Episode Transcript
Speaker 1 00:00:06 Hello, everybody. Scotty, my another episode of All Things Considered Franchising, powered by Scott, my franchise coach.com. Uh, today's guest is president and founder of the Largo Group. I know we're talking about, supposed to be talking about franchising, but the Largo group, I guess in, in, in so much term and in so many terms or basic sentences, it's all about the numbers. Numbers don't lie, <laugh>. So we have Anne Gannon with us today, uh, who's gonna talk to about, uh, talk to our audience, uh, whether you own a franchise, thinking about it, have a business, you're an independent, how important the numbers are in the business. And it's not so much just outsourcing the work and getting it back and, uh, signing your name and sticking in the mail to send it back to the i r s or your local state. But it's also understanding the numbers, the, the mythology behind the numbers to make your business thrive and be well successful. So welcome to the show, Anne.
Speaker 2 00:01:09 Oh, thank you so much for having me. It's great to be
Speaker 1 00:01:11 Here, <laugh>. And let's start out about a little bit about your background. Um, you know, uh, again, I don't, I don't mean this in a negative sense, but, you know, there's this stereotype about people who are into numbers, that accountant that, you know, the, the, the, the pocket holder and the pens and the slider and Yes. You know, and, and, and, and, and that's not the case because let's face it, the numbers, the financials of a business, whether it's large, medium, or small, or even a Fortune 100 500 company are very important. So let's talk about your background, how you got into this and what, what got you interested in numbers, so to speak, and kind of go from there.
Speaker 2 00:01:55 Yes. So, uh, I, yeah, I grew up with the dream of becoming a professional golfer, or actually was not to be an accountant. So all the way through college and everything, I traveled the country, you know, really pursuing my dream of golf. Uh, what a lot of people don't realize is, you know, what that looks like is you, you know, you're flying to random places all over the country. You're staying in private housing cuz there's no we money in women's golf. Um, so you're meeting a lot of people along the way. And what I realized when I got to, you know, being professional, was that I was always so fascinated by business and the people that I had met. And I had always been very curious about, you know, like, how did they get to be who they were? If it was the guy who owned the restaurant in town, or, you know, someone who had their own, you know, was an entrepreneur, which seemed to be a lot of the times that you were meeting, um, you know, how did they get there?
Speaker 2 00:02:44 And so when I turned pro, I realized that, you know, I really wasn't fascinated about the golf swing or how to get more distance. It was really, you know, this journey that I had witnessed along the way. So rather than, you know, prolonging the inevitable, I was like, you know, I think I'm really gonna go figure out what that is. Like, what am I curious about? What am I interested in? Um, my dad had been an entrepreneur, so I'd kind of grown up in business. And so I had great advice from one of my, uh, professors in college when I came back, was just like my first degree had been in economics. And she's like, economics is great, but, you know, accounting really is the other side of it, right? It's just the detailed part of it, but it really is the same curiosity that you enjoy.
Speaker 2 00:03:24 And she, you know, the best advice I ever got was her thing was, accounting is a skill, right? Don't look back at, you know, how you did in your accounting one-on-one course because you weren't really thinking you were gonna be an accountant at that time, right? But if you apply yourself the same way you played yourself in golf, there's no reason you can't do well in this skill and it'll be a skill you'll have for your life. And so that was sort of the mindset I went into my master's program with and, um, sort of how I attacked even, you know, first job in public accounting. But what I realized in the firms was the model of traditional accounting is fine, right? It, it does well, these firms do well, but it's not really designed for that entrepreneur. And so there's this inherent frustration that exists because you have these accountants that have to finish their return as quickly as possible, right?
Speaker 2 00:04:08 Their billable hours. That's, that's how they make money. And then you have these entrepreneurs who have no idea what accounting is, and they're just waiting for guidance or help or someone to just walk them down this path. And there just isn't time, right? If you're handing someone a return on March 1st, there just isn't time to like explain the balance sheet, right? We just have to get it in and then everyone procrastinates and lets it go. And then here we are the next year doing this same thing again. It just doesn't work, right? So my thought right away is if you could change this, right, and make it more of a methodical approach, like throughout the year when the accountants have more time, the businesses, you know, don't see it as important. But if you could convince them that it is important, you could get to next year and be in a much better place. And so that's really where the Largo group came from. Largo means methodical and musical terms. And so the idea of if we could take apart what we're doing in that rush time and break it out throughout the year, I think you could get to a much better outcome for both sides and something that really generates value add.
Speaker 1 00:05:09 That's interesting. So let me ask you a question. You know, at Scott, my franchise coach.com, in most cases, 75, 80% of the people that I'm speaking with my firm is speaking with, we're talking to people that are getting into business for the first time. Um, you know, uh, f let's put aside the fear and anxiety. I mean, that, that's the normal, you know, it, it, it, it, it, it, it's a big step. So that, that first time entrepreneur, uh, whether it's a franchise, someone speaking to me or it's an independent, they wanna buy the local pizza shop, or they wanna buy the local shoe shop, whatever it may be, what should be the first step on the financial side? Forget about the financing side. I mean, securing financing if they're not, not gonna utilize their own money, but what are some of the things, or what are the one and two things that someone should be looking at when they're looking at a business and flash forward in six weeks, they're gonna own the business. What financially should they focus in on? I mean, does that make sense? I mean, you know, everybody says, well, I gotta do my tax returns, I gotta do this, I gotta do that. But, you know, there's, there's gotta be a hidden agenda. I would think about the numbers. So in your your methodical approach, the Largo approach, what should somebody be looking for? I mean, what should they be concentrating on?
Speaker 2 00:06:28 Yeah. What we try to do right away. And I think that's a great, you know, place to start because I do think that people who are getting into business for the first time, you really, it's so overwhelming. And I think a lot of times the accounting comes last, right? Because you have to learn the operations, you have to learn how to open the door, you have to learn how to service the customer. There's so much operation that you have to do at the beginning that it's easy to put the accounting aside and then it six months later, year later you're like, oh my God, I have no idea what this looks like. So what we really try to do is break it out weekly, right? So even if you don't know what the next six months are gonna look like, and there's all these different scenarios of sales and transfer, and whether you're brand new or you're buying it from someone else, like there's a million different things that could happen in that first six months.
Speaker 2 00:07:13 What we try to do right away is break it out into a weekly projection. So you might not be able to project the first month, but maybe you could project the first week and then tying that back into your operating expenses again, you know, rent is once a month and we don't have to go down the rabbit hole of dividing rent by four. I mean, that is what it is, okay? But, you know, payroll is probably weekly. There's probably a schedule for whatever your employees are. So what is that cost every week? What are your, you know, if you are in hospitality, what is your food cost? If you're, you know, retail, what does that purchase look like? And breaking that into a weekly cash flow, I feel like is a really good place to start, because then with that information, you can go to the next week and the next week and all of a sudden feel like you have a little more control over the decisions that you're making every day.
Speaker 1 00:08:01 So when somebody is investigating a business model, now in franchising it's a little bit different because the franchisor can only disclose the financials that's published in the item 19. And that could be all over the place as far as how they do it, whether it's net income or whether it's sales, top third, bottom third, whatever it may be, independence a little bit different. You're gonna get PNLs, although there are PNLs in certain, uh, franchises that you can get depending on how it's, uh, whether it's published in the item 19. But if somebody was to analyze a business or wanted to get into the business, are these steps that you're talking about, these breakdowns as important before you make the investment to get an idea of what the business is all about and really kind of get a true sense of the numbers? Uh, or is it somebody come to you after the business has been purchased, uh, and, and or the investment has been made in a startup, a franchise, starting a brand new location and putting the pieces together financially, the the financial numbers?
Speaker 2 00:09:04 Uh, yeah, I mean, I think it's very important to look at when you're, look, when you're analyzing a business, you know, as you're making that decision to know that there's things that you're going to do differently. So while it's important to look backwards, you know, in prior years, I think it's also important to look at how are you going to operate this business? And I think it's really important to, I think the biggest thing that's sometimes forgotten when people are making that decision is how does your life work today? And how is your life going to work as an owner? So, you know, for example, if you're planning on being there six days a week and you're really gonna be the manager, then we wanna make sure that you are compensating yourself for this and you're building that into the model. Because I think what happens a lot of times, especially in that first year, is you sacrifice everything and then you're just annoyed <laugh> to say the Yeah,
Speaker 1 00:09:55 No, you're answer are
Speaker 2 00:09:55 More than
Speaker 1 00:09:56 Annoyed <laugh>. No, you're absolutely right.
Speaker 2 00:09:57 You're like, I've gone a year and I haven't paid myself. And I would say, if you go back to that weekly model, I'm not one of those accountants who thinks you shouldn't pay yourself, right? Like, you've taken on all the risk, you've taken on all the stress, you have to do everything. You're wearing 12 hats where you probably came from like a corporate job or something else where you weren't wearing 12 hats. So we want you to make money. We just wanna build that expectation into right, the model from the beginning. So being realistic with the salary you're giving up, you know, all of that becomes so important from the very beginning. And that's where I say like, you're gonna do things differently than they were before. So if, you know, if it were two people running a business and now you are taking over, you just wanna make sure that those right fundamental questions of how this is going to operate, especially with your time are, you know, approached from the beginning.
Speaker 1 00:10:46 Yeah. Well, it's the cash flow of a business, you know, how much of that cash flow are you gonna take as a salary? What are you gonna pay yourself? Uh, you know, are you paying yourself too much? And that's why the business doesn't have any money to reinvest it itself. So, I mean, tho I mean, that's great advice. I mean, I remember one time, a, uh, I I I, I won't get into too many details, but, uh, someone called me, we'll leave it at that and said, uh, um, we're not making any money. Uh, you know, I want to get rid of this business. We're not making any money. And I said, okay, well send me the p and ls. Let's take a look at everything and the long and the short of it, you're gonna, you're gonna laugh, Anne, I know you are. That in their, uh, travel expense, they were showing $7,000 a month.
Speaker 1 00:11:26 So my, of course, my, my, my question back to them is, what is the $7,000 a month for? I said, oh, well, we go to Las Vegas once a month. And I go, well, isn't that income? I mean, you know, I mean, that, that's, I mean, obviously you're, I'm, and I'm assuming you're doing business out there because you couldn't claim it as an expensive, you weren't <laugh>, but you know, to say that you're not making any money. Yeah. But the business is spending 7,000, so don't spend 7,000 or, or don't spend 7,000 on the trip, you know, spend 3,500 on the trip and pay yourself $3,500 salary. I mean, so, right. Again, those are the kind of things that people don't understand or kind of can't read the p and l and understand that where are the numbers coming from? So dissecting those numbers is very important to understand, uh, the cash flow and the, and, and, and how sound the company is, correct. I mean,
Speaker 2 00:12:20 Oh, definitely. And that's where I think it really starts weekly and tying it back to the cash balance, because ultimately I think there's always times where it's like, oh, you know, my cash balance didn't go up, you know, in the last 30 days. But like you said, did you, you know, fill up your tank of gas with the company card? You know, does the company pay for your automobile? Like, there's probably expenses in there that have owner benefit, and that's okay. Right? Like you said, obviously we, we want them make sure they're legitimate business expenses, but assuming they are, right, like you can't really say you didn't make any money. We first wanna kind of dissect those expenses because I think what happens is it's easy to then add that to our stress. Like, and I'm not making any money. I'm here six days a week and I'm not making any money.
Speaker 1 00:13:06 Yeah. And you Yep. And you wanna run and, and you wanna run the business, right? On the accounting side, you know, my father used to, like I said, my father used to tell me that numbers don't lie, but he also said that you don't wanna knock at your door at one o'clock in the morning, and it's two guys in a black suit with, uh, i r s written on their, uh, <laugh>. No, no, we don't like that. You, you don't want that. So, so you have offices in Boston and Philly mm-hmm. <affirmative>, uh, privately held company, uh, something. You've been, you've been in business for eight years. Uh, that's an achievement itself as an independent. So congratulations. But let's play a little game here. One or two common mistakes that you see that people make who are getting into the business ownership role for the first time on the accounting financial side. What are, what are some of the one or two mistakes people make and what is the remedy to prevent those mistakes from happening?
Speaker 2 00:13:58 I would say the biggest mistake is assuming that somebody else will take care of this side, right? And I say that as somebody who offers bookkeeping services <laugh> in my company. But, cause I'm great, you know, I'm happy to do our, I love our bookkeeping clients. I think it's great that they have us, you know, save them time. But if you're getting into it for the first time, just like anything else in that business, you have to understand what this part of the business is first, right? Like, you need to understand where is your QuickBooks file and where is all the information coming from? Because the biggest mistake across the board is there's just a disconnect in where the information comes on, right? The biggest one I see, especially knowing, you know, we deal a lot with hospitality is, well, you know, you're tracking your sales from your point of sales system and you're looking at it and your bookkeepers, you know, recording the cash deposits, well, they don't match <laugh>, right?
Speaker 2 00:14:49 They fundamentally do different numbers. So if we haven't even figured that out, like there's no way that p and l's gonna make any sense to you, cuz then inherently you're gonna be frustrated cause you're gonna say the sales number is not right. Well, she doesn't know how to use the point of sales system. She just, she, he or she just knows to use the cash deposits. And same would be true with labor, right? Our tips, like all these basic things, it starts with taking an hour and just really asking good questions of where is this information coming from? Right? Like, I've had people screaming and yelling because, you know, they never sent us their utility bill. We pulled the utility expense that may have been two months worth of utilities, right? From the bank statement, right? So we have to first understand are we taking bills or are we taking exp Like there's, there's fundamental things that maybe an hour's worth of time we could break it down and make sure when you pull your p and l it's not a waste of time to you, it's the numbers as you want to see them.
Speaker 2 00:15:43 So I think that's the first, and again, I don't think it's weeks of time. I think it's a couple of hours at the beginning before the frustration grows. And then I think the second part is really having an understanding of how much cash you have in this business. Mm-hmm. <affirmative> and how much cash this business needs. Because even you're, you know, great companies, right? There are times of the year where it's a truly a timing issue where you're growing and you had to hire an additional person and then the sales come in a month later. So there's always gonna be cash struggles, right? Like no matter where you are, if you are looking to grow, cash is going to be a pain at some point. But if you have a good understanding of how much cash you need, whether it's, you know, I always wanna have three payrolls, I always wanna have four payrolls, whatever that number is, defining that at the beginning, we'll help alleviate some of the cash. Cuz what happens during the growth times is we get stressed and then we don't look and then all of a sudden we're
Speaker 1 00:16:37 Scrambling them at the payroll. Right. Creeps up on you pretty quickly. Yeah. Um, you know, in franchising, at least when I take my clients through that, uh, financial breakdown or startup financing, I always tell people, you know, businesses have never gone out of, uh, business because they've been over capitalized. They've always gone outta business because as you just pointed out, they wake up one morning and there's that big negative red number or they have a zero and they don't have any money. So they're under capitalized. In your opinion and or, or you know, and, and your thoughts on financing or a startup or getting into financing, how important is it to be capitalized, right. Yet not be over capitalized to think that you have so much money and I can go out and buy that company, you know, Ferrari or you know, that company boat. Yes. I think you understand the point. So how important is that strategy to capital aside, capitalize yourself right? On the financing site?
Speaker 2 00:17:38 Yeah, I mean I think it's important to, I mean I think the people that I've seen the most successful have used debt strategically. Okay. Or used some sort of financing strategically. So I think you don't wanna have too much cuz I've seen that where you just are taking on so much debt that any of your growth is really just, you know, servicing the debt and it's, you know, just sort of this vicious cycle. But I think when from the beginning, you wanna be very realistic about what that first year looks like. Because even when you're open two or three months, I mean, you know, cash flow's just such a lag, right? Like, but you're paying payroll before you're open. You're just immediately in the hole no matter what business you're in when you get into that first six months. So I think being realistic about what that looks like, not being afraid of debt, but just making sure that the numbers make sense.
Speaker 2 00:18:28 So, you know, does it make sense to finance my equipment versus buy the equipment up front? That's a question that really has to be as much about cash flow as it does about the interest rate. Because so many times it's like, well I don't wanna pay 6% interest. Well, you might be saying something different if you're stressing about payroll three months in <laugh>, right? Let's 6% interest, right? It's not ideal, but if it gets you to where you wanna be six months or a year from now, then you can always pay. Like I said, the problem is never having too much cash. You can always be strategic a year in and pay down some things that you took out at the beginning just to make sure you have enough cash. So I think just a holistic approach to cash flow where you're Yes, looking at the interest, yes, looking at the debt service, but also really planning out that first year of being open just gets you to a point where you're, you're gonna be successful, you know, a year plus in.
Speaker 1 00:19:19 That's great. Oh, that's great advice. Um, we're, we're, we're closing down to the, uh, the, the end of the, uh, podcast here, this session anyway. And any guidance or expertise you wanna share about your services, uh, maybe how people can reach out to you for any questions. Again, we're talking to Anne Gannon, who's the, uh, principal and, uh, founder of the Largo Group. Um, and I don't mean this in a negative sense, but kind of that unconventional accounting approach where the approach is more of, I want to educate you on your business and your business numbers so you'll have an understanding, not just do your quarterly, yearly filings and, you know, have to call you up and say, Hey, you're outta money kind of thing. Really kind of make sure that your business matures and you become successful. But, so just take us through how somebody could get, you know, uh, get in touch with you and, you know, just kind of some overall guidance for people who may be looking to get into a business for the first time.
Speaker 2 00:20:20 Yeah, so I definitely think, you know, check out our website. I mean, what we really try to offer are, you know, the same set of services that most accounting firms offer, whether it's, you know, accounting, bookkeeping, services all the way up to tax returns. But again, our core belief is that, um, our, through our team's work with you that we would educate you as well so that you could do it if you had to or wanted to. Um, but also you have full transparency into exactly how we're putting, putting the information together. The other thing I think that really sets us apart is that we always are forward looking. So helping, you know, build a budget for 2023 with you, making sure you have the tools in place to where you can look forward and catch problems before they become problems. Right? Catch. Um, so yeah, so check out our website. We offer, you know, free seminars throughout the year. We have a lot of, um, great education there for new business owners cuz it can be the best thing you ever do if done the right way at the beginning,
Speaker 1 00:21:15 Healthy business, healthy mind, and, uh, you sleep well. So last question, and I know our audience is, is, is, is, is, is hoping I asked this, the most famous golfer you have ever played a golf round of golf with?
Speaker 2 00:21:28 Oh yes. So my claim to fame a little bit is that I, uh, beat Michelle. We in match play
Speaker 1 00:21:34 <laugh>. So
Speaker 2 00:21:34 That
Speaker 1 00:21:35 Was best round you ever shot?
Speaker 2 00:21:37 Uh, 66.
Speaker 1 00:21:38 66. And that was on 18 holes, right? Nine. Yes.
Speaker 2 00:21:41 <laugh> no. Nine. Yes. Only
Speaker 1 00:21:42 Kidding. Yes.
Speaker 2 00:21:43 Kidding.
Speaker 1 00:21:43 Only kidding. Uh, I asked that because I had a friend of mine, we were out in Montauk, uh, played Montauk Downs one year and this many years ago, and we came off the course and uh, I said, so how's it going? He says, yeah, you know, I shot a 66. And I said, wow, that's great. I said, you're on fire. He says, no, that's just for the front dime. <laugh>
Speaker 2 00:22:00 <laugh>. We're making the turn. Yes.
Speaker 1 00:22:02 But anyway, but anyway, this is Scotty, my, uh, host of All Things Considered Franchising, powered by Scott, my franchise coach.com. Scott, my franchise coach focuses on people that may be in career dis uh, career transition, looking to possibly explore business ownership for the first time, investigate and researching franchises. Maybe you're interested in selling a business that you have. Uh, all Things Considered Franchising is a podcast devoted to entrepreneurship, the franchising industry, and of course independence as well, providing some information and guidance on how to be successful in business. We've been talking with Ann Gannon, who is the president and founder of the Largo Group and it's been great. We wish you all the best and hope to have you back, uh, sometime soon.
Speaker 2 00:22:46 Yes, thank you so much. Have a great day.
Speaker 1 00:22:49 All right. Yeah, have a great day. This is Scotty, my signing off.
