Dan Platta on Why Hitting $1M in Your Business Won’t Fix Your Problems

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Introduction

Stephanie: Hello everyone, welcome or welcome back to the Filthy Rich Cleaners podcast. I am your host, Stephanie from Sewing Clean, and today’s fantabulous guest is a fellow Wisconsinite, and you guys are in for a treat today. I have Mr. Dan Plata, he is the owner of Best Damn Bookkeeping, and he is the best damn bookkeeper around, guys. I have had hours of conversation with this man, and I was like, I need him to get on my podcast ASAP. He’s got his own podcast, he has one hell of a background story that has gotten him to where he is today, and you guys are gonna learn so much. I am so excited for this conversation. Dan, thank you for joining me, I’m really excited.

Dan: Oh yeah, hey, what’s happening, don’t you know? Oh yeah, oh yeah. We’re gonna do a little podcast up in here. Don’t you know we’re gonna do that?

Stephanie: You know, I was up in Wisconsin. You just go hard Wisconsin with this, you just go full on Wisconsin.

Dan: ‘Cause me being around you, as I said on your podcast, being around you pulls it out of me.

Stephanie: My best friend sent me a video the other day. Last time I was up in Wisconsin, there were a couple of drinks that were had, and she has this video of me with a Drink Wisconsinbly shirt on, a piece of cheese, acting like I’m smoking the cheese like a cigarette, and I’m like, this is the most Wisconsin thing I’ve ever done in my life.

Dan: That’s perfect, yeah, that’s perfect. Now you just need an ice cold Leinenkugel sitting next to you, and it’s perfectly authentic.

Stephanie: Exactly, exactly. So Dan, obviously you own your business now. You have run service-based businesses. Some of my listeners may be like, why is this guy, what has he got to do with cleaning businesses? Why should I give this episode a listen? So can you run us through your background?

From Corporate Cargill to the Cleaning World

Dan: Man, it’s so funny when you look at how you get places, and you’re just like, how in the world? What did happen that got me here? Growing up, I was totally one of those kids where you gotta go to college ’cause your parents said you gotta go to college, and then you gotta go get a corporate job because that’s what you do. You go get a corporate job, and then you work there, and try not to totally hate your life until you retire. Then you retire, and then hopefully you live a little bit before you die, but you get to spend some of the money you earn.

And so I thought that was what I was gonna go do. I went to UW-Eau Claire. I was told it was the Harvard of the Midwest while I was there.

Stephanie: I went to La Crosse, and so Eau Claire’s about, what, 45 minutes above Black River Falls, which is where my business is. So Dan is right there. I’m in the wheelhouse.

Dan: It’s on the I-29 corridor.

Stephanie: Yes, we always said the snobby kids who couldn’t get into the cities went to Eau Claire. Can you concur or deny?

Dan: I didn’t really meet any snobs. I would say the snobby kids went to the big city. The redneck kids went to Eau Claire. We had an archery range on campus. I was the president of our rod and gun club, and so we would literally have hunting and fishing tournaments all the time. It was a pretty redneck, beer-drinking university.

Stephanie: Yes, yes.

Dan: But we learned a lot too, and I did the thing where you do a victory lap. I ended up with three majors and just did five years and took all the classes with a lot of beer breaks in between. That part of me has not changed. I’ve always been very good at working hard and drinking a few beers when I’m done.

So then I went to the corporate world. I worked at Cargill, which is one of the biggest private companies in the US in the agriculture space. I did accounting for a minute, and then I was like, man, accounting in the corporate world is super lame and boring. Not at all for me and my personality style. I like to be creative, and apparently if you’re creative in the accounting space, you get thrown in jail, so you gotta be super careful.

So I did that for a minute. Then I got into trading, like financial commodity risk management trading. That was super fun. Did that for a while. Did some M&A and huge financial projects, like building plants, shutting plants down, pushing $100 million projects. That was cool, but I always had this entrepreneurial itch, and it felt like in that type of world, A, like at Cargill, to run a business, you had to be willing to go live anywhere in the world. I went to China, I went to Central America, and did some really cool things. But every time I was gone for weeks, I was like, I just wanna be back in Wisconsin chasing some big bucks around and getting out on the boat.

At some point, I was like, this ain’t for me. I’m not a big city dude. I’m not a travel-the-world sort of dude. Don’t get me wrong, I do love traveling the world, but there better be some hunting and fishing when I get there. In China, it turns out — and no offense to the people in China, the people in China were frigging awesome — but they’ve already eaten everything. Like, there ain’t no wild animals. There’s no wild animals. It’s so populated. You get to Shanghai, and it’s like New York City times 10. You’re on a bullet train for an hour, and you’re still in skyscrapers. It’s nuts.

But that world was just not for me. So I had this entrepreneurial itch to scratch, and a buddy of mine had bought a window cleaning business for no good reason other than it was cheap enough that you couldn’t afford not to. That was the logic. He had done some financial advising in the past and was my financial advisor for a minute. When he told me he was leaving doing that to buy small businesses, his idea was he was gonna buy ’em, flip ’em, more like an investor style. And I said, “Hey, financial analysis is my jam. I love that. So if you need help setting up the books or doing M&A and financial analysis to figure out how much something is worth, that is literally what I do for a living and have fun with.”

As he started buying businesses, he had a couple of other partners, and the second business they bought was a window cleaning business. They turned it around, and then they said, “Hey, you know what? This is actually kind of fun, and we’re pretty good at it. Let’s go buy another one.” So we started in Minneapolis, and we bought one in Cincinnati. Then one of our employees there, her dad had a window cleaning business out in Portland, Oregon, so we bought one out there.

Accidentally Buying Maid Service Companies

Dan: Then we said, and this is why I’m on this podcast right now, “Hey, these window cleaning businesses kind of suck in the winter. We literally have nothing to clean in our cash flow. We lose like 100 grand over a couple months. Why don’t we go clean the inside of the houses?”

That was a terrible idea, but we pursued it for quite a while. We literally started cold calling maid service companies, and we cold called a guy named Derek Christian, who had a business called My Maid Service in Cincinnati. To our surprise, when we said, “Hey, we’re just calling around, seeing if any maid service business owner wants to sell,” Derek was like, “Yep. Actually, I know this guy, Sean Day, up in Cleveland, and he might be looking to sell too. And there’s a gal that I know down in St. Louis, and I think she’s looking to sell.”

So we went from buying Derek’s business to buying Sean’s, and Sean and I still work together. We bought his and we just didn’t let him go. We bought a gal named Kathy Gage, we bought her business down in St. Louis. We added one out in Portland, Oregon. We bought one down in Tampa, Florida. Then I left the corporate world in September of 2016. I had help with a bunch of these acquisitions, was still doing the corporate thing until my wife got out of her MBA program. Then she went and got the cushy corporate job, and then I got to leave and screw around.

I left the corporate world to go run, at the time, I think we had like 100 employees in all these locations around the country. We had bought everything. So my first thing as the CEO of this business was, “Well, we gotta figure out how to grow this thing from the ground up. We’ve never proven that we can do that.” Then I started a service business in Minneapolis, and was out scrubbing toilets every day, and grew it to six people, and was the lead tech, and the assistant tech, and the trainer, and all the roles that you are in that phase of the business. Eventually sold that ’cause I could not find somebody to turn it over to, and had 100 employees around the country.

One of the things we had done — and for your listeners, I do not recommend having a bunch of locations across the country. It was miserable. I just think back to like, damn, if we would’ve just stayed in Minneapolis, how good of a business we could’ve grown. Instead, every time something would start to work, we’d be like, “Let’s go buy one way the fuck over” — can I swear?

Stephanie: Yes, fuck yeah!

Dan: Okay, okay. I assumed I could, but I was like, I should probably bear with it. Like, let’s go buy one way over there, where we have no control over what’s going on, and then, and it’s brand new to us.

Stephanie: Was it just like shiny object, or like, why the lack of focus? What was that?

Dan: Because they got into it as investors. The intent was to buy businesses and flip ’em. So if there was something that was a good deal, it wasn’t about the operation. It wasn’t about the client, it wasn’t about the employees, it was about — that makes it sound cold. Obviously all of those things did matter.

Stephanie: No, I know what you mean. These were financial decisions that, black and white, it seemed like a good idea.

Dan: Yes, yeah. At the time, our initial vision, as stupid as it sounds now, was like 50 locations. We had it mapped out by city, which markets were the best, based on demographics and growth rates and all that stuff. And we weren’t gonna stop at window cleaning and maid service, we were gonna look at lawn care, and we were gonna look at adding on home services.

Stephanie: So was the goal to be all franchise, or literally these are all individual companies?

Dan: They were gonna all be owned and operated under the same roof, so non-franchise. That was a terrible decision, because as we found out, when you go to these other locations, if you don’t have an owner there — St. Louis was the one that burned me the most. When you don’t have an owner there, your manager can just quit. So it turned into that, of like, every time we’d have something going right in one place, we’d turn around and look and be like, what the hell happened over there? There was just always one or two places totally on fire.

Amidst all of this — and this is kind of how I have a bookkeeping business now — that was what I started doing really early on when we started buying these companies, is I did all the books and the financial modeling and figuring out how to organize stuff and measure stuff so when we had locations around the country, we could tell what the hell was going on there. And so — and that’s my jam, again, is the financial analysis side of it, and the budgeting and the forecasting and whatever else.

We had a business that we had started that was purely an admin company, and it existed to do administrative services for all of our other locations. So it did the marketing, it did the recruiting. I mentioned Sean from Hire Lead Chill — he and I worked together for a long time. Still do, I own part of Hire Lead Chill. Had a meeting with him today. We had recruiting as part of that central division, we had bookkeeping. We had our phone team as part of that division for a while, to centralize everything, which is what private equity would do.

We were following kind of the private equity model. The problem was, we didn’t buy three to five million dollar businesses. We bought a lot of 500,000 to a million dollar businesses, and they just weren’t big enough to run themselves like a three to five million dollar business can, which is why private equity doesn’t get any lower than that, ’cause it’s still dependent on the owner. We thought we could solve that problem. We couldn’t. We were dumb.

The Catalyst to Simplify

Dan: In hindsight, I started doing bookkeeping for other companies, just buddies of mine that needed help and asked for help. That one client turned into 10 clients, turned into like 100. At one point, we had 300. And I remember, so now I’ve got this growing bookkeeping business, and Sean was doing the same thing on the recruiting side. Our admin company became our biggest company of everything.

I had this trifecta happen, where everything changed. I was at a business mastermind event one week, and then the next week, I was down at Debbie Sardone’s CBF Live event down in Dallas. Both great events. But then the next week, while I was traveling, my general manager in St. Louis put in her two-week notice. So then I had to travel a third week in a row, and go there and try to solve that, and I missed my four-year-old’s birthday.

That was it. That was just the catalyst I needed. And don’t get me wrong, I don’t rather enjoy four-year-old birthday parties. They’re not exactly my favorite time. But when it’s your four-year-old, even if you don’t give a shit about the party, you care about being there for your four-year-old. I was like, oh, damn it. I’m that dad. I’m always gone, I’m always working, there’s always something that’s a different priority. I remember in that instant, I was like, I’m getting rid of everything. I’m going down to just the admin company because we can do it remote. I hunt and fish a lot, I’m a total redneck, and I wanna do that with my kids and my wife.

Ended up slowly working our way out of all the home service companies. Then also had the realization, oh, I still have these three investors. I’m the minority owner. The three guys that started it were still the majority owners. I’m like, well, now this is silly because I’ve got this bookkeeping business, and now we’re up to 300-plus clients. But it’s not mine. I own like 30% of this thing. I tried to buy ’em out of it, and that didn’t go well at all. So two and a half years ago, restarted Best Damn Bookkeeping. Now we’re back to — I mean, in a really fast rush, we’re back to like 300 clients already. We have 35 on our wait list right now ’cause I had to — we were talking before we jumped on — I had to let one go, and then have one that’s in the hospital right now, just got moved from the ICU today. So we’re hoping and praying for her to have a full recovery. But as they say, when it rains, it pours.

You asked me earlier, well, what are you gonna do? And the only thing I know how to do is I’m just gonna work harder, Stephanie. I don’t know, I’m gonna work harder. I’ll figure it out.

Stephanie: Hey, I’m flying up to Wisconsin in a few weeks, and I’m like, put me in coach ’cause we just had rapid-fire new hires that were not working out and other people who are quitting ’cause they were, whatever, school, careers, whatever. It doesn’t matter what the details are. It’s just like, okay, my manager is telling me, now would be a really good time. I was already coming up, you know, extend it, throw me in coach. And it’s not like I wanna rely on that, but it’s like you need to be willing to pull that lever of, if this is what needs to happen, I am willing to do that. But it has to be — it can’t be the fallback all the time, ’cause that means, obviously, as you alluded to, we’re relying on the owner 100%, right?

That is a huge problem, especially with — our listeners are mostly under a million in revenue, I would say, just from what I know of our listeners. We have some who are maybe in the one to two million range, but the majority of them are under that level. So obviously, you’ve seen a shit ton of cleaning businesses at that size. You’ve bought a lot of cleaning businesses at that size. What were you seeing at that size of business? Under a million, I really wanna hone in on the patterns that you see. Obviously, you are a bookkeeping company, but you have such a very niche-specific background of being in the cleaning — it’s just like this perfect marrying, and it makes a lot of sense why you service home service, who you serve is cleaning businesses and home service businesses, ’cause you know your shit. So talk to me about what you saw in them.

The Purgatories of Scaling

Dan: Yeah, so when we were acquiring them, we were usually looking for an owner that had a good culture already built and was priced right. And hopefully they had somebody that was ready to step up and run the show. If they did, we could kind of come in and displace the owner and elevate whoever their manager was. In turn, we just found out that nobody had a good manager. Everybody obviously thinks their business is doing great, but most of the people we bought out weren’t truly honest with how much the business really needed them. Everybody tries to say, “Oh, it’s turnkey.” It’s like, no, you’re in there a lot.

Stephanie: You’re doing stuff, yeah.

Dan: Yeah, you’re in there a lot, or you wouldn’t be selling it, right? If it was so great, so easy, you just keep running it. You just keep owning it.

From a bookkeeping lens — and I’ll frame up our bookkeeping before I get into what I see when we’re doing books. I very much view bookkeeping differently than what your tax person is gonna tell you bookkeeping is. Most people say bookkeeping, and they’re talking about, “Oh yeah, we’ll categorize some stuff so that it can be in your QuickBooks so that you can use it to do your taxes.” I think that’s bullshit. I think bookkeeping is a finance activity. It’s all about organizing your data and reporting it in a way that’s industry-specific against industry-specific benchmarks. So it creates a report card for you. The idea of using it to do your taxes — sure, but that’s not the point of it. That’s just the aftermath of it. That’s just the counting your chips at the end of it.

The importance of how it’s done and how often it’s done — we do ours for our clients every single week. ‘Cause when I’m running my business, I need data every single week. I can’t wait till the end of the quarter to see how the hell I did. We have metrics and KPIs and stuff we’re tracking, but I need to see what the report card looks like every month, so I can see if the decisions we’re making and the KPIs we’re measuring and the thresholds that we set are working, right? They have to be profitable, it has to work.

Given that lens of how we look at bookkeeping, I’m constantly assessing financial performance of all of our clients. I do have a really cool and goofy seat in that I get to watch hundreds of businesses and talk to hundreds of business owners. My job is literally to play CFO and coach for all of our clients. So all I do all day every day is obsess about business models. I have the luxury of getting to watch what works. There’s a pattern that I see over and over again, or a series of patterns. I call them the purgatories of scaling. And you’ll know if you’re in one, because when I say these things — or you’ll know if you just got out of it ’cause you’ll be breathing differently.

When I travel around and go to trade shows and I’m on stage, I call this — I have my bag of tricks, I have five or six different presentations I like to do — but this one I call my number one head-nodding presentation. When I’m on stage and teaching people the purgatories of scaling, the whole crowd’s just sitting there like, yep.

Stephanie: Yeah, you see the Vietnam War flashing happening in front of their eyes.

Dan: There was one guy, I was in Vegas at a commercial pressure washing convention. I had one guy that was at 17 million and he didn’t know that I was gonna talk about this. The day before, he talked about purgatories three and four. He said a million is the toughest. Three million was really hard too, but a million is probably the toughest. He had forgot about purgatories one and two. He was at 17 million.

Purgatory One: Getting Out of the Field

Dan: Purgatory number one is when you’re first getting out of the field and you’re trying to delegate that and replace yourself from being the lead tech. That’s scary and it’s expensive, and you don’t know what you’re doing. So you hire really shitty people and then you complain that nobody wants to work anymore. Then you need all these clients ’cause your client load has to double to get you out of the field, and there’s still not enough money left. So you do all this work and put up with all these people’s problems and you actually make less money.

Stephanie: Yes.

Dan: It’s super predictable. Everybody goes through it. I watch it happen time and time and time again. Usually around 150 to 250,000 really sucks in our businesses, ’cause it’s always people related and you run into problems you haven’t solved yet. You can’t just go clean more stuff as Steph or as Dan and solve the problem. You have to get the right people on your team and you have to be able to grow the revenue to be able to keep them all busy. So that’s purgatory number one.

You get through that — and what’s funny is you get through that and you start getting profitable again. Then you make the same logic error that gets us through purgatory number one. We get into purgatory number one by cleaning a bunch of stuff. We say, holy smokes, me and a helper, I did 100,000 of revenue and I made 60 grand or whatever. If I go to 200,000, I’m gonna make 120 grand. That’s what our brain does. We’re like, if I double my revenue, I’m gonna double how much money I make. I can make 120 grand at 200,000. In reality, you get to 200,000 in revenue and you’re like, I have less than 60,000. I actually went financially backwards to get to 200,000. That’s when we’re like, do I just go back? Should I just go back there and be a cleaner? I make more money when I’m a cleaner.

Stephanie: I can hear our listeners right now. I can hear them cleaning right now and nodding, being like, yeah, I’m thinking about doing that.

Dan: That’s my number one head nodder. It’s a real decision. And I will say, there’s not a right answer to that. Not everybody should scale a business. It sucks. Scaling a business really sucks. You have to make sure you want that set of problems.

I will talk about my problems openly right now, ’cause I’m in a set of purgatories. And I think it’s important that we don’t just post pictures of how big our team is and talk about the money we’re making.

Stephanie: We post pictures of Steph is flying back to go clean some shit. Like, it’s embarrassing for me to say that because I’m like, oh, I’m supposed to be out of this. But I think it’s so important to be honest and be transparent of, this sucks. I’m trying to avoid what happened last year, which was the same fucking thing, because we had this rapid-fire turnover in a very short succession, and I still haven’t solved it. And that’s embarrassing and it’s annoying. But I’m like, I’m gonna fucking push through. We’re gonna do this thing.

Dan: You’re in purgatory number three, you’re with me. You’re in purgatory number three. It’s just not an easy one. It’s a really tricky one.

Purgatory Two: Building Out Managers

Dan: Purgatory number one, you finally get to 250,000, 300,000, and then you start making money again. Then you have people that show up every day and clean every day. You’re like, oh, sweet. I’m answering the phones, I’m doing some bids, I’m helping out on big deep cleans.

Stephanie: Yeah, it feels good.

Dan: Maybe I’m jumping in and helping train somebody, but now I got this one gal that’s really good at training and she loves it. So then we’re back in this mode of, oh, I love my business again. And if I double it, I’ll make twice as much money. Our brain does the same thing. We’re at 300,000, we’re like, if I just get to 600,000 — and then you get to 500, 600,000, you’re like, I can’t manage everybody anymore. We got 10 people on the team. I need a manager to manage all the cleaners ’cause they’re coming to me with all their problems, and they have a lot of them because there’s so many of them. And I can’t keep up with these phones and all the sales and all these marketing decisions. I need an office manager to handle all the administrative stuff.

All of a sudden, now we have managers and we didn’t even know how to be a manager. Now we’re expected to manage two managers and we suck at it. And we promote — this was the one that bit me — when I had six cleaners on my team, I kept trying to promote a production manager. I got it wrong three times and I quit. I’m not joking.

That Minneapolis business — granted, I had my bookkeeping stuff going on, and we had so many employees around the country. I remember just a day where I had employees quit after employees quit. It was people that I poured my heart and soul into. I called my business partner. I was like, “Mike, I’m done. I’m listing it, I’m selling it. I’ll shut it down and get $0 if I have to. But I can’t do this every day anymore. I haven’t found the right person. I’m not confident that I am gonna find the right person. And it’s not me. I got too much other shit to do. This isn’t worth my time right now.”

Thank God, a guy named Mark Reisdorf came along and just happened to really want my business. It worked out. He bought it for a really fair price. I thought he way overpaid for it. I told him that. He thought he got a great deal. I was like, “This never happens, Mark. This never happens.” They still clean my house today.

Stephanie: That’s amazing.

Dan: I gave up in purgatory number one. Because I just could not get out of that spot. But when you do get through it, you get the right people. You get that insulation again. It gets tricky again when you need trainers and you need managers and all that. And it gets expensive because now you’re paying people to manage other people instead of just going.

Stephanie: Yeah, the overhead. They’re not bringing money in in that same way.

Dan: And your marketing’s gotta — your marketing ain’t word of mouth anymore. You’re spending money on stuff that you don’t know if it works or not. You’re gonna get some of that wrong and get that expense rolling through. You gotta rent a bigger space. So now you’ve got this fixed overhead of rent. You’re insuring a bunch of 20-year-old kids running around cleaning stuff. Those people are expensive.

Stephanie: You’re 30 now, so you can say “those people.” I know those whippersnappers. Software, insurance, like these huge expenses that it’s like, you need these things obviously to operate. But it’s all of those things — I totally agree. You think you’re gonna make all this more money, but at every stage, I swear, I make less percentage-wise.

Dan: Oh yeah, percentage-wise for sure. I think that makes sense that you would get less percentage-wise ’cause you’re buying insulation to some degree. Overall, as long as the dollars keep going up and you can delegate more and more and stuff, you buy yourself the freedom and you create opportunity.

I tell our team that all the time. We don’t grow our business to make more money for Dan. That’s stupid. Who gives a shit about Dan? I don’t expect you guys to care about how much money I make. I don’t want you to. I want you to really care about how good of a job we do for our clients. I want you to care that we uphold the business model, ’cause someday I plan on selling it back to y’all, and if it doesn’t make money, then future you is kind of fucked too. But we don’t do it to make money for Dan. We do it because we have to create future opportunities. ‘Cause if we just stay here, who’s gonna wanna work here? Who would wanna stay working at a place where there’s nowhere to go? The business has to grow to create the opportunity.

That’s the guilt I feel as a business owner. I have to be the hamster on the wheel creating that growth opportunity. My employees deserve something to look up and see an opportunity to go chase. And if the business isn’t creating it, then we’re doing a shitty job. Why would somebody wanna come work for this stale thing, right? But that’s easy to say, not so easy to do — how do you create that growth?

Tommy Mello in the garage door space, if you haven’t had a chance to see him speak — one of his favorite go-to lines that I absolutely love is, “Your dream has to be big enough that all of your employees’ dreams fit inside of it.” I think that paints such a great image of what it is that we need to build for our employees. They deserve us to build that for them.

Purgatory Three: Building a Leadership Team

Dan: Then you get the right manager, you get the right ops manager, you get the right office manager, and then you get into the purgatory we’re in right now, Steph, which is you start building out a leadership team and trying to transition. For so long, you are the growth engine. And growth is like love and fairness — I can’t really define it, but I know it when I see it. Some people just know how to hustle it and make it happen. But I don’t know how to write a delegation plan of, here’s how you grow a business. Because you just do it and you just figure it out and push and pull and build and whatever.

When you get to one to 1.5 million, that starts to get really weird because there’s so much growth happening, but you can’t manage the entirety of the process anymore. You start building a leadership team and you start getting a general manager that everybody else can report to ’cause it’s not good for them to report to you anymore. That gets really messy and really expensive. And you still are gonna have all these people problems.

You don’t have — like it’s still very whipsaw, and now you’ve got way more problems ’cause you have way more people, and your systems and processes need to be so much more defined. We ran into that in our businesses. There’s 25 of us on our team right now. Whenever 10 of us, we just figured it out.

Stephanie: Yeah, yeah.

Dan: With 25 people, you can’t just be like, “Our process is figure it out.” It doesn’t work anymore. You need to be really defined. And you’re still gonna have turnover. Like I mentioned earlier, we just let somebody go and then we have another guy in the hospital. When two of your heavy hitters are gone, it’s like, holy shit, you really feel it. There are some people that you get really dependent on, which is good and bad.

Stephanie: And then you can’t even — it’s tough ’cause you wanna grow the business, but right now you’re just trying to get back to stable and maintenance. That’s where I have — like last year we really ran into that too of, I have all of this fricking business and I can’t, it’s right there waiting for me to scoop it up, but I can’t even keep us at maintenance, let alone think about taking on more. And that’s that frustration.

Dan: I don’t get as frustrated with it anymore ’cause I think I see it so often that I’m just like — you accept it. Yeah, I’m just like, well, here we are. I remember telling our team — we had a couple of good months early in the year. I was like, “You guys, this is gonna sound really weird, but I know this is coming. We’re all gonna work our asses off and the business is not gonna be profitable this spring. We’re gonna be growing so — growth is expensive. We’re gonna be growing really fast. We’re gonna be elevating people, which means moving them throughout our profit-loss. It’s gonna create some more infrastructure burden. We’re gonna have to grow the business even more to pay for it.”

Sure enough, I think in April, which was only a four-payroll month for us, we did well over 100,000 bucks and lost two grand. In May, we’re gonna lose like 20. I always tell them, this is when investor Dan has to step in, right? Investor Dan will get distributions out of the business, but investor Dan also is gonna need to put like 20 grand back into the business here, because getting through these purgatories is really expensive. By June or July, we’ll make 20 grand instead of lose 20 grand. But it’s a rite of passage of — we have to make sure the right people are on the team. One of the gals we had to fire just wasn’t the right person to be on this bus to take us to the next level. That decision sucks. It sets you back a little bit, but if you don’t make that decision, you’re gonna grow something that sucks.

Every time we get through one of these, we have to shed the things that suck. There’s gonna be clients where you’re like, “I don’t want your money anymore. When I was smaller, I needed your money. Right now, you’re ruining my day. There’s so many people I need to take care of. I can’t have anything that ruins my day or that takes my energy away when I see that pop up on my phone.” If you’re an employer or a customer and your name pops up on my phone and I’m like, “Oh” — trust me, you’re gone. At that level, there’s no more room for it. It’s gotta be filling your cup.

You just gotta get skinny and make the changes. Then you can get through the purgatory, but it’s a bitch. It is a bitch. It is a bitch.

What Owners Lie About at Each Stage

Stephanie: I’m really curious. At each of the — obviously we’re kind of focusing on these three purgatories, ’cause that’s where most of us are at, right? You mentioned when you were buying businesses, a lot of them would fudge how much they are actually involved to make it more attractive as a buyer. What do you think looking back at — or just, you’ve seen so many businesses — what do we lie about at each stage, either externally or internally lie to ourselves? Especially when you’re coming in, you’re like, say I’m hiring you to bookkeep and I’m at stage one, two, three of purgatories. What am I probably going to lie to you about?

Dan: Usually at stage one, you lie about nobody wants to work anymore and that it’s impossible to find good help and these people aren’t teachable or coachable, but it’s really that you just suck at recruiting. And it’s normal to — that’s a phase you need to get really good at. One of the biggest challenges with recruiting is your competitors are everybody. When you’re marketing, your competitors are only maid service companies. Marketing is easy, you’re only competing against other people that clean houses. When you’re recruiting, you’re competing against the warehouse down the street where they could work and the fast food joints where they could work.

Stephanie: Oh yeah, where they can stand and make the same amount of money compared to physically getting down and scrubbing toilets.

Dan: You gotta be really good and you need to sell them. So many people try to interview — I think I mentioned this maybe on our last podcast — but I reverse interview people. I don’t ask them any questions. I need to sell them.

Stephanie: Yeah, tell them about the dream.

Dan: They need to know, they need to pick me. They need to believe in where I’m taking this thing. If they don’t believe in me, that I’m the right leader to follow, why would they come and work here? I don’t want them to come and work here. So I tend to see that’s a big issue early on — we just don’t know how to recruit people. So we get stuck.

Stephanie: Well, you see job listings that are basically a ransom note. It reads as, “Don’t come work here if you’re gonna behave like this. Don’t come work here if you’re —” it’s just all negatives ’cause the people have been burned so many times.

Dan: Oh God, yeah, yeah. You’re so cynical.

I think as you get to the next level, you really need to have really strong core values when you start bringing managers in, because you need to know why you’re promoting people and why you’re firing people. You have to get really good at firing people — clients and employees. That sucks, but if you keep a shitty employee, you’re gonna lose your good employees. That was why I had to make a hard decision a couple of weeks ago — it wasn’t a performance issue, it was a culture issue, and you cannot have that. Even on steroids at purgatory level three, where you’re really trying to build a leadership team and really hone in on that culture.

But it happens when you’re getting managers, ’cause if you promote — and this is a hilarious mistake we all make — which is we take our highest-producing person and we’re like, “Oh, you’re clearly the manager.” Sometimes that is the worst person to be a manager ’cause they can’t teach anybody else how to do it. They don’t have the skills to be a manager. Being a manager is such a different skill set than being a producer. So we trip over that a bunch of, we take the highest performer and we’re like, “You work hard, here. Well, now all these people report to you, good luck.” We don’t give them any systems or processes or anything to actually manage people.

Stephanie: Oh yeah, and that’s the hard part. Damn cats all over the place.

Dan: Did you just do a cat swap?

Stephanie: No, same cat, she just circled. She’s just doing laps around. But she just stepped on my keyboard, so I’m like, “Get out of here.”

But it’s really interesting because for me, I hit the lottery when it came to my managers. They all started as part-time cleaners. They all had professional backgrounds prior though, meaning they worked administrative roles, they’d managed, they’d done things like that. So I just got really fucking lucky with them. When people are like, “Oh, tell me how to find managers,” I’m like, “I mean, I found mine from my cleaners, but most of my cleaners are not who I would choose from anymore. None of them stand out. None of my current cleaning techs — the best of the best, they’re amazing. None of them would I put into an office management role. They’re not the people.”

It’s like I just happened to luck out. Don’t necessarily follow. Doesn’t mean you can’t find it, but I just had a call with an owner earlier today, she knows who she is when she listens to this, where she put somebody in the office, now she can’t even open a fucking spreadsheet. And I’m like, “Why is this person in this role?”

Dan: Yeah, they should be out cleaning.

Stephanie: They were so good at cleaning, they took them out of their sweet spot.

Dan: Exactly. I almost lost arguably our best employee of all time. She still works for us in our recruiting business. Nikki is her name, and she ran our Cleveland location. She was a cleaner, and she just had that — but she had the right mentality to be a manager. So we made her the manager, and we’re like, “Hey, if you’re gonna manage this location, we should have you in the office. That’s where you should be, because that’s where managers are when you manage a location.”

About six months later, Nikki was like, “Hey Dan, I’m resigning. I just don’t like it, I can’t do this.” I was like, “What do you mean you don’t like it? You got promoted and all this.” She’s like, “I just wanna go clean. I hate when the phone rings, I get such bad anxiety.” I was like, “What? I didn’t know that. I assumed you wanted to be in the office to run the business.” I was like, “Well, can you still manage everybody, but do it from the field?” She’s like, “Can I? Do you think?” I was like, “Well, fuck yeah you can. You tell me.” You can be the manager and still be anywhere, right? You’re in this role for your leadership, and leadership isn’t a role, it’s a behavior. So if you can manage everybody, but you’re out cleaning, and you hire somebody for the office — immediately she’s like, “My friend Billy. Billy would be great for the office. We really only need somebody part-time.”

So then we hired Billy to run the office, which worked fricking great. They were this dynamic duo, and you could run the business and call the shots from the field. I was like, “Man, it’s so much more about the right person at that level.” It just astounded me. I was like, “Oh, you don’t have to do this from an office. You can do it.” There needs to be an office person — that role still needs to happen — but it doesn’t need to be the person in charge of everybody.

Stephanie: Yeah. And being flexible and making sure — I remember for me, one of our biggest turning points in my management team was they were all kind of responsible for, “Just get this pile of things done.” But there was no actual ownership or like, “You are specific, this is yours.” The roles were so all in a big pile of mush. That was a huge thing for us — being very defining and moving things around of, “Well, this doesn’t actually make sense to be on you.” And I think a lot of people are like, they feel they have to have the management role perfect and set in stone, where it’s like, a lot of times you get the person in there and it’s like, “Actually, you’re really suited towards this.” Having that malleability, I think is really important.

Letting Your Team Make Decisions

Stephanie: As you grow, just even understanding how to build out that org chart and what roles — you’re wearing multiple hats, and it’s okay to put yourself in the org chart in multiple places, just trying to understand those true workflows of who’s accountable to who and what does this role do and how does it function best.

Dan: So I run into that a lot. When you’re trying to find managers, you promote the wrong people and you put them in weird spots because you just force it ’cause you’re not sure, and you’re like, “I need to get out. I don’t want to do this anymore. So I’m just going to put somebody here and cross my fingers and hope it works,” type of promotion.

In the third purgatory, the issue I see is we build a business that we know how to grow, but we don’t know how to have anybody else help us grow it. We’re so afraid to turn over decision-making. Up until about a million bucks, we still make pretty much all the decisions. As we were approaching it, I was really intentional with Skip, our GM. Last summer, we were working on a new CRM and we both agreed we needed a new CRM. He’s like, “Well, I’ll go shop ’em around, and then you can tell me which one you want.” I was like, “No, no, this baby’s yours. You run it, you run the business. I grow the business, but you run it. Everybody reports through you and everybody else is going to be using the CRM. I’m going to be the worst user of it guaranteed.”

That has held up. I am definitely the worst. I’m like, “How do I create a task? What do I need to do this thing for?” So he did. Hilariously enough, he doesn’t really like the one he chose. He brought two of them for us to both review, and I was kind of like, “I think I like this one better.” He’s like, “I like this one better.” He’s like, “But it’s your call.” I was like, “No, it’s not. It’s your call. It’s gotta be yours.” So he chose the one that he liked. We don’t like it as much anymore, but I’m not mad about that. That’s such a good thing to go through.

So it’s not about disconnecting, but it’s about just trusting. In that one to 1.5 million range, you have to let other people make decisions, and you have to let them be wrong, and you have to support them. Again, if it goes against the culture, you have to get them the hell out immediately. If you build around that, you’re going to build just a toxic shitty place for everybody to show up every day. But you can’t make the decisions anymore.

That’s really tricky to do. Your role in that transition from a million to two million and truly building a leadership team is letting them decide and holding them accountable to decisions they need to make and the results of that decision. It’s fine if they screw up. That needs to be really clear. It’s totally fine if people screw up. We can coach that. We can teach it. We can do performance improvement plans. It’s not fine if they have bad behaviors. Like I mentioned earlier, that just needs to be, “You’re out of here.” You got to get really serious about that at that level about who really gets to come on the journey to the next level. ‘Cause it has to be the best of the best of the best of the best people, or it’s not fun to grow it, but B, it’s really hard to grow it if there’s people undermining that culture.

Stephanie: I totally agree. You said like getting out of your own way of the control — because it feels so scary, because it’s a much bigger ship that we’re sailing here. It feels like, well, I have to be more involved, right? I would say one of the best things to happen for us was me becoming busier with other things where I am not available to answer things. The manager is like, they have to make a decision ’cause I’m not there to make it for them. And like you said, always give that feedback of, “Well, next time maybe we can adjust.” I would much prefer them to be empowered to just make the decisions, and then we can discuss after if in the future we need to do something different. Even big decisions of, if they understand your core values and culture, I don’t even do the hire. That’s not my job or my role in the business. But it is my job to see patterns of, “This isn’t working. We need to adjust something about the hiring process,” but then you go and implement it. So I totally agree — otherwise you’re gonna be pulling your hair out. You can’t have your fingers in all the pots, ’cause otherwise you can’t have the vision.

Dan: It is a weird exercise. Recruiting for our account managers is one thing that might be the last thing I give up because I’m such a stickler for who I let in.

Stephanie: Also your business is a bit like — I feel like hiring a cleaner versus hiring what you guys do. Let me clarify.

Dan: Not to put down cleaners. I don’t wanna make it sound like our bookkeepers are less valuable, but we have a team in the Philippines, and I want them to call the shot on that. They know the nuances of that culture better than I do. So I want them to be the gatekeepers of that and be held accountable for that. With our account managers, I wanna be the gatekeeper of it because that is where I expect the highest execution of our core values. When I do that reverse interview, I use so much time talking through the core values. I literally tell people on that interview, “If I go through these core values and tell you stories about why we do things the way we do things and your reaction is, ‘That’s neat,’ do not fucking come and work here. Please, for both of our sakes, you deserve to go somewhere where when you go through the core values of that company, your reaction is, ‘Fuck yeah, you can’t stop me from working here.'”

I literally say that verbatim. When I go through these, that has to be your reaction. People will drop off at that point in time, at which point I’m like, “Thank God they dropped off.” They started working here and then they started talking to one of our HVAC clients or our electricians, they’re going to have a challenge.

Stephanie: You know what, that’s what I love too. Obviously you are a master of branding because I would say that you are so authentically who you are, and you’re very unapologetically who you are. Obviously we really jive, even the cursing or whatever. I know some of our listeners — I put a warning in the front — but it’s like, it’s not something that I am going to change because this is who I am. The audience that you bring in jives. You’re exactly who you are. I know I keep saying that, but you have to be — that’s your brand. You gotta be if you’re going to try to grow something, otherwise you’re going to attract a bunch of people that are following a fraud.

Dan: Yes, yes, exactly.

Stephanie: Like you said, especially with who you’re serving of blue-collar companies — we’re going to be this way. So if you can’t jive with that and you’re very uptight, it’s not going to work, right? I love that. The name of your company speaks to the brand, you know what I mean? Filthy Rich Cleaners — it’s supposed to draw somebody in who’s attracted to very transparent. We’re going to talk about money. We’re going to talk about the audaciousness of business for sure.

Why Bookkeeping Is a Finance Activity, Not a Tax Activity

Stephanie: Obviously I want to talk about money with you, Dan. When it comes to — I do money stuff.

Dan: It’s a thing I do, I do money stuff.

Stephanie: You do money stuff. So let’s talk about some money stuff, shall we? Okay, again, since we’re talking in these stages — when it comes to the bookkeeping side of things, I really love how your framework around it is that this is to make financial decisions, like to take action, right? Bookkeeping for you is to take action in the business, as opposed to it just being a thing you do for taxes. Where do you think people can get to in the purgatory stages with still behaving like bookkeeping is — do you see people in stage four who are still acting like bookkeeping is just for taxes only?

Dan: Not a chance.

Stephanie: Okay.

Dan: The farthest along I’ve seen somebody is about a million. I don’t think I’ve ever run into a business owner that hated their business more. Think about it: if you don’t understand what’s going on in your business, that happens a lot when we’re early on. We don’t have good books, we don’t have good data, but we know what’s going on in our bank account and we still touch all the money.

When you have 20-some people working for you and you’re doing a million-some of revenue, the amount of money coming and going and chaos that’s coming and going — if you don’t have good numbers, your head’s going to fly off. The amount of anxiety and uncertainty — I remember meeting with that person, they were the most miserable person that I’ve met with. They have a good business, doing a million bucks, right? That’s great, everybody wants to do a million bucks. They were scared shitless of their business. They’re like, “I have no idea what’s going on. I just hope I can make payroll tomorrow.” ‘Cause their payrolls were big, right? They’re talking like 20 grand in a payroll.

Stephanie: That’s stressful, yeah.

Dan: It’s totally stressful.

The Million-Dollar Fallacy

Stephanie: Why do you think — I mean, do you think it’s just like — I remember when I was smaller than a million, I was fixated on that. Like everything’s going to change, it’s all magical when you hit that. Why do you think we feel that way, and what fallacies do you think are related to that? Like of, “Actually no, you’re probably going to make less money. You’re probably going to have more stress.” I know for a lot of our listeners, a million-dollar business would be a dream. So I’m not telling you to break that dream and piss on it, but what do you have to say about that?

Dan: I think — actually, I have a presentation I give on this about goal setting and making sure we’re chasing the right thing. So often we chase somebody else’s dream, and we’re like, “Oh, a million dollars. How cool would that be?”

Stephanie: Sounds good. We don’t really know why. We don’t know what. We think our goals are around money, but so often money’s just a tool to actually chase our goals.

Dan: I really had to reckon with that when I restarted a bookkeeping business. I was like, “Well, we made plenty of money in my last business, but that wasn’t fun. I wasn’t happy. So what am I really here for?” Back to the authenticity, I think that’s why I’m so just diehard authentic. I had to run a business for somebody else for a while where — and I was able to be myself, not saying I wasn’t, but now when it’s totally mine, I’m just doubling down on it. If you’re not with me, fuck you, get out of here. We got a lot of people that need help and this is how we’re gonna do it. And if you don’t like it, just get the hell out of my way. We’re gonna go help a ton of people and we’re gonna have tons of fun doing it. More fun than anybody else.

A million is just easy, right? It’s a good round number. It’s bigger than what most are doing. When a lot of us started our businesses, that was a threshold we’d look at. We’d look up there and be like, “Oh, they’re successful.” But if you talk to anybody that is at a million right now — we’re at about 1.3 in our business — they usually will tell you how much it sucks if they’re being honest. And it doesn’t suck because there’s not also a lot of cool shit that’s happening. Just remember, as business owners, we’re all obsessing about the problems that we’re facing in our business. We have a lot of cool shit that goes on in our business, but the cool shit is already solved. We’re onto the next problem. There’s never a time in your business where you’re not solving a problem. The minute you solve a problem, you create the next one.

Don’t get discouraged by that. If you’re a business owner, you better fricking love problem solving, ’cause that is literally what you are in the business of. And if you are in the business of problem solving, you are also in the business of decision making. And if you are in the business of decision making, well, you better fucking know your numbers, ’cause every decision you make in a business is numerical. There’s no way around it. Even the fluffy employee engagement ones are numerical. Employee engagement costs money and employee attrition is expensive. You should know how much it costs you to turn employees over and turn them over real fast if they suck. Don’t hang on to them, it gets more expensive.

Everything is numerical. That’s where I look at bookkeeping — it’s really a finance thing. It’s not an accounting thing. Yeah, we need to do nerdy accounting things to organize the data the right way. But then we got to report it in an industry-specific way. We use a dashboard that looks like a report card, except instead of letter grades, we give color grades. We’re not letters people, we’re numbers people. We do green, yellow and red against industry targets. Green if you’re below the target, yellow if you’re a little above it, red if you’re way above it.

It’s not that green means you’re doing a good job. Green means you could be really under-investing in something like marketing. If I have a client that’s like, “Hey, I really want to grow,” and then they’re spending 2% on marketing, I’m gonna be like, “No, you don’t. You think you do, but you’re very afraid to and you’re not putting any investment into it. You’re not gonna grow if you’re not willing to invest in it.” Red doesn’t mean you’re doing bad. If you’re in the red on marketing, and let’s say you’re spending 15% on marketing, that doesn’t mean it’s good or bad. It’s bad if it’s not working — that is bad. But if you’re spending a ton on marketing and you’re growing like crazy, then it’s fine. As long as, if you’re risk-on and you want to grow really fast and deal with the incremental problem solving that goes with fast growth, that’s fine. But you have to pick which set of problems you want. Not every set of problems is the same, and the right set of problems for everybody.

Stephanie: And what you’re describing is conscious decision making, not just letting it willy nilly. You’re making that decision. It’s being confident about it of, “Okay, yes, I’ve overspent.” I’d probably be red in the employee benefits section, but that’s what makes me happy and I like doing those things, and that’s how I want to spend the business money. So I’m making that decision. It’s not just happening willy nilly.

Dan: Yes, exactly, exactly.

How to Get Started with Bookkeeping

Stephanie: So I’d love to hear — for people who maybe right now their books is literally a spreadsheet, like is software not, like obviously I’m QuickBooks since day one. From the basics of, I know ’cause I meet with people all the time, and I see what they have, and they are not — a lot of people are not doing anything. I guarantee a lot of our listeners right now are feeling a lot of shame and overwhelmed. So in the last part of our conversation here, I would love just tactical: what should they start to do? How should they prepare? If they’re like, “Listen, I’d love to have a conversation with you, Dan, get on your wait list,” what could they do to prepare in order to be ready to work with a bookkeeper? ‘Cause I guarantee a lot of people are not even — I know, because they tell me — they’re like, “I don’t even want to hire a bookkeeper ’cause I’m so embarrassed.” It’s a mess. They’re afraid of the data.

Dan: Yeah, yeah. I would just say, if you haven’t started, that’s the best. Your books are totally clean if you haven’t started keeping them. I’m serious about that. The worst is when we get a QuickBooks that’s really jacked up.

Stephanie: Yes, time consuming.

Dan: Then I have the awkward conversation with somebody about, “We could clean it up but it’s gonna be really expensive.”

I’m gonna lay this out because people don’t always draw this parallel. Bookkeeping and maid service are exactly the same. Hilariously the same. The only — there’s two differences. One is we don’t need to drive to our clients’ houses ’cause we can clean their shit digitally. The other is I know that weekly is the right cadence. I don’t offer biweekly or monthly. We need to clean your house every week if we’re doing your books. There’s no alternative. We’ll bill you monthly, but we’re gonna be in there cleaning it weekly. If I ask you, Stephanie, what was that 300 bucks that you spent at Amazon last week? You’re gonna remember. But if I say, “Hey, what was that 300 bucks a month ago?” You’re gonna be like, “Shit, I gotta go look it up.”

We’ve looked at the efficiency. Efficiency is one of our core values that I’m really big on. I don’t want our team doing accounting for the sake of doing accounting. Everything we do is around doing it as fast as possible. Just like when you clean a house, top to bottom, left to right — you need to know that you can get through that house in three man hours, right? We need to do the same in bookkeeping. It’s hilariously the same.

If a homeowner hadn’t cleaned their house before, the next best time to start is tomorrow. The best time to start cleaning it — if you don’t have a house yet, then when you do have a house, like if you don’t have a QuickBooks yet, when you do have a QuickBooks, that’s the best time to get it set up ’cause it’s not a piece of shit yet. It can be really messy when you’ve let it go or you didn’t know what you were doing and you were just trying to force stuff in there, which is totally fine. With a lot of our clients that tried bookkeeping but they don’t actually know accounting, we just burn that old one down and start a fresh one.

Stephanie: Do you backlog? That’s what I always wonder when people are like, they’ve been trying, it’s kind of a mess, or like, say you burn it down and start over. How much do you backlog? That’s where my brain goes to, but what if you get audited?

Dan: So we have clients starting right now that we’re just gonna go back to the beginning of 2026. If they wanna go back farther, well then you just go rebuild it then, right? You can go back and re-grab the data, re-pull it. But I’ve worked with hundreds and hundreds and hundreds of — probably thousands of clients now actually — and I’ve never had one get audited. If one did and there was data that they didn’t have because they didn’t have bookkeeping before that, it’s like, well, if you start bookkeeping now, there’s no point in paying Best Damn Bookkeeping or whoever it is right now to go back and do all these years. Let’s just start at Jan 2026, and if you get audited and they say, “Hey, you need to go back to 2023,” well then we’ll call the bank and we’ll get some bank statements and we’ll go back and do it whenever. There’s no wrong time to start.

Stephanie: That’s really encouraging. I’m really happy I asked that, ’cause I know that’s a lot of people in their mind of, “Yeah, but then I have to do all this backlog.” I myself, my brain goes to that of, anytime I start tracking a new KPI, I then spend like a month backlogging it to the beginning. I’m like, “I have to.”

Dan: Well, that’s just out of curiosity. You just can’t help yourself.

Stephanie: I gotta know, like what was the lifetime value in the first year? Yeah, what’s my baseline?

Dan: I think with bookkeeping, the best — it’s the classic situation of, the best time to start is today, the next best time is tomorrow. If you need to go back for something, you can, but it just totally makes sense to start at January of the current year. So when you wrap up the current year, you can use it for taxes and you have a year’s worth of data.

Don’t Hire a Local Bookkeeper

Dan: I would say that this is a mistake I see so many people make. Before I even say it, I’ll preface by saying, grab time with me. You can go onto my website, bestdamnbookkeeping.com. There’s a link to book a demo with me there. I don’t care if you use our service or not, but I spend an hour with people on a demo, and the first half hour is just me teaching. Whether it’s why to be taxed as an S Corp and why to do stuff this way, or, “Oh, here’s some recruiting stuff.” We’ve hired hundreds of people over all my business. I own part of a recruiting company. If that’s a weak spot, I can teach on that. Then the back half is me showing the reports and stuff that we do and talking through our processes. Just book time with me. This is my favorite shit to do — help small business owners get their finances right. I don’t care if you use us. We got a wait list of 35 freaking people. Please don’t — please don’t use us. Thank you.

Stephanie: Good word.

Dan: We’ll get through our wait list quick here. We’re in purgatory number three. Give me a break.

Stephanie: Give me a break. Purgatory number three.

Dan: It’s hot in here. It’s purgatory. But one of the biggest mistakes I see people make is they hire a local person. A local person doesn’t know shit about running a maid service. They don’t know how to set your books up. They’re only gonna set it up super generically. And even worse is if they’re your tax person. Your tax person is only gonna set stuff up so that it fits into their tax software. They’re not gonna set it up based on what a maid service needs. They’re gonna set it up based on what they need.

The hilarious thing about it, which kind of sucks is, when a tax person is doing your books, they’re actually doing it for themselves. They’re doing the bookkeeping. They can use the data for your taxes, but they charge you for it. They should have to pay you because they’re doing the books for themselves. They’re not doing it for you. They’re not sending you industry reports. They’re not helping you make decisions. They’re not advising at all. They’re truly just doing it to make their tax lives easier. But again, they’re gonna charge you for it. And usually that’s a local person and they don’t know anything about a maid service. They can’t tell you, is your payroll on track? Is your marketing at a normal level? Is now the right time to go rent a facility? How much room do you have to spend on employee benefits? They don’t know. They don’t understand the business model.

Again, I don’t give a shit if you use me, but find somebody that’s industry-specific, that’s been out cleaning houses, that knows how your business operates. Because again, this data is finance data. It’s built on accounting, but it’s all about making sure your business is working. If somebody doesn’t know how the hell your business runs, how would they measure your data to help you run your business better? They wouldn’t know.

So don’t, for the love of God, hire somebody local. There’s nothing about accounting that needs to be local. Zero. It’s all digital. We have this video thing like we’re doing right now where we can get out and talk and screen share. You don’t even need to drive to my office. If I was local, it would be more inconvenient, which I always think that’s hilarious. They’re like, “Well, I want somebody local so that I can just go walk in.” I’m like, “You literally can meet with me faster.”

Stephanie: Yes. You meet with me faster and you won’t have to waste any gas and get out of your car. You can be on your phone. You can be on your computer. You can be at a lake. Just get some wifi or a little cell signal. We can have a meeting and we can screen share everything. Everything’s digital. You don’t need to come in.

Dan: Fabulous. I’ve got pajama pants on right now. You don’t even have to put pants on.

Stephanie: Yeah, this is the world we live in. This is the world we live in. Don’t even need to wear pants to meet with me.

Dan: Don’t make that mistake. Don’t fall for the local thing. It just doesn’t do you any good if your tax person or your bookkeeper knows what the weather is and what road your location is. They need to understand your industry. That’s super important.

Stephanie: So valuable. A hundred percent. I think we get so hung up ’cause we’re a local service that we’re like, “Oh, we must work with local.” But I will say my worst accountant was my local accountant that my parents used for their business, and she fucking sucked. I did not like her and she was mean and she made me feel stupid.

Dan: Yeah. Accountants are good at that. They love to talk over your head.

Stephanie: And do super passive aggressive insults. Very much like, “Well, I mean, I thought you should know how —” I’m like, “I’ve never done this in my life. Why do you think I know how to fill this form out or even what form I need to fill out?” It made me feel very dumb for sure.

Dan: Yeah, accountants do that.

The CRM and QuickBooks Mistake

Stephanie: Okay, so definitely work with somebody who’s industry-specific. Don’t be hung up on local. Best day to start is today. If not, then tomorrow. What else? What other kinds of things can they do to prepare?

Dan: One mistake I see a lot of people make is they get mixed up — and every CRM does this. I don’t know if ZenMaid does it or not. You might know.

Stephanie: You’re the expert here.

Dan: All CRMs create an option to sync up to QuickBooks. There is no reason why you would sync your CRM up to QuickBooks, ’cause one’s accrual data and the other is cash basis data. Your CRM is invoices, how much work you’ve done, Mrs. Jones and whoever and where you did the work. That’s super important data, but none of that matters in QuickBooks. You don’t need any of your invoicing, any of your payment records in QuickBooks. QuickBooks needs your bank deposits. That’s what matters to the IRS. That’s what’s considered sales.

Over time they’re the same thing, but there’s timing differences between them. If you sync up your CRM, you duplicate all of your sales data, ’cause it’s gonna push in all your invoices and all your payment records, and QuickBooks is gonna go, “Oh, look, sales.” Then you’re gonna deposit money in the bank and QuickBooks is gonna go, “Oh, look, sales.”

Stephanie: Oh.

Dan: Your sales end up getting duplicated and it creates — it’s manageable. You can do it that way and spend all the time and effort to try to match those up and tell QuickBooks, “No, these things are the same.” Or you can just leave them unsynced because you don’t need any of that data from your CRM into your QuickBooks. You already have the deposits, and that’s what matters for sales purposes.

The data in your CRM and ZenMaid is still really important. When we report to our clients, we show them both numbers. Month to month, they are going to be different — how much you invoice and how much actually is in your bank account. Even if to the dollar you charge every credit card every single day, they’re still gonna be different because it takes two to three days for the money to get put in. You’re gonna have timing differences anyway. Then you add onto that, this customer didn’t get their card set up properly and Mrs. Jones’ card declined. There’s always gonna be differences. Over time, you obviously want to watch both of those. They should be the same over a longer period of time. But month to month, they can vary by thousands of dollars just based on the timing of one deposit.

Stephanie: That’s really fascinating to me. So when it comes to QuickBooks, does every customer — you want the individual customer names to be in there and then just associate all sales related to them, but it doesn’t have to actually be invoiced?

Dan: You don’t even need any of the customers in there.

Stephanie: Wow. Like customers, customer names. You’re blowing my mind. I’m like, no, no, no, no, no.

Dan: You need the deposit, right? The deposit from the bank is sales, but it doesn’t matter who the customer was. It doesn’t matter what kind of service it was, whether it was a one-time, whether it was whatever. For your QuickBooks and your income tax reporting and for your bookkeeping, none of that matters. Now for sales taxes — Wisconsin, Minnesota, we got some sales taxes.

Stephanie: I thought we were exempt because it’s a service.

Dan: In Wisconsin, it might be. In Minnesota, we have —

Stephanie: Yeah, Minnesota sucks when it comes to taxes.

Dan: It varies state by state. If we do a job in Minneapolis, in the city of Minneapolis, there’s six different taxes we need to collect.

Stephanie: Well, we’re right on the border. We get requests all the time from Winona, and we are never going to operate in Minnesota. I’m never operating in Minnesota. I’m like, “Fuck Minnesota, sorry.”

Dan: Yeah, you guys are out not dealing with your taxes over there. In QuickBooks, the one nuance to make sure is captured is, if a deposit comes in that’s not sales — maybe you borrow money, maybe you get an insurance rebate check, or maybe you put money into the business and write the business a check to fund the business for something — that’s the one thing that needs to make sure it’s caught and not put to sales, that it actually goes to the right spot. If you get a rebate from a supply purchase, you return something, it shouldn’t go down to sales, it should go down as a credit back against whatever the thing was you got the refund for.

That’s the one nuance with cash-basis accounting — you got to make sure that you don’t count things as sales that aren’t actually sales. But again, there’s no need in QuickBooks for any of the client data, any of the invoices, any of the payments — super valuable data. It’s super valuable. I literally tell people all the time that will meet with me to talk bookkeeping. I’m like, “What’s the CRM?” And they’re like, “Oh, I don’t have one yet.” I’m like, “Why are we talking? As your bookkeeper, I already know, I’m your CFO now. If you’re going to use us for bookkeeping, I’m your CFO. I don’t even need to look at your books to know the next thing you need to do by the end of the day is go start looking at CRMs. It’d be crazy to run a maid service business or any other home service business without an operating system. You don’t need bookkeeping right now. You need a CRM.”

Stephanie: Yeah, if you’re writing on a calendar or using Google Calendar to do everything.

Dan: Yeah, don’t call me. Call Steph, don’t call me.

Stephanie: You need ZenMaid before you need bookkeeping.

Dan: You need a CRM to run your business with. Once you start running your business and making money, then you need somebody to help you keep track of it.

Stephanie: This is really fascinating. I’m gonna have to book a call with you, Dan, because I’m such a psycho about everything being in QuickBooks. Like everything has to be in there. And I use that — I love pulling the reports in QuickBooks. So that’s why I enjoy everything being in there. I’m going to have to book that call, Dan, but then not hire you.

Dan: Yeah, yeah, hey.

Stephanie: You can’t hire me. I’m unhirable.

Dan: Unhirable, yes. That’s super fascinating to hear. Wow.

The Five Spending Decisions of a Maid Service

Stephanie: When it comes to — since you do have such great knowledge on industry-specific — is there anything specifically related to cleaning businesses on the finance or bookkeeping? Or maybe it is just general — like they don’t track any KPIs at all. Is that the biggest problem that you see, is they simply are not tracking?

Dan: Yeah, I think early on, people just don’t know what to track and how to group things. One of the things we do — and why I call our dashboard a report card — is we group all the money that a maid service spends into five different types of groups. There’s really only five decisions that we make.

The first is always production-related decisions of who’s going out to clean it, where is it, what do we need to clean the thing, and how are they paying us? We’re going to spend a certain amount of money to just go clean it. That’s truly an expense. When we think about how a business works, yeah, Mrs. Jones is going to pay us 200 bucks, and it’s going to cost us around 100 bucks to go clean that thing. We want the cost of our service to be somewhere just a little over 50% usually.

We’re obviously not done spending money yet, but now there’s four other spend decisions we need to make in a maid service business. I always try to coach all of our clients that all of these are investments. I beat them over the head with that word, because an investment has to make you more money. You wouldn’t invest money if you thought you were going to lose money, you just wouldn’t spend it.

Those four investments — the first one is always marketing, because when we’re like, “Oh, we just went and did this $200 job and we spent 100 bucks to go clean it, we still have 100 bucks left. That job went well, we should go do more of them. How do we get Mrs. Jones’s job? Let’s go run some more ads or put out some more yard signs or door hangers or whatever our client acquisition decision is.” Within that, when we talk about marketing, there’s maybe ad spend, there’s maybe labor for who’s running our social media stuff, who’s producing our podcast. There’s software sometimes for stuff like this. There’s software for getting Google reviews or sales software tools — anything around client acquisition decisions we put into that marketing group. There’s a lot of sub-accounts in there, but it’s all about client acquisition.

Then it tends to be, when we start doing more marketing and getting more leads, we have more estimates, more quotes to do, more emails, more phone calls, more follow-ups. We need admin help ’cause we can’t manage all of them anymore. So that’s our second investment — people infrastructure. We need VAs, we need office managers, we need nerdy bookkeepers. Anybody that you hire that’s helping you run the business could be on your team or it could be a third-party service. Coaching groups I would put in there, where it’s a recurring thing that’s coaching you to help you be a better manager or leader. All of those are administrative, professional things. They’re not out cleaning, they’re working on the business instead of in the business.

You will — and we all go through these phases where you’re half in the field, half out of the field. There will be times where you’re like half cogs and half admin. When you’re no longer that, then there’s gonna be somebody else on your team.

Stephanie: Someone else. We have those hybrids, yeah.

Dan: You always got the half-sies. That’s totally cool. From a nerdy bookkeeping standpoint, for some of our clients, we’ll actually split that person up and put half of their wages in each bucket because it’s just so important.

Stephanie: We started doing that, yeah. I have my whole position of Hannah. She is our field development and quality assurance, but she is the on-call person. She’s also training, and I wanna know how much it costs to train somebody. So we literally break hers all out now.

Dan: Yep, yep. She’s the most divided human on your team.

Stephanie: Oh my gosh, yeah.

Dan: There always is. And then when it’s not her, it’s the next person. Somebody’s always in that type of role.

We have our admin team. I will say that is the trickiest thing as we scale, especially at this million-dollar level. That admin team is very challenging, not in who they are and what they do, but we can’t tell if they’re doing a good job. Your technicians, you know today, how much money did they create? Was Mrs. Jones happy? How long did it take them to generate that revenue? You know if your cleaners did a good job the day they did it.

I always joke when I’m on demos with people — I always say, I make that point and I’m pointing to the dashboard that we use, and I’m saying, “Right now, are you and I doing a good job? We’re doing administrative stuff right now. Are we doing a good job?” It’s impossible to tell. So I love having that line on a P&L broken out. In maid services, generally 15 to 17% is the sweet spot that we’d spend on admin. If we’re high on that and it’s stuck there and our business isn’t growing, then we have either the wrong admin people or we’re not getting out of their way and/or we’re not challenging them to grow our revenue. Maybe they don’t even know that their job is to grow the revenue.

Again — and this always sounds cold — they’re just an investment. I always like to fall on this sword: if somebody hires us for bookkeeping, we’re just an investment.

Stephanie: Yeah, don’t take it personally.

Dan: We have to make them more money. If somebody hires us, we have to make them more money. If they can’t look at what they pay us as an investment and say, “Oh, that’s totally worth it. It makes us way more money than it costs us,” then you got to fire us. That’s a shitty investment if we cost money.

So you have your admin team helping you run the business. Then you start acquiring fixed overhead stuff. This is all the stuff that sucks the wind out of the business, but it’s necessary. It’s rent, it’s insurance, it’s interest on loans, software like ZenMaid or a phone system, interest in utility bills.

Stephanie: Gusto, that type of stuff, yeah.

Dan: You’ve got these recurring infrastructure-y bills, but you can’t get rid of them. That’s not good or bad. You just have to be really thoughtful about when you add them. Once you have ZenMaid, you’re never going back. You’re never gonna run a business without a CRM again. Once you rent a facility, it’s really hard to get out of. Once you have the insurance, it doesn’t go down. We measure that as proactive infrastructure decisions that we put in place as we grow the business. That’s its own bucket of decisions.

The last one is what I call variable overhead or discretionary overhead. It’s all things that are opportunistic, one-time, reactive expenses. It’s employee engagement. You can do an employee engagement thing — and if you have a lot of money, you might take all your employees out to a restaurant and throw a big party. When money’s tight, you’re like, “We’re ordering pizza and I’ll buy a case of beer for the shop.” The money’s always gonna dictate.

Recruiting, we generally put in there, because you can go make a Facebook post or you can spend a couple grand on Indeed ads. There’s no right or wrong way to do it. It’s variable because it’s gonna be reactive to the current situation that you’re in. Meals, entertainment, travel, going to live events is in there too, because you could fly first class on Delta or you could take a bus. So it’s all these different types of decisions.

Like I said, we group them into those five brackets — or buckets, I call them often — because it tends to be, as we scale the business, we don’t suck at all of them. We usually only suck at one or two at a time. We can color-code it against industry targets and say, “What’s working, what’s not working, where are we losing? Where are we bleeding in the business?” At least then we don’t need to try to solve all the problems in the business. We just go work on that specific problem area in our business.

Stephanie: Oh, that is so useful. I’m like, “I can’t wait to bracket it that way,” because that feels a lot less overwhelming of, “Okay, this is actually the actual problem.” Even like you saying 15 to 17% admin, I’m like, “Oh, we’re at 16% usually for my office managers.” I’m like, “Oh, that made me feel so good.” That’s not the problem, okay. Moving on to the next bucket. Where’s the red at?

Dan: Right.

Why Knowing Your Numbers Beats the Anxiety

Stephanie: What you guys are seeing in real time, what having data does for your peace of mind — the fear of the unknown is oftentimes way worse than if you just rip the fucking Band-Aid off and look the data in the eye, because then you can solve something, right? Not knowing is scary.

Dan: It’s worse when you don’t know. The anxiety is worse when you don’t know. At least when you know, you’re just like, “Well, this fucking sucks.”

Stephanie: Yes.

Dan: All right. Okay. There’s so many things that suck as a business owner. None of us should be afraid of that. That’s all we do all day is work on things that suck. We don’t get to work on the stuff that’s working.

Stephanie: Exactly, yeah.

Dan: We just keep working on things that suck. Once you’ve been at it for a while, that part’s not so scary. It’s the unknown that’s scary. That is what causes a lot of people to avoid bookkeeping — it’s still an unknown, and it’s scary when it’s unknown. But once you know it, it’s no longer scary. Then it’s just reality. Then you can get after it.

Stephanie: Yeah, and honestly for me, that’s one of my favorite things I do every week — yeah, update all the numbers — because it soothes me, because it tells me what the hell’s going on. I literally feel like if we’re on my vacation or something like that and I fall behind even a half a week on that, there is an anxiety in there. It’s just like updating my personal budget. I was just up in Boston. I haven’t done my budget after all that shit, getting black eyes and stuff.

Dan: Getting black eyes.

Stephanie: Just having lots of fun. I haven’t updated my budget yet. There’s that sense of unease of, “I don’t know.” Once I do it, I’m gonna feel a lot better, ’cause I’m like, “At least I know.” Then I can go off of a place of knowing. For anybody feeling that sense of fear or dread — it’s not good. That dread is not gonna get better. In fact, as Dan’s telling you, you will not get to a bigger place without it all collapsing or you feeling like shit all the time if you do not solve this problem. And by “solve it,” I mean address it. Not necessarily — there’s always gonna be problems with it, but look at the damn thing.

Dan: Yeah. And one of the things that I think is cool about our business — and this is totally a cheat code after having built a bookkeeping business before — we used to send PDF reports. The industry targets haven’t really changed over time. Businesses need to be profitable. That’s not rocket science. We used to send people a PDF report and nobody would look at it because some people just didn’t understand it. Some people didn’t know how to read a P&L and didn’t know the difference between that and a balance sheet, and why they’re different than your bank account.

What I found was, we just need to send a video to people. We have all this technology. So now at the end of every month, every client’s account — and this is what is burying me when we jumped on. You’re like, “How are you doing?” I was like, “Oh, I’m a little overwhelmed.” I have 100 clients I need to record month-end videos for. One because she’s in the hospital, one because we let her go, and I didn’t want the new account managers taking over her clients to have the burden of trying to do a financial analysis for a business they just acquired. So I’m doing all 100 videos, which when our account managers do them, they’re like two to five minutes. They’re not trying to make recommendations. They’re a tour guide. I coach them — I don’t want them making recommendations. Their job is to read the data to the client.

Stephanie: Explain this, yeah.

Dan: Help the client understand what’s happening in their business. I can’t help myself when I get into one. I’m like, “Here’s the relationship between these things, and then this is how this is impacting this one. So you’re like — here’s some, maybe you got the cart before the horse here. Here’s some ways to think about this.” So mine ended up being five to 10 minutes. I’m like, “Man, I got a frigging 100 of these things to do.”

Stephanie: It’s go time. It’s go time, Steph.

Dan: Oh, you got this.

Stephanie: I’m excited. I would love to see you after that 100. It’s just like, is there a dead look in your eyes?

Dan: I’m halfway through.

Stephanie: Oh, you don’t even look dead in the eyes, really.

Dan: I did get out fishing this last weekend. I need my reset. I got to get out in the woods, on the water a little bit, have a couple of beers, and then I get my reset and get back after it.

Where to Find Dan

Stephanie: Oh my gosh, Dan, I could talk to you for hours. I did on your podcast. Guys, if you want to go check out the podcast I did with Dan on his channel — Dan, where can they find that?

Dan: Home Service Happy Hour Podcast. It’s out on all the podcasty places. It’s out on the YouTubes and the Facebooks as well. I think on Facebook, it’s under the Best Damn Bookkeeping Business page. On YouTube and TikTok and Instagram, I believe it’s under Home Service Happy Hour. If you Spotify it or Apple Podcast it or whatever you do, it’s out there.

Stephanie: Okay, we’ll definitely link it down in the show notes. We’ll link your podcast, Dan. We’ll link all of the things about you. So guys, reach out to Dan, jump on a call with him. I know I’m going to, because my mind is just churning here. This has been — like, we are going to have to do another episode when you are caught up because I want to talk about the recruiting stuff too — that you obviously, with Hire Lead Chill, I want to lead — is that what it’s called, Hire Lead Chill?

Dan: Yeah, Hire Lead Chill. You got to hire them first, then you got to lead them, and then you get to chill.

Stephanie: You get to chill. Oh yeah, I want to talk about that too, but we got to cut it here. This has been amazing. I’m so grateful for your time, Dan. I just love talking to you. It’s awesome talking with you. And actually I have a feeling my boyfriend’s going to be in love with you because he listened to the last one. He was like, “Dan’s so cool.” His dual degree is in accounting and finance.

Dan: My man, my man.

Stephanie: He’s so much like you. He’s like, “I would crack a beer with that guy any day.” I’m like, “Yeah, you guys would get along really well.”

Dan: Yeah, we will. Next time we’re up north.

Stephanie: Dan, thank you so much. And everybody else, hit that like, hit that subscribe, go subscribe to all of Dan’s stuff because he is awesome. We will see you on the next episode of Filthy Rich Cleaners. Bye guys.

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