Setting our financial goals is a must in order to level up our business and ensure success. Join Lisa Hylton and Susanne Mariga, author of Profit First For Minority Business Enterprises, as they delve into a conversation on achieving entrepreneurial goals financially. Susanne Mariga is a certified public accountant, tax coach and chartered global management accountant with over two decades of experience who have helped clients achieve their financial goals and continuous growth through business and personal tax planning. She shares inspirations that led her to write her book. In this episode, we will enhance our knowledge into ensuring long-term financial stability in our entrepreneurial journeys.
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Leveling Up Your Business With Profit First For Minority Business Enterprises With Susanne Mariga
Susanne Mariga is my guest. She is a Certified Public Accountant, Certified Tax Coach, and Chartered Global Management Accountant with over two decades of experience helping clients achieve their financial goals through business and personal tax planning. Before founding her firm, she worked at Arthur Andersen, and at one of the Big 4s, KPMG, combining her industry knowledge with her own experience of growing a small business has allowed Susanne to help her clients’ design unique profit first-based business plans that ensure success and long-term financial stability. I’m super excited to have you on the show. Welcome to the show, Susanne.
Lisa, I’m so glad to be here with you.Success starts with changing your mindset and discovering what you want. Click To Tweet
When you were working in public accounting, what industry were you focused on? I don’t know how it was back then, but did they give people financial services or consumer products or something else?
It’s so cool getting interviewed by another CPA, that’s so awesome. These people have no clue. They assume that you’re an accountant and you do everything. I still think of myself in public accounting having a CPA firm. I have a unique experience. I grew up in accounting. My dad had a CPA firm when I was growing up. He hired me when I was fourteen. For guys out there that are entrepreneurs, always consider hiring your children, it’s a great income-shifting strategy with that. I was his bookkeeper when I was fourteen. I did bookkeeping, sales tax and payroll tax returns. Malcolm Gladwell who wrote Outliers says it takes ten years to become an expert at something. I always joke that I was 24 when I became an expert when all my peers are getting out of school.
When I got out of college, I went to work with Andersen. I had a unique experience with Andersen. I got to do everything. I was in financial services, but I also had some manufacturing clients. I had the Komatsus, Goldman Sachs, your Bank One, which is now Chase, securitizations from that standpoint. It’s a very interesting experience. When I went to work for KPMG, they split my time. I had the manufacturing clients all during the wintertime, Mitsubishis. During the summer, I had the government, the City of Indianapolis. It’s a unique experience that makes you well-rounded.
Lots of good experiences. I love it. It’s quite different from my story because I was in public accounting, but my entire career was financial services from the point at which I started until the point at which I left many years later. That’s why I asked. You said you’re in audit or were you in tax in the Big 4?
For the Big 4, I did an audit but for the smaller firm, I did a lot of tax.
I’m already ready to jump into your book, but my show is broken. My Level Up readers know that my show is broken down into three sections. There is a background and then we’re going to jump into the meat, and we’ll finish up with the Level Up questions that I ask all my guests. To get into the background, can you share with my readers where in the US do you live?
I live in Houston, Texas. Tejas, way down South.
What do you and your family like to do for fun?
We’ve got a big vacation going to the beach, so we’re going to be at the beach house, and we’re going to chill like kids get wet in the ocean.
Your book is called Profit First for Minority Business Enterprises. Can you share with my audience why you decided to write this book? What inspired the book?
You coming from public accounting, I’m sure you have very similar experiences in what I did. I was the first one in my mother’s family to ever graduate from college. My grandfather was a sharecropper in North Carolina who worked the old plantations. That was a big change in regards for my family coming down and graduating. When I graduated, all my aunties ran down and they thought I had graduated from Harvard or something, they were so proud. It was interesting because I went to Arthur Andersen, that was my first job out of college. One of the first things that I asked as I was going there not knowing much about Chicago, “Where should I live in this big, beautiful, amazing city of Chicago?” They gave me suggestions of where they would love to live. They said, “Lincoln Park and Lakeview are amazing. Whatever you do, Susanne, don’t live on the Southside or West side of Chicago.” I don’t think they meant any harm by it. They were simply looking out for their best interests. They didn’t even see color at that moment that they were saying that.
Naturally, I moved to exactly where they said. I moved to Lincoln Park, Lakeview. I always tell when I was in a high-rise where you could look out the window, you couldn’t see where the ocean and the sky began, it was so beautiful. When you got off the elevator, you were like surrounded by Barbie and Ken, everybody drove each other, that environment. I’m a pretty explorative person. I’m not one of those people that stays in my backyard very good. I took a bus at random weekends. My mom would kill me to find out what I was doing all alone. I would take the bus all the way down to Michigan Avenue right at Roosevelt, if you’re familiar with Chicago. I would switch buses and wherever the good Lord takes me, I would go. It was interesting because as I crossed that Roosevelt border between Roosevelt and Michigan, the world changes in Chicago. The buildings get less cared for.
You start to see windows knocked out, less grocery stores, people walking around, but not a whole lot of retail. While most people think about avoiding a side of town, my mind naturally goes to, “How do we change a side of town? How did we change it? How do we better it? How do we create equality and economics?” That’s what it came down to. There were no industries, no jobs, and less hope in these areas because there was no investment of capital to create jobs. Over the years, different things happen. When you’re supposed to do something, you keep getting that door knocked on you.
I remember a couple of years ago, I went to go visit my aunties and they live in the Chester area of Philadelphia. It’s a pretty hard area. I remember taking the rental car and I was pulling out to the side of my auntie’s house. I remember looking at the alley as I pulled up and she comes out to greet me, and this alley is covered with flowers and balloons. I asked my aunt, “Why are we decorating utility posts right now? Why are we doing that?” She’s like, “A little boy had gotten shot. He had been caught in gang fire right behind the house.” The neighborhood came together and they created this little memorial to celebrate his life. That was a tipping point for me where we cannot continue to allow wealth to not be equal in America because the reality is you have this disparity because of lack of resources and lack of hope. How we change that is we can keep waiting for the government to do reparations, but that is not happening anytime soon that I’ll able to see.
We empower entrepreneurs and we teach them how to build healthy companies. When our entrepreneurs build healthy companies, they don’t just change their own legacy, they change the legacy of their neighbors and they create jobs. I saw Mr. so-and-so, who lives next to me and he created this business. He created a grocery store, or a plumbing company, or an engineering company. I can do that, too. That literally changes the economics and the hope of a neighborhood. That is the reason why I wrote Profit First for Minority Business Enterprises. Lisa, you worked in public accounting as I did. We need more people that look like you and me in the room.
There are lots of different things to go here. I want to start with, how do businesses adopt profit for minority businesses? What are some of the things that they can do to do that?
It starts with changing your mindset and going, “What is it that I want?” I meet many entrepreneurs and you work with entrepreneurs too, so you know what I’m talking about. They have multi seven-figure revenues. It’s a lot of work to get to seven figures to make those monthly sales. We get to their tax return in a year and they are making $50,000. I’m like, “You could have got a job working 40 hours a week to make $50,000.” In fact, our grocery stores are paying $15 an hour right now. What we call that is entrepreneurial poverty, the working poor. To get what you want in life, you have to know what you want. There’s a whole psychology behind it. There’s a whole consciousness, subconsciousness where if you choose your thoughts and you create emotions, because our emotions feed upon our thoughts, you think about positive things, you’re skipping down the street the next minute. You think about something scary or negative, you’re creeping and fear. It’s important to identify what’s important to you so you start to create those emotions which create the chemical reactions to get you moving in the right direction.
What does winning look like? Winning looks like different things to different people. Some people want to grow that seven-figure franchise and be all across America same as like, “I want to be a mom-and-pop shop.” It’s okay but starting with what does winning looks like at the end of the day. Based on what winning looks like, none of us want to join a business because we want to be working for, and nobody does that. The problem with the accounting equation is we teach our entrepreneurs, revenue minus expenses equals profit. Sell, discount your prices, you’ve seen the Amazon Bid Wars, and then pay your expenses. The reality is as the CPA, you’ll attest to this when you make profit a random byproduct of your actions, it becomes a random byproduct. A profit first person says, “We’re going to take our profit first before we pay anybody else. We’re going to make our equation revenue minus profit equals expenses.”
What that means is, like Dave Ramsey’s Envelope System, we’re going to set up bank accounts. All of our money is going to go into this one account called revenue. Twice a month on the 10th and 25th, we’re going to allocate to different bank accounts according to our purpose. We’re going to allocate money immediately to profit because on day one, you’re going to be proper, you’re having a better year already. The next bank account that we’re going to allocate to is owner’s pay because when I asked you who’s your MVP, who’s your Most Valued Player, it better not be April, Amy, Tom and Sue, it better be you. I need to compensate it for you like Amy and Sue would walk off the job if you’re not paying them. You better walk off the job if your company’s not paying you. We’re going to make sure we set up a salary for you. The taxman, figure it out, he’s there to stay so let’s make sure we reserve for the taxman, too, so you’re going to have a bank account for taxes. Whatever’s leftover, that’s going to be our operating expense account. That’s what we can use to get that fancy office lease downtown if that’s what you choose to do, or better yet you might want to be in a home office. In that case, you can hire the best and brightest across the country.It’s important to identify what's important to you. So you start to create those emotions that will move you in the right direction. Click To Tweet
This brings me to the characteristics of healthy companies because you mentioned healthy companies. Can you talk about the characteristics of healthy companies?
I have this amazing table in my book that shows common-size financial statements. They show financial statements that are not necessarily based upon dollars, it’s based upon a percentage. What percentage of your total revenue goes to your profit, tax, owner’s pay, and operating expense? In that table, the numbers change as the company grows. As the company grows, as I become more of an enterprise, I’m scaling. I’m relying on the power of my team. I’m still getting paid as the owner, but now it’s a smaller percentage of the total pie because now, I’m relying on the power of my team. I’m more of the CEO, the brand, my profitability is growing, my numbers change. I’m going to refer to that table there because the numbers can change according to that, but it’s about taking your profit first and making sure you have a healthy, viable company because at the end of the day, your company isn’t just a way of allowing you to live, it’s an asset too. It is going to go for either percentage of your revenue or multiple profits. You can have that multimillion-dollar revenue, but if you don’t have profit to support it, your valuation will get affected, so its’s that balance.
Correct me if I’m wrong, in your practice, when working with clients, did you find that maybe some clients weren’t necessarily having a good handle on operating expenses?
It’s a common trait with entrepreneurs, especially in entrepreneurship of color. My practice is interesting but most of our clients are not minorities, which is strange. I’m writing a book, Profit First for Minority Business Enterprises. One of the things that made me want to write this book was there was a disparity, a difference between how minority companies function versus non-minority companies. Part of it was as minorities, we’re first-generation to get out of college, they graduate, we’re the first generation to start successful businesses, so that information isn’t passed down. I was lucky I got a lot of know-how from my dad who was a CPA, but most people don’t get that. Also in the minority community, there’s pressure to do good for the community, which is a beautiful thing. We want to make sure each 1 reach 1, and we lift each other out. Sometimes that affects our decisions as business owners.
There’s a loyalty to sometimes putting people in places. Even if we know intrinsically, they’re not happy here, they’re not in their zone of genius. They’re here because they’re getting a great paycheck because you love your neighbor and you hire your neighbor’s kid, but they’re not the fit for here. They’re not going to be the one that takes you to the next level. By keeping them, you lose the opportunity to bring someone in better. There’s a lot of that loyalty that goes in there, too, that also holds us back.
Going from there, I’m curious about your journey to starting your business because you spent almost twenty years in working as an employee for someone else. Has profit first had a personal contact for you too?
Yes. If it’s in a technical environment like ours, having that experience before you start your company goes far. If I did not learn governmental accounting, I would not have had been able to build part of our practice as a governmental practice. We have some of the largest cities in the country as clients and we were able to do that because of coming from KPMG and having that corporate or that governmental experience, which is tremendously helpful. Like every entrepreneur, I had to learn through the school of hard knocks too. I started my business because I love what I did. I would geek out on tax returns and I would’ve done it for free.
Doctors will give you medical advice even if they’re not getting paid because they love sharing their knowledge. Engineers or even plumbers, they love what they do. It’s their gift to the world. We’re artisans in our own paths. I did exactly the same thing. I was so focused on cutting my price and helping people get to their numbers that I suffer too. Profit first, for me personally, implementing it in my business was the turning point of creating the business that I dreamed of creating.
A couple of things that you’ve said there which ties nicely with what you said earlier, having employees that are not operating in their zone of genius and keeping them on as opposed to being able to let them go, so that way you could at least get someone else in. You were operating in your zone of genius essentially in the fact that this is what you love to do. Advice you would give to people in finding that, because I don’t know about you, but I do meet a lot of people who say that they don’t feel like they know what that is for themselves.
That’s exactly normal. My daughter, she’s feeling that pressure, she’s like, “All my classmates know what they want to be when they grow up, and I haven’t figured it out yet.” I was like, “I didn’t know what I was going to be either until I’m almost in my junior year of college.” I was pre-med. I love sciences, which by the way, ended up being an incredible thing for writing this book because understanding statistics was amazing. It’s about giving yourself permission to try new things and to walk away from things. There are a lot of times we put pressure on ourselves and even the world puts pressure. You went the school for this, you studied so hard, and invested so much time. Think about the alternative. What happens if you live another 50 years and you’re doing something that you hate every single day? That’s the alternative to it. Give yourself permission to try new things until you find that zone of genius. Even when you find that zone of genius, you might get bored of it. You might find another zone of genius, and that’s okay too.
Going back to the revenue, in your story, in addition, I could tell from what you said that operating expenses is one thing, but it sounds like entrepreneurs underselling their services is another key component in them not being able to fulfill that profit first and being able to run profitable businesses. What advice do you give to people on that who might not even realize that they’re underselling?
You have to understand your margins, your why, and your goal. If I make $2 bracelets, I’m going to have to sell a whole lot of bracelets in order to be able to pay my rent. It’s the reality of it. It’s understanding where you want to be positioned, how much you need, how much this business needs to produce for you, what does winning look like in a day, and making sure that your strategy aligns with that. Maybe it’s being a commodity provider, but you’re going to have to manufacture a lot of those commodities in order to get there, or maybe it’s going to be more of a boutique-level service. If you’re in real estate, you’re going to want to understand things like, “What is going to be my occupancy rate? What historically is going to be the occupancy rate based on my location of where I’m at right now? How much do I need to bill per night in order to be able to make the living make this worthwhile for me?” Understanding your environmental factors holistically and pricing based upon what your goal is.
One of the things that came up for me too is identifying your client and your service. Some entrepreneurs and business owners, in terms of thinking about profit first, they might be thinking about creating a lower profitable item with the hope of trying to get that sold first and easier, or even working with smaller companies. Whereas for you, you noted that some of your clients are government agencies and cities. Going after the premium clients can also help you with profit first, I would assume because you know that those clients have the ability to pay for the services and for you to then have a more sustainable business.
You have to know what your offering is, where you want to be positioned, and who you can best help too. Our practice has always been a mix of government and private clients, but they’re more on the higher end of private.
There have been lots of talks in terms of changes on tax rules and tax laws. I also noted that in your bio, I introduced you as a Certified Tax Coach. What is a certified tax coach and then getting into some of the latest things that business owners and specifically real estate investors need to think about from a tax perspective?
A certified tax coach is an addition to being a CPA and certified by the American Institute of Certified Tax Planner. I deal with high-net-worth taxation. What that means is that most of my clients, when we get into that tax plan, it’s interesting on the profit first side, they come to me because they have cashflow problems, they want more profit. That quickly turns into a tax problem where they’ve got too much profit and the government wants to take it away. What we do is your normal accountant will tell you, “Go out and buy a truck.” You can get a Section 179, $25,000 deduction on it. We’re like, “Why would you go buy a truck if you don’t need a truck for a doctor’s office? What are you going to do with the truck?” You’re going to take that as income because you know you’re not using it for business unless you’re doing an ambulance service and women that are delivering in the back of your pickup truck, that’s not going to happen.
Instead, we’re going to look at things like how do we decrease your expenses by not necessarily getting expense? How do we defer this expense long-term in order to get a deduction and create and build wealth at the same time? Some of the things that we’ll do is beyond your safe harbor 401(k), maybe one of your goals is longevity because the longer somebody is with you, the more profits you’re going to get. Once people are with you for a while, they get better at their job, they get more efficient, and they learn new tricks. You want to keep that brainpower in your business. We’re going to do a 401(k) that has a six-year vesting period. You’ve got to be with me for six years before you fully invest, and I’m going to take a deduction because I’m putting contributions towards your 401(k).Life is a work in process. You will not arrive until you're six feet under because every opportunity is an opportunity to learn. Click To Tweet
If you get drawn away with the nice fancy lights of our neighbor and you only stay for two years, you forfeit those contributions. If you forfeit them, they go back in the trust. That means that I could either put it towards other employee contributions or leave it in a trust. At the end day, I’m the last one standing, so it’s all mine. We’re going to look at things like that, look at income-shifting opportunities, things that don’t increase your expense, but increase your wealth and allow you to get a deduction as if it wasn’t an expense. That’s a little bit more complicated from that side on there.
From a real estate standpoint, there are rules around vacationing, but the thing that I love is the step-up basis and the capital gain. If you buy real estate, you hold it for a year and you sell it, that would be an area for you to be able to get capital gain. Capital gain depending on what your income level is, if you make less than $80,000 and you’re married filing joint investment that’s at 0% bracket. Imagine a 0% bracket on a capital gain, that’s crazy. The qualified opportunity zones are happening right now, reinvesting back into your neighborhoods that are deemed to be in a qualified opportunity zone has a great way of getting part of that capital gain forgiven for you, which is amazing and pretty awesome, too. There are lot of things going on. If you hold real estate, there’s only a limited amount in this world. Once it’s gone, it’s gone. Real estate is great, it holds its value. If you want to create generational wealth when you pass away, your children inherit it at the value that it was on your date of death, so they don’t pay any tax if they sell it the day after you die. There are some great opportunities there.
Anything else that I didn’t cover that would be beneficial to share?
We covered quite a bit. If they want to go check out my book and learn more, Profit First for Minority Business Enterprises, they can go right on Amazon and order the book.
That leads me to my Level Up questions that I ask all my guests. The first one is, what are you grateful for in your life right now?
I am grateful for my family like being able to see my kids. The pandemic was challenging for a lot of people, and it’s different trying to adjust to being that home and that working mom, but I’m grateful that I spent a whole year with my kid. That’s pretty awesome.
What has attributed to your success and continuous growth?
It’s looking at life as a work in process. Not necessarily there’s something broken, this is more of an accounting geek thing. I know you get that whole concept of the web. Life is a work in process. You will not arrive until you’re 6 feet under. Every opportunity is an opportunity to learn.
What do you now know that you wish you knew at the beginning of your journey?
We got to talk about from what point in the journey. There’s only one you, so if you don’t show up, the world is going to miss you.
I know that you’re also the host of The Profit Talk podcast. Can you share a little bit about what you share on that?
The Profit Talk is a profit first focus type of channel. We share tips and tricks on how to increase profitability in your business. We talk about business ideas like how to franchise, how to increase profits, human resource issues, tax strategy, everything profits and increasing profits goes into the Profit Talk.
If my readers want to learn more about you, where’s the best place they can go?There's only one you so if you don't show up the world is going to miss you. Click To Tweet
We have a private Facebook group and we teach how to implement profit first in that private Facebook group, Profit First Master Class with Susanne Mariga. You can look that up on Facebook and learn more.
Thank you for coming on the show, so much value.
Thank you, Lisa. Thanks for having me.
- Susanne Mariga
- Arthur Andersen
- Profit First for Minority Business Enterprises
- Amazon – Profit First for Minority Business Enterprises
- The Profit Talk – podcast
- Profit First Master Class with Susanne Mariga – Facebook Group
About Susanne Mariga
Susanne Mariga is a Certified Public Accountant (CPA), Certified Tax Coach (CTC), and Chartered Global Management Accountant (CGMA) with over two decades of experience helping clients achieve their financial goals through business and personal tax planning. Before founding her own firm, Susanne worked at Arthur Andersen LLP, as well as one of the Big 4 firms, KPMG.
Combining her industry knowledge with her own experience of growing a small business has allowed Susanne to help her clients design unique, profit-first based business plans that ensure success and long-term financial stability. As a Certified Profit First Professional (PFP) at the Mastery Level, she is passionate about helping small business owners and entrepreneurs maximize their revenue and grow their businesses. She is the host of the Profit Talk Podcast, where she discusses business tips and strategies. She is the author of the book Profit First For Minority Business Enterprises (2021). Connect with Susanne at www.susannemariga.com.
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