay, I'm ready. I have my Google Sheet. I'm going to do a balance. I'm going to know a balance sheet. I'm going to know my liabilities, my assets. I'm going to do an income statement. I have my mindset right. I have a budget in mind. What is one thing they can do this week? to feel more confident in their financial future or work towards that financial future as an entrepreneur. Shari Rash: I think putting goals in place, realistic goals are super important. But without the, if we don't hit it, we're not doing this, it's not a shame spiral type of thing. But I think having goals, so I understand all of this stuff. I have it all set up. This is awesome. My goal is to pay myself X amount of dollars each month or My goal is to bring in X amount of revenue. Just create a goal. again, not pie in the sky, a very realistic goal that you're going to hit. And then when you hit it, you're celebrating it and you're going to feel awesome because you're doing all of these things. You're doing all the right things. You're Kathryn Finney: that. No, that's a great place. Kathryn Finney: No, please finish your thought. Shari Rash: You're doing all of the right things. So now you got to celebrate it and you got to reward yourself because you're doing more than a lot of entrepreneurs are not doing. So that in itself is amazing. So set the goal, make it realistic, tell other people about it. And then when you get it, tell those people that you hit it and celebrate it. Kathryn Finney: Awesome. that note, thank you so much, Sherry, for being with us. Sherry just gave us the financial blueprint for taking the leap without losing your piece. If this helps, if this episode helped you rethink your money game, make sure they hit that subscribe button, drop us a review and share it with a future founder in your life until next time. Build smart, build steady and keep building the damn thing. Thank you.