Like many creatives, I tend to avoid looking at my business numbers but that’s not going to be true after this conversation! Danielle Hendon of 4Corners CFO empowers and encourages entrepreneurs to get their heads out of the sand and confront their numbers – including me during our conversation.

Danielle shares her fascinating career origin story, the effect the pandemic had on its trajectory, and why she is dedicated to increasing livelihoods and legacies instead of shareholder value. We commiserate about not being able to outsource our brains, being avoidant of money talk but still needing to strategize. She talks about money and an end-of-year review not being a judgment tool but a way to understand the story of your business. 

You’ll end this episode with advice, insights, and immediate actionable steps for this end-of-year season as she shares the exercise she takes her clients through, the true goal of a budget, and the types of clients she prioritizes. It’s an episode you don’t want to miss!

Episode Highlights
  1. From Corporate to Empowerment: Danielle shares her inspiring career journey, including how the pandemic reshaped her path and motivated her to prioritize increasing livelihoods and legacies over shareholder value.
  2. Money Talk Without the Fear: Learn how to approach your business finances with curiosity, not judgment, by viewing them as a tool to understand your business’s story.
  3. End-of-Year Strategy: Danielle walks through a powerful exercise she uses with her clients to review their numbers and shares actionable steps for this end-of-year season.
  4. The True Goal of a Budget: She explains why a budget isn’t just about limitations but about creating a roadmap to achieve your goals.
  5. Client-Centered Success: Danielle also discusses the types of clients she serves and how she helps them feel empowered about their financial strategies.
Episode Resources

Read the Full Transcript ⬇️

00;00;18;26 – 00;00;50;26
Rebecca Hay
Hey hey hey, it’s Rebecca and you are listening to Resilient by Design. Today I am with Danielle Hinton. She’s the founder and owner of Four Corners CFO, which is a firm that offers financial advisory services to small business owners on a scale that fits their company and budget.

She couples her decade of experience in corporate finance and accounting with her passion for small business owners. Danielle brings the benefit of big business financial analysis to entrepreneurs. And now, instead of helping corporations increase share price, Danielle gets to how businesses like yours and mine increase their personal livelihoods so that they can leave a legacy and a lasting impact on their community.

The conversation I have with Danielle is not to be missed. It is about the value of understanding your numbers. Financial planning and looking at your year. And we’re viewing as we get to the end of the year is the perfect conversation to be having, which is how did you do this year financially? Did you make a profit? We talk about profit margin.

We talk about what should you should be doing as an interior designer. What areas are more most profitable? Is there a standard profit margin? We talk about all of that and then some. Danielle shares a really interesting tip about how you can categorize your expenses. It is one that I have never heard before. So hang on to your horses.

You guys are going to love this episode with Danielle. Enjoy! Welcome to podcast, Danielle! I’m super excited to talk all things money with you. I’m so happy to have you here today.

00;02;37;18 – 00;02;45;28
Danielle Hendon
I am so happy to be here. Any chance I can get to have people talk, think, look at money and not just put our head in the sand? I’m excited.

00;02;46;05 – 00;02;51;06
Rebecca Hay
I love that. Why don’t you let our listeners know a little bit about who you are and and what it is that you do?

00;02;51;11 – 00;03;17;12
Danielle Hendon
So I am a fractional CFO, owner of Four Corners CFO. I’m actually a CPA, though we are not a CPA firm and I did not take the traditional route getting here. I love telling my origin story because I think there is a very creative part of my brain that doesn’t get to be acknowledged, except when telling my story, and that is the musician in me that thought I was going to be an opera singer when I went to college.

00;03;17;12 – 00;03;20;11
Rebecca Hay
Wow. Yeah, cool.

00;03;20;12 – 00;03;41;29
Danielle Hendon
I thought it would be really cool, until we had an English professor that told us all about the future of our career, and I realized I don’t have any friends in high places, and I don’t want to be a teacher. So I’m going to be broke or I need to do something else. I did have friends that were in the business school doing accounting, so I went over there, tried that out.

There’s this weird mix of music and numbers that just make sense, and I don’t know why, but my husband laughs at me all the time with what I had done up until that point. And like small jobs and stuff through high school and college, he was like, I don’t know how you didn’t know you’re supposed to be an accountant the whole time, but okay.

00;04;01;03 – 00;04;17;02
Rebecca Hay
Oh, isn’t that interesting? You know, sometimes we just can’t see our own natural abilities. We’re just too close to it. Sometimes it takes having that third party kind of recognize it and say, no, you’re really good at this one thing. Or like, I always talk about you as being good at this. That’s really interesting.

00;04;17;03 – 00;04;37;15
Danielle Hendon
It’s crazy and hilarious. But so I did the accounting degree, got my masters, got my CPA. I went into public accounting, like most people do when they get an accounting degree. And then I started a family and realized I didn’t want to be working 80 hour work weeks with a newborn at home. So I left public, and being in the Houston area, I landed at an oil and gas company.

I loved what I did, honestly, I loved what I did in public. I love everything about numbers, and I know that makes me crazy, but I’ve always really enjoyed what I do. The oil and gas company I was with, though, went through bankruptcy and they came out the other side, owned by financial bankers who started slicing and dicing everything up.

And then the pandemic hit. It became very clear that that business was going to close. At the same time. It was an opportunity, and I don’t want to take away from anything anyone went through during the pandemic. But I think so many of us found this silver lining of just slowing down. It was an opportunity for what I will say was a workaholic mom, because when you love what you do, you do a lot of it to get to be the figure out school and get to know the teachers and get to know the friends and the coaches.

And I didn’t want to give that up.

00;05;30;07 – 00;05;34;23
Rebecca Hay
I can relate to that. Yeah, I know a lot of our listeners are moms, so they can relate to that. Yeah.

00;05;34;23 – 00;06;07;19
Danielle Hendon
And it was that that moment where I was like, okay, I could go back into corporate, I could go run another audit department, I could do all the things, or I could try to live life a little differently and keep this piece of it where it is. So I started for corner CFO with the knowledge that though I never realized, I’d say I was grateful for a bankruptcy, having gone through that process with a corporation, I knew how to take these really big business concepts and scale them down, because at the end of the day, the controller’s calling me and saying, Hey Danielle, how do we do this with just two people?

I don’t know what you want me to do. And I was like, well, okay, think outside of the box time. But now we take all of that to small business owners, and instead of instead of increasing shareholder value, which is what it’s all about in a corporation, we now get to increase livelihoods and legacies. And that just feels really cool.

And I get to grow a team where family and relationships mean just as much as work.

00;06;34;25 – 00;06;50;18
Rebecca Hay
That’s cool. I love that you’re helping small business owners. I mean, as interior designers and decorators, stagers, the like. We are all small businesses. And it’s funny, I think that the the government doesn’t isn’t there like a small business is like something like up to 500 employees or something.

00;06;50;24 – 00;06;51;08
Danielle Hendon
Really.

00;06;51;08 – 00;06;59;06
Rebecca Hay
Big, which is so crazy to me. I’m like, that does not seem like a small business, but I guess it’s all relative. On the global scale.

00;06;59;08 – 00;07;02;25
Danielle Hendon
I’m like 3 to 5. Sounds small to me, but okay.

00;07;03;00 – 00;07;26;01
Rebecca Hay
Yeah, and a lot of those listening today don’t even have any employees or haven’t even outsourced anything yet. Some of us have built teams and some of us have freelancers helping, but we are small business, and so I love that there are people like you who are helping. So let’s I want to dive into this because this is definitely an area that interior designers, myself included as creatives, have never really gravitated to.

Like literally today I wrote in my My Full Focus planner because I’m about to go on a trip tomorrow. I’m like, Frick, Rebecca, you did not answer the bookkeepers questions from three weeks ago because I look at the email and it’s like, can you please tell me all of the like, unreconciled, whatever transfers and who was at fault?

And I’m like, oh my God, that just like, looks gross, don’t like it, don’t want to do it. I try to outsource as much as possible, but actually it doesn’t always help to do that.

00;07;55;25 – 00;07;58;14
Danielle Hendon
You can’t outsource your brain.

00;07;58;16 – 00;08;25;25
Rebecca Hay
I know it’s so frustrating. So I want to talk about that, and I want to talk about that sort of financial part that a lot of creatives are not necessarily that we’re all missing, but we don’t even necessarily want to spend time doing because here we are, like decorating and designing. And I actually had one of my Power of Process alumni, Andrea Craig, came on the podcast recently, and she was a CPA working on Wall Street and then started her own interior design business.

And she even admitted that for the first year running her design firm, she ignored the numbers because there is just so much. It’s almost like the story of like the cobbler’s, what is it? The shoe makers children don’t have any shoes, right? It’s like we’re so busy just trying to, like, create and client serve and do all the things.

It’s like, oh, the numbers feel like this pain in the ass that we kind of don’t want to pay attention to. Do you experience that with your clients? They kind of ignore the numbers.

00;08;52;23 – 00;09;12;18
Danielle Hendon
Absolutely. I think the easiest thing to do is to put your head in the sand and just pay attention to your bank account because you know what’s in the bank account. And if the bank accounts got money, you’ve got money to spend. Not my recommendation, but it is normal to think that way. And it actually reminds me of my kids are swimmers and one of the swim moms owns her own business.

And we would get into these conversations while the kids are at practice. And she would literally be like, Danielle, you’re making me sweat. I can’t talk about this anymore. And I’m like, I get it. I get it. Like I can get so amped up about it. But then I also have to remind myself a it’s like a foreign language to so many people.

You are not taught accounting. You don’t know the lingo. You’re not supposed to know the lingo. The numbers look like a sea of mess on a page that is overwhelming to even look at, let alone think about. Try to understand.

00;09;45;05 – 00;10;03;28
Rebecca Hay
I mean, I think this is a good conversation to have because we are approaching the end of the year, and whether or not it’s your fiscal end of your year or just a calendar year, I can tell you my fiscal year is like July 31st, but yet I still think in calendar year. So it’s like December is coming up and I’m like, I need to look at how we did, even though that’s maybe not how I file my taxes.

It is definitely how I plan for my own business needs. I think a lot of designers are the same. Let’s talk about that. Like if you’re someone has who’s ignored kind of the numbers and buried your head in the sand to use your words, what is the first step we need to do? Like before we get to the place where I’d love to talk about doing the financial end of year review, or whatever you call it, whatever that looks like.

Like what is the first step that we need to do to kind of start to pay attention to that?

00;10;29;12 – 00;10;55;10
Danielle Hendon
So the first step is ripping off the band aid. You have to actually take your head out of the sand and realize it’s not a judgment tool. I think a lot of us put our head in the sand, because we feel like the numbers are a reflection of our work, our ability, and especially as women in business ourselves, sometimes that drives so much more of us putting our head in the sand than what those numbers actually are.

It’s just a tool at your disposal. It is something you can look at. It’s not judging you, it’s just showing you what’s happening. And I tell our clients, one of the things we talk about the most, it’s a way to understand the story that your business is telling you. If you allow yourself to use that tool to understand the story, then you get to make better decisions going forward.

If you keep putting your head in the sand, you can. I have had business owners come to me that grew a business to multi-million dollars on gut instinct and bank account. You can do it, but it’s not always going to feel good. And being a business owner myself, I know what it’s like to go through your business with the constant what ifs and the anxiety and what’s going to happen, and I don’t know the future.

And how do we do this and can I do that? All of those answers are honestly in the numbers. If you’re willing to look at it. So the very first thing you’ve got to do is rip the Band-Aid off and be willing to look. The second thing to that is make sure you’ve got something to look at.

00;11;57;29 – 00;12;03;04
Rebecca Hay
Right. So I was going to say, what do I look at? I look, where am I looking? Help me out.

00;12;03;06 – 00;12;22;06
Danielle Hendon
I never recommend business owners do their own bookkeeping for a couple of different reasons. First of all, your time is worth so much more than you would pay a bookkeeper to do it. You can find really reasonable bookkeepers for really reasonable rates to help you out. Even if you’re a startup. There are bookkeepers that adore startups, and they’re all about trying to help out.

You do not need to learn how to use bookkeeping tools or do any of that. What you do need to know is how to look at it, though, and where to go. Look to see what those numbers are and be willing to go look. So first of all, go find a bookkeeper. Please don’t do your own books.

00;12;38;19 – 00;12;42;12
Rebecca Hay
Yes, I agree, I agree. I wholeheartedly agree with that. Yes.

00;12;42;12 – 00;12;43;27
Danielle Hendon
And then just be willing to look.

00;12;44;04 – 00;13;01;02
Rebecca Hay
I just want to add because I’ve seen this and this was me for a while, but also I see designers do this where they’re like, oh, I just have my accountant do my taxes at the end of the year. And that was me for many years. And the problem with that is that I had no idea where I was at until the end of the year.

Like, literally, I didn’t know how much money I made until I filed. I was like, oh, like I paid myself. How much? Oh, that’s how much HST is our tax here in Ontario? That’s how much tax I owe. Oh, I didn’t I didn’t save that like I was not aware. And so that transition to a monthly bookkeeper and I think that’s probably what you’re suggesting was a game changer.

00;13;22;03 – 00;13;42;03
Danielle Hendon
Yeah I mean that’s how you know what’s going on every month. Because I will give you an example, especially for interior designers, because a lot of times you guys will take payment upfront and payment at the end and you’re buying who knows how much stuff in the middle to get things done. Your bank account is not an accurate representation of what’s going on in your business.

Yeah, you don’t know what’s coming in and what’s going if you’re not keeping up with those books. And I have had clients come to me in the interior design space where they weren’t even able to keep up with what they’d bought and had they invoiced it, because there’s just so much going through all the time.

00;13;59;06 – 00;14;18;15
Rebecca Hay
Yeah, it is a very complicated business model, I have to say, and I don’t think a lot of us realize or appreciate that before we go into the industry, because we are reselling products to clients, we’re taking we’re taking a deposit like there’s so many different ways a retainer, there’s so many different ways to do it. Absolutely. So bookkeeper okay, so we’ve got our head on the sand.

Now we have a bookkeeper who’s going to help us. What’s next?

00;14;21;18 – 00;14;45;18
Danielle Hendon
I will tell you, the first line every business owner looks at is not actually the line I would recommend you look at. Everybody can usually tell you their revenue. It’s the one thing people know that was your revenue. And what was your revenue exactly. But I want you to know what your profit is because at the end of the day, revenue doesn’t mean anything if it’s not enough to cover all of the costs and leave you with a profit.

Yeah. So make sure that you’re looking at that PNL and understanding what that profit number is. Again, kind of back to, depending on how your pricing and how people are paying you, you could be losing money without even realizing it.

00;15;03;14 – 00;15;16;06
Rebecca Hay
Yeah I think too as we start to grow and scale and you get bigger projects, I know I fell into this trap as a designer where you’re like, oh my gosh, I just landed this amazing job. I need to hire someone to help me. Oh, we got another job. We need to hire someone to help me.

And then I was like, I’m getting an operations manager. Then I’m going to have this administrator, and I’m going to hire a junior. I probably need a senior designer. I’m thinking about what the project needs, but not thinking about how it might potentially drain the bank account. And you can get to a point where all of a sudden it catches up with you, and all of a sudden I looked at my expenses.

I don’t know, I was a few few years ago and I saw it and I wasn’t paying attention. My head was in the sand. It’s just like in the first four years of my business, and all of a sudden someone brought to my attention, Rebecca, you know, your payroll. Payroll is $30,000 a month. Oh, my God, I can’t pay.

That’s not possible. I don’t make that much money. But it was. And that’s not including overhead, like the studio that I rent, the computers that you name it, all the things and so it was a really a wakeup call for me when I had to really start paying closer attention to like, okay, if this is if I want to sustain these expenses, then I need to be really intentional with bringing on a pipeline of projects.

00;16;14;22 – 00;16;16;10
Danielle Hendon
And pricing those projects.

00;16;16;13 – 00;16;17;04
Rebecca Hay
Yes.

00;16;17;04 – 00;16;52;11
Danielle Hendon
So on the note of profit margin, this is not technically the way most accountants would tell you to do this. But with our clients I want to see any revenue generating costs in that revenue section, which means anybody you bring on to provide services with that client, whether it’s freelance, contract, payroll, I want that number up there by your sales number so that when you’re looking at what you’ve actually made from your projects, it truly is your profit.

And if you are a solopreneur and it’s your hours going into this, and I know you don’t want to do this, nobody I talked to ever wants to track their time. Nobody. You need to know how many hours you’re spending on it and put the value of your time up there as well.

00;17;10;26 – 00;17;18;07
Rebecca Hay
Interesting. So sales generating versus let’s say rent.

00;17;19;03 – 00;17;44;00
Danielle Hendon
Yep. So separating your cost between we call it revenue generating and non-revenue generating. There are very technical accounting words. But that makes the most sense to most people. If the actual expense that you’re paying is generating revenue, it’s literally they’re $100 billable per hour on your service or they’re part of the flat fee that you’ve charged or they’re it’s a product that you’re marking up.

It is a revenue generating cost. So but if it’s your rent or your ops manager who is not necessarily generating revenue, then they go down in the operating expenses.

00;17;57;14 – 00;18;04;16
Rebecca Hay
I have never done this. Danielle, this is so cool. I’m like, okay, I sold, but also I’d like one more thing to do.

00;18;04;16 – 00;18;09;00
Danielle Hendon
Shoot, wait, answer the bookkeeper first and then go on vacation.

00;18;09;02 – 00;18;18;20
Rebecca Hay
I know it’s not vacation, it’s work. I’m going to High Point Market oh, which is an expense. Is it revenue generating or is it up?

00;18;18;20 – 00;18;36;17
Danielle Hendon
No. All so I would tell you, it is revenue affiliated. So it goes in the operating expense category. And when we work with clients, we take those operating expenses and we put them in three buckets themselves. So if it’s not revenue generating it’s an operating expense and it’s going to either be required.

So I don’t know a business that runs without cell phone and internet. Like it’s just not possible today.

00;18;43;02 – 00;18;45;00
Rebecca Hay
Yeah. Yeah. Or web hosting.

00;18;45;00 – 00;19;07;02
Danielle Hendon
Yes. So if it’s not required it might be what I call a personal park. So depending where you are whatever tax benefits you can receive as a business owner, one of my favorite examples in the US is my kids are on my payroll. They do not add an ounce of value to my business, but it is tax defensible and it’s a tax benefit and we do it.

So that is a personal perk. Another thing that might go there would be a passion project of yours, a charitable contribution that you just insist you want to do. Those types of things. Go on. Personal perks.

00;19;17;20 – 00;19;18;03
Rebecca Hay
Okay.

00;19;18;03 – 00;19;42;17
Danielle Hendon
Everything else, like your high point market would be an investment in your business and while it is not revenue generating, it should have a return on investment. So it should be giving you time, money or both. And things like conferences, courses. Going to the high point market is not just an investment of your money but also your time.

Right. So making sure that whatever is happening while you’re there is going to return time, money or both in excess of what you’re spending.

00;19;52;08 – 00;20;16;10
Rebecca Hay
That’s great. I love that advice also being intentional. So when you are going on these trips or you are investing in the course in the sake of a course like do the work, implement those systems into your business, whatever you’re being taught or if you’re going to high point, okay. Connect with the people that you want to connect to so you can get better pricing on products or in my case, connect with other potential marketing partners or podcasters.

I want to help, you know, push the marketing forward for my coaching business. It’s about going with intentionality. Otherwise it is just kind of like a vacation.

00;20;25;19 – 00;20;27;28
Danielle Hendon
And they can be exhausting too.

00;20;28;00 – 00;20;32;05
Rebecca Hay
Oh my, they can be. No, they are, they are exhausting. I’m sorry.

00;20;32;06 – 00;20;34;23
Danielle Hendon
You need a vacation after you go.

00;20;34;25 – 00;20;54;28
Rebecca Hay
Quick question. Somewhat related. I’m flying to Nashville tomorrow for a mastermind, so I’m invested in a mastermind. And then I have one day, and then I fly to High Point Market, where I’m hosting an event and a panel and that sort of marketing for all the things. So the podcast, for this podcast, we’re doing a live podcast recording, but there’s one day in between that, and I want to get a massage and I’m going to pay for it with the business.

Is that okay, or is that depend on your region?

00;20;57;24 – 00;21;06;08
Danielle Hendon
Depends on your region. But I would say probably not. Maybe if you took a client.

00;21;06;15 – 00;21;14;16
Rebecca Hay
Shareholder benefit or like I’m giving up my weekend to work, so I need to be ready to show up.

00;21;14;16 – 00;21;23;16
Danielle Hendon
I mean, I feel like you absolutely need it and deserve it. Obviously, whether or not you can write it off for tax purposes might be a little iffy.

00;21;23;22 – 00;21;27;06
Rebecca Hay
And that could depend on region, I guess, as well. On how it’s all categorized.

00;21;27;09 – 00;21;30;03
Danielle Hendon
It can.

00;21;30;05 – 00;21;46;10
Rebecca Hay
Okay, this is very eye opening, Daniel. I did not expect us to go here, but I’m loving it. This idea between like revenue generating expenses versus just the standard operating expenses. So like, guys, if you’re listening like, write that down and go do that. What else do we need to look at after that?

00;21;46;12 – 00;22;07;22
Danielle Hendon
The revenue generating is what got you to profit margin. The operate thing is where we can kind of trim some costs and it gets you to what we call net income. So like that net profit margin, did you have money at the end of the day? Is it black or red? Is there money or not? That number is still just based on your PNL, your profit and loss.

There are other things that need to come out of that number that will hit your bank account at the end of the day. And you mentioned this earlier in kind of one of your or earlier sprees, taxes. Taxes are going to hit you whether you like it or not. And my goal is that everyone’s profitable. And if you’re profitable, you’re paying taxes.

I’m sorry. It just has to happen.

00;22;29;10 – 00;22;30;00
Rebecca Hay
Yeah.

00;22;30;03 – 00;22;44;29
Danielle Hendon
And you don’t want that to be a surprise. Yeah. So if you know that you’re generating income after those operating expenses, you need to be saving for taxes. You need to be giving yourself a profit distribution. And you need to be saving for emergencies.

00;22;45;04 – 00;22;47;19
Rebecca Hay
That’s a lot of things that need to come out of that.

00;22;47;23 – 00;23;12;22
Danielle Hendon
It really is, especially when that number in a creative space like interior design and space, everything is so project based. There’s not the level of consistency that you might see in other service providers. So that number is going to fluctuate, which means that savings is even more important than it is for a lot of other professional services, because you’re going to have what we call kind of a feast or famine cash.

00;23;12;22 – 00;23;13;20
Rebecca Hay
Flow 100%.

00;23;13;20 – 00;23;16;04
Danielle Hendon
And you have to be ready for the famine.

00;23;16;07 – 00;23;34;23
Rebecca Hay
And you know what? I love that actually. You acknowledge that and you understand that. Obviously, you’ve worked with interior designers because that is something that sometimes is hard to describe to someone who’s not familiar with the industry. You know, we get this big project. They give us $300,000 lump sum to start placing orders and tours, and you think, well, we’re rolling in it.

But meanwhile, like, I don’t know what your margin is on that and that’s going to take you until next year. By the time next year rolls around, you’re like, oh my God, I hope I get another project, because now I’m robbing Peter to pay Paul because I’ve already spent that money. And it does. It goes up and down.

00;23;47;26 – 00;24;13;07
Danielle Hendon
Digging out of that hole is so hard. And we had a client recently and it was just, okay, how do we pay the credit card? How do we pay the credit? And every time it’s maxing out and maxing out, it comes down to a couple of things. It’s going back to those revenue generating costs and making sure I know you don’t want to track your time, but if you are spending more time than you think you are, you might not be pricing yourself where you need to be.

I also am a fan of what I’m going to call the pita cost. When you talk to somebody and you know this client is going to end up being high maintenance, that needs to be baked into what you charge because it’s going to take your time to do it.

00;24;29;22 – 00;24;59;09
Rebecca Hay
Yeah, I know that’s that. I feel like is a whole other conversation about charging for your worth, pricing your services, and calculating the right design fee and starting to look at, you know, was I profitable? That’s a whole other conversation. I don’t want to go too far down the rabbit hole, but we can have that. Again, I love talking about that is I have so many horror stories from my own life that I always love to share, to pepper and pepper in do as I say, not as I did, but what I would love to know from you is like back to this conversation about the end of the year.

So here we are. We’re nearing the end of 2024 at the time of recording and what do we need to do to look back at the year like I have? I always do, I have my own little version of an end of year review. It’s not just financial, it’s also looking at the clients that I love to work with.

You know, what were their attributes? You know, what would I do differently? Spending my time? And then I do look at projects and I look at products, right? So the products that we resold, which ones had the best return like best profit margin, which vendors did I like working with the most? Like who did I give the most money to?

Okay, let’s use that and leverage that into the next year. Like, do we give them more money and say, listen, you need to give me a better discount? I do things like that. But from a strictly financial point of view, I would love to hear from you. What do you recommend? And I’m sure it’s quite robust and you can’t go into detail.

But at the very highest level, what do we need to do towards the end of the year to set ourselves up for success financially for the year ahead in 2025?

00;25;58;08 – 00;26;21;09
Danielle Hendon
So it’s a combination of looking back but also not forgetting to look forward. I love budgets, it’s like our bread and butter is budgets and cash flow and all of that forward looking stuff. But to get there, you have to also understand the past. So going back to like the bookkeeper and having your head out of the sand, you’ve got to be able to look at those numbers.

And especially for a project based business like you guys are, you need to be able to look at the whole year, not just this month. How did this year go? Yeah. And I would ask you to compare it to how did last year go? Are you growing or are you shrinking. And it’s going to be two different numbers you want to look at.

Revenue is important. I don’t want to take away from how important that number is, but I want you to know if your profits increased or stayed the same. If you are growing in revenue and you have the same amount of profit, then really all you did was just create more work that happened and pay more people.

00;26;58;26 – 00;27;19;11
Rebecca Hay
I it’s so interesting you say that I did like a let’s look at back at the last ten years, and there was a two year period where I was like, wait a minute, I got so much. I had such a bigger revenue, like 30% more revenue, but I actually made a little bit less money because I scaled up my expenses thinking I needed that to handle the revenue.

So interesting, so worthwhile.

00;27;22;15 – 00;28;04;11
Danielle Hendon
And if you are in a space, I will say there is a time where that does happen and it will happen, especially when you are trying to scale into more of those administrative hires, like an operations manager or a team lead or things like that that are not revenue generating are going to create a little bit of a crunch there, but they still need to be revenue affiliated and have their own key performance indicators, KPIs that help to drive revenue through growth, so that if you are experiencing that kind of crunch of administrative costs, it should not be for more than like a year or two before you’re seeing the payout and the return on investment.

00;28;05;08 – 00;28;23;10
Rebecca Hay
Yeah, that makes sense. Like if you think about a startup, you know, there’s a lot of businesses that they’re investing. Let’s say that that might be hundreds of millions, but to get that’s a start up cost. We need to establish our systems, get our people in place because the work is starting to come and it will come. But we do need to level up.

And I think that’s where I was at at that time. And if you’re listening, maybe you can relate to this, but I’m getting higher end clients. I need a stronger team. Like I need a senior designer now on the team. I need a project manager. And so there was that shift, actually. Now, in hindsight, I’m looking at that.

I did level up and invest because in the hopes of scaling, you can’t service that next level of clients with the same team that you have today, doing it the same way you do now, right? You’re always going to be improving. And maybe that just means giving someone a raise so that they can step up and that they are available or what have you.So that’s actually really helpful. But we don’t want that year over year, I guess.

00;29;00;14 – 00;29;25;17
Danielle Hendon
No. Eventually, you want to see that profit grow. If it’s not, then something in your either revenue generating costs and pricing needs looked at, or something in the operating expenses is not generating the investment and the return on investment that you’re expecting. It to. So take a look year over year at your revenue and your expenses being at the end of 2024 and what the clients we have in the conversations we’ve had.

I don’t want you to be surprised if you see that it’s a little smaller than you thought it would be, and I want to normalize that and tell you that we have seen it across the board. It is not a new thing. It is an industry thing. But that does not mean it’s a forever thing either. And you have control over you and your industry and your pipeline and your finances.

And there are always things you can do to trim costs, get more efficient, get creative, or raise rates or whatever it is to get out of that situation.

00;29;59;20 – 00;30;16;06
Rebecca Hay
Yeah, I want to add it’s okay to do that. It’s okay to downsize. It’s okay to let someone go. I mean, if you look at the big tech companies last year, like there was like LinkedIn laid off whatever, thousands of people because they were not generating the revenue and they didn’t have that extra revenue for those cushy extra jobs and extra managers.

And that’s just business. And I think that is something to pay attention to. Like, especially, as you say, so many designers have not maybe had as many projects this year or as high end projects or as robust budgets to work with as maybe in previous years. And so it’s looking at, okay, maybe I do need to trim. It doesn’t mean that that’s forever, but you need to be responsive as a business owner.

And one of the big mistakes that I did make going into the pandemic, so obviously didn’t know what was coming. I had great reserve funds in the business, so I kept every single person on my team.

Come on and was like, let’s work on our internal systems, let’s create this process, let’s do this. Why don’t we update the website and and eventually I ended up not needing all those people and they some of them had to leave. And so I just kept everyone on little too long. I wasn’t as responsive as I think a business owner could have been in that situation, and it caused me thousands and thousands of dollars.

And so I think it’s okay to say, like, if you’re not doing as well, it’s okay to to look at where can I cut right now.

00;31;22;15 – 00;31;42;03
Danielle Hendon
Well, and that leads into that forward looking perspective. I want you to think about your pipeline and what is in the pipeline going into next year. What are you anticipating coming up? I know these projects can take months to talk back and forth between things actually starting. Or you might be in the middle of a project that’s taking all of your time.

Do you have something on the other side of it yet? What’s coming up next and making sure that pipeline is ready for next year, and thinking about how do you want to show up next year? How do you want to budget? Do you need all of the team you have? Do you have enough projects to support that, recognizing it’s a balance because there is definitely a high cost to turnover.

You don’t want to let a bunch of people go and then have to bring a bunch of people back. Now you’re having to train people all over again, but you do need to look in the next year and think about. So we’re looking back at last year and looking at this year, but then thinking about next year. What is your pipeline?

What are your sales forecasted to be? How much can you do? Who do you need help from and like you said earlier, what vendors do we want to lean on? What relationships do we want to build? Whether it’s with the vendors or with networking partners? Or where do we want to grow next year? And how are we going to get there?

A lot of people can start this backwards looking year end process in like September, October, November and they forget to look forward. And if your numbers are not where you want them to be, it can be somewhat of a defeating exercise. And then you just give up on the year when this is the time to build momentum. This is the time to get everything ready for the year that you want to have in 2025.

00;33;07;19 – 00;33;21;05
Rebecca Hay
Yeah, I love that. Okay. Question for you. Is there an average or a typical profit margin that you’ve seen in an interior design business? Is there a goal profit margin? What would you say?

00;33;21;08 – 00;33;43;05
Danielle Hendon
It varies because you guys, again, are so creative and everybody is very creative in how they price and whether they mark up or whether they just pass through or if it’s flat fee versus hourly. Is it design versus there’s so much to it because profit margin on a markup for a product is going to be very different than someone services.

So the overall profit margin can vary. And you don’t have a lot of control on what you can or can’t markup on products. But what you do have a lot of control over is what you’re marking and pricing your services at the exercise. I usually walk through with designers, especially if you’re a solopreneur, is how much money do you want to make and how many hours do you want to be working?

And that is how we’re going to calculate your hourly to then go into how are you pricing your services. And that is more of what I lean on rather than that profit margin piece.

00;34;22;16 – 00;34;30;24
Rebecca Hay
I like that it’s like, let’s reverse engineer it. Absolutely. Okay. Well shoot. So it’s not like 20% is like that ideal.

00;34;30;24 – 00;34;57;20
Danielle Hendon
I would tell you from a service based perspective on your design services, excluding any product markup I like to see for any service provider. Interior design included a 5050 split. So I want you to be pricing at least double what it’s costing you. So if you had to hire this out to somebody else and hire a designer in so that you could spend more time on the business, that’s a legit cost.

What is that hourly? I want you to be pricing at least double what that hourly would cost you to then cover your operating expenses and have a profit margin left.

00;35;07;06 – 00;35;19;14
Rebecca Hay
Okay, so double. When you say double, you mean the hourly, the cost of that hourly person, or whether it’s a fixed fee and you’ve estimated the hours, what have you doubling that covers the operating expenses usually.

00;35;19;14 – 00;35;37;16
Danielle Hendon
So like a 5050 split or a 50%, what we call gross profit margin before all the operating expenses is what I aim for on a service based item. Products gets a little trickier, and the margins don’t tend to be as nice, but a 5050 split on that service side.

00;35;37;18 – 00;35;48;03
Rebecca Hay
Okay, that’s really helpful. I think that’s really key to it, is to think about them separately. Like I’m a proponent of making sure you do make money on the product if you’re managing it because as Lord.

00;35;48;05 – 00;35;49;08
Danielle Hendon
And you should.

00;35;49;10 – 00;36;10;03
Rebecca Hay
Be involved in that. And absolutely, that’s a totally viable business model. And I’ve talked a lot about that on the podcast, but I think that’s interesting is looking at the profit separately, like, let’s take out the goods and the cost of goods sold. And I find sometimes when I look at my income statement in like QuickBooks, wherever I go, it’s a little funny because you’ve got like your top line, like your gross revenue.

And then as I could, cost of goods sold is usually a huge chunk of that if I’m reselling a lot of product. Right?

00;36;15;03 – 00;36;15;15
Danielle Hendon
Yep.

00;36;15;19 – 00;36;18;27
Rebecca Hay
And so it kind of feels like it skews things a little bit.

00;36;18;29 – 00;36;38;25
Danielle Hendon
It does. And I would not. So I love seeing this recorded again a little differently than what you might be used to seeing. First, sales should not just be everything having your product and you’re like, separate out the types of services you provide is going to be critical because we want to know how much money you made on the product.

But then even within that, I love seeing the product and the cost of it right next to each other, almost like joint accounts. So your cost of goods sold for the product and the product itself. If you’re marking up, you should always see more and income than you saw an expense.

00;36;56;03 – 00;37;18;18
Rebecca Hay
Interesting. Yeah I it’s not set up that way in the accounting programs that I’ve used. But I will say and for the designers listening, one thing I had my accountant two years ago, to your point, Danielle, is I didn’t like that. It was just like products and then like design fees because of my fee structure, because I have consultation fees, I have fees for just the design phase, I call it.

And then I have a separate project management or implementation phase that I build separately for. So what I had her do is I had her create three categories so that when I was tracking, I could see how much money did I make in the design phase. And then I can look at that against our hours and then how much money I make in the implementation phase, and separately, just how much money are we bringing in consultations a year?

And I think that was really helpful. And I had to they had to do something in design docs to set that up for me. But it was very helpful at the end of the year, to your point, to look back and see. And that’s because I have a phased structure and that’s how I structure my business. But we think we’re profitable in one area, but sometimes we’re actually not profitable.They’re actually more profitable in another area. I don’t know if you’ve seen that, but.

00;38;06;04 – 00;38;24;18
Danielle Hendon
And you can do the same thing with products. We were working with a client where we separated it out. So you had a vendor where she knew she could mark up. She’s got a vendor relationship. That was one set of products, but then if it was, hey, she had to go to a container store and buy X, Y, and Z and it was retail.

So we had vendor and then we had retail, and then we had some of the commission based or affiliate arrangement stuff. So you can really see what are the different pieces going through all of those.

00;38;35;13 – 00;38;49;17
Rebecca Hay
Oh smart I love that. Oh my gosh. So good. This is amazing. But you’re not an IT like you’re an accountant by trade. But you don’t do people’s accounting to be clear. Because if you’re listening to this you’re like, great, I’m just going to send everything to Danielle and she’s going to file my taxes and want to be good.You don’t do that, right?

00;38;50;28 – 00;39;08;18
Danielle Hendon
I do not. So as an auditor by by trade coming up, I’m a big fan of what they call segregation of duties. I do not think you should give all the keys to the kingdom to one person. So we don’t do the bookkeeping and we don’t do the taxes, because I think it’s important that you have multiple eyes on your books.

We do the budgeting, the cash flow forecasting, the strategy, the consulting. But we don’t actually do the books. We will coordinate with bookkeepers all the time, and we’ll coordinate with the tax preparers all the time to make sure we’re strategizing. But we don’t want to be the ones doing because we want to be able to say, I think that went in the wrong place.

And just like you as the business owner, if you’re doing your own books, if you are so in the weeds, it’s really hard to step back and get that 10,000ft view.

00;39;38;00 – 00;39;55;17
Rebecca Hay
I love that you offer this, Danielle. Like this has been the missing piece for me for so many years where I get frustrated with my accountant who is wonderful, but I think I never fully understood the role and so my expectation was always so much greater. Like, why isn’t she helping me figure out the best strategy for this?

And let’s discuss these categories. Or, you know, I had her helping me with forecasting for a little bit in the early years. I saw the value of it, but it wasn’t really in her wheelhouse. And I was paying a fortune, right? For hourly rate to kind of figure it out as we went along. So you’re actually filling in a gap that I have seen, and it’s like a missing piece that maybe if you’re just starting your design business and you’re listening, you’re like, I’m not there yet, but listen carefully because this is something that as you grow like to have maybe one extra person helping you, even as a solo, there’s a benefit in having

this person to come in. The CFO with those strategy eyes who understands the business and our industry, our business, and can sort of help you get it set up so that you know what you’re looking at. And that’s what I’m hearing. Like, you can help us set it up so that then every month I can look and I’m not just looking at some jibber jabber that my bookkeepers done.

And I’m like, I don’t understand, what is this code here? Why am I oh, is that in the right category or whatever? I don’t know, I don’t have time. Like, really.

00;40;52;05 – 00;41;11;18
Danielle Hendon
Yeah. And some of it is in the setup the other part and where I feel like the magic happens and you really get to understand the story that your numbers tell is when we build out that budget and we have an expectation each month for the year, and we compare it to your actual results, because the goal of a budget is not to actually hit the budget.

The goal of a budget is to understand why you’re not hitting the budget, so that you can either make an adjustment to the budget or an adjustment in your business.

00;41;19;16 – 00;41;24;22
Rebecca Hay
Right? Yeah. It’s like an exercise to like, force you to look at your numbers.

00;41;24;22 – 00;41;43;15
Danielle Hendon
But we do the exercise and then we bring you the answers to say, hey, look, this is what it looks like going on. This is the story. We see what’s actually happening in the business. What happened this month, what happened to so-and-so’s check? Why is this payment not here? What’s going on? Did we lose a client? Did we add a client?Like what is the picture.

00;41;45;29 – 00;42;03;24
Rebecca Hay
I like that it could probably also be something as simple as oh I didn’t realize I was paying that freelancer as much as I was. I know it sounds silly, but we’re right. We’re busy. We’re busy yet those hours look good. Okay. Write the check. And then three months down the road, you’re like, wait a minute. Like, I feel like we should be more profitable.

And if you’re not on top of the freelancers hours or something like that, it could just be having that mirror there to reflect, like, here’s what you’re doing and here’s here’s how it’s affecting your business. Oh my God, so good.

00;42;14;08 – 00;42;33;28
Danielle Hendon
Or one of my favorite examples. Recently we had a client that was getting billed every month for their software. For whatever reason, the software billed them annually, and we were like, Holy cow, what? What happened here? And they had to pick up the phone and call and get it reimbursed, because they couldn’t put all that money out at once.

00;42;34;02 – 00;42;54;15
Rebecca Hay
I’m like, that’s a great example. Like, you could probably help business owners sort of strategize, like, do I want to pay for this monthly or does it make more sense given my cash flow to pay? Because usually annually is cheaper, right? So it’s like I find I’m constantly having that balance between I just I want to get the cheaper price, but then there’s certain months I feel very cash poor.

I’m like March, I don’t know why everything comes up in March. My personal frustration is a long month. Maybe that’s why I like three pay periods. I was so poor in March, but I like you can help with that, right?

00;43;08;27 – 00;43;29;24
Danielle Hendon
Absolutely. And figuring out, especially as we get part of that year and planning as we’re getting towards the end of the year, if it is the end of your fiscal year, then it’s also for especially cash basis taxpayers. What do we want to prepay? Can we prepay? Are there things that are worthwhile to spend money on and bring that tax burden down and add value to the business?

Please don’t listen to this and go spend money just to bring taxes down and save 20%. That doesn’t help your business, but there are things you can do like the prepaying or the annual that saves you money in the business. And if there’s cash flow to do it and still support your feast or famine cycle, you have to know what that cycle looks like for you as a designer.Then you might be okay to do some of that prepaying and have some of those cost savings.

00;43;55;01 – 00;44;13;18
Rebecca Hay
Right? So great. Oh my gosh. Okay, that is our time for today. I feel like it’s so funny. I never thought I would enjoy talking about money in finance, but I think it’s because I struggled for so long and I still, if I’m being honest, it’s still not. I don’t love it, I still struggle, I’m like, okay, I’m going to hire you now and that’ll solve all my problems.

Like I’m the type of person who’s like, outsource everything because I don’t want to do it. That’s why I just find it so interesting, because I do see how important it is, especially when you’re running a business. And let’s be honest, as a creative, as a designer and a decorator, you’re running a business. It’s not a hobby. And if you’re listening to this podcast, it’s likely not a hobby.

You’re likely looking to make money. And so the more you can understand your numbers and your financials and set yourself up for success, the happier you’ll be. Like your point earlier, Danielle. Like we want to enjoy what we do and have a business that lights us up and that we loved and feels good.

00;44;49;14 – 00;44;58;08
Danielle Hendon
Absolutely. It has to feel good. I don’t I don’t work with any clients that aren’t passion centered because it’s boring. It’s the passion that makes it interesting.

00;44;58;10 – 00;45;01;23
Rebecca Hay
Totally. All right. What’s your last nugget of wisdom for us today, Daniel?

00;45;01;27 – 00;45;10;08
Danielle Hendon
What I have had to learn, because I’m a bit of a perfectionist, is that failure is never an option if you refuse to stop trying.

00;45;10;11 – 00;45;14;28
Rebecca Hay
Failure is never an option if you refuse to stop trying.

00;45;15;04 – 00;45;21;26
Danielle Hendon
Like if you’re always moving forward and you’re always trying, then you’re never going to fail. You’re always going to figure it out one way or another.

00;45;21;29 – 00;45;41;19
Rebecca Hay
It’s just learning and you keep moving forward. It’s like when you stop, yeah, you failed because you didn’t try again. Oh love it so good. That’s like the best nugget ever. I don’t think we’ve ever had that one here. Thank you. This has been so great. Thank you so much. Oh, before we go and sign off today, can you please let our listeners know where they can find and follow you?

00;45;41;24 – 00;45;52;25
Danielle Hendon
Absolutely. So we are going to have a web page set up just for you guys. It’ll be the number four corners cfo.com/resilient by design.

00;45;52;27 – 00;46;04;14
Rebecca Hay
Fantastic I feel so special. And we will include this in the show notes. Guys are just go and click on the link. It’ll make it super easy for you for corners cfo.com/resilient I love it. Thank you.

00;46;04;17 – 00;46;29;18
Danielle Hendon
Thank you. This was so much fun. Any chance to get the hat out of the sand and make it feel more accessible? I feel like so many accountants and CPAs tend to talk over their clients sometimes, and you end up with a deer in headlights and you don’t even want to talk to them anymore. And if if this just even spurred a conversation with your bookkeeper or your accountant, so you can better understand your numbers and take control of them, that made my day.

00;46;29;20 – 00;46;45;08
Rebecca Hay
I love it. I can’t even tell you how many conversations I’ve had with my account where I feel so, so stupid. I’m like, I’m sorry, I don’t understand. Can you repeat that? What do you mean by that? And then I leave the meeting and I do feel disheartened and a little bit like, oh God, I don’t want to ask again.I’m embarrassed. So thank you. That’s such a great point. Thank you for being here today. I can’t wait for everyone to share with us how much and what specifically they took away from this episode.

00;46;56;03 – 00;46;59;06
Danielle Hendon
Thanks, Rebecca.

00;46;59;08 – 00;47;19;02
Rebecca Hay
Okay, that was amazing. I seriously am considering hiring Danielle and her company for my business because she fills that missing piece that I’ve been trying to fill myself over the years by creating my own financial forecasts and looking at the number and creating budgets. And let’s face it, I don’t want to do that. I don’t want to do that with what else to do that?

I hope you guys enjoyed that episode. I would love to know what your big takeaway was. Hit me up on Instagram, send me a DM and let me know. You guys know that I have a course called Pricing with Confidence. If you want to go deeper into like structuring and how to price your services, it is a great short, bite sized course.You can find it at rebecca.com/pricing. It is not expensive. I think it’s like I don’t know $300 or less. Sometimes it’s on sale so you might get lucky but it is a great resource for that. Definitely go check out Danielle’s site. She set it up just for us, and it’ll be linked in the show notes here, because I think that what she has to offer can be a game changer for your business.

I had someone like Danielle on my team early on. I can only imagine how much more profit I would have retained, because I would have had somebody helping me strategize and plan and really helping me see my business for what it was. Instead of putting on the blinders, putting my head in the sand and just keeping moving forward, hoping that I would just make more money with a project, hoping a person would.It would work out, or hoping another project would come my way. There’s so much power in having somebody there as your real business partner. Looking at the numbers to help ensure that you’re successful. Anyways, I hope you guys enjoy that episode. Thank you for listening. I’ll see you soon.