HVAC Success Secrets: Revealed

EP: 225 Diane Gardner w/ Profit First - How To Maximize Profits In The HVAC Industry

• Evan Hoffman

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In our latest episode of HVAC Success Secrets Revealed Thaddeus and Evan had the pleasure of hosting Diane Gardner, a bestselling author, Quilly award winner, and Profit First certified master. 🎉 Diane shared invaluable insights into maintaining profitability in the face of challenges such as high interest rates and fewer jobs. 🚀💼



Key takeaways 

  • Spot Hidden Profit Leaks: Diane emphasized the importance of identifying and addressing hidden profit leaks to maintain a healthy bottom line.


  • Adopt the Profit First Method: Implementing Profit First can transform your financial management by ensuring that profit is planned for upfront rather than what's left over after expenses.


  • Effective Tax Strategies: Utilize strategies like the Augusta Rule and hiring your kids to significantly reduce your tax burden and keep more of your hard-earned money.


Whether you're managing an HVAC business or any other home service company, these insights can help you optimize your operations and enhance profitability. 💡📈


Catch the full episode to dive deeper into these strategies and more! 🎧


Find Diane :

On The Web: www.profitcoach4you.com
Facebook - facebook.com/profitcoach4you
Linkedin: linkedin.com/in/dianeberrethgardner
Via Email: diane@profitcoach4you.com



Join Our Group: https://www.facebook.com/groups/hvacrevealed
Presented By On Purpose Media: https://www.onpurposemedia.ca/
For HVAC Internet Marketing reach out to us at info@onpurposemedia.ca or 888-428-0662



Sponsored By:

Chiirp: https://chiirp.com/hssr
Elite Call: https://elitecall.net
Service World Expo: https://www.serviceworldexpo.com/
On Purpose Media: https://onpurposemedia.ca


Diane Gardner:

And I think this one is a little bit of a disruptor right now. Until we get those interest rates back down a bit it's here to stay for a while and how can we work around that and still stay profitable without giving away too much? Still stay profitable with fewer jobs, potentially.

Thaddeus Tondu:

Hey, welcome back to another episode of HVAC Success Secrets Revealed with Thaddeus and Evan, where we have good conversations with good people, and any good conversation we're having is worth having drunk. cheers, buddy. I just got going with our guest, beforehand, chatting a little bit about some of the profit things. I'm actually been excited for this conversation since we were on her podcast. I talked a little bit about some of the marketing side of things in, helping home service businesses with their profitability, but also now having her come on our podcast and some of the knowledge that, one Diane Gardner is going to bring, to the show. So a little bit about Diane in case you're wondering who the heck she is. Well, she is a best selling author. She's a Quilly award winner, which is based on one of her first books that had Dane Kinney involved in it. She's a Profit First certified master from the one Mike Michalowicz, in case you've heard of his name before she's very passionate about helping home service businesses maximize profits and stop overpaying for taxes. one of the topics that we're going to get into will be that. In terms of making money now, what in the tax planning, but when I asked her why she specialized in home services, well, her dad was an electrician, might be stealing the story from you. So I'm sorry, Diane, but her dad was actually pretty bothered when she became an accountant. and she really wanted to help home service businesses because they're great at what we do and great at what they do, but they're not. This, by the way, just isn't home services. I think this is just businesses in general, not great at running a business profitability and one of her super powers when I asked her that was, how to spot hidden profit leaks. so stay tuned to that part of the show when we get into, talking about the hidden profit leaks that we're going to have. So I'm excited for today's episode.

Evan Hoffman:

Yeah. And I think it's, very timely when we look at, especially for HVAC, right? The summertime. Is money time, right? The phones are ringing, people are wanting services, and it's an opportunity now to make sure that you're managing the profits appropriately and can manage your, your expenses appropriately throughout the summertime. When, money's coming in, it's a lot easier to spend it. So let's, pay attention to those profit leaks and I'm excited for the conversation.

Thaddeus Tondu:

No,

Evan Hoffman:

it's

Thaddeus Tondu:

going to be great but of course, today's episode would not be possible without our lovely sponsors and in no particular order, Chiirp, Service World Expo, Elite Call, and On Purpose Media. So let's rock and roll with those guys first. So join us at the most magical contractor experience at the Service World Expo in Orlando, Florida, this fall in October the 15th to the 17th, you got keynotes, breakout sessions, four hour workshops. That's new this year, by the way, social mixers and exhibit hall with some great products and guess what? They've got a podcast hall. We're going to be there. We'll see you there. Network with other residential contractors and hear from this amazing keynote. So they're all designed to help contractors like you elevate your business. Register now and use the promo code secrets 100 for a hundred dollars off. Visit serviceworldexpo.com and register today.

Evan Hoffman:

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Thaddeus Tondu:

Cool. Cool. Cool. And in case you don't want to leverage text messages, you want the good old voice, we'll check out the folks over at Elite Call because they outbound your database to fill your dispatch boards with lucrative service and appointments and boosting your membership. They are a U S based call center that for over 20 years, they, their teams don't just make calls. They directly integrate appointments into your CRM and fill your job boards. So don't let your competition get ahead that let elite call connect with their customers. First, visit elitecall.net to learn more today.

Evan Hoffman:

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Thaddeus Tondu:

Cool. And I don't know why I thought about this, but when I think about Diane money, money, money. Welcome, Diane, to the show.

Diane Gardner:

Thanks for having me guys. I'm looking forward to this.

Thaddeus Tondu:

Well, I'm just going to ad lib this one out. I'm going to go for it. So let's vent here for a second. Good or bad. What's on your mind? what is something that you want to vent about in the home services industry, either good or bad?

Diane Gardner:

I will vent on the increased interest rates that are causing my clients, my coaching clients and accounting clients to lose sales because their customers aren't qualifying for the packages that they were qualifying for last year. And it is making a difference, even though it's busy season, their sales are down because of that.

Evan Hoffman:

It's really frustrating when it takes away sales and it's not even something that you can control.

Diane Gardner:

Yes. Beyond your control, nothing you could really plan for and I know my, clients have been having to pivot and come up with other financing companies to work with in the effort to be able to take care of, especially the larger jobs before it would have been a no brainer. Now it's causing people to have to stop and think and figure out how can we get them qualified?

Thaddeus Tondu:

Well, that's an interesting point like other financing providers, how many financing providers do you have at your disposal to be able to work with individuals, to be able to make sure that they can, do what they need to do within a reasonable amount and that's a key thing to have multiple finance providers for any business.

Diane Gardner:

And I think this one is a little bit of a disruptor right now until we get those interest rates back down a bit it's, here to stay for a while and how can we work around that and still stay profitable without giving away too much, still stay profitable with fewer jobs, potentially.

Thaddeus Tondu:

I have a feeling we're going to get into that topic, throughout the sprinkled in throughout the show, but let's walk it back a little bit and let's actually start with a little bit into your journey in, you know, why you wanted to not go into the trades following your dad's footsteps, even though your dad doth protested that you probably should. and you started your journey as an accountant instead.

Diane Gardner:

So I started my journey as an accountant cause I was good with numbers and that's probably not the best reason to become an accountant, but it was mine way back when I was young and dumb and didn't know any better walked the traditional accountant role for many years hated my business. I had clients whipping me around. I was black and blue all the time because they just, they weren't nice people and 2010 changed my life. In addition to losing a bunch of people because they went out of business, it caused me to sit down and take a hard look at my business do I like my business? No. I would have sold it for a dollar back then. I hated my business well, what are you going to do about it? What are you going to do? You have a choice. You're sitting here with, about 60 percent of the clients you had a year ago. What are you going to do with that? And how are you going to come out the gate different? So with that became my journey of how can I move away from being a boring white vanilla, boring accountant and turn my business and my world and my life into something where I can bring more value, a higher level of value to these small business owners that need it. So specialize in all my home service businesses, my roofers, my plumbers, my HVAC, electricians, landscapers, those kinds of people, because they're great at what they do, but not so much on how to do it profitably and that has been an amazing journey. And on the way, along the way, I've met some really incredible people. The first one you see over my shoulder is Mike Michalowicz with Profit First. That program changed not only my life, but has changed my clients lives as well.

Thaddeus Tondu:

And I kind of want to unpack a little bit of what the proper first, but I've, I'm a fan of Mike Michalowicz and I actually liked that. He, reads a lot of his own book, like the audio, the, books of it and it's actually funny when you listen to how he interacts with it, because he adds in little quips and I just love the little laughter that he has in the story and here's an anecdote or, side story, not even in the book, but phenomenal author in terms of some of the stuff that he's done he actually was, I can't remember the one, it's the precursor to EOS. I'm trying to blank on the name, but it's the one where, you take a two week sabbatical from your business. you probably know the one I'm trying to blank on the name for whatever reason clockwork yeah, there we go.

Diane Gardner:

Yeah, clockwork.

Thaddeus Tondu:

So clockwork, when he did that, like that phenomenal concept, to be like, hey, go take two weeks off of your business and don't touch a single thing with inside of it not a lot of people can do that, but let's go back to the profit first because it's up there. It's on the, it's on the top left of your screen or right, depending on, maybe the mirrored view of when you're watching this, but it's on the top of your screen. So, so walk us through a generalized concept. In bringing down profit first, but also how this relates to, you know, you have a book, right now, the, the nine profit boosting tactics that's on the website. they're Your Path To Profits and there's nine of them in there. We're not going to cover all nine on the show. So you have to go to our website. we'll drop that at the end of the show. do you able to get the book, to listen to all of them and grab all of those but the first one is choose to be profitable. I think this probably ties into profit first a little bit so let's walk through that.

Diane Gardner:

It does that. Yes and thanks for starting there thanks. I think most service business, or I'm just going to say most businesses owners, it doesn't matter what kind of a business it is, don't even think about the concept of that they can have a plan that will allow them to be profitable school and the life of hard knocks has taught us that sales minus expenses, whatever's left over, if there is anything left over, we as an owner might get it and I will tell you the first many years of my own business, that was crumbs leftover, literally crumbs and I kept thinking, why am I working so hard? I'm not, there's nothing. I'm not getting anything out of this. Why am I working so hard? And it wasn't until I myself found Profit First that my own business got transformed, which is why I'm so adamant about it, sharing it with my home service clients and coaching clients because the whole concept behind profit first is let's work off of the amount of money that you really have to spend when we look at our bank account and I'm going to use round numbers for easy math and let it says we have 50, 000 in the bank account. Well, in reality, 15, 000 of it belongs to your employees because you got to make payroll on Friday. Maybe there's another five of that is payroll taxes. So that's 20 of it. And we've probably got some sales tax or something out there that needs to be paid. So let's just say for easy numbers, another five, that's 25 of it oh, we've, but wait a minute. We've got vendors out there that have to be paid. So now we're down to maybe there's 10 of that 50, but wait a minute. There's income tax you owe on that money. So maybe now we're down to 5, 000 of that 50 is really available to be spent but we look at our bank account and go, there's 50, 000 in there. I'm going to go buy whatever it is we want to go buy and not thinking about in a few days or in a week or in a Small period of time we're going to have to put this other money out there So the concept behind profit first is to set up multiple bank accounts We have our operating account. We all have a profit account where you as the owner get to re take in a reward for taking the risk of being in business and being the CEO of your business, a tax account to where we can always pay our income taxes and we're not going to get in trouble with the IRS or your state. And then from there, We may have an account for cost of goods. Maybe it's your materials and your subcontractors. We put them off in a separate account so you can always pay your suppliers. Maybe there's an account for emergency so that when something like COVID hits, or an earthquake or a flood or something like that. We can still have some money to keep our business going. Maybe there's an account for seasonality, especially in HVAC world. You guys are so seasonal. You're making hay right now because the money's flowing in but what about January, February, March? Unless you're up in the cold country where I live, where now they have heating they can do, some states don't get that little, bump in the winter there. So let's have a seasonality account where we're pulling money away right now while that money's flowing in and we use it to carry us during those slower months or maybe we need a future growth account. So when we buy that next truck or van or hire that next employee, we've already got some money sitting there. Whether we pay cash for it. I like to see three to four months of somebody's salary sitting there before we hire somebody. That way we know we can pay, we can pay that salary. We're not stressed out oh my goodness. I added another person to payroll. How in the world am I going to make that payroll now? And then you end up letting the person go potentially a few months later, cause you just can't squeeze the, you know, the payroll. We've been practicing. We've got that payroll. We're, we're doing it every pay cycle, putting it in there so that it's limitless on what you can set your accounts up to do and each time we do that, we make this business more and more and more successful.

Thaddeus Tondu:

And then looking at that, I mean, it's also reverse engineering that a little bit too, to say, okay, well, how can I, if I want to have a 20 percent net profit, at the end of the day, well, what do I need to charge to be able to hit those numbers that you've already set up in those accounts, which is another, big thing, but you mentioned, and actually we were just on a, mastermind, with some other, agency owners, and now we're a little bit more flat in terms of our, revenue don't have the spikes in the busy season, like an HVAC owner might have, but looking at, and one of the conversations that was okay, well, how much, cash in the bank should I have on hand? Now, obviously a little bit different when it's seasonal, you've got to be able to factor in, if you know that you're going to be slow for four months, well, okay, you should probably have cash on hand to be able to make you through those four months and then a little bit after that now, if you're fairly, off, I mean, I don't want to say flat revenue, but steady growth, you don't have the, busy season, the slow season, you're fairly stagnant. What would you say somebody should have for cash on hand in their bank accounts to cover their expenses?

Diane Gardner:

Usually I see somewhere between three to six months so three more on the, maybe the slower end, six on the more seasonal kind of a business, because sometimes those, the seasonality piece might be three or four months and if you've got six put away, you've got some money as you're ramping back up, you can make full payroll and you're okay.

Thaddeus Tondu:

Perfect. I love that number and I've been a fan of, for our business, I want to have two months. that's just my, depending on your risk tolerance and your cashflow, Yeah, risk tolerance and cash flow and so I'm like, I'm fine with two months but, and that's a good part about the, you know, the, the choosing to be profitable aspect of things. Evan, did you want to add anything into that before we go on to one of the other points, which is not point number two, you have to get the book to get to point number two.

Diane Gardner:

And I do want to add something else too after Evan.

Evan Hoffman:

The question I had was around memberships. because that's something that, if a business is billing annually for that, that's work we're going to be completing in six months, nine months, et cetera. When we're going out and running that, tune up call, how do you advise your clients to collect that money? Do you suggest setting up a separate account for that? To then pay technicians out of that money. Is it something that you see as a loss leader for businesses, where they're just trying to, to maintain that customer relationship, how do you see the membership and then how do you advise a, one of your clients to actually manage that money?

Diane Gardner:

What I typically see is a separate account and that membership money going into that account. So we're protecting it so that we do have the money to make payroll on it cause it seems like a lot of the services that come in that membership platform are provided during the slower months. So you can keep your team going. So we need money to offset the payroll for those slower months. So what better way to do it than to put that money over in a, in a protected bank account. So I'm all about protecting these important pieces by putting them in separate bank accounts and oftentimes, depending on the person and their self discipline, we'll even suggest a different bank for every account make it inconvenient that I can't just pull up my phone because I've got Five or six or seven accounts in one bank and just a simple little swipe and pull it over to my main operating account. I actually have to either go to the bank or go log into their site and do a transfer. I have to do something that's put a little bit of friction in there and make that something you have to really stop and think about a second thought before I just do it protecting that money.

Evan Hoffman:

It's protecting yourself from yourself.

Diane Gardner:

From yourself. Yes. Now, some people are really self disciplined and they're fine having all the accounts at one bank, but most of us aren't most of my, my clients, we will have them at multiple banks.

Thaddeus Tondu:

That's interesting. I'm laughing because with the reason that we have our bank is because both of Evan and I, on our personal side, banged with that bank and we got our corporate bank there because of ease of transferring money, we're also, I feel we're fairly self disciplined cause like I have it on my personal side where like, I just have auto things going into different accounts on my personal side and I just, I forget about it and I'm like, oh shit, vacation time oh man, I got a lot of money in my vacation account. Sweet let's go. Cause it just goes into that, right? Forget about it all the time.

Diane Gardner:

Isn't that feel good though compared to the flip of that, your wife or your family or kids or whoever saying we're going to go on vacation and you're inside, you're panicking. I've promised them this vacation. How in the world am I going to pull it off? I better check to see if the credit card has enough on it yeah, that's the completely opposite side of that.

Thaddeus Tondu:

So if that's you, don't, do that. that's bad. moving into, sorry, go ahead.

Diane Gardner:

Can I just, you had mentioned that we can actually plan for the amount of profit that we want, and that goes right back to the Profit First, we see an average of somewhere between three to 5 percent net profit on most companies when I find them and I look at that and go, oh, here we go. Here's those little crumbs again, three to 5 percent net profit is nothing, but the national average is about five. four or five and so at least they're average. But our goal is to get those net profits up to 15, 20 percent and people look at me up front and go like, you are crazy. How are we ever going to get our profits to there? But when we're working off of what we call our op X or our operating account, and we've removed all those temptations, we are able to make better decisions and you'll find that the profits will start increasing because you're making better decisions and like you had mentioned earlier, Thaddeus, we, if we know we want, let's say 15 percent net bottom line, we can reverse engineer what that line needs and then people like yourselves can help them get the leads and the stuff that they need to be able to hit that top line revenue. I can get, I can help them with the, the calculation to reverse engineer it, but I'm not your leads kind of person. I'm the one that'll help you protect your money that'll help you look in the corners and under the sofa cushions and places like that in your business and find, a bunch of other leaks that are sitting out there as we always say, there is no neon sign going, find me, find me, find me, find me. They're hidden. You have to go looking for them.

Thaddeus Tondu:

Well, and that, that kind of blends, well, and I mean, we've already talked a little bit about it. in what, story do your numbers tell in really pulling that out to say, okay, well you mentioned the, three to 5 percent net where it should be 15 to 20%, you know, that's a big story right there. I think a lot of times other people miss out the, gross margin, and what's your gross profit, as well in looking at the numbers that, did the story that those numbers tell and there's a whole bunch more, stories that numbers tell, that are in there and so what sort of things are you seeing and what sort of stories are numbers showing you for, the bad, when somebody comes to you and like, oh shit, that is bad and where does it need to go to be good or great?

Diane Gardner:

One off the things I see all the time is they'll have a hundred percent of their payroll down in their operating or overhead expenses and so they come in and they go, look at my cost of goods is only 15 percent and it's like, wrong. Let's pull your payroll costs up there. Let's get those payroll taxes and your workers comp that goes along with that payroll cost of your production team. Let's get those guys reclassified up there where they belong and then there's usually some other job costs that are hidden down there, but that's not the big number. It's that payroll number, getting it up there and then once that happens, that number usually will jump from their 15 or 20 that they were so proud of to 40, 45, and then they look at me like, Oh my goodness, I had no idea because they don't know their numbers they're not aware of what's an overhead expense, what's the cost of goods sold expense and they don't know how to tell the difference between the two.

Thaddeus Tondu:

Well, that's an easy layup question. How do you tell the difference between the two? It's funny because I actually wrote, that down before you said that cost of goods versus operating expense and I put people on there is one, but I think there's a lot of other things where people don't necessarily know what the difference between a cost of goods and an operational expenses.

Diane Gardner:

So cost of goods is any expense that is incurred. to be able to get a job completed so it's not your rent. It's not your utilities. It's not your phone. It's not that kind of stuff. It's your materials. It's your subcontractors. If you have any, it's your payroll and all the payroll related expenses it might be those merchant fees that you're paying your finance fees that you're paying so that you can get the job to close because they, you know, they can't afford to pay for the job without some sort of finance and we might shove those up there. We're looking for licenses and permits, dump fees, any of those kinds of things that are related to the jobs that you're doing. Now they're not going to necessarily be in your quote when you're working up a quote or what you're pricing and stuff, but they're fees that have to be paid because you did this job, anything related on that belongs up in your cost of goods sold, and that can blow that number up to be a way big number compared to what they want it to be.

Thaddeus Tondu:

Well, and somebody told me the other day that really the big way to look at this is the jobs are okay. If I had zero customers right now, but I had a business and I had all these expenses. Well, any expense that would be a result of me working with a customer is the cost of goods sold any, if I had no customers and I sold all these expenses down, that's an operational expense and so it's a good way to be able to break that down and look at that and so, like a CSR, they're not a cost of good they would be more of an operation or it could be both, right? Yeah and there could be some blends too in that too and you might, as well so.

Diane Gardner:

One, I see all the time Thaddeus is what about the owner? So I'm going to say you and Evan have a HVAC company and you're strictly in the office. Evan's out in the field maybe half of the time and he's doing whatever the other half of the time so how do we break that out? So one of you that is you you're overhead and evan is maybe half we put half of his salary in overhead and half up in cost of goods and that's when they don't think about either because a lot of times they're wearing a multiple hat they're still out pushing jobs. They may not be doing the actual installs or whatever, but they're out in the field and so we want to look at their time. How are they spending that time? And really pull that salary apart if we need to and put it where it needs to go so that we get a truer reflection of what is their real cost of goods. Because if you weren't doing it, we'd have to hire somebody else to do it.

Thaddeus Tondu:

A hundred percent and it's good to understand what those differences are and like your bookkeeper or your accountant can also do a manual split on your QuickBooks, for example and basically what that means is that if you have 10, 000 in salary to Evan and he, well, 5, 000 is cost of goods sold, 5, 000 operational expenses. Well, when they do your books and your profit and loss, they just manual split the two of those. So it shows up in two different areas. and so getting really granular, I think with somebody's chart of accounts and how you look at those things is super important for businesses. Now here's another part though, because I just said chart of accounts and some people are probably like, the fuck is a chart of accounts.

Diane Gardner:

Evan answer that or don't you want me to answer it? Evan's been quiet.

Evan Hoffman:

No, definitely not me. I'm not the finance guy.

Thaddeus Tondu:

No, this is why it's probably because he's been quiet because when he gets into the marketing ones, I'm kind of quiet. when it gets into kind of the numbers of the finance, I get going on it and he gets kind of quiet. So it happens. It's a ying and a yang.

Evan Hoffman:

He bores me to sleep. That's all.

Diane Gardner:

Oh, I hope I'm not boring you Evan.

Thaddeus Tondu:

I could have been an accountant at one point in my life.

Diane Gardner:

Well, a chart of accounts is how accounting software separates everything out by codes or by words. So a chart of accounts will contain things like your sales, maybe any refunds or returns, discounts that you're giving out, which I'm hoping you're not doing much of that. Cost of goods sold is going to include your materials, your subcontractors, your production wages, the payroll taxes, the things we've just been talking about. Your operating expenses is going to include all your overhead kind of items. It's going to include your rent, your utilities, your advertising and marketing, your accounting, your other legal and professional fees, your software, office supplies, your insurances, all those types of things are going to land down in the overhead expenses and traditional accounting says sales minus all those expenses equals your net profit. In profit first we say sales minus profit equals the expenses because we want to plan our profit first and end up with here's much here's how much is left to actually pay for all these expenses but there's a kicker here. Somebody will look at their P& L and they're going to say well look at I've got a hundred thousand dollars net profit but I've got twenty thousand in my bank where's the difference? How come I don't have a hundred thousand in the bank? And that is because we've bought trucks, we've bought vans, we may have bought a building, we've got loan payments that go on those, and those items use up your cash and so cash in the bank rarely, if ever, equals your net profit, because we do have those other uses of your cash and I'm trying to really simplify this.

Evan Hoffman:

It's a great point because I can't remember the stat that Billy Stevens said when he came on the show, but there's a percentage of businesses and it's really, really high that go out of business, even though they're profitable.

Diane Gardner:

Yes. Oh, I see it a lot.

Thaddeus Tondu:

It's cashflow versus net profit. Yes.

Diane Gardner:

Cashflow. Yes.

Evan Hoffman:

And so I think that's something that's, that's really great and that's, part of this whole point of unpacking the story. So how do we begin to unpack the story? We get this, this sheet with all the numbers on it. How do we begin to understand what the story is behind the numbers that is, that is the actual reality? You know, Thad just did a reel that we put out today that talks about facts versus feelings, right? So how do we avoid the feelings of what our money is telling us and start to dive into the facts and what the real story is behind them?

Diane Gardner:

So I like to suggest that you work with an entrepreneurial accountant. And yes, there are such a thing out there and somebody who actually will think of their own business, like it's a real business. And they are looking, actively looking for ways to help you understand that story cause it goes way beyond sales minus expenses equals profits. We really need to dig into what's sitting on the balance sheet, which is the balance sheet tells us what we own and what we owe and then how much equity we might have in that business because then you start getting into the whole conversation, which is another topic that we won't touch today is, are we in a healthy enough of a business that we can even find financing? Because if banks are looking at it from a different angle, then your accountant might be looking at it because accountants, we're always wanting to minimize your net profit. So you pay the least amount of taxes the bank's wanting you to maximize that net profit to show that you have enough equity in the business that you are financeable. So how do you, handle that crossroads? And that's a topic for a different conversation but there's, all these different stories swirling around within your business. We've got to have sales, we've got to be profitable, got to pay those taxes, but then people tell me, but if I make more money, I'm just going to have to pay more taxes. I like how I got, yeah but we do have strategies around that, but that's not a reason to stop making money because you're gonna have to pay some taxes and so, but the stories all start getting jumbled in somebody's head and then I think they go into some mindset, maybe some money mindset issues start taking root at that point.

Thaddeus Tondu:

And I happily pay more in taxes because that just means that I'm earning more money and generally speaking, I don't want to pay more on the same, on the same amount of profit cause then that's not good. in terms of the money mindset, though, I think this is a great topic and a great conversation. I think a lot of people have an unhealthy relationship with money, likely stemming from, educational, upbringing and we don't need to get into the educational system and, how it doesn't prepare people for financial, hardships or, Hardships isn't the right word, but, or hardships or prosperity in the real world. So when looking at money mindsets, how does one break, let's say a, what was me mindset or a, well, I'll never make it or the fact that when they look and say, okay, well, if I'm earning 50, 000 this year and I all of a sudden earned 250, 000, now they, grow up to this two and 50, 000 they're only capped at how much they're actually earning. What was the stat? They can only see themselves earning twice what they're currently earning, something like that. How does one break through that to be able to start to look at potentially earning more money?

Diane Gardner:

I think a lot of times they end up having to do some coaching around that mindset. I see it all the time they can grow their business to a certain point, but can't seem to get past that. That's, and I'm using the word self imposed ceiling you know, they can get their business let's just pick on 500, 000 versus a million. They can sit there at 500, 000 and they're comfortable. They know what they're doing and they're almost afraid to take that step to get to a million cause that's another big step and a lot of it has to do with whether we have an abundance mindset or a scarcity mindset and getting from scarcity to abundance takes some work. It's not something you're going to wake up one morning and go, okay, today I'm going to have an abundance mindset. When you've been living in the, in the world of scarcity, it takes a lot of work, takes a lot of examining yourself and your beliefs. we all grow up with, with beliefs. There's people out there that have beliefs that, you know, making a profit is somehow evil well, if you're a business owner and you were raised in that type of a home, you're going to have a hard time ever being profitable or that spending money to grow your business is somehow wrong you know, there's just so many limiting beliefs out there that we have somehow picked up along the way. How do we get through that? I know myself, I worked with a mindset coach for about a year to get through because I could not seem to grow my business past a certain point. I tried so hard and couldn't get it past there. So once I realized some of my own limiting beliefs and face them, then I was able to move on and we do almost twice that now today. Which is pretty cool when you look back at that.

Thaddeus Tondu:

Well, and here's the thing that I like about that is that the, you know, you talk about being a profit coach for you and you having your own limiting mindset behind that. But then you went and sought somebody as a coach to help you break through that. Well, now you have the power to say, okay, well, I broke through that. I doubled where I'm at now. I can also help you to be able to do that too and I think that's, that's a key distinguishing thing in there that a lot of people don't actually go seek that help. To be able to go break that down, to be able to change their story, to be able to understand the narrative, to be able to get through to that next level, which is super cool, super powerful.

Diane Gardner:

I think a lot of people stay stuck and they just keep digging the same hole year after year after year, instead of getting some help and letting somebody pull them up out of that hole and that's what coaches are great for.

Thaddeus Tondu:

Well, what is it? The definition of insanity is doing the same thing over and over again, expecting different results. right and so that's exactly, if you're getting the same results every, all over, every single time, you're not doing anything different. Well, then do something different. Right.

Diane Gardner:

Especially in the world that we live in today. I mean, between YouTube and all the different podcasting places where you can channels that you can pick up information, you hop on Amazon and have a book in your fingertips within a day or two. I mean, there's, there's so much information out there that it's almost like no excuse for not being able to get some help. It's there if you want it.

Thaddeus Tondu:

It's the lack of, application.

Evan Hoffman:

A hundred percent. Well, we're about halfway through, so we want to make sure that we hit up our random question generator.

Diane Gardner:

Uh oh.

Evan Hoffman:

One of Thaddeus favorite parts of the show where we ask a random question that has nothing to do with anything that we've been talking about so far. So Diane, you get to choose behind door number one, two, or three. Which question would you prefer?

Diane Gardner:

I'll take three.

Evan Hoffman:

Perfect. It was the one I was going to read for you anyway, so you actually didn't have to.

Thaddeus Tondu:

We

Evan Hoffman:

never do that here. We never do that here. Yeah, no, never. Is there anything that makes you far angrier than it should? What do you blow at, blow up at? What is it that just drives you nuts that really shouldn't?

Diane Gardner:

Stupidity and laziness.

Evan Hoffman:

On your part or other people's parts?

Diane Gardner:

Other people's part.

Thaddeus Tondu:

You I can get on board with that.

Evan Hoffman:

Now

Thaddeus Tondu:

you

Evan Hoffman:

know what it's like to work with you, bud.

Thaddeus Tondu:

I was just about to say the same thing. Now, now it's just like working with Evan all day long.

Diane Gardner:

There's a difference between somebody who's, who, who may not be blessed with a lot of brains, but they're willing to try and they're learning versus a person who is just flat out lazy and stupid and, and just wants their hand out and give me something.

Thaddeus Tondu:

Well, the political joke that I wanted to say there, but I will digress and hold that one in.

Diane Gardner:

And I thought, don't go any further.

Thaddeus Tondu:

No, no, no, I won't. I reined that in. I think my joke was well enough tasteful, that, it basically said it without saying it. So, I love that. Anyways, let's dive in. I know we're going to skip over one of them, just for the essence of time cause I think the last two that we're going to talk about are, are a little bit deeper in, in potentially longer of a conversation. So we're going to jump to number seven, in the book, and I know we're kind of jumping around a little bit, but Hey, you know what? We don't want to cover all nine because you just got to go ahead. website, get the book, is debt choking the life out of your business? And I think we alluded to this and touched on it ever so briefly in terms of, Hey, I've got a hundred thousand dollars on my, profit and loss, but I've only got 20, 000 in the bank account and we like kind of briefly on that and so looking at the debt conundrum that I think some businesses get themselves into, and we've had some conversations with folks that have, I ran into that, right? And now they're in this world of debt and they're having a tough time getting out of it. What are you seeing in terms of debt choking a life out of a business?

Diane Gardner:

First thing I see is mismanagement of credit cards. It's so easy. I want something, flip out the card, purchase it, and not really giving any thought as to how we're going to pay that thing off next month. In an ideal world, you use your card, you pay it in full. Use your card, pay it in full and we just keep that cycle rolling. But not everybody does that and I've seen clients, in fact, I've seen them with a hundred thousand dollars worth of credit card debt and you know what the interest rates are on those. I mean, they're huge and then I see them with these quick payday type loans in their business because they mismanaged their cash and those guys are brutal. They're taking 20, 30 percent interest every single week they're pulling a payment out of that bank account now this business owner is crippled with their cash flow, which causes them to make another poor decision because they're just fighting the cash flow. They're not even looking at their whole business, they're fighting the cash flow game and then half the time they go run out and they buy a new truck on top of it. Not a used one, a new, a new one, because you know, the whole bunch of debt isn't enough. Let's have some more. And then they can't keep up on all those payments and they're a stressed out mess. They're working 18, 20 hours a day. Their family never sees them. They're not healthy. They're tired. They're just a mess because they started out with a couple of poor decisions up front and how do we get out of that? In profit first, we take our profit account and at the end of the quarter when it's profit distribution time, we'll take maybe 5 percent of that profit account for the owner and most everything else goes towards debt and that's how we start paying down some debt but I've seen this repeatedly over the years, those quick payday type, you know, business loans that are out there those things are awful and the businesses really, really, really suffer when they get sucked into that vortex.

Thaddeus Tondu:

No makes sense and, are there ones that might not necessarily be as known that potentially could cripple a business? And obviously credit cards won, payday loans, the other vehicles on top of it, are there some hidden ones that are out there that people might not necessarily realize might be choking the life out of their business?

Diane Gardner:

Well, I'm going to flip over to the P& L side of things and look at the amount of interest that they paid in the year. I've got a couple of clients that are paying maybe 200, 000 a year in interest. Well, if we weren't paying that amount in interest, that would go straight to their bottom line profit and they'd have that cash to run their business and to run it more effectively. But because they're paying that big amounts of interest that they're, it's causing the whole trajectory of their business to stall out and it's hurting them because it's sucking up so much of their cash. So that can be really, really dangerous.

Evan Hoffman:

I remember an episode that we had with, Rodney Koop when we were at, well, it was, it was the new flat rates event at Service World Expo last year. Yeah that was exactly what he talked about in his business was the debt that was, that would existed there and as an entrepreneur, we fall into this trap of I'll earn it. I'll just go figure out how to make more and make more and make more and I know I've been guilty of this many, many times my young business career so far, and it's crippling and you think that you can continue to outbeat it and outpace it and it catches up to you every time.

Diane Gardner:

In my first business, I made the mistake of putting too much on credit cards. The cashflow wasn't flowing and I kept supplementing with credit cards. It took me years to get those things all paid off and now we have a policy. I mean, you pay that thing off. it's dangerous because it allows you to make a decision that you potentially wouldn't have made otherwise.

Thaddeus Tondu:

It is true. I know a lot of people that do that. and I'm just like, how pay it off every month, every time. Yep. perfect. So now somebody's, they, they've chosen to be profitable. They're leveraging proper first. They've understood their stories. They've got, you know, the numbers they tell there, they've minimized their debt. It's not choking their life out of the business. Now they're into making money. Now they've got good, good profit, good cash flow. Well, now what, what do they do when they start making good money to be able to minimize how much to pay old uncle Sam, or in our case, Sam's dad. Trudeau.

Diane Gardner:

Trudeau. Well, since I work primarily with all U. S. companies, we'll go with the Uncle Sam version of this.

Thaddeus Tondu:

Perfect. Good. Cause he's better than Trudeau.

Diane Gardner:

Is he? I'm not sure. Okay. I don't know. I don't know.

Thaddeus Tondu:

Six and one half dozen on the other. So our tax rates generally for small businesses are a lot lower, but I digress.

Diane Gardner:

So here in the States, by the time they, well, for most businesses, the income tax from their business has paid on their personal income tax returns. So by the time you pay your federal and your state taxes, it can be a whopping 40, 45%. Okay. It's like that's almost half of what we made we get to give to the government. I don't think so. I've always said all my career here of working with tax planning is we have to pay the amount of tax that we owe, but nobody says we have to give the IRS a chip. They certainly don't deserve a tip. Tip is for good service, for great service, for going over and above. So let's not give them a tip. Let's pay that least amount that we actually have to pay. There's a lot of strategies that can be done with things like investing in a retirement plan in your business for your employees and for the owner becomes part of that owner's overall exiting the business with X amount of money sitting out there. For those businesses that are in the four to five million minimum on up, we have a wonderful strategy with a captive insurance plan where they can actually become their own insurance company and they can insure themselves for lots of things that you couldn't afford out on the open market. So I have a client right now working through this where we're actually insuring their top producing salesperson because if they lose that person, it will really affect their business and so we've got some replacement insurance in their captive insurance company. So they'll have the money to recruit and find another top performing salesperson when the day comes that this person leaves or maybe we want to insure against cyber. There's so much cyber, threats out there anymore that none of us ever worried about, you know, even 10, 15 years ago, we didn't worry about that. Now it's there. Things that we can't insure for in the open market because we can't afford it. But you can pay a premium fee to your own insurance company and yes, you'll pay claims out of your own insurance company. But over time, it becomes this wonderful investment platform out there for you, which becomes part of your retirement planning. So there are some amazing strategies that can be done or we want to sell the business. There's some great tax planning strategies out there where they can keep more of their money and I don't know if it works up in, Canada or not, but down here in the States, we work within the IRS code. So I'm not familiar with Canadian tax code.

Thaddeus Tondu:

Yeah, most listeners are US based anyway, so, yeah.

Diane Gardner:

So there are strategies.

Thaddeus Tondu:

There's differences, like you guys have the Augusta rule where we don't.

Diane Gardner:

Yes, we love the Augusta rule and for those that are listening, the Augusta rule allows you to rent your home out to your business up to 14 times in the course of a year and to charge your business what you would pay to rent a conference center or something along those terms. The money that the business spends is a deductible deduction, but the money that you bring in personally is not a taxable part of your revenue. So it makes a nice little tax planning strategy. We can hire our kids and that's a favorite one. you get two things out of that one. Not only do you get a write off, but you get to teach your kids the value of money and the value of how to earn money and to be self employed at a point where there's no risk for them. So we've got some great strategies that can bring that tax bill down to a manageable amount.

Thaddeus Tondu:

Evan, you were going to say something.

Evan Hoffman:

I was going to ask for specific examples, but she just gave two. So that's perfect.

Thaddeus Tondu:

Perfect. Yeah, I was going to ask them to elaborate on the Augusta rule, but you did. So, the reality is, is I think there's probably a lot of different strategies that one can imply, depending on what they're, they're, they're doing. Their threshold is, and also where they're at in the financial picture and what their net profits actually are different strategies apply for different individuals. One, there is no blanket statement that says do this. although if you were a business owner and you own your own house, you should definitely be doing the Augusta rule and if you have kids, you should definitely be paying them. In my opinion, I wish that those two things were available for us in Canada. I think we can pay our kids, but it's a little bit different of a, ruling up here. I just wish we had the Augusta rule because that would be phenomenal. I would definitely like that.

Evan Hoffman:

we pay less in corporate tax anyway so.

Thaddeus Tondu:

That's true. Yeah. so generally, depending on where you're at. So like, for reference, the Canadian, the federal small business tax rate for income, under 500, 000 is 9%. I don't know what it is when you're above 500, 000, but, and then provincially is different. So I'm in Alberta. So our, we have a 2 percent federal tax or provincial tax rather on anything under 500, 000. So anything under 500, 000, I'm only taxed at 11 percent of my net income.

Diane Gardner:

That's not bad and that's a gross income tax. Not net?

Thaddeus Tondu:

No, it is on net income.

Diane Gardner:

Okay. Yeah.

Thaddeus Tondu:

So yeah, so our tax rates for businesses are actually a little bit more favorable in Canada than some other places in the U. S. I mean, it's, what is it, 18 percent is the, is the federal rate, for net income tax, I believe, in the U. S., roughly somewhere around there.

Diane Gardner:

It's 21 percent right now.

Thaddeus Tondu:

Oh, it's up now, okay, yep.

Diane Gardner:

Scheduled to go back up to 35 percent in 2026. Unless something happens.

Evan Hoffman:

Depending on a like result.

Thaddeus Tondu:

So perfect. Well, Diane, thank you for taking the time to chat with us. I know we went through some of those on all of those, but of course, if anybody wants to get the rest of her book, you can actually get it on her website. Profit Coach 4 You and that's. That's the number four. So Profit Coach 4 You. We'll put these in the show notes after, for those listening later, if you want to check them out on Facebook, you can facebook.com/profitcoach4you and if you have questions, hit her up via the old emails, diane@profitcoach4you.com but before we go, we have one final question here for you and since you've been, binge watching us, today, you probably already know what it is, but I'm still going to ask it anyway. What is one question that you wish people would ask you more?

Diane Gardner:

I would say how to save more money on taxes because very few people ask me that. I have to go looking for people who want to save money. They complain about it, but they don't realize that they can actually do something about it other than complain.

Thaddeus Tondu:

Well, and that's the last part, right? I'm making money now while tax planning and reaching out and asking those questions, right? I guess on the, so we talked a little bit about the business side of things and saving money on taxes on the business side. You know, we talked about hiring children, Augusta rule, some other things that are at play in there. What about on the personal side? Because I know that you probably specialize in businesses, but if you're like most accountants, you might handle the personal taxes for your clients. I don't know if that's the case or not. I know our accountant does both, but what are some ways to be able to an individual side of things save money on what they pay taxes individually?

Diane Gardner:

Well, because I specialize in businesses, I do their business and their personal income tax and the strategies that we tend to employ are aimed at the business, but felt on the personal level. There's, a much smaller amount. in the way of strategies for just an individual person who's not a business owner. You know, there are some contribution, charitable contributions, some things like that they can do. there are some various things that they can invest in that will give them some better rates of return, but it's a lot more limited than when you own a business. Hence why we play in the business side of things.

Thaddeus Tondu:

Right. Well, and it just, it dovetails in it and it helps with that I know and like we talked about that with my accountant too, right? Like, okay, what's the business projected earn? How much you want to pay yourself? Okay. Well, let's minimize how much you tax you pay in all of it. by implementing great tax strategies, across the board. So. Yep. Love it. Well, thank you, Diane, for taking the time, to come on and chat with us. Happy to have you on. I know that, you shared some great information here today for, people on looking at their finances and deep diving into, be more profitable in their business and I think when they look at a profit first mentality and, and understanding the stories that the, numbers, can tell them, I think they're going to be well on the, their way to success in the business side of things by listening to this show with you today. So thank you for dropping all the knowledge that you, that you dropped here today.

Diane Gardner:

You're welcome. Thank you for having me on your show and I enjoyed when I had you guys on my show.

Thaddeus Tondu:

It was tons of fun. So, thank you so much and until next time.

Evan Hoffman:

Cheers.

Thaddeus Tondu:

Cheers. Well, that's a wrap on another episode of HVAC Success Secrets Revealed. Before you go, two quick things. First off, join our Facebook group, facebook.com/groups/hvacrevealed. The other thing. If you took one tiny bit of information out of this show, no matter how big, no matter how small, all we ask is for you to introduce this to one person in your contacts list. That's it. That's all one person. So they too can unleash the ultimate HVAC business. Until next time. Cheers.