076: Financial Structure Needed to Support Growth

Michele (00:35) With me today are Virginia Toledo and Jessica Geller of Toledo Geller. They have a boutique firm that excels at delivering turn-key, custom residences for singles, couples, and families who value exceptional design. Virginia and Jessica’s approach begins with a deep dive into how each client dreams of living and they get to know their clients intimately.

Virginia, Jessica and I have been working together for most of 2019 to build and enhance their financial structure and systems to support their growth in the design business. On the podcast today they will share a bit of that journey to own their numbers and financials.

Michele (02:05) Hey, Jessica. Hey, Virginia. Welcome to the podcast.

Virginia (02:08) Hey, Michelle, thanks for having us.

Michele (02:11) You're welcome. I'm excited to talk to you. We've been working together for a while now and had talked about bringing you on and chatting. And I'm excited about what you're going to share about how your business has developed and grown and then the partnership and how you work together. I mean, there's so many dynamics and so many things that we can dig into today. But what I want to do is start by just asking you I've done the intro, so everybody's heard that but I want to hear from you two. Tell me what your business is like today, who you serve, where you serve, all the good details

Virginia (02:46) So we're located in Englewood, New Jersey, Bergen County, and the primary focus of our studio's work is high-end residential. We've been in business 13 years now and what we really tried to provide for our clients is a soup to nuts comprehensive approach to design. So we want to, you know, be that first point of contact, even if you haven't purchased that house yet, and are considering, you know, making that big buy, we want to know you know about your family's lifestyle and you know, be that first touchpoint all the way to when the dust settles, so to speak, through the full construction aspect of it and give our clients a well-rounded design approach.

Michele (03:27) So, Virginia Do you get called in before they ever buy the house, to come to look at it to see if they can even make it what they want. Or do you? I mean, I know most designers get called in after the home has been purchased... Do you find that your team gets called in before the purchase in some cases?

Virginia (03:43) Occasionally we do especially if it's been a client that we've worked with, in the past, and they know that we understand their family's lifestyle and needs and wants. They'll call us into preview a property or two that they're considering making a serious offer on beforehand.

Michele (04:00) You know, that's really interesting, you don't hear about that as often. You hear more of bringing in a design team, maybe when they're working with the architect, and maybe when they're getting things going on a build. And then you hear about the designers being asked to come in after the purchase has been done to now make it. I think there's a great market to market yourselves as “We will come in and help you purchase the home that fits your lifestyle and then design with that in mind.” So I don't know if you've ever pushed from that angle, but I think if you're already doing that, that might be a really neat service. Because, you know, especially for prior clients, if they don't know that, they don't know that you've offered the service to come in. Like you said, I love that to preview multiple homes, and then to help them be almost like a separate, a separate opinion. Because of course, no offense to realtors out there, they're going to want to sell you the home that doesn't really fit your lifestyle. I love that so much. We need to talk about that and push that a little more.

Virginia (05:00) Yeah, and there's so many more stepping stones that we could take from there that, you know, Jessica and I have talked about and, you know, plans for the future and how we'd love to grow our firm and offer more services, you know, down the road, there's a lot of potential there.

Michele (05:15) I just think it's interesting when you're sharing that, and I know you mentioned it the other day when we were having a conversation, that you would work with a family who was looking to buy and I think they were choosing not to or something, but that idea of that's not normally when we would think that a designer where it's not general conversation, that that's when they get called in. But realizing that when you're purchasing a home, it's part of the team. You know, it's interesting, too, because I think I told you all my son just bought a house, and I went in and kept looking at how you could do this, and you could do this and you could do this, I was giving him the ideas. And some of them I was going oh, this one's going to feel awkward when you get so I was playing that role, without even really I guess thinking about it, but I can see that being a huge selling point for people that especially have worked with you and know how great you are. But that who just want a second opinion?

Jessica (06:08) Yeah, it's also been very helpful for people who a real estate agent can often oversell and just say, Oh, this is going to be a quick fix, and it's not going to be this much money, and you'll just overhaul the kitchen and blah, blah, blah. And we can sit with them and say realistically, Okay, at this size of the kitchen, it's going to be around this price so they can work at it. So what their offer is, or they can back into what their budget is.... that way, because they don't know that information. But we are experts. And we do.

Michele (06:41) Right. There's a big difference between Oh, yeah, you can just redo that in your kitchen. 20 30,000. And it's going to be 150 because of the site, right? Totally different numbers. And that believe it or not the same conversation that we were having, like what can we get in the house? What can we do aesthetically? What can we do? And how much is it going to cost because of that is money that needs to be available after the purchase? So, okay, we could have a whole nother podcast just on that. Yeah, right. But thank you for bringing that up, I think that might spark a couple of ideas of, for other people on you know, here's a service that I could offer for clients that are moving. Let me come in early and help you figure out if it will work and tell you what it's going to cost in roundabout numbers to think about in the purchase process. Oh, my gosh, okay, my head's about to blow. All right. All right. I got it. I got to clear my mind because that was not what we're going to talk about today. But I love it so much. I love it. Jessica, a question for you. How did you and Virginia start working together? Like how did you your personalities are such a great match?  I enjoyed talking to the two of you and seeing how you interact? How did you two come together in this endeavor?

Jessica (07:49) So it's pretty interesting because often people ask or assume that we met in college or some type of schooling where we were friends who decided to work together, but we were actually total strangers. And we met on Craigslist.

Jessica (08:14) So Virginia had started the company and was gaining a lot of traction. And I needed some help to continue building it and growing it. And so she put an advertisement on Craigslist. And I at the time was working. I had been in a different field. I have a master's degree in social work. And I had been working in that but wanted to explore interior design. And so I had gotten kind of like a midway job at the kitchen cabinetry company, but I knew that that was not what I ultimately wanted to do and that I wanted to have my own business. And I answered the ad that she put out and we hit it off. I started working for her and very quickly we realized that we had something good going and we decided to become business partners. And that was 13 years ago. And we always say,  a lot of our chemistry has grown organically, you know, we did it. Again, we were total strangers, we didn't have a friendship and then we became business partners and have grown, from friends to family. So it's a unique way to have gone about it. It's not the typical version of that story where people are friends and they decided to do something together. So it's been a great experience for us.

Michele (09:39) So you know, what I also think is very interesting about that number one. Okay, so here's the big shout out if anybody's looking for work, go put something on Craigslist, right. I've heard that multiple times. It's almost like adult business dating that you did for a little bit there. Right? Totally. And then what I find interesting is that I in some ways, I like the fact that you weren't best friends, because having worked with quite a few partners, it's difficult to be best friends and committed because you won't say what you need to say when you need to say it. In that cases you hold back, you don't want to ruin the friendship, your lives are already so intertwined, that you can't explore what it could be if you both were working in brilliance. But I believe that maybe when you come at it with a total stranger, you both get to grow because then you get to see what the others doing there. There's not that barrier of I can't say something because our kids are best friends. And now we got to hang out on Friday. It might have grown into that but not at the beginning. So you get to each fully be and see what that would be like. So I love the growth process. Actually.

Jessica (10:48) There are so many statistics about failed business partnerships that are family or friends. And I think that that's what sets us apart and has made us last this long and I have been no doubt in my mind that will last as business partners for as long as we both want to be doing this.

Michele (11:05) Absolutely. And there's such a connotation with partnerships, oftentimes in this business and others, I think, because of what we're all talking about here. I was at a networking event two nights ago and someone came up to me and introduce himself and he said, I'm one half of an interior design firm, and he said a partnership suck. And I was like, No, I actually love my business partner. He was like, taken aback, like, I wouldn't want to do this without her. He was like, well, that you don't hear that very often. Gosh, yes, that's where people come from. But I think we're talking about laying a foundation and like you just said, being able to be ourselves and finding out about what each other's strengths and weaknesses are through that process, and then giving each other the ability to shine and each in our department so to speak.

Michele (11:56) Yeah, and I know, I mean, we work together, right? And so one of the things that I noticed early on is you guys have high respect for each other. So I've worked with other partners where you can kind of tell when one says something the other might bristle. There's none of that, there's no eye-rolling other than laughter.

Virginia (12:17) We do a lot of that. 

Michele (12:20) But I also know that you, to your point, Virginia, you each have grace for the other to give them room to shine and to give them room to work in their strength. And so I love not just seeing it, but working in it. And it has been a very different dynamic watching the two of you interact. I also agree that partnerships are very, very difficult and the way they work best is when they're set up properly. And a lot of people don't come in at the beginning and set them up properly. They come in and they lean on the friendship or they lean on the relationship. Instead of leaning on the contract, on the agreements, on the operating agreements, on how we're going to get into business and how we're going to get out of business, and if they create the proper documentation upfront, and let it do its job, then it frees you up to be and to do. And so I think that you guys came at this the right way, friendship or not, by setting up the business first, and then not letting the friendship relationship get in the way because it was it a budding relationship versus full-blown. So I would say even to those people listening, who are looking to set up a partnership, even if it's with the best friend, put the friendship aside and set up a true business and then work that way and be willing to have the hard conversations. And that's what's going to sustain you. Wouldn't you agree that there are, hard conversations?

Jessica (13:48) Yeah, absolutely. And having respect for each other and realizing that while it's a partnership, and it's one firm, there are two entities to it, and each of them at various times is Going through different things or have different priorities. And as long as you respect the other person's needs and desires, then there's a common ground, there's a way to work together because we don't always align. But we always respect each other. And we always want the best for each other as well as ourselves. So that kind of that's...

Michele (14:22) You're working towards the common goal, you're not going in different directions, which is the whole thing about it is staying on that. I mean, isn't that true with any partnership, marriage, any partnership, we have to work towards the same goal, or there's going to be a difficulty in the middle. Right?

Jessica (14:39) Absolutely. 

Michele (14:40) Right.

And so tell me what your event it together in this business for 13 years, it's grown and it's changed. But your last few years have been a bit of an explosion. So I think Jessica, you mentioned where Virginia started. It was really growing, you stepped in and then you guys formed this partnership and it's grown, but these last couple of years have been like, wow, tell us a little bit about your Wow.

Jessica (15:06) Wow.

Virginia (15:06) Wow. Um yeah, I mean, I think like every business, there are their ups and downs and highs and lows. But if I had to speak to the last three or four years, we've just been on an upward trajectory. That's awesome. Our projects have gotten better, we've gotten larger projects and more of them. And so I think, with that came more of an emphasis on finances and systems and all of that, that we probably weren't very good at being more so "Creative people". But while we're very creative, I think what Jessica and I share a lot of is that we like structure. That's just the way we operate and if we just touchback about how we started the business we always had structure from the inception. And even though it was just a two-woman show at the time, we still worked Monday through Friday, nine to five, even when we worked out of a home office, we were very diligent about things like that. And so I guess when things started picking up and really ramping up both financially, and from a project scale-wise, we felt like we were scrambling a little bit. And then at that point, we realized we needed help, because doing it all in house, was just over our heads, and we were losing a bit of the structure. I remember one time, we had missed something and Jessica was frustrated about it, it was like an oversight on our part. And she's like, you know, we wouldn't have missed this. If we were, not so inundated and this is not okay,  we charged a certain rate, we want to put out a certain product and customer service, and she was absolutely right, but it was we were wearing way too many hats. And so I think that was the point which our light bulb went off and said, Now let's start reaching out to experts, business coaches, financial coaches like you to help us really, right growth.

Michele (17:12) So what size is your team right now?

Virginia (17:16) So we have four people that would include Jessica, me, and then we have a freelance draftsperson. It's almost like a full-timer for us at this point

Michele (17:26) Okay. So I think an interesting point to make is Virginia, you said you had structure from the beginning, right?

Virginia (17:34) Yes.

Michele (17:35) But as the business grows, the structure didn't grow along with it. And so then what was there that was a process procedure and structure to serve the business as ABC size when it went to lmnop size? Right, it wasn't there. It didn't support it anymore. And I think that's a really good point to make. Is that we may start with the process and structure but as our business scales grow, we need to go back and address those, because they may need to be thought of differently, they may need to be enhanced, they may need to be grown deeper and wider or have another set of hands involved or another set of eyes involved. And so your business grew bigger than the process supporting its group. Would that be fair?

Jessica (18:20) Absolutely.

Michele (18:22) So it wasn't lack of it. It was just it didn't keep pace. And it's hard because sometimes you don't want to over-process and over-structure and have the work be down because then it's almost like you're doing more than you ever needed to. But you also don't want to be, like so much came into the business structure and processes and procedures and oversight didn't keep up with it. So I think that's a good thing for us to keep our eyes on. You know, there's that saying, you get what you inspect not what you expect, and which means we have to constantly be inspecting. You've also heard that what you focus on grows so We have to not just focus on the design and the opportunity to serve the client, but the underlying processes and foundations to internally support what you are outwardly supporting to the client. And that was where you started seeing a disconnect where the forward-facing to the client was growing because they were coming in, but the underlying services weren't keeping pace.

Virginia (19:22) Right. Right. Right.

Jessica (19:23) And I think along those lines, it's also that if you build it, it will come. It makes a lot of sense for us. I remember in 2009 or 10 when we first got our first office space, and we were terrified, paying New York City rents, and we were like, are we really doing this but we were able to put it out there, this is a legitimate firm. We are really doing this and it worked for us. And then the same thing when we hired our first employee. Do we... were panicking ..... Do we really have the ability to pay for someone's salary and keep them employed? And we did it. And sure enough, it works. And so same with hiring, our current accountant and you and our bookkeeper. And every time that we do something that feels like it's going to be stressful, it's putting it out there in the universe that we're ready for it and the universe has delivered to us. So we've grown with each of those steps.

Michele (20:23) Well, but not only putting it out there, but you also did plan for it. I mean, you looked at the number this wasn't just a...

Jessica (20:30) It wasn't on a whim.

Well... It was some of those first things before we knew you were absolutely on a whim by the seat of our pants anyway.

Michele (20:45) Right. But I would also say Jessica, you're the one who watches more of the financial numbers of the two of you in the business. You both look at the numbers, right? Now loves them. Right, Virginia? But so you were looking at them. You didn't know there was money in the bank? I mean, I'm just saying it. It may have been a little bit more, felt a little more like out there when you did it. But there was preparation behind it. Whether you understood the details behind the preparation or not it was there. Exactly. So where were some of the pain points after you scaled and grew? Let's talk about those pain points.

Virginia (21:28) The most painful point, was getting hit with some personal income tax that we didn't realize was headed our way when we started to get very successful and have really solid years and we don't have the finance background. So it happened one year and we were surprised and we tried to take some steps to rectify it for the next year, but it wasn't enough and so we got hit again and that was definitely the biggest pain point that we've had, and understanding the financial aspect as two creative people, two people with business minds, but we haven't been formally trained. So that's absolutely where we've struggled the most.

Michele (22:28) I thank you for sharing that. As you both know, working with me, it's not new to me. I actually have experienced it myself, which was the whole reason I built my business around. Dang, that was painful. We're not doing that again. Right? It only took a year. And I was like, all right, pull it all that finance girl because I'm not doing, I'm not going there. Again, there's nothing worse than getting an income tax bill. So let's talk about how that happens. Right? So let me just explain a little bit overall, in general, how it can happen to a business. And so it usually happens when a business is in growth mode, and you're bringing in more income and you are monitoring your expenses, which means you have more of a net profit, which then either shows up either in salary or a net profit. And so this is what happened to you. You're an expert, right? So you both have your salaries taken out, but when that net profit at the bottom is not paid, the income taxes aren't paid for your portion of that. It can smack you,

Jessica (23:23) Right.

Michele (23:23) Right?

And so that's a hard one because I think if we don't know that, as you said, the first year, I didn't pay attention to it. And I made the net profit and I had the money that came into my home and then all of a sudden is you have a tax bill, and the six figures and you're just dying, like where am I getting that from? Because it had already been spent. It had been brought into our home and spent not allocated and saved out because it didn't run through payroll.

Jessica (23:54) Right. 

Michele (23:55) Right?

Virginia (23:55) That's right.

Michele (23:56) And I see it often. I see it a lot even with Companies that are LLC, even more so with them because if they are not paying, they have nothing is taken out and payroll, you at least had some small portion taken out and payroll. So it is very common if we're not inspecting it, we're not watching it. And we're not allocating for it. What also happened to me so the first time I got hit was because I wasn't watching for and I didn't think about it. And it was a growth year so my accountant didn't even mention it to me, because before that, by the time that paid into my self-employment IRA and had had my income merged with my husband, he had been paying a heck of a lot more taxes than he probably needs to but it balanced out with mine. And then I superseded it, which made us get hit with a really high tax bill. My next question and I think this could have been part of what your struggle was as well. And I can't remember what your exact but I'll tell you mine. It probably mirrors it a little bit. It is the next year when I was trying to solve the problem. What happened was my accountant had said to me, Michelle, this is the amount you need to pay in taxes, we're going to do estimated taxes and quarterly payments. But they didn't tell me the basis that they were giving me those amounts on. So they didn't say, for example, if you have a net, we're assuming that you're going to have a net profit of $100,000. Therefore, you need to do this. Well, I knew what I had kind of estimated my net profit to be that year. And I hit it in June. That had been my plan for the whole year. And I went, oh snap. I know there is no way that the taxes are going to cover if I duplicate this for the last six months. That was when I started realizing how it needed to be a percentage of not just a firm rate unless you knew exactly within a small amount what you were going to make. And so that's when I started changing everything and I think yours was similar. Yeah, you grew substantially the next year, and but the taxes had been built on a lower basis, the tax amount that you were going to pay, right?

Virginia (26:05) Yes. Right. That's right. And but it's so easy for anyone to get caught in that scenario. Because, again, what you're great at is breaking down, what is it making, breaking down big concepts into bite-size pieces for people to understand? But I'll admit that when we were working with our previous accounting firm, which was a large firm, oftentimes, when they would talk, these things through to us probably got 50% of what they were describing, and entrusted that they know what they're doing, and they know what problem we have. So we'll be all right.

Michele (26:48) Certainly, they're solving it for me.

Virginia (26:50) Exactly. Right. And so, you know, I think for a lot of people, you get to a point where you can't even stop the bleeding. It's just a year after year, and you just, entrusting other people to make the decisions for you, but they might be a really big firm and you might be a really small fish in their pond. And it's just, they're not going to put that emphasis and, you know, foresight into your business needs. So, you know, it kind of takes a lot of sort of encouragement for a business owner to stop and think about who those people on their team are and decide whether or not that's the right fit for them too right now, it's complicated.

Michele (27:33) Yeah, and I know for me, like you. I had a good accountant. But I also wasn't having a conversation with her and saying, This is my goal for the year and I'm growing my business and this is what it's going to look like so that we could plan check-ins, I did the old I'll meet with you at tax time, give you what you need. And by that point, it was already too late. I was already smacked.

Jessica (27:56) Yeah, I have the vocabulary to say this is What...

Michele (28:01) Right.

Jessica (28:01) We're looking for this, this what we need. We could not express that, to express what our past issues were, we just knew we don't want to be in this situation anymore. So It was so hard for us. And it's also very hard to find somebody that can be on your team as you. We didn't even know where to look. So we had been looking for you for a long time. And we just couldn't find you, it wasn't until we did find you and then we're like, hallelujah. But it's not something that people talk about. Often it's not something we just thought, Okay, well, our accountant should be able to handle all of this. And we finally learned that an accountant just accounts, they can't, some of them can do more. But for the most part in the person that we had been working with, they were just accounting for our money and not helping us plan for our money…

Michele (29:00) Right. And there is a difference. Some accountants have a very forward-thinking consultative approach. But the old school accounting, that's not what they do, they take the data that you give them, they put it in the right buckets, and they move on. And so there really has to be an interview process to make sure that it's an accountant that is working on your behalf. That's why I have two accountants that I've had on my podcast, Christie Lot, and Peter Lang. And I'll put both of their info at the bottom. And both of them have more of that consultative approach, to try to work with you a little bit more than just I'm going to show up once at the end of the year, but it needs to be an ongoing conversation and relationship. I remember when the two of you called me it was early 19. And I remember when you call me and you said here's what we want. We've had to pay taxes. We thought we were cleaning up we've had to pay taxes again, we don't want to do anymore we want to get, we don't want to prepay and then have no cash flow and then be stuck with tax bill that we can't we just want to let the year cover the year and start fresh in the new year. And Virginia, I think you were the one you met, you may have been the one at least I remember it that way you're like, and we want somebody on our team. This is a long term thing we don't want to get in for a month and getaway. We want somebody walking in this with us, right?

Jessica (30:27) Absolutely.

Jessica (30:28) Yeah. And no, like complete DIY, because there were a lot of people sort of selling us that kind of idea as well, where they give you information. And then you have to sort of just god bless and implement this on yourselves, on your own. And that's not what we wanted, either. We want it much more of a collaborative effort to get this resolved.

Michele (30:47) And the financial pieces were hard and we weren't talking small numbers either on all of it. So the numbers say that because you're working out a tax bill of $2,000, that's very different than a tax bill of $70,000. Right? So both are super important based on the size of the company. But there's more risk of the bigger companies. Right? More risk to get it right. Virginia. I'm just going to stir the pot for a minute because here's what I loved about you...

Virginia (31:00) Stir away. 

Michelle (31:04) You have been so honest through this process of trying to wrap your head around your financials, and part of the process as I had you and Jessica go through the Understanding Your Financials course. 

Virginia (31:30) Yeah.

Michele (31:31) And you pushed back a little bit. And you said, I just want somebody to go do it for me. Do you remember that?

Virginia (31:38) Oh, yeah, I think I remember vividly like at dinner with my husband, we were at PF Chang, which we may be going back there tonight actually.

Michele (31:46) And this was a painful experience. If you remember.....

Virginia (31:49) It was like drinking bourbon and like, she wants us to do this and this and I just can't do this. I just want her to do it. I'm griping about it. And he's kind of just like laughing at me because he knows that numbers get me there. It's always got me very frazzled, or I just, I guess they get me frustrated when I don't know how to do something, you know? So yeah, I think as we went through the process, and you were very firm on the fact that,

Michele (32:16) So nice word for that...

Virginia (32:19) Very firm on the fact that...

Jessica (32:21) You have to put in the work. 

Virginia (32:22) You have to put in the work so that it's kind of like the way you work with your children, right? You have to let them feel the pain for them to, fully understand, comprehend, what's involved. And so with that, you wanted us to be able to look at reports and be able to understand what they mean, so that whether we were working with you or someone else or another accountant, that we would at least have the wherewithal to know if we should be raising a flag. And we didn't know that before. I think we would look at reports before and Like, they're like negative numbers there were they probably shouldn't be, but I'm sure they'll figure it out. Oh, now our reports are super clean. And we have such a global understanding of how we create a profit and how we plan. So yeah, I was definitely kicking and screaming for the first time...

Michele (33:21) You had your heels dug in a little bit there. I remember one of our coaching sessions and you were flustered and you're like, I need to design. I don't want to do this. I just want somebody to do it for me. And I remember saying, Virginia, I understand. But you've had somebody I'm going to put an air quote "Doing it for you", and it didn't work out so well. So my goal, like you said, is to empower you and to equip you to know when to raise the flag, to know what the numbers should be, be able to analyze the data to go wait a minute or yippie but be able to react appropriately. And I said If you will go through and do the Understanding Your Financials, go through... 

Virginia (33:24) I promise you that...

Michele (34:05) I promise to do that. And then we moved into master your profit the profit for So, here's how you make it, here's how to read it. And here's how to save it now, like I said, I promise you, if you go through it, we can then get you, bookkeepers and accountants, to help you do it. But you've got to be able to see what they're doing to know how to ask the questions to know how to raise the flag. I said, trust me and go through it. And then I remember you were like, okay, you were not happy. That's okay. But then, but then sweet girl, you came back in a coaching session and you're like, I get it. I understand it. Because the cool thing is the way I've written it and done it online, you can watch it over and over and over till you get it. And Jessica had been watching it too and you two talk together. And you came back and you're like, I know what that number means. Now I know the next questions to ask. You said I feel empowered by my numbers.

Virginia (35:03) Absolutely. Yeah. I mean, we had a whole mess that had to be cleaned up. So that was one part of it. Right? It wasn't even as if we were starting as a new business. And you were able to hold our hand from the beginning and go through it all. We had this whole massive cleanup, it was nerve-racking and of itself, which meant, closing down years of QuickBooks to start fresh. That was, oh my gosh, what do we do with our files and all this sort of thing, above our heads, to getting through all those Muddy Waters, get clarity on that, and then planning ahead.

Michele (35:39) Right.

Virginia (35:40) So much so I mean, you took us from really understanding what is a reasonable goal? I think we always have had goals, but really, they weren't... They're kind of like pie in the sky and then maybe we'll hit it now. We really have...

Michele (35:54) They're grounded in numbers now and grounded in patterns and grounded in percentages.

Virginia (35:59) That's right. That's right. So you helped us break it down into little morsels of, Okay, this is what we need to be hitting monthly to even get near that number. And it just makes every day coming to work have a little bit more purpose because I think that we've always loved what we've done. We knew we had a business, but it was almost a little bit of a passion project when you didn't associate the financial aspect to what each day is worth. And now that we have that perspective, even planning our days has become a lot more efficient, because we know what financial goals we're trying to meet and what we have to do to get there, where before it was a lot more willy nilly to you know.

Michele (36:44) It was kind of that same way that Jessica was talking about hiring, it's a little more I call it grasping, you're just kind of grasping for things hoping that that's going to work out. But let's be fair, a couple of things had to shift and I made this comment before not to go in and change everybody who's on your team. But we did find, in your case that the prior bookkeeper and accountant, we're no longer offering services that supported where you wanted to go.

Virginia (37:13) Right.

Michele (37:13) And we needed to make shifts. So we had to shift your bookkeeping, we shifted your accounting, you're now with the awesome Peter Lang. And we'll give him a huge shout out here. And so we did those things to support where you are and where you were going. And we have all worked as a team. So I'm working with you and with your bookkeeper and with your accountant.

Jessica (37:35) Right.

Virginia (37:36) And we're creating this support team around Toledo Geller. To get where Toledo Geller wants to go. And here's what I find so stinking exciting for the two of you. As we've been going through this process. Let me tell you the let's talk about the unexciting part and we'll talk about the exciting part, the unexcited first, just because I like to end on a happy note with that, right. The unexciting part was this took a lot of work, and it took time. This was not a get in and get out in three months. We started early this year. And we've gone through it almost an entire year together at shifting QuickBooks shifting bookkeepers, shifting accountants, getting financial plans in place for the business that not only took care of all past tax issues, current tax issues for the calendar year, and preparation. This is where I would end on a high note. We also started looking into the future into IRAs and 401Ks and how to save so it wasn't before where we don't have the money to put there because we got hit with this huge tax bill. Your business has continued to grow through all of it because like you said, Everything became very intentional. So now you knew even more stuff, how to price things, some of your pricing change. Some of your packages changed. Everythings, not willy nilly, though, not just because somebody said go raise a price. We did it because we knew what was happening with every number running through your business.

Virginia (39:02) Absolutely. And with that, we were able to see where we make the most money. Also, it wasn't up until then I didn't even really have a clear view of whether it was product or service, we can now very easily see how much we make on our consultations, which are great cash flow and have that in our back pocket now.

Michele (39:23) Most of you use that word cash flow and like it.

Virginia (39:27) Yeah, it's just been remarkable and understanding how all those things can work and help you thrive?

Michele (39:36) Yeah, Jessica, you were a little more involved in the numbers at the beginning. You didn't fight me quite so much as Virginia did. And I have to say Virginia wasn't rude in any way. So I don't want to but it was what she was fearful of it. And she was overwhelmed because you both had a lot of design we're in it wasn't the area of the company, that in the past, she had been the one responsible for having your eyes On. And so when you had been looking, and you were asking certain questions because you were already a little more deeply involved in that. 

Jessica (40:10) Right, so believe me, I was also kicking and screaming a little bit, I just didn't show you that...

Michele (40:17) Let her take the heat, on that call.

Virginia (40:19) I let her.

Jessica (40:20) But I also just said, You know what, we've hired somebody, we're going to trust the process. And I know there has to be a light at the end of the tunnel. But on a day to day basis, we talked earlier about strengths and what each of us handles and I am the one who kind of oversees all of our purchasing. So I'm very intimate with who our vendors are, how much we're paying them, what the markup is, what the shipping and delivery fees are and all of that. So from that perspective, I am very involved in that so yes, 

Jessica (40:59) There was that part where I saw those numbers day in and day out, but now I have an understanding of how they fit into the big picture. 

Michele (41:07) Right.

Jessica (41:08) I definitely didn't have that before.

Michele (41:10) So I've had some people comment that. And I think the reason I wanted to talk about kind of the fear of looking, there was a part of you both that said, the numbers aren't working for us. They're feeling out of control, the structure that we had is no longer supporting our growth. We're now being hit with a tax bill. So you're feeling that pain. We're looking at the p&l and the balance sheet, and we're checking out the fact that they came in, but we have no clue what they're telling us. You don't know how to use them and analyze them back a year ago, right? So you knew that that was one of your next growth places was in the underlying structure and specifically in the financial structure of your business, so that that didn't implode? And that causes stress when those aren't done, right. And so...

Jessica (41:56) Where I was, I think I said to you, I'm like, I don't think it makes sense for me to do this business anymore. Like I just don't. But now I see the other side of it. But there was certainly... 

Virginia (42:06) We didn't know... 

Jessica (42:06) We didn't know... There were many days where it's like, I don't think I should be doing this. I'm not making money, I am an added expense in a way to my household. So why am I doing this?

Michele (42:19) Right. And we did find that after we dug through the numbers and cleaned the numbers up, you are making money and you have a plan and it has made you love your career and your job and your partnership even more because you understand your worth to what you're doing.

Jessica (42:37) Right. I just was saying, Okay, so now my household owes taxes and it's my fault and I don't have the money to pay for it.

Michele (42:46) Right. 

Jessica (42:47) Understanding that there's a way to pay for it and still make money on top of it. We just didn't have that piece was missing for us and we didn't understand it and we couldn't figure out how to get out of that hole. But now, knowing that we have, we have the tax money set aside, we have money for a rainy day set aside, we have money for profit set aside, all of those things are it's just... 

Michele (43:14) And your salary. 

Jessica (43:15) And our salary. I mean, it's just such a shift for us.

Michele (43:20) Yeah, I say that because even though you had all those pains when you called me, it still was frightening to have to do the work. And I'm just mentioning that because other people feel the same way. There are people out there who felt all the fear that you felt all that anxiety and stress. I felt it too. I felt like here I am doing all of this stuff so that my husband can help me pay and that felt horrible. Like I'm taking money out of my home. I said that's exactly how I felt.

Virginia (43:50) And it's almost like going into this whole thing and not knowing everything about it was scary. Not knowing what was going to be uncovered. Right? I think there was also a part of it, like, gosh, maybe this business isn't worth having, and maybe the numbers, once we clean everything up, will prove that was before. There were just a lot of unknowns. So we would walk around just not knowing enough about the finances, and that's should be scary. And it was because I always feel like there was this thing like looming like what's next? We should be making money, but we're not maybe we're doing something wrong, but maybe we're not doing something wrong. It's all of those.

Michele (44:31) You are doing a lot, right? I mean, what we uncovered truly was you were doing a lot right. There were some missing pieces to support you.

Jessica (44:38) Yes.

Michele (44:38) Right. You know, what I find interesting about this is the conversation that I had with you is the same conversation that you and other designers have with your clients. Trust me, trust the process. You've brought me in, to pretty much design your home, design the room, some elements are going to go in there that isolation, you may not understand. But when I present the full concept and we have installed the day you're going to get it. And that was what I kind of said to you. You're bringing me in to help design the foundation of your business and your financials, you may not understand the steps in isolation, Virginia, go do the class. When it's all over, you will understand the full completed idea of here's what your business looks like. And that was where you said, okay, and I remember both of you saying, we don't understand, but we're going to follow the process. We've hired you we trust you will follow the process. And I said I'll get you to a point that you're not the one who has to do it. Yeah. stand it.

Virginia (45:43) Yeah, yeah. There were a few moments of having to rewind the video.

Michele (45:53) So let me ask you this. I know right. In that Understanding Your Financials. I know that it's a lot in there. But you came back with the light bulb on especially at honestly after the very first lesson because the very first lesson is what is a bookkeeper? What is an accountant? What is accrual accounting? What is cash accounting? I mean, I go all the way back to the basics, as if you don't know, because not everybody knows. And then I teach you how to read the income statement. And I teach you how to read the balance sheet. And I tell you the difference between markups and margins, and I show you what your numbers should be. And most people watch that very first one three to four times. The first time they watch it, just to understand what it's saying because it sounds like I'm speaking another language. The second time they watch it, they watch it and start to understand. And the third time they usually pull out their documents, and stop and pause and look and stop and pause and look. So I say that because it's usually not one time through. I mean, it's thick and rich with content, but you felt empowered enough after the first one to be willing to listen to the rest of the lessons. Do you remember the moment where the light bulb started going on when you were taking that course?

Virginia (47:07) Well, gosh, I do remember that first course. And I know that what I kept doing was I was looking at our documents at the same time, the first place. Oh, so that was kind of crazy. And I pause. I mean, it probably took me three hours to get through a 20-minute video. And then I was like, trying to take notes. So it was all very overwhelming, but super enlightening in that first video, because some of the things I was familiar with sure, but again, you're really good about breaking things down and so it was becoming very clear and I like that I actually had questions from that video and then our next meeting, I'm like, Okay, now I need to understand, you know, this, this and that. We're wouldn't even have known to ask those questions. And it also was a little gratifying in that some things that had been questions of mine, like some of these negative numbers on our report that shouldn't have been negative numbers under like secondary cogs account with our previous bookkeeper and accountant? And you help me understand that, no, that was not right. That should not be reading like this. And your reports need to be a lot more clear. You know, so that was gratifying and knowing that there was something in our gut that said things weren't right. And we were entrusting other people. And now we had a little bit more control over the situation because we were working on rectifying it all.

Michele (48:31) Yeah, the best part of when we get back together after it because I just said, just do lesson one. Like, I'm not asking you to do the whole course do lesson one and come back. I was really expecting more of the questions to come from Jessica because up until that point, the majority of the monetary financial questions had been from Jessica. And Virginia, You were the one who said okay, I have my questions. And I was like, okay!!  

Jessica (48:54) She's a very good student. 

Michele (48:56) She is a good student, even though she was stomping her little foot. She was a good student! So, I just am saying all of this because there is a fear. There's a fear around the numbers. There's a fear around, not trusting yourself. There's this gut check that says, I don't think this is right. And I think you're correct. It was not. Right. And we need to get that fixed. And that fear of what's going to be uncovered. But talk to me a minute about what it feels like on the other side of all of it. Because I think if we focus so much on the fear, which we all have, it keeps us stopped. Something pushed you to say, I can't do this anymore. The pain is too bad. Give me how, and then I'll tell me how it feels on the other side. I know you said you feel like you come into your work with intentionality. The margins and the markups and the numbers for every project and then how they feed into not only the company you have but the company you're trying to grow into. How else do you feel

Virginia (49:57) The word is empowered and confident. Understanding our value, you know, more now than ever, because when you really start to look at the numbers, you get a clear view of your profitability, what you're capable of. And I think before that we just really didn't have a handle on it. And now that we know what we're capable of, and what we can achieve, it's exhilarating. It's scary because the potential is there to do so much more. You know, we also recognize not only are we designers and business owners, but we are also mothers and we're wives. And so there's this,  we're in a period of our lives where we need a balance a lot. So the growth can't be like, you know, an explosion, but at least I can say for myself that, as mothers of two daughters, especially to Jessica also has a son but she has two little girls that we can like leave a legacy for these girls. That, our mothers build a business from the ground up, that's sustainable. If it's whether they want to get into this business or want to sell it for a profit for themselves and sell it to someone else, that's something that we're leaving for them, and I never could. I didn't think the company had the potential to be that, it was like, Okay, well, we each get a salary every, you know, two weeks, and we're okay. And, you know, that's it is what it is, but now with a structure and really understanding that you know, this could be, you know, a multimillion-dollar company.

Virginia (51:32) That's kind of crazy.

Virginia (51:34) But understanding how to get there too, because now we understand how many hours we need to build for every week, monthly basis, what numbers we have to hit to do that. And then once you know that, you still have to work your tail off to get those projects and get it so that you can meet those numbers, but it's all a lot more attainable, I guess. I don't know it can never happen or it can't

Michele (52:00) So I'm the mom of two sons. And I'll say that I don't have daughters. But I wanted the same thing for them to see me as a woman doing those same things so that they would understand and see that their wife (if they choose that) could do the same thing. So that it, you know, and I mean it. There's one thing that we're doing by leading the women behind us, but there's another thing we're doing about enlightening the minds of the men behind us. 

Virginia (52:29) Great point.

Michele (52:29) And so I love that, you know, I made a joke at the high point market. My kids think I play on Facebook, they're like, yeah, my mom makes money playing on Facebook, because they see Facebook groups answering questions. So that's the joke around our house is my mom makes money playing on Facebook. But I think what you said Virginia that I want to jump on for just a minute is this idea of what we're capable of. And we set some financial goals early on even before we had your financials completely cleaned up. Like we had him clean enough that we could kind of say, here's what we think you're going. And you guys are all ready and it felt like a stretch goal. I remember you from Wow, that feels like a bit of a stretch. And I'm like, no

Virginia (53:16) We had a goal and then we raised it because we're crazy like that.

Michele (53:18) That's right. And I remember saying to you... No, the numbers support it, the percentages support it, here's what I think. And then as we get through the year, remember, we did the math and I said, Okay if we project out, it looks like it, you're going to exceed it. And it looks very much like we're getting ready to exceed the stretch goal that had already been stretched...

Jessica (53:37) Right.

Michele (53:38) From the beginning of the year. Right? 

Jessica (53:40) It makes me nervous for next year.

Virginia (53:43) For me, like lights a fire.

Michele (53:44) Like, I'm excited. I'm like, let's do that. And I can't wait to do the next planning, right. 

Jessica (53:50) Yeah.

Michele (53:50) Yeah. And so what but I love how, again, I think that we have to do some things and take some risk and use some of that gut instinct and but there There is a lot that can support us in the numbers and the grounding of the financials so that you're not jumping off the cliff without at least having a parachute. Right? I don't have a problem with you jumping off the cliff, but we need a safety net or a parachute when you jump. And that's the difference between making a plan and knowing when to jump and how to jump strategically and safely. And that's what we're continuing to build for the two of you. It's a safe plan for growth, like you said, not so explosive when you're still a wife and mom and friend and daughter and all these other things that need to have some focus.

Jessica (54:36) Right.

Michele (54:37) So what is one of the next big profit goals in your business?

Jessica (54:42) I think um, one of the things that we have is, we have the profit account that we've set up with you, but I think what we want to do is have, well, we can't use any explicit word so I won't tell you what we really call it but in kind of an emergency fund...

Michele (55:00) Yes, or Oh, crap fund. 

Jessica (55:02) Oh crap, we'll take that. So I think we really want to build that up because we are both planners and warriors by nature. So to know that we have a backup for a rainy day, we know exactly what it takes to run our company monthly now. So we want to have several months saved aside for that purpose.

Michele (55:25) So in profit, First, we call it a vault account. And so what we're going to do is create like this vault and we will start planning for like three months of all of your business expenses. It's the rainy day vault and then we're going to create rules around that account, like what is it that allows you to go in it because just like the vault at the bank, or your safe deposit box, you can't just go up and open it. You gotta take a key sign in there. There are some barriers so that you're just not pulling it out all the time. So that'll be our next step is we'll create the vault. The oh crap fund will Start putting some money in that and building that up so that what happens is that allows when you go through these cyclical ups and downs that happen, you don't feel so stressed, we have money to pay your employees and money to grow. And so I think that's a great idea. So you have my support to help you build it. I'll help you build that.. is there anything else you'd like to share with the listeners today?

Virginia (56:25) I think my advice to people would be if you're feeling overwhelmed, and you think that I know, I'm working in the business, I don't have a moment to work on the business because I think it's so easy to just feel like you never have time for it.  It's the hamster wheel. Just do yourself and your business the favor of stepping off of it for a minute, and you'll find that if you get the right help, you'll it'll just lend so much clarity to why you're doing this. You know, besides loving what you do. They'll be a new sort of business-minded mindset around why you're doing it as well as opposed to it feeling like a passion project. I keep using that word, but that's what it can start to feel like when you're on that hamster wheel, not understanding your profit and your margins and you know, how your business can grow.

Michele (57:20) I second that, I think that's great advice, Virginia. And think you would probably agree and Jessica as well when you can make yourself take that step off and slow it down enough. When you get back on it seems to be going at a little bit slower pace, because you building the structure and everything under it is when the structure isn't supporting it, that you're scrambling all the time. And I know our goal from the very beginning was to have you proactive with your money and not reactive with your money, just like you try to be in the design. And so the proactiveness you came to me very reactive because Your financial structure had not grown, to keep up with the income, to be honest, and with the expenses. And now we have you and much more of a proactive I mean, the fact that we have a profit account and your taxes are covered and your salaries are paid is way different than we have none of those things covered at the rate that they need to be. And so, but it took a lot of work. And that's the thing, I want to make sure that this is not something that you go to somebody and they just do for you. You have to roll up your sleeves and then do it with somebody.

Virginia (58:33) Yeah, right. That's right. That's right.

Michele (58:35) So, Jessica, where can we find you all?

Virginia (58:39) You can find us at Toledo Geller on Instagram and Facebook, and our website is www.ToledoGeller.com.

Michele (58:48) Excellent. And I'll put all that in the show notes so they can find you. Thank you both for sharing your story. I am super excited about your success and your growth and just how you both feel so much more relieved and able to enjoy the work that you've created. Enjoy the company that you've created. And that's my goal. I think you use the word empowerment. That's what I always say, I want to encourage, equip and empower. Because if I can encourage you, which is what I tried to do, please go take the course and then equip you through the course and the coaching, and then you feel empowered, then you do get to own the outcome that is so great to then share that with your sons and your daughters, and your clients ultimately, here, the clients benefit, right? Yeah, yeah. And it's sometimes easy to think that this is just the extra work when this is some of the most important work that allows you to serve the clients the way that you both said you want to at the beginning. So thank you for letting me guide you and coach you through this and thank you for even kicking and screaming all the way to success. I love it. I recognize it because I do the same thing. Mine just might be in marketing. I kick and scream all the way to success, but we get there. We get there and it takes the team. So you've got a great team as well.

Virginia (1:00:05) I'm in it, thank you for sticking with us as well because you always can also say, the same way designers can fire a client ...You can also fire a client. Right.

Michele (1:00:19) And I would only fire people that aren't doing the work, you know, and just complaining so just like you would if you told me to go do all this in the room, and they just kept complaining and didn't do it. At some point. You'd be like, I can't help you. 

Virginia (1:00:31) Right. Right.

Michele (1:00:32) You guys have been great. And I kick and scream my way through it. So I don't have a problem with that. I knew that you wanted to. It was just the fear of the unknown and the fear of and the length of time, let's be honest time stretched in that. 

Jessica (1:00:48) And some of that was our very busy period. So right, it all was like the perfect storm. But that's exactly why we knew we needed something because we were so busy. That meant we were making money and what's going to happen with that money that we're making. So it was just, we had to just buckle up and do it.

Michele (1:01:05) Yeah. But it's also created a relief on the other side. So...A hundred percent

Virginia (1:01:09) We can leave right now.

Michele (1:01:11) Yeah. Well, thank you both for joining me today. Thank you for being on the podcast and thank you for sharing your journey and to come back and talk about some of the partnerships and some of the other things you're doing. I'd love to have you on again.

Jessica (1:01:22) Okay, thanks, Michele.

Virginia (1:01:24) Thanks, Michele.

Michele (1:01:24) Have a good one.

Virginia, Jessica (1:01:25) You too.

Michele (1:01:27) Thank you, Virginia and Jessica, for sharing this journey. I know it resonated with me because I've lived it and I'm also sure with others, and just like they both said, doing it alone is difficult. So I encourage you to get a team. I would love to support you and understanding your financials and in building a plan to support the growth goals of your company. Start with the designer's inner circle. You can get information at ScarletThreadConsulting.com. When you join the designer's inner circle. I will actually do financial analysis for you right off the bat and help you create a plan to kickstart your business. Then we can help move you through the process of learning and owning your numbers. Profit is a choice and it doesn't happen by accident. So make sure that you choose to start with the designer's inner circle where we can help you.