623 Anne Gannon:

Striking out on your own and launching a business so you can do what you love for a living is a dream come true for most of us. Yet many entrepreneurs get so caught up in all the creative exhilaration they forget to watch their numbers, putting off financial discipline and systems for another day.  Today we learn how to stop dreading our finances and let the numbers guide our growth.

MELINDA

I’m Melinda Wittstock and today on Wings of Inspired Business we meet an inspiring entrepreneur who helps business owners take charge of their finances.

Anne Gannon is a Certified Public Accountant who created her own business helping entrepreneurs master their finances. She specializes in providing a monthly accounting and tax service that works for the business owner so you can be on top of your finances without stress.

I can’t wait to introduce you to Susan! First

It’s hard to find an entrepreneur who loves nothing more than to watch their numbers. Of course it’s great when the cash is just rolling in – but we all know the devil is in the detail when it comes to knowing your cost of customer acquisition, your churn rates, the lifetime value of a customer, or other financial KPIs that tell the daily, weekly, monthly and yearly story of how well your business is doing. And I haven’t even begun to talk tax.

Anne Gannon is the Principal at The Largo Group, offering business owners and entrepreneurs innovative accounting and bookkeeping solutions – you could think of her as a CFO in a box. Anne says her company’s revenue has grown 75% year-over-year for the last 5 years, now with more than 500+ customers across the US.

Today we get into the details of financial planning, management and much more – plus the mindset of money, and how you – yes you – can stop avoiding your numbers and take charge of your finances.

Let’s put on our wings with the inspiring Anne Gannon.

Melinda Wittstock:

Anne, welcome to Wings.

Anne Gannon:

Oh, thank you so much for having me. I’m really excited to be here.

Melinda Wittstock:

It’s so important what you do. I mean, helping entrepreneurs get their numbers in order. I don’t know how many entrepreneurs I’ve mentored that that’s actually not what they’re thinking about as they’re creating all these great products and services and yet the numbers are the thing that tell the story. Tell me, what are the biggest challenges amongst your clients?

Anne Gannon:

Well I think you’re right. I mean, I think what you hit on is very true in that as creatives and entrepreneurs, I think we love what we do. A lot of people say, “I would do it for free,” but what that means is actually put the profit part or the numbers part last. And so I think that is the big challenge for the creative type is to realize that profits aren’t a bad thing and that we actually need to be profitable in order to be sustainable. And so the two really do go hand in hand.

Melinda Wittstock:

They really, really do. So you work with a lot of entrepreneurs. Kind of what stage do they come to you and what are some of the problems that they’re experiencing?

Anne Gannon:

So I think a lot of times people come to us once their business has started. You invested money, whether you bought a restaurant or you bought a retail store or you started something online. And now you’re three to six months in, you’re realizing that accounting is important. Cashflow. We kind of need to know what’s going on. And so that’s where we step in and the goal really is to provide a weekly cadence to really understand what’s going on in the business weekly. Is the business profitable? But I think the biggest challenge in that is that obviously where your business is six months in is not where you want to end up. So there’s a lot that goes into having a growing business.

Anne Gannon:

Is it sustainable? How much cash do I need? There’s an endless number of questions and I think that’s where that overwhelm can kind of kick in, especially if we’re the creative type because we have the vision of it being this huge enterprise, but how do we get there? And I think that’s really where we try to fit in and guide that element of here’s the things we need to do to meet your goal and your dream for this company.

Melinda Wittstock:

Right. So at that early stage, it’s like setting up your QuickBooks, it’s like figuring out what your projections are, it’s like all those sorts of things, how you’re organized. Let’s just take it through step-by-step first at the early stage, what do you need in place at that early stage and then we’ll break it down and go from there into the levels of sophistication? Of course, there are many. So at that early stage, what does someone need?

Anne Gannon:

Well I think a lot of times it can feel at the early stage that you need 20 different things, when in reality the basic question is, “Is our business cashflow positive?” So what I try to guide our clients to at the beginning is, “Okay. We might not have every line item accounts correct, yet we might not know what it’s going to be.” There are all these questions that we can work towards, but at a minimum we need to know how much money did you make or lose last month because that’s going to guide our decision of, do we have enough cash? Do we need to get a line of credit? So, what I try to coach our clients at the beginning on is even if you don’t have time to deal with the QuickBooks, you don’t have time to set it up.

Anne Gannon:

You’re bootstrapping it all around. At a minimum, check your bank balance three times a week. Write it down and then see 30 days from now, do you have more cash or less cash? Because that’s a great place to start. And then we come up with all these reasons in our head for like, “But it was a payroll week,” or, “I don’t have money because.” The cash balance doesn’t lie and that will tell us how much cash do I need to survive next month and next month so I can wait and get my dream as it evolves.

Melinda Wittstock:

Right. Because that informs all kinds of decisions too that get into how you bill your clients. Are you bringing in money in advance of a service or what are the terms or are you waiting 30 days or 60 days or whatever, which makes a massive difference.

Anne Gannon:

Well, exactly. And I think a lot of times I think as entrepreneurs we avoid that because we don’t want to know. We enjoy the creative process. But like you said, it’ll help make better decisions because you might want to have 30 day terms, but once you see your cash balance, that just might not be reality. So I think it will help get over the hurdle of the fear and really help you make better decisions.

Melinda Wittstock:

Right. Okay. So as we start to get more sophisticated, obviously cashflow is an issue at any stage of business and sometimes businesses have their biggest cashflow problems when they’re succeeding because they’re growing super, super fast and then that comes with more expense or you might have that terms issue where you’re waiting on payment or you have some sort of fulfillment issue where your revenue is sort of behind your expense. And I’ve seen really successful businesses run out of cash or get close to it. So what are some of the issues there when you’re in that fast growth phase?

Anne Gannon:

I really think the next piece is to build a forecast for your business to say, “What does the next four week cycle look like?” Ideally, ultimately we want to have a budget and we want to have all these detailed plans for our labor and our expenses and all of that, but we might not realistically have time for that yet, but I think looking at your four week cycle, so taking the months out of it, especially if you’re in any sort of hospitality where you have weekends and during the week and things like that, but just looking four weeks out to say, like you said, “Is this a timing where I just haven’t collected yet, but I know I will in the next week or two or is this truly a gap where I’m spending more than I’m taking in and it’s not timing, but there is a hole here that I need to make sure that I can cover?”

Anne Gannon:

So I think projecting out the next four weeks, it could even be high level. Revenue, expenses. One number, it’s fine, but just what is that net income because that will tell us, “Do I project to have money four weeks from now or is there something where, even if it’s strategically I’ve invested, I hired two more people. What is that going to cost me four weeks from now?”

Melinda Wittstock:

Yeah. Exactly. And so one of the things I want to ask you, and this is particularly focused on women entrepreneurs. We’re more likely than men to like not pay ourselves or not pay ourselves as much or not watch as we’re building the business that we’re taking steps to also build our own wealth. So how does a founder really balance that in terms of what they’re putting into the business and what they’re taking out of the business for themselves?

Anne Gannon:

I think that’s so true. And I think that that is really one of the lessons of COVID for any business that has been impacted by COVID. I think the business owner had an aha moment when they looked back and said, “Wow. 2018 and ’19 were pretty good years.” And yet they didn’t take money out for themselves. We were in growth mode or we had all these targets and I didn’t need the money so I didn’t take it out. And all of the sudden when COVID happened, all of those profits are taken away and your nest egg then doesn’t exist because the business doesn’t have the cash anymore. So I think it’s a huge lesson and one that I hope entrepreneurs will remember that the reality is you, even if you’re just looking from a tax perspective, you as the owner, if you’re set up as an LLC or an S-corp, are taxed on the profits whether you take them out or not.

Anne Gannon:

So if your business earns $50,000 at the end of the year, you’re paying taxes on that $50,000 and yet in most cases, owners might take out the amount to cover the tax liability, but very rarely do they take out the $50,000 that they earned from the business, which is okay, but I think we need to be aware of that. You’re making a decision to leave the 50,000 in, but that is your 50,000. So we really do, like you said, need to think about the owner wealth as part of this strategic plan because the business might not have 50,000 next year and what happens when that’s gone. So I think you’re 100% right that it’s a different mindset because we want to give everything to our business. I joke that my company’s my third child. It’s my baby. So we want to give it everything we can, but so many times that’s actually hurting our future because we’re not thinking of ourselves as well.

Melinda Wittstock:

Yeah. It’s interesting too the tax part of that as well. Like is it better to pay the taxes on the profit in your business or to earn it personally? Right?

Anne Gannon:

Right.

Melinda Wittstock:

You’re going to pay taxes somewhere, but there might be a difference.

Anne Gannon:

And I think just being aware that what shows up at that year-end report, the K-1 for most S-corps or partnerships, that is your money as the owner, just as if you had received a W2, but so many times we don’t actually take that cash out. And it might be the case that the business doesn’t have the cash now, but at least being aware of, “Hey. I didn’t take 50,000 out last year. Maybe I’m going to take out a thousand a month as distribution to myself.” But I think that awareness is so important because so many times we have people who don’t even look at the year-end K-1 and just continue on. But that really is your money as the owner.

Melinda Wittstock:

Right. For the type of businesses though, say like mine where we’re just in the middle of doing a three million equity round. And in effect, selling part of the company to get the capital we need. It’s a fast-growing media technology business. And in that case, it gets a little bit more complicated in terms of the structure, in terms of how you pay yourselves right. Hitting your metrics, all the financial due diligence, all the things. It’s a slightly different calculus. And one, in which you, say in my case, the big reward comes at the exit. Like either you sell your company, a big acquisition or if you’re really blessed, perhaps you take it to IPO, on that kind of trajectory. How does the advice change or does the advice change?

Anne Gannon:

Well, I think one thing to really think about is your role in the company is still different from the passive investor because so many times we see the case where you have a group of investors that have invested into the entrepreneurs streams. So now they have all of the funding they need, but inherently your role as the founder is different than the passive investor. And so, while you want to consider yourself an investor like the other passive investors, you also are the founder. And so I really encourage our clients to really make sure that they are compensating themselves for both because you’re not just an investor who’s going to get paid out when the big exit happens, but you’re also putting in all of this sweat equity along the way and if you don’t get compensated for it in that time, no one at the end of the day is going to even realize, on the passive investor side, all of the work that you’ve put in as the founder.

Anne Gannon:

So I think it’s very important to draw that line and make sure that you are compensated for your efforts weekly or monthly, however it is through a salary perhaps because you really wear two hats. You have the investor side, but you also are the founder and are contributing in that side-

Melinda Wittstock:

Exactly. So say for instance, you can have some sort of structure in that case where it’s partly salary base, it could be bonuses, it could be additional rewards of a different class of equity, for instance, but to keep noting it. One of the things that we do is even if I’m not actually paying myself because I’m looking at cashflow, it’s going in the books though as an accounts payable.

Anne Gannon:

Yes. Exactly. Exactly. Because there has to be record because so many times I’ve had clients where it’s like, “Oh. Well it’s okay. We’re all going to take distributions at the end,” but that distribution might be covering your investment piece, but you still need to cover this time and energy you’ve put in. So I agree. Even if it’s a note, it’s something that is due to you at a later time, just some record and a value to it so that way the investors can see this isn’t just you get more, this is I did this and this is my compensation for that.

Melinda Wittstock:

Exactly. Like having that in the books from the get-go.

Anne Gannon:

Yes.

Melinda Wittstock:

Whereas it’s even just from a negotiation standpoint, if it’s just like this is what it is, as opposed to coming back and saying, “Oh, please, please, please, can you pay me?”

Anne Gannon:

Right. Yes.

Melinda Wittstock:

Right. Yeah. This is really, really important. Why do you think people are so afraid of looking at their numbers?

Anne Gannon:

I think it is truly that fear of the unknown. I think it’s our mind tends to run into the worst scenario possible so it’s easy to sort of go down the rabbit hole of, “My business isn’t making it or I’m not doing well.” And I think then that creates all this fear that then we just don’t want to look and we bury our head in the sand. I really believe it’s fear. So many times people will tell me, “Oh, well I was just really bad at accounting in school or I just don’t get it.” I really think at the end of the day, it’s something we can all learn, but I think when it’s our own business, we just have this fear that sort of takes over and we avoid it.

Melinda Wittstock:

Yeah. I wonder if it’s a bit of a mindset issue too and we’ve talked a lot on this podcast about money mindset issues. Deep, subconscious beliefs about money. Sometimes they’re tied to our sense of our worthiness or how much we value or not ourselves or just old beliefs about, “Oh, people who are really wealthy or greedy are bad or something.” Like we all have these money stories and we’re not necessarily aware of them, but you do see it affecting people’s behavior. So how much of that is part of the equation in the way that you help your clients?

Anne Gannon:

Very much so. I think it helps to talk that out because like you said, I think everybody has their own mindset towards money or how you view yourself. And I think part of it too is it can be a struggle for the entrepreneur because you are the leader of your company. So a lot of our clients, especially if you’re working in a restaurant, you’re the owner, but then you have this staff. You are in the kitchen, on the line with the rest of the staff on a Friday night, and then kind of forgetting the fact that you’re the owner. That you have this value beyond just someone who can make a good meal or can be nice to the guests.

Anne Gannon:

So I think you’re right that a lot of it is valuing your skillset, what you bring to the table, and seeing that as it’s okay. If you were to hire someone who had your skillset, you of course would pay them good money, right, because they have good skills. So there’s no reason to think that you’re not worth that, but I think you’re 100% right that it is a mindset that we all have to accept and embrace as we are worth this money.

Melinda Wittstock:

Exactly. I want to turn a little bit of a corner with you though because you are a former professional golfer. So you’re a competitor in sports. And if there’s one thing, like entrepreneurship where you have to master your mindset.

Anne Gannon:

Right.

Melinda Wittstock:

It’s actually like as an athlete and competitive sports. So what did your golfing career teach you really about entrepreneurship that informs you now in terms of what you do?

Anne Gannon:

So I played golf all growing up, all high school and college and then played professionally and then sort of realized that I just didn’t love the nomadic lifestyle of traveling around for months on end to different tournaments. So I went back to school for accounting and for the longest time I really didn’t connect the two. I really thought, “Well this is my new path and golf is sort of in the rear view mirror, but I like to play occasionally.” And then it actually wasn’t until COVID that I really started to think about the connection and mindset in that all of the times in golf … I mean, golf … I don’t know if you’ve ever played, but it’s a sport that just-

Melinda Wittstock:

Badly. But I can putt actually pretty well. I aim it straight, but man. I can’t get it very far. Can’t get it very high, can’t get it very far. It’s very frustrating to me.

Anne Gannon:

No, it’s a frustrating sport. So if you grow up playing competitive golf, you get your teeth kicked in every time you play because it’s never perfect, right?

Melinda Wittstock:

And you’re competing with yourself too.

Anne Gannon:

Oh yeah. I mean, it’s never the best because there’s always a shot you could do better and then inevitably you think things are great and the ball goes in the water. So it is a mental beast to play competitive golf. And when COVID hit, it was like, “Oh my God.” All of those things that I remember trying to tell myself on the golf course of like, “All right. Ball went in the water, but that’s okay. We’re going to get it back.” And the visualizing things being okay. Like all of that started to be kind of the language that I started to use with our clients and started to post things on social media and everything because it wasn’t until the moment I’m like, “This is so connected because if we don’t watch our mindset this golf round there or our business is never coming back.”

Anne Gannon:

We have to have this mindset of, “This is temporary. We’re going to get on a good path. Yes, tomorrow will be better than today.” And all of the things we tell ourselves are so important right now because it’s such a scary time. When things are good, it’s easy to tell ourselves that things are going to be better tomorrow, but when things are bad and scary, that mindset is so important. So I think it was sort of like a personal journey the last year to realize that those two are hand in hand and the way that I kind of look at things a lot of it is from all of those years of golf and having to train my mind to be positive because originally when COVID first happened there were people who were like, “Well you’re too positive.” And I’m like, “Well you have to be. Like if we don’t believe this is going to work out, like what’s the point?”

Anne Gannon:

And so I think it’s being aware of like, yeah, I mean I’m a positive person, but there’s a reason for that. Like I’m not just pie in the sky, but you have to train yourself to be positive every day and see things as they’re getting better.

Melinda Wittstock:

Yeah. It’s really true. Like I share an athletic background with you except in figure skating. And that’s another sport where you’re kind of competing against yourself, but with all the added stuff, like all the really weird BS of the skating mother.

Anne Gannon:

Right.

Melinda Wittstock:

And all the mind games and just all that stuff going on and like, yeah. It’s interesting. One of the things that I really learned was mindset. I also learned a lot about visualization. Like if I could see myself do it, then I could do it. Like when I was learning my triple jumps, right?

Anne Gannon:

Yeah.

Melinda Wittstock:

If I could see it, I could do it. So that was so powerful and that has definitely informed my entrepreneurship, but also kind of the mindset of remembering to enjoy it. As long as I was enjoying it, I was skating for the love of it, that was great. The minute or any time that I felt the pressure of like, “Oh, I have to actually, have to, should, must,” I’d be more likely to falter.

Anne Gannon:

Yeah.

Melinda Wittstock:

And that’s a really interesting reminder too for entrepreneurs because for us the work is never done. I don’t know about your business, but certainly for mine, it’s never done. So you have to kind of come to terms with being able to enjoy the journey along the way, like even the crappy stuff, even the kind of curve balls that get thrown at you, right?

Anne Gannon:

No, I agree and I think it’s true. I think the other thing that you actually do better in sports is track your progress. I think it’s easy to enjoy the journey in sports because you see like, “Well, I’m better now than I was before. I see that I’m getting better.” And I think in business we forget to measure our progress, that we are getting better as entrepreneurs every day and we are stronger today than we were a year ago. So I think it is true that there is a lot of correlation between, like you’re saying, like you have to find a way to enjoy it, find a way to make it work mentally every day, and then, I believe like track your progress and see how you’re improving.

Melinda Wittstock:

Absolutely. So you went initially the big corporate route. What made you jump from being in a big kind of corporate accounting kind of scenario to your own business?

Anne Gannon:

So I think a mix of both. I think as a woman, I think it’s hard in a big corporate environment, wanting that quality of life or at least control over decisions quality of life wise. And so it was hard in the corporate world to kind of see that that path existed, but the bigger thing was that I’ve always really wanted to have a great connection to my clients. And part of the reason I went into accounting was I just have always loved business and seeing people’s dreams and understanding new things and just having that curious mindset. In the corporate world it’s hard in corporate accounting because you just have tax return after tax return and you don’t really get the chance to develop this relationship because we’re billable hours.

Anne Gannon:

So you don’t want to call someone because it’s going to cost them money and it’s sort of a lot of red tape. After a few years I just realized like, “This is not serving me and this is also really not serving these clients. Like there’s such a better way to do this.” And so the Largo Group really was the idea of let’s blow up the way accounting works for business and really do it in a way that works for the business owner, where if they have a question, they can ask me and I’m not going to send them a bill, but we’re going to work together and get better every day and really work on building their business and giving them the information they need to succeed.

Melinda Wittstock:

That is wonderful. So tell me a little bit about the ideal client that you’re looking for and also where the best places to find you and work with you. If you’re an entrepreneur at various stages of your business, listening to this podcast right now, need some help from Anne, what’s the best way?

Anne Gannon:

So I would check out our website. It’s the largogroup.com. We have educational opportunities. We offer a lot of free content, but I would also say to reach out if you do feel like you have the need for accounting done a different way because I think the value in what we do is we are able to understand your business and project forward. So we’re not just looking backward and making sure that your accounts are reconciled and all of that, but actually looking forward and projecting cashflow needs, forecasting, budgeting so that you can grow and scale and meet your dreams.

Melinda Wittstock:

Wonderful. Well Anne, thank you so much for putting on your wings and flying with us today.

Anne Gannon:

Thank you so much. This was great.