finance

Talk-Commerce-Alejandra Santos

Looking Forward in Finance with Alejandra Santos

Have you ever wondered what the difference is between an accountant and a finance person?

An accountant looks backward, and a finance person looks forward.

Alejandro Santos helps us to understand the complexities and the simplicities in accounting, why you should be looking forward more than you should be looking backward, and how vital that finance person is in your organization.

Transcript

[00:02:46] Brent: Welcome to this episode of Talk Commerce. Today I have Alejandra Santos. Alejandra is the c e o and founder of Startup Tandem. Alejandra, go ahead, do an introduction better than I just did. Maybe tell us your day-to-day role in one of your passions in life. 

[00:03:03] Alejandra: Oh, thank you so much Brent, for the introduction and for having me here.

[00:03:06] Alejandra: I am very excited for today’s episode. So my day-to-day means a lot of meetings, talking to clients and steering them into good practices with their financial. And with the finances in their business, and taking long walks along the beach with my dog and , trying, if I have the opportunity to take a meeting to the beach, I will absolutely do that as well.

[00:03:27] Alejandra: And a passion of mine. I just, I have so many, but I’m gonna say since we’re talking about dogs, passion is to rescue all the ducks from the streets and put them in beautiful homes. . 

[00:03:36] Brent: That’s a, that is a great, that’s a great venture to do. All right, so Alejandra, I did warn you that I’m going to do this free joke project.

[00:03:43] Brent: I’m gonna tell you a joke and you could just tell me if you feel as though the joke should be continue to be free, or if you feel like we could charge for the joke at some point. Okay. Here we go. Never date a tennis player. Love means nothing to.

[00:04:01] Alejandra: I think that one’s free. Okay, , 

[00:04:04] Brent: thanks. Thank you so much. All right, so Startup Tandem. Tell us a little bit about how you started Startup Tandem, and why you started it. 

[00:04:13] Alejandra: Yeah, so thank you for that brand. Startup tandem. I’ve been doing accounting and finance for 15 plus years. I actually bred into it after I gra I graduated college, I did the wealth management, and then I went into corporations, big companies, nonprofits, and it was when I moved to California that I went into entrepreneurship as an employee.

[00:04:32] Alejandra: Internal employee is an external consultant working for. One of the competitors, not what it is now, a competitor of mine. And it was there that I realized a big gap that existed between the services that were provided, two entrepreneurs when they were building their businesses to exactly what, the price was for those services.

[00:04:50] Alejandra: And it just didn’t make any sense to me. So that’s why I created Startup Tandem. A startup Tandem is a supportive partner of four entrepreneurs in when they’re in their. To start a business and as a startups and all the growth level, that maturity, some clients are making 80 million in revenue.

[00:05:07] Alejandra: Some other ones are making one $50,000 in gross revenue. It just, it really doesn’t matter where you are in your journey. We are committed to become that partner that can set you up at least with a good infrastructure and take you all the way until you scale or until you’re ready to hire internally. So that’s exactly what we do.

[00:05:23] Alejandra: We set up entrepreneurs with the tools and the resources. to help them in their finance journey and not just, give them whatever service. It’s not a one size fits all. It’s customized to its company’s growth. 

[00:05:35] Brent: When you start with an entrepreneur or a new business, do you see them making common mistakes in, in, in their accounting practices or bookkeeping, things like 

[00:05:44] Alejandra: that?

[00:05:45] Alejandra: A hundred percent. So one of the biggest pitfalls that I see is that they’re not on top of, Just general bookkeeping. And they don’t have really good policies in place. By that means that there’s no AR policy or AP PO policy approval policies in place. There’s a lot of personal expenses go flowing through the company.

[00:06:03] Alejandra: And, They do their taxation, their taxes according to their bank statements rather than a financial statement. And it’s not really until they have the urge to bring an external investor, an external partner, or they’re trying to get into a very big line of credit or some kind of debt financing that actually puts them urgency.

[00:06:22] Alejandra: To, wow, I gotta clean my financials now because we’re gonna look at that. And at that time, at that moment, you’re really 10 years into the business or five years into the business, and you’re looking at a high cost. Just to go there backwards and then forward to clean those financials is a big mess and it takes a lot of money out of your pocket.

[00:06:42] Brent: Do you find that a lot of entrepreneurs aren’t necessarily versed in accounting and maybe they don’t underst. what payables are and what receivables are and even the sense that, hey, I’m suddenly, I’m amount of money, but I have a whole bunch of inventory to you. Help them with some of those 

[00:06:58] Alejandra: pieces.

[00:06:59] Alejandra: Oh, 100%. And yes, what we do, a big portion of what we do with our marketing and resources that we offer is education. Just because that is a thing that we do see in the industry. There is no urgency in. in financials, in financial management, in accounting, and knowing what your numbers are. So a lot of it goes with educational videos, educational resources, why you should do it, why it works, why you should, this is a big component of your business.

[00:07:27] Alejandra: We. Definitely focus on that as an early stage company. Even though you cannot afford, if you cannot afford a full service yourself, we definitely wanna set you up with the tools and infrastructure, the policies to help you get into a good regimen. And, if you wanna do it yourself, you can, do it yourself, but at least you have something to go buy.

[00:07:47] Alejandra: And then when it comes to inventory, that’s a big pitfall that I see, especially for e-commerce companies, startups, and businesses, is. They don’t have just with the basics, they don’t have a really good skew numbing clutcher. Which that means it’s like products. Some products don’t even have a skew, so it’s really hard to even track down what the levels of that skew is or that inventory product is if you don’t even have a good traceability on it.

[00:08:11] Alejandra: So yeah, there is a lot of things that I see pitfalls, but there is a lot of things that also systems and very low budget resources and tools can. Entrepreneurs gear to the right position. 

[00:08:24] Brent: You see a lot of entrepreneurs doing books or doing their bookkeeping as the last thing they wanna worry about, they just get it done.

[00:08:32] Brent: And I, you had mentioned that they just go off bank statements for reconciling they’re not doing cash flow reports and there’s so many more things that are involved in there. How do you educate ’em on some of those? . 

[00:08:42] Alejandra: So yeah, it’s really interesting. I get a lot of clients at the end of the year because they’re getting ready for tax season, and one of the big things that I get is, oh my God, my books are a mess.

[00:08:52] Alejandra: I don’t even have a set of accounts. Can you please help me out? Cuz the tax season is coming. And it’s great. Yes, we can definitely do that. However, When I asked them those questions that you just did, okay, so what is your cash burn? What is the biggest driver of your cash burn? What, those are the things that you have to know in order to make the right strategic decisions in your business.

[00:09:11] Alejandra: You gotta know all those drivers. You gotta know all those KPIs. So when I make those questions to them, it’s it goes like an. in the brain. Oof. Okay. I don’t know those things. Maybe I should know them. Yes, abso a hundred percent. And I try to get because in numbers it’s not for everybody, and especially when you are a business owner and you’re creating this amazing product, you’re very creative. You probably don’t wanna talk numbers. So when you’re very creative, I try to talk, in the level. Whoever is in front of me to educate them, okay, maybe you do need to know what’s causing that burn, because if you know that you can control that, you could probably put that money into this instead.

[00:09:50] Alejandra: Product development or a marketing expense, something that’s gonna drive revenue up, and that’s when they realize, okay, I do need to be more diligent with my financials. 

[00:10:02] Brent: are some, are there some basic from an educational standpoint that you help them with and say just in reporting balance sheet, p and l, cash flow statement, are there some just basics that every entrepreneur should know before they even start?

[00:10:15] Alejandra: Before they even start? Yeah, that’s a good one. . I even have friends that entrepreneurs, and I tell them all the time, get your stuff together before, please don’t give it to me like that. The first thing I say is try treat your business as a business. And your personal is your personal business.

[00:10:28] Alejandra: A business is basic. Don’t run your. Personal expenses through the business is just at the end of the day, you gotta look at the big picture. And if the big picture is, I’m gonna sell my company in five, six years, guess what? They’re gonna be looking at those ebitda. They’re gonna look at operational income and they’re gonna see what’s flowing down there.

[00:10:46] Alejandra: And if you put all their personal expenses flowing, it’s gonna destroy the valuation of your company. So I try, just keep the big picture, even if you don’t understand the technicality of it, just keep the big picture in mind as soon as you have a business. Go with the, goal. I’m gonna sell my business.

[00:11:01] Alejandra: I’m gonna go an I P O, and then work towards that since the beginning, from the beginning. And just that will give you a clear sense of what you should or should not do. And if you have a hesitation, then ask questions to someone that does. No 

[00:11:14] Brent: I think you mentioned how the banking system works and how they wanna look at your books.

[00:11:20] Brent: If you are gonna start, if you’re gonna try to get a loan it would also apply to, if you wanna sell your business or get investors how do you recommend somebody that maybe they’ve been in business for five, six years and suddenly they’re, they want to start making their books, is it a process to weed through the mess that a person may have made and then they, you need to get ’em on the, in the right.

[00:11:43] Alejandra: Yeah. So there is definitely a process, especially if you have been in business for a few years and you have done taxes according to your bank statements rather than what’s sitting on that, on those financials. There is definitely a process, especially because those years are already closed.

[00:11:57] Alejandra: I called them closed because. Taxes have been already filed. So it’s really how can I say? You have to talk to the person that file your taxes to, to see what kind of adjustments you have to put in those financials to match exactly what you did in your taxes. And let’s just say that most of the time, your taxes, the taxes that are done are show less revenue.

[00:12:15] Alejandra: Then what’s in the financials? And it’s just because it’s cash basis and there’s a lot more things that are happening on the financials that are happening in, the bank statements. Let’s just say that it’s, you have to go retroactively. So what we do is basically Reno talk to the tax attorney or tax prison that did those books and say, okay, this is where we are.

[00:12:35] Alejandra: this is a trial balance. Now what can we do to get it there and then go forward cleaning up the whole, financial set and make sure that everything that’s flushed out personal, from business is flushed out and there’s a differentiation on it. Because what happens is the banks will look at least two to three years, depending on the financial institution.

[00:12:55] Alejandra: To see, what, how much your gross revenue is. You’re gonna look at those numbers. So if we can make the financials as accurate as possible, and related to what was posted on the taxes and then moving forward as well, we can show some growth, then that can put in a better place, and that goes with investors as well.

[00:13:14] Alejandra: The same, they’re gonna ask for your, your financials. Most you don’t, you probably don’t wanna even share your tax return if it’s flowing through you with an investor it’s uncomfortable situation. So we would have to go back, clean it up, match it to that, and then go forward and show some kind of forecasting, increase in revenue.

[00:13:33] Brent: Yeah, I think that you brought up a really good point about how the tax how the bank statements won’t reflect your ar They won’t reflect your inventory, they wouldn’t reflect any depreciable assets that you have and how important those are for a business owner to know. And even for when you’re going to get a loan, the banker’s gonna want to know what your assets are outside of what the bank balance.

[00:13:56] Brent: maybe talk about some of those pitfalls that entrepreneurs fall into when they, maybe they’re not as educated around accounting as they should be. 

[00:14:05] Alejandra: Yeah, so that’s actually a good point, Brent. So there’s a lot of asset based financing and it’s very important to know that, especially if you are in e-commerce and you have inventory on the books So there is definitely platforms.

[00:14:18] Alejandra: I’m just gonna speak very, a few of them. I don’t endorse any of them by the way. There is a Shopify, there is PayPal capital there is Clear Bank. Those right there will finance against your cashflow revenue stream. But what some asset based institutions do, and you can do the traditional or the non-traditional way, which.

[00:14:37] Alejandra: Do you prefer the non-traditional way for small companies or startups because they’re a little bit riskier? They basically look at your inventory and see what the inventory turnover is and see exactly what the valuation on that in turnover is to finance against it. And what happens there is that if you don’t have.

[00:14:54] Alejandra: If you don’t have a clear, a clean inventory balance, meaning they’re gonna ask for warehouse reports, they’re gonna ask for, what’s sitting on the balance sheet ties into the warehouse and evaluation that’s sitting in the warehouse. Actually the same as in the books. And if you don’t have that really button up, you’re missing on a lot of money.

[00:15:12] Alejandra: And if you do get an untraditional institution, they, you’re probably missing on not right now, cuz there’s inflation. In the future you probably will be missing on lower, in a low cost of capital financing rather than going to a traditional institution. When they give you a term loan, which is gonna be really high with really bad.

[00:15:29] Alejandra: Payment terms. So there is a lot to unpack when it comes to the balance sheet financing. There’s your ar like if you have some really good contracts and clients and they’re valued at, let’s just put a number, 500,000. You can get some really good financing against that if you find a good institution that can give you good factor for that.

[00:15:47] Brent: On your website you list that you do services like bookkeeping and fractional cfo. Maybe explain to our listeners some of the differences, and if we started with the bookkeeper, you have a comptroller, there’s a fractional cfo, there’s a cpa. How there’s a lot of different roles that that a in financials that play.

[00:16:06] Brent: Tell us if you could just explain some of those differences and then maybe tell us what, how you help. Yeah, 

[00:16:13] Alejandra: no, thank you. So yeah, so bookkeeping is your, I’m gonna call like the very low level service. Very basic, can somebody coming in, making sure that your bills are there, your invoices are there, your payments are matching, your invoices very low level.

[00:16:28] Alejandra: I don’t like to really just offer that because I think the company does deserve a little bit more. Than just bookkeeping. I like the accounting, the whole accounting service for anybody honest. It doesn’t matter what your business growth is. And it’s because it not only makes sure that your books ar and AP are really up to par, but it’s also gives a little bit more insight on what your margins are and where you know, your, where your biggest drivers of expenses are.

[00:16:56] Alejandra: If it’s marketing or you. Probations or whichever one it is. So I like that one more. And each level, for us at least, we do have a CPA person and management, that manages the accounts and make sure that everything is up to par. We do have also staff and senior accountants that take care of the very.

[00:17:16] Alejandra: Low, low, the low budget task as well. And then when it comes to fractional, CFO is going forward, right? So one of the things that people need to understand is that accounting is, keeping the financials accurate to what’s going on right now. But cfo, f o means going forward. But in order to have a good forward overlook, you are gonna need accurate financials like the forward.

[00:17:40] Alejandra: journey is based on the actuality right now. A CFO person is somebody that will do those analysis for you, is gonna do an f p, and a analysis is gonna do a weekly cash flow. It’s gonna do some variance analysis, which is like budgets, forecast versus actuals, right? Where are you standing according to your forecast or your budget?

[00:17:59] Alejandra: And if we have to readjust the forecast to meet those numbers this person will help you navigate. What kind of KPIs you’re gonna need to reach, or what kind of KPIs you need in order to meet certain metrics or something like revenue goals. This person can identify, like I said, cash burn.

[00:18:16] Alejandra: Where is that cash burn coming from? If you are a company that’s bringing product from China or bringing, product from another country, what are your shipping costs? Is that like the main driver of your cash burn? What can we. To mitigate that cash burn. And it’s somebody that, when it comes to financial institutions, goes ahead and assess the risk of each loan or line of credit or any, o other kind of tool that you wanna get into.

[00:18:40] Alejandra: This is a person that will analyze and assess that risk that comes with it. And it’s a true apr, right? What exactly are the fees that my company’s gonna face on a yearly basis? Divide business with this company. It’s just, for all, anything that you need. There is, like I said, accounting is actual.

[00:18:55] Alejandra: So you need somebody that can make sure that every number in that book is actually, has a backup. If there’s traceability, there’s an a report. If somebody comes looking for answers, there’s something there. And then you, a fractional CFO is somebody going forward. How do we get to the next level?

[00:19:11] Brent: If somebody’s just starting let’s and they want, they, A year’s worth of books or two years worth of books, they’ve just done it on their own. How long would you expect somebody, like one of your team members to get them up to speed where it’s ready to. Start forecasting revenue, start for forecasting cash flow, things like 

[00:19:30] Alejandra: that.

[00:19:30] Alejandra: So it really depends. Let’s see, one year, two years, and they’ve done it all on their own. We would have to go and look at those books, make sure that, if there are any changes that we need to make. We do them in the current year. Talk to the tax accountant, like I said. And just honestly it takes a month or so to get the, to get us up to speed on like the accounting side.

[00:19:50] Alejandra: And then after that, because we need actual information, we need some really good, reliable information to do the forecasting. And then I would say like a few weeks after that, three weeks, we could probably have a model ready. We do models. Very differently than a lot of companies that I’ve worked for before.

[00:20:06] Alejandra: We don’t have a one size fits all kind of issue because everybody has, different business models and not also a different business growth as well. So there’s a lot of things that small companies don’t need and they probably find overwhelming. So we basically have standardized models already.

[00:20:23] Alejandra: We have a small model and we have a more complex model, and we adjust those models accordingly to the business. The, The business and the business model that we have. So with that being said, it doesn’t take as long to, to create something. But it does what could be that time delay would be the cleaning of the accounting and make sure that everything is reliable.

[00:20:45] Brent: What do you see from a mistake standpoint that entrepreneurs or business owners make when they are hiring somebody like you? and they want to try to cut costs at the same time. Is there places where you see people being cheap and maybe they should just spend the extra money on services to make sure that their books are right?

[00:21:07] Alejandra: Yeah, so I’ve seen different cases, so I’ve seen people. Hire full staff of marketing internal team, and overhead is one of those things that is the biggest driver of cost, especially for a small business. It’s one of the things that I look at. The first things that I look at are, do you have an office?

[00:21:26] Alejandra: How much are you paying for that? And how much people do you have in staff? Because you will be surprised. Fractional goes a long way when it comes to building a business. You just have to find the right partner. That’s what it goes with, everything, right? You just have to talk to people. getting a conversation.

[00:21:42] Alejandra: Go have coffee, vet them out, talk to their clients, talk to their partners, see how they’re reacting. But that would be one of the biggest pitfalls that I see is that these companies are spending a lot of money on employees, internal employees. With that comes and I don’t. Know if a lot of people are listening are in California, but if you are in California’s one of the worst states to have employees.

[00:22:04] Alejandra: It’s like the state is against you as an employer. There’s so many policies that you have to follow. It’s insane. So you could. , you could reduce that level of stress if you just go, find some agency or someone that does those services on the side and can be a good partner to you. The other one that I see is, like I said, if you are in e-commerce and you’re doing inventory is inventory wow.

[00:22:27] Alejandra: There is a, if you’ve. Find the wrong three PL company. Oh my goodness. There’s so much cost that goes with that. It’s just, and it’s a lot of cost to get out of it through PL and to get into another one. So research on the right three PL company is one of the biggest ones that I would suggest to do as well.

[00:22:44] Brent: As a business owner, do you recommend like a payroll service or do you recommend that the entrepreneur or business owner do their own? . 

[00:22:52] Alejandra: Oh, that’s a good one. So definitely a service, a payroll service. I honestly, I like everything. I’m not very techy. I like everything that’s very user friendly, user interface friendly to me.

[00:23:03] Alejandra: And I like the ones that are targeting startups because, they basically provide a lot of support and that companies do need and they’re not very bureaucratic, like older. Payroll software providers are but I’m not, I’m not here to recommend anything. But one of the big, one of the ones that we use is Gusto is very user-friendly.

[00:23:22] Alejandra: It connects with different softwares. And then I also hear that ADPs going and. Connecting, doing a thing with QuickBooks coming up soon. So that’s, that could be a good one as well. I just think that when you’re starting a company, you wanna be very e easy, make your life easy with a lot of techno technology tools, cuz it gets really complicated when you have so many at the same time.

[00:23:42] Brent: Is there a, is there an alternative to QuickBooks 

[00:23:44] Alejandra: as a small business? Oh my God, there is. There is, but is, you’ll be surprised how many people use QuickBooks. I think 90% of the population, I use QuickBooks, so there is, but QuickBooks is just makes it easy for small business owners because it’s very cost efficient, and for example, there’s NetSuite, NetID is a really good platform. , but it’s expensive. And that’s what I am saying, and they do have an in inventory management already capability in it, which makes it a fully RRP system. However, it is very costly, and this is when as a business owner, you have to make those decisions.

[00:24:21] Alejandra: It’s What is the value added for the software that I will be buying is if I’m spending $30,000 a year for the software, what is the value that I’m getting out of it? How many employees do I have that are you gonna be using it? And then from there determine if this is worth the investment or not.

[00:24:37] Alejandra: So that’s where we go with the companies that’s. Probably use QuickBooks online because it’s very cost efficient. You can connect it with other tools, but there’s ma As you grow your business, I, if it makes sense, go for it. If it doesn’t make sense to put those 20, 30 grand in a system, then don’t go for it.

[00:24:55] Alejandra: Just continue, using tools that work for you. 

[00:24:59] Brent: Is there, can you highlight challenges? So you mentioned e-commerce in selling a product. Is there challenges in selling a service as a, as a. . 

[00:25:08] Alejandra: Oh, always. There’s always challenges. . Oh my goodness. There’s so many challenges. Yes. One of the biggest challenges, it is credibility.

[00:25:15] Alejandra: Making sure, obviously when you’re, when I see it from a small business owner point of view, when you is your baby, Especially the finances. This is go to finances. Oh wow, somebody’s gonna handle my finances. You wanna make sure this person is really vetted and wonder what they’re speaking to.

[00:25:31] Alejandra: And I a hundred percent agree with that. Also marketing service is another one. That is, there’s presents a lot of challenges because marketing’s all about results. It’s not about the process. While the finance and the accounting is all about the process. , about the results.

[00:25:43] Alejandra: So you just have to, it is always, there’s always a challenge no matter what you sell. For me, the biggest challenge is people like me, they talk to me, they meet me, they’re like, oh she’s very pleasant. But I look very young. I’m not gonna lie. You’re looking at me right now.

[00:25:56] Alejandra: I look very young and people are like, oh my gosh. She has that much experience. How old was she when she graduated high school? And when they look at my experie, My experience will talk for itself. So if you do feel like there is a way to vet more of your service, providers, you can always ask for references for clients, for partners, for, just to see what they’re doing for other people.

[00:26:18] Alejandra: And, at the end of the day is, find a partner that has flexibility as well. on a contract. If you don’t like them, goodbye, there’s no oh my God, you, I have to pay this. I have to do that. I have no, it has to be somebody that’s easy because at the end of the day, you’re is your business and you wanna make sure you have the right partners in place.

[00:26:36] Brent: If you had a piece of advice going into this fourth quarter in these high interest rate times to a business owner, what would that be? 

[00:26:44] Alejandra: Start looking to cut costs. Right Now, look at the areas of like I, we just talked a few about overhead costs, right? Unfortunately there is a lot of people being laid off right now because of that reason.

[00:26:55] Alejandra: But. It shouldn’t be that way if you were vetting your costs at an early, earlier time this year, right? Because inflation has been coming for a long time already. So just be proactive look ahead. That would be my first advice. Look ahead, look at your cash burn. Start looking into those weekly cash flow models that I always, you know, monthly cash flow models will tell you so much, but if you look at a weekly standpoint and see exactly what’s driving the number in, you will see there is a lot of areas that you can, lower down those costs.

[00:27:23] Alejandra: The other one is, it was probably better back a few months ago to get into a line of credit, Kind of use that money now, the interest rate are so high, I don’t even recommend it. Just start initiating those conversations with a lot of financial institutions to see what they offer in the near future.

[00:27:42] Alejandra: Because the, the interest rates will come down. It’s, as the government continues to push, they will come down at some point. So the cost of capital will, will become cheaper. Just start initiating those conversations now and be, prepare, be proactive in this time. 

[00:27:56] Brent: Yeah, I’ve always heard that the best time to ask for cash from a bank is when you don’t need it at all.

[00:28:02] Brent: Exactly. , when you absolutely need it, that’s when they don’t want to give it to you. . Yeah. You, you mentioned weekly and monthly cash flow models and that’s how you can help cut expenses. Do you, so you recommend looking at the detail within that cash flow to help you see where that money’s going?

[00:28:15] Alejandra: Yeah. So this is the thing with the monthly one. So the monthly is a very undirect cash flow model. It takes the activity of the balance. Just to see what’s happening. But on a weekly basis, it is very direct. And you can monitor that on a weekly basis. Just to assess where you standing and when is It tells you by week when your cash is running out.

[00:28:34] Alejandra: If you’re running out of cash on January 3rd, that’s when you’re running out of cash with everything else that you’re being forecast, you’re meeting those forecast numbers and it helps you be proactive in your budget If you say, okay, I’m running out of cash on January 3rd. , that’s not a lot of runway.

[00:28:49] Alejandra: We don’t have, external capital coming. Let’s cut down what are the budget areas that we can minimize to bring it to February, at least one more month. That it helps you be really proactive in identifying those areas of opportunity. And then if you need to ask, do a fundraising round, then it gives you at least that lag time.

[00:29:08] Alejandra: Okay, two more months to get really out there and ask for. 

[00:29:13] Brent: Perfect. Alejandra, as we close up the podcast, I give the guests a chance to do a shameless plug about anything you’d like. What would you like to plug today? 

[00:29:20] Alejandra: It is Black Friday coming up, so make sure that you have your inventory.

[00:29:27] Alejandra: If you’re using something like Shopify or e-commerce, make sure your inventories are set up correctly cuz that way you don’t have a future headaches in the, once everything is done, make sure that you have your follow ups correct, coming out to all those new customers, make sure that you have some retained strategy for the new customers coming in and purchasing your product.

[00:29:46] Alejandra: So I would just say there’s actually a blog from OK Kendo I can share it with you and I just head over. There is a few tips of coming from different experts on how to prepare for Black Friday, cyber Monday for you to make a lot of money and cut a lot of headaches. . 

[00:30:01] Brent: That’s awesome. Yeah, I appreciate that.

[00:30:03] Brent: We don’t often get different types of industries that you’re giving advice for. Thank you so much for that. Alejandro Sandro, Santo, sorry. is the CEO and founder of Startup Tandem. Thank you so much for being here today. 

[00:30:17] Alejandra: Thank you brand. This was so much fun. Mutual Gusto, .

Thank you for making it to the end of this episode of Talk Commerce. Please rate this episode wherever you download your podcast. We are actively looking for people to participate in the Free Joke Project. Go to talk hyphen commerce.com and sign up for your free spot on the Free Joke Project. If you are a business, I will do a 32nd elevator.

In the spot to help promote your business. That’s talk hyphen commerce.com.

Talk-Commerce Nicole Hamilton

Wealth and Homeownership with Nicole Hamilton

In interviews with homeowners, 25% say they bought their home first for an investment and second for a place to live. The other 75% say they bought a house simply as a place to live with little expectation for it to be a good investment. You grow wealth through homeownership.

Nicole Hamilton has made a career of helping others with home ownership. She explains REAFE in detail. A Real Estate Asset and Financing Evaluation is about maximizing the returns you get from your real estate.

Her tip for the episode is to think twice if you want to refinance. If you refinance with less than half the time on your mortgage, you start over with your interest payments!

Show Notes

Personal: 

https://www.linkedin.com/in/nicoleh

Company:

https://www.instagram/homeowner.ing

https://www.facebook.com/homeownering

https://www.youtube.com/channel/UCGegoDlazIT6OZTQBCba4cw

Roger Brown

https://www.mathestate.com/


Here are more links that might be of interest to listeners:


A product for people who want to plan for Homeownership: https://www.homeownering.com/the-formula-steps-to-becoming-a-homeowner/

And this is about the financial, real estate analysis I do: https://www.homeownering.com/reafe/

Here is a free equity report we have on our site: https://www.homeownering.com/free-home-equity-report/

Transcript

Brent: Welcome to this episode of Talk Commerce. Today I have Nicole Hamilton. She is the CEO of Homeowner. Nicole, go ahead, introduce yourself. Tell us your day-to-day role and one of your passions in 

Nicole: life. Oh, okay. It’s great to be here, Brent. I’m an entrepreneur in the housing industry. I have a company called Homeowner.

Nicole: It’s very pro home ownership and treating your real estate with the same care that you do your other investments. I’ve had other companies in the sector. I’d say the common thread through all of my ventures is an obsession with real estate, finance mortgages, Home equity appreciation.

Nicole: Home is an investment home ownership and intergenerational wealth. My current company home owning. Is dedicated to getting people into home ownership and then getting them good financial outcomes. So it spans the the life cycle of home ownership from buying utilizing and improving your financial situation through home ownership.

Nicole: And then, selling. and my passion, I guess one of my passions right now is weightlifting, . I go really into it. 

Brent: Wow. That’s great. Yeah. I definitely need to get more into Weightlift as I’m getting older, I realize that my upper body, I run every day, but my upper body is definitely neglected, especially over time and it, I think as we get into our fifties, which I am, you are it’s harder to gain.

Brent: On your upper bodies, you have to work twice as hard as if we were in our twenties. Anyways, we can, we’ll keep moving out along there, but that’s awesome. That’s good to know. I’ve heard more and more people talking about that, yeah. Alright, so before we jump into our content I have a thing called the free joke project, hashtag free joke.

Brent: And I’m just gonna tell you a joke and all you have to do is tell me if it should be free or if we could charge for it. Do I have to? You do not have to laugh. I would appreciate real real feedback on it. All right. But they’re all fantastic jokes. All right, Ready? Okay. My doctor just diagnosed me with a severe lack of awareness.

Brent: It came out of nowhere.

Nicole: Free . 

Brent: Alright. Super

Brent: Thank 

Nicole: you. I actually love, another patch of mine actually is standup comedy. Oh, wow. All right. I will listen to any standup comedy. Yeah, so I, I’m interested in the free joke project and I hope to follow that hashtag and learn more. 

Brent: Yes. I’ve started publishing on Twitter art on On TikTok, Sorry.

Brent: Sometimes they’re on Twitter, but they’re all on TikTok on my Brent w Peterson TikTok channel Anyways. Free hashtag free joke project. Great. So Nicole homeowner I’m I’m also a homeowner and always interested in the subject. Tell us about how you got into it and what was your journey getting there?

Nicole: Yeah I guess the way I got there was Earlier in my career I was a science major and then I went into technology. And then I got very interested in how technology can make people’s lives better. I know sometimes it makes people’s lives worse, but I know that, for me it was, how can I apply this to really helping people?

Nicole: And then the recession in 2008, housing crisis hit, and I really wanted. Help solve a problem. The problem being that a lot of people got loans that they couldn’t necessarily understand were afford, and that caused a lot of foreclosures and immense pain for economic pain, for many millions of Americans.

Nicole: And so I started a company called Tactile Finance. Tactile Finance, Pronunciation. Pronunciation it. And that was a sort of visualization product for banks to use with their clients or non-profits to use with their clients. And it just provided transparency into the market. And that’s where I got super into the math and.

Nicole: And the consumer need and the consumer approach to housing finance. So it’s been about a 12, 12 year journey to where I am now. Which I would say, I wound that company down in 2015, 16, 2016. And it ran its course and I realized that I really wanted to focus on the consumer, not the inter, B2B business, but focusing on the consumer and the consumer needs.

Nicole: And so I think that journey just gave me a lot of insight. I understand, the, a more sophisticated picture. I understand the bank’s motivation. I understand the role of the non-profits, I understand the mortgage industry as a. . And then I guess one of my superpowers is to take really complicated information and make it digestible for people and an enzyme

Nicole: So that’s where my real passion for homeowner came, which is there’s all this sophisticated knowledge out there, but like people. Regular people like you and me can use it to better their situation and understand the complicated aspects of owning a home, selling a home equity, and things like that actually make an enormous impact on your, ultimate net worth.

Brent: Yeah, I think do. So going back, starting with people with on their first home, how do you help them past rent and getting into their first home? What, Do you have a formula or do Yeah, go ahead. Sorry. 

Nicole: It’s an excellent question. Brent . So I actually have a product, it’s called the Formula, and it’s on our website and it’s like $20.

Nicole: It’s very inexpensive and it’s a system which basically gives you. The ability to see all the diff it’s all the different criteria to be a homeowner. So there’s a lot of different known loans and qualifications to get a loan, and it lets you see where you are in relation to those criteria now, and then plot your way to the quickest, most effective path to being a home.

Nicole: So I’ll just give you an example. If you’re refinancing a house or buying a house the lo what the loan officer is doing in the background is they’re trying to fit you in this formula. It’s called a dti, debt to income ratio. And that’s a blah, blah, blah, gobbly go, industry language, but ultimately they’re taking all the aspects of your financial picture.

Nicole: And they’re trying to fit it into a way in which the bank will say, Brent, you can get this mortgage. But all of that is very opaque to a home buyer. And what this does is it just gives you that information that you can see exactly what criteria they’re using, and there’s ways that you can adjust your goals.

Nicole: If your income is too low and your debt is too. Then the house that you can qualify for is gonna be lower, right? So it’s this formula that you massage and say, Okay, over 12 months, if I can reduce my debt by X and let’s say I pick a house price of, 350,000 then I can get to that goal.

Nicole: That’s a achievable goal for me. Whereas if you don’t have that information, you’re just like, Oh no, poor me. I can’t afford a home. So it’s just empowering people. A lot of people get left out of the housing, out of the home, out of home ownership because they lose faith and they don’t know how they’re gonna get from point A to point B.

Nicole: The real issue is that how, being a homeowner is is a known wealth builder, especially for the middle class. And letting more people get into home ownership is incredibly important. I A lot of, public policies are designed around that. So it’s just like a way to distill this information.

Nicole: Create a plan for yourself and be able to actually see how you can get to that goal. So that’s one of the things that kind of came out of, all this work that I’ve done in the last 12 years is how to make information that’s known in the industry, known by, other people. So it can empower.

Brent: Do you feel as though now what? Home ownership got more difficult after 2008 and are banks getting better at helping people to get into home ownership now compared to right after the crash, the home crash? 

Nicole: I think what the crash did is it changed a lot of laws, like the dod Frank laws.

Nicole: It made lending. It made it, it made a lot of good things happen in the industry that prevent consumers from being taken advantage of. So that, I think, was a net positive for everyone, including the banks. In a lot of ways. It made lending safer. It also, we know that we’ve been through very, up until recently, a very, a period of historically low interest rates.

Nicole: We’re not in that right now, hopefully we will be again, sometime I. Yeah, so obviously that made it easier for people to purchase homes and it also drove home prices up too with, demand and everything like that.

Brent: I think my first home was in the nineties and it was, I think we got an arm.

Brent: Or if a five year fix with an arm after. Something like that. Yeah. And at the time it was like 9% interest or something like that, but with the arm it brought it down or something. I don’t know. How you, do you have a formula me, to help people through that? Because I know like my friends in England where every mortgage is an arm and now they’ve said their payments have doubled all of a sudden because of that adjustable rate.

Nicole: Yes. So arms are, I had an. It’s arms, A lot of mortgage people actually get arms, seven year arms and things like that because the interest rate is low in the beginning. But it’s contingent upon the idea that you’re gonna be able to refinance out of that into a better rate. So it’s a, it’s a. So there there’s some risk in that, that you just really need to know what it is. And I actually made a video it’s on my website, but it explains exactly what an arm is. It doesn’t have a lot of viewers cuz a lot of people don’t know, don’t necessarily wanna follow through the whole five minutes.

Nicole: But I do have a video about product, a product review of. Of a ShopVac that, that hits 35,000 views. But the arm video is not as popular as the ShopVac video. . 

Brent: Yeah, I have some Jack Russell videos that are far more popular than any videos that I can post on YouTube. So I think it is funny what people tend to watch.

Brent: Alright, so back to finance. If so, one of the hard parts as an entrepreneur, Is getting a mortgage. One of the easy parts before 2008 as an entrepreneur was a stated income mortgage, which they don’t do anymore. How do you have do you have specific help for self-employed people as they’re trying to get a mortgage?

Brent: And maybe is there a certain amount of time that you have to either show a W2 or show your tax returns to a. 

Nicole: Yeah, so there’s rules for, so there’s, yeah there’s rules for mortgages. Usually the rule is for W two s is you have to show two years of your income. And it’s two years is really a rule too for business income.

Nicole: So a lot of banks will have you submit. Whatever structure your business is. If you’re, if you’re an LLC or whatever, then you submit that income, to the mc if you’re not getting a paycheck, if you’re taking a draw from the company. So there’s different ways to do it but you touched on a really important thing, which is that, for entrepreneurs, it can be d.

Nicole: If you’re in any of these categories or let’s say an Uber driver, you’re getting income from all these different places and you don’t have a w2, there are formulas that banks use to assess what your income is. So it doesn’t mean that you can’t get a loan. But in business the one thing about business income is that they wanna see that it’s going.

Nicole: So , if you have a year that, you know, so that can be a factor, right? If you have a, if you have, 2021 was a good year and 2022 is a bad year, but 2023 is gonna be a better year. There’s some ease of, getting a loan if you’re showing that your business is improving.

Nicole: And there’s also. There’s always leeway too with in the, these areas where you have to interpret, whether something is improving or not improving. There’s always you can ask for, the manager above the loan officer to take a look at it and see if, if you can submit more documentation.

Nicole: Or provide more information about the industry that you’re in. I know that during the recess, sorry, the pandemic, restaurants, restaurant owners, weren’t a great bet, right? So there’s some industries that really suffer, from declined if you’re getting business income from that.

Nicole: But there’s ways that you can, the more you know about it, the more you can help yourself. Just like anything. . 

Brent: Yeah. Especially I think as an entrepreneur, that’s the hardest part is maybe, and I think it’s even harder as a young entrepreneur. So if, let’s just say you’re in your twenties, you’ve started a business and you’re trying to navigate that process of your first purchase because you don’t have a w2 is it better to go to a big bank or a small bank?

Brent: as a new home buyer or as an entrepreneur? Does it 

Nicole: matter? I think it’s great to really go to a lot of different types, so I always recommend that people also put a mortgage broker in the mix. , because they have a access to many different types of loans. If you go to a bank they’ll have their own products, but if you go to a broker, they’ll be able to search more broadly and find banks that are more suitable for your particular situation.

Nicole: So it’s just good like anything else to shop around. 

Brent: Do you ever talk to people about maybe a sec or investment home or a second home, or somebody that’s buying a home just for Airbnb? 

Nicole: So one of the things that home honoring does, which I got into lately, which I think is a really important aspect of investment finance, which is neglected by wealth managers for the most part is analyzing properties for their long term investment potential.

Nicole: in the case of, if you’re someone who’s not getting a mortgage just to get the lowest monthly rate, which is most of us, right? We don’t want to spend a penny more than we need to on our housing, cuz we have a lot of other expenses. But for a lot of people, they do have a little discretion in how they structure their financ.

Nicole: And you can structure it in a way that gives you, a better return based on your goals, on your investment goals. So one of the things that we offer is a, they call it the reef, which is a real estate analysis. It’s like a financial analysis. So in that case, you’re looking at your current houses, if you have more than one or just one, what the financing is, which your overall goals.

Nicole: And then coming up with different scenarios that could, maximize your, the goal that you’re looking for, whether it’s putting more money in play, whether it’s reducing all your expenses, whether it’s looking to buy a second home, whether it’s looking to buy a home for rental purposes, things like that.

Nicole: It’s a financial investment analysis. And I think, too few people go through those steps to understand their real estate as an investment. And if you consider how much we all spend on our housing, really do, and doing little tweaks, like taking a second look at that, helo that you have, is there a better way to structure it so that you’re spending less?

Nicole: What is the interest rate that you’re on? When does it a adjust, taking a more watchful eye to these major expenses that you have. And a lot of people don’t know that they have options, so that’s a really big focus of home owning right now. 

Brent: Yeah. I think you, you brought up a really good point about your financial advisor and it’s been my experience that a lot of financial advisors don’t look.

Brent: A rental property as a valid investment, they think somewhat probab. Some do I’m not gonna, I shouldn’t generalize so much, but a lot of them would say you put your money in bonds or stocks or, and properties sometimes, or a property or maybe a real estate fund might be something they would recommend.

Brent: But buying a rental property and then trying to. Is sometimes out of their purview. Maybe it’s more common for entrepreneurs to buy doing something like that. But I Maybe just a quick comment on that. Do you feel as 

Nicole: that’s, Yeah, I think that, wealth managers and investment managers, they know their domain very well.

Nicole: And if you think about. There’s a lot to consider already in their domain. They’re not really necessarily trained or equipped to do something, in the real estate realm because real estate investment is itself a large domain. There’s a lot of math and a lot of considerations, tax considerations all kinds of things.

Nicole: Liability considerations. With real estate investment that is, that, I don’t know that you could expect someone to also be an expert in, it’s a different kind of thing. I have a good friend Roger Brown who wrote a book called and I Wish I had it here. He’s a great guy. It’s called Real Estate in.

Nicole: Math or something like that. 

Brent: Roger Brown. I’ll put it I’ll do some research and I’ll put it in the show notes. 

Nicole: Yeah, no he’s an amazing mathematician and so I, I learned a lot from him. He did a lot of work with me over the years, validating the math that I was doing. , helping me make sure that it was solid.

Nicole: And so I learned a lot about real estate investment from him, and I just know that I’ve read his book. It’s very interesting, but it’s it’s something if you’re gonna get into that field, I just don’t think that an investment, a wealth manager is the right person to maybe help you with.

Brent: Yeah, and I guess I never thought about this. Probably there probably are wealth managers that are focused more on the real estate side rather than the just straight up investment side. That’s an interesting, I, that’s an interesting take on things. Yeah. How about what about recommending if somebody were to buy a, an apartment, just paying cash for it.

Brent: Is there ever a good time to do that 

Nicole: right now? Yeah. , I think right now, if you’re a cash buyer, And, you can imagine if the Fed is trying to, slow the economy down and and we know that rates are going up and mortgage rates aren’t tied to that specifically, but they have definitely, the, a lot of relationship to the cost of money being lent, So you know right now you would expect real estate prices to decrease as it’s harder for people to buy homes in this high interest rate environment or high mortgage rate environment.

Nicole: If you’re a cash buyer, you’re, this is your time, Like this is this is in your sweet spot cuz you. If prices are declining and you’re competing against people who have to get a mortgage and you don’t need a mortgage, then you know it’s your 

Brent: time. Yeah. Good. Nicole, we have a few minutes left.

Brent: And it always goes by so fast. If if you have one little piece of advice that you could give somebody, what would that be? To get into the housing market right now. 

Nicole: I think that you should if you wanna be a homeowner and home ownership is for you, you should make it a goal. And don’t give up on it because it does have a lot of potential to improve your financial situation, but at the same time, obviously you wanna know what you’re getting into.

Brent: Yeah, I like that. I like that concept because if you never set a goal, you’ll never 

Nicole: achieve. Exactly. It’s true for everything in life, isn’t it, Brent? 

Brent: Yeah, that’s fairly, that’s a really good way to look at it. So Nicole, as we close out the podcast to give everybody a chance to do a shameless plug, what would you like to plug today?

Nicole: I have a newsletter. It has a lot of subscribers. You can go to my site, homeowner.com/newsletter. You can sign. And also, take a peek at the site. There is the formula, which is for people who want to be aspiring homeowners, and there is what we call the reef, which is financial analysis for getting better returns on your, on the money you spend on home ownership.

Nicole: That’s great. That was really three plugs, . That’s 

Brent: perfectly fine. You had to sit through my joke, no, I 

Nicole: love you could get it. I wanna hear more of your jokes. Okay. 

Brent: You could get extra plugs because of the bad joke. , 

Nicole: the free joke. 

Brent: Yes. Thank you so much for being here today. It’s been such a pleasure.

Brent: And just so many more things we could talk about on this subject. 

Nicole: Yes, Thank you for having me. Wonderful to be here with you. Thank you.