Do you have a tax planner on your side? How about a bookkeeper?
Are you subconsciously abdicating all the decisions when it comes to your numbers? Do you only focus on making money in your business (revenue) but give all of the rest of the financial power away to a 3rd party? Do you think your tax planner or bookkeeper cares about your money as much as you do?
Knowing how (and where) your money flows through your business and tracking the performance of every dollar is a game-changer when it comes to maximizing and optimizing how much money you ultimately make. And when I say make, I mean KEEP.
Yes. You need an A-Team to help you manage your money and build your wealth — BUT, that does not mean abdicating your finances to these experts. A lot of accountants that are preparing your taxes have only a fraction of the picture that necessary to maximize your profits and minimize your taxes owed. And, bookkeepers are administrative. They are there to take direction, not make decisions on how to report/track your monies. Not to mention, they have usually overworked themselves, trying to make ends meet, and don’t have the time it would require to pay attention to your books as necessary.
You are the one that is the most intimate with your business and the most passionate to see it succeed. That is why knowing your numbers is so important. Cash flow management is the name of the game.
Looking only at your top line is useless. You need to pay attention to your bottom line. That’s where the money is! Think profit first then all the rest will fall into place. Figure out what your short term and long term goals are. Figuring those out will help you set your profit goal which ultimately determines your revenue targets.
I enjoyed this conversation with Tatiana Tsoir. She is a CPA and bookkeeper who is not your average CPA and bookkeeper. You’ll hear how she and I are completely aligned with how we coach business owners to think about their money and as a result manage it! Tatiana helps business owners become the boss of their bottom line so that they can make money doing what they are most passionate about.
If you, or someone you love, have addiction issues — you’ll definitely wish to listen in!
We run the gamut of topics in this interview!
- What is a Tax Planer
- Having Sovereignty Over Your Numbers
- Cash Flow Management
- Entity Matrix
- Long Term & Short Term Goals
- Why You Need To Think Profit First
- Are You Volume Oriented Or Quality Oriented
- Price Theory
- Why You Need Three Tiers To Your Product And Or Service.
This transcription was made by using Otter.ai so it is not 100% accurate.
Krisstina Wise [0:00]
Hello and welcome back in this episode I interview Tiana to soar. She is a CPA, a financial author and a business owner of a very successful Bookkeeping and Tax planning business. Now, with that being said, Don’t tune out. In fact, if you’re thinking of dropping off because this accounting stuff seems boring, well, then that’s the exact reason why you need to stick around and listen to every word of this episode. Tatiana and I are on the same page when it comes to the mindset around accounting, also known as money counting in your business. Basically, it’s this in a nutshell you, not a third party need to track your money, do your books, look at your financials, know your numbers, these numbers are critically important to the financial success of your business, which ultimately means the financial success of you personally. And with the right mindset, knowing your numbers and managing your books powerfully is not only lucrative, it’s really fun and addictive. That being the that being the boss of your bottom line is the name of the game. And notice how I didn’t say top line. It’s the bottom line. That’s the game we’re playing. In this episode we talked about why tightly managing your financials which is what fuels your dreams what numbers are crucial to success. What margins we should be paying attention to the biggest mistakes small business owners make when it comes to their financials, Bookkeeping and Tax planning, and the best type of business structure to set up for your specific type of business goals. To Tiana has a fun personality, I promise you’ll be happy that you listen to this accounting podcast. You’ll giggle and you’ll pick up some real nuggets that will increase your bottom line in 2021. Please enjoy my conversation with Tatiana to soar. Tatiana, welcome to the Wealthy Wellthy podcast.
Tatiana Tsoir [1:44]
Thanks so much Krisstina for having me.
Krisstina Wise [1:46]
My pleasure. Well, I’m really looking forward to our conversation. I think we are in a lot of alignment when it comes to money and business and entrepreneurship and starting businesses. And when I looked at your bio and look through things, number one, I’m just so impressed. I see a CPA, an MBA tax planner, you’ve taken price psychology classes, gone to the profit first models, I’m like, Oh my god, girl. That’s impressive. So with that said, Tell me tell me and tell all of my listeners a little bit about you. Who are you what drives you and what got you to in a little bit of life story that brings us to where we sit together today.
Tatiana Tsoir [2:30]
So I actually wanted to be a lawyer for most of my youth. So since I was 14, till until I discovered accounting in the United States. So actually, when I went to finish my bachelor’s in the US when I moved here, I had to pick a major college in college. And I wanted to pick a major that would allow me to support myself through college and then through law school. So I had a plan of going to law school. And where I come from law school is a kind of a mix of undergraduate and graduate degrees. So it’s a five year program. Here. It’s the bachelors first and then the graduate school. So I picked accounting, I was I figured, you know, I can make some money doing bookkeeping on the side while I go to school. And that’s exactly what I did. And basically, throughout college, we were brainwashed, sort of, quote unquote, brainwashed in a good way. Because the professors would say, Well, if you’re in the accounting major program, why wouldn’t you sit for the CPA exam, so I thought, why not? So except for the CPA exam, I actually, in the process discovered a passion for accounting. And because I’ve worked with small businesses while going to college, I actually saw different leadership styles in different industries, how people did things differently and completely differently. And I got interested in learning more and actually started using a strategy used by one client and offered it to another client and or suggested maybe an approach to another client and I kind of began to become an advisor to clients. And then I went and I got my CPA license required experience. And that happened to be in a small accounting firm. And in a small firm, which is different from a larger accounting firms, you actually get to do a lot of stuff right away, which was awesome, because in two and a half years that I was there, I learned to prepare pretty much any tax return, knew a lot about taxation, handled a lot of foreign reporting, got involved into all these different things that I would have never got in two and a half years at a large firm and opened up my own practice as soon as I got pregnant and decided that I don’t want to put my children through the stress of tax season. So that’s kind of how I got to be where I am today. Three years ago, I decided to write a book but didn’t actually do anything up until about a year ago where I joined a workshop and I wrote my first draft and I got involved with a publisher and it’s just all history from from that point.
Krisstina Wise [5:23]
I love it. Well, thank you. So there’s so many things I want to talk about. Funny enough, I I went to accounting school, so I got an accounting degree, but I chose not to sit for my CPA actually worked for big at the time. It was a big eight accounting firm during the summer after I graduated when I was going to sit for my CPA. And for me, I realized, like, accounting is not my deal. tax planning, and tax is not my thing. So anyway, I it’s funny, I love money. I love numbers, and I love math, but I just never really had that, that desire to do accounting and tax planning. So well done. There’s there’s a few things I wish to talk to you about. Something that I teach a lot, and when I read through your material were really jumped out to me is that even though your CPA and taxes is that, what I found is that a lot of standard accounting CPAs, those that really focus on tax or not for that matter, it doesn’t mean they’re good at business, it doesn’t mean they’re good at small business, it doesn’t mean they actually understand personal finance and small business, cash flow managers management, as opposed to just preparing books for taxes. And what I found is that’s what’s confusing to a lot of small business owners, is they send their books off to the CPAs to do it for taxes, and they think they’re fine. And they really have no clue how the money moves in their business. So I think that you share a similar kind of point of view. So let’s talk a little bit just since you are a CPA and a tax strategist and you understand cash flow, and running profitable small businesses. Share with me where the confusion is, or some mistakes or misunderstandings that small business owners have maybe even annoyingly, as a result of not understanding how the cash works in their business.
Tatiana Tsoir [7:16]
This, the answer to this question is kind of a two prong, if you may. First, it has to do with the fact that accountants although we work with business all the time, we often don’t consider ourselves a business, which is a little bizarre if you think about it, but it’s the truth. I mean, up until about three years ago, I did not consider myself a business. I was making money doing what I loved. I was getting peano paying my bills. And that’s it. I didn’t think of myself as what can I do to develop my business to grow to maybe change things, things around or maybe use a strategy that hasn’t been used before. And it actually a client of mine who’s one of the greatest CEOs that I’ve worked with, said to me once Tatjana, accountants don’t start businesses, visionaries, do. And I thought, that actually makes a lot of sense, because we don’t apply our own skill set our own business. And that should tell you something, you know, we focus on the compliance so much. And that kind of drives us into this drives, it kind of puts me into this other I guess a side of things where the reason for that is actually, the fact that accounting service has been so commoditized, that it’s kind of this not the society’s fault. It’s kind of both the accountants and the society’s fault. We started thinking of an accounting service as a commodity. And because of that many accountants who branch out on their own think, well, I need to be competitive and pricing. And that’s not the right approach for a service like that. Because what happened over the past decades, was that for an accountant to make a decent living, we would have to have three 400 clients and the compliance alone, the filing of the taxes, the sales, tax, the other stuff, all of that consumes all of our time, and we don’t have time to spend more than a couple of hours on your on your business. So you think you’re getting a great service, you’re getting all this advice and all this support, and the accountant is great because you’re not paying taxes. But the reality is that you’re not getting anything beyond the compliance. There’s no time for it in the year. So I there’s a number of colleagues of mine who’ve taken a different approach. I got trained in in tax planning, I got coached So that I could actually get my life back, I developed packages in my service so that when a client purchases a specific package, they know exactly what the expectations are on both sides. I don’t give away free information I don’t, you know, I charge for, for what I am worth. And that makes me an expensive accountant. But at the same time, the clients who work with me actually get value, I actually helped them grow and develop and create a strategy, not just the tax strategy, but actually business strategy. Because I’ve already worked with millions of client, well, not millions of clients, but a lot of clients over the years. And I’ve seen how different CEOs do things differently.
Krisstina Wise [10:42]
Yeah, that said, that’s so eye opening, right that like way, we’re not even practicing what we’re what we’re telling others to do. We don’t think at business and and it is, it’s a different mindset, that’s that that’s what I want my entrepreneurs listening is that, that there’s just this tendency of like, Oh, I just want to focus on making the money, and then I give it to the bookkeepers and CPAs, to do everything else thinking that they’re looking after the best interest of ourselves in the business, when they’re No, they’re just preparing those things for taxes and compliance. And there’s a lot of missing profit, there’s a probably a lot of missing cash flow, there’s probably a lot of overspending, these different things if the business owner, small business owner, just isn’t aware of because it’s more of advocating that, hey, that person understands the numbers, and I don’t. So thank you for sharing that. I think that that’s a big awareness. Something that I wanted to ask you about, I know that it looks like you help a lot of people really start their business. And I A lot of my listeners, they’re, they’re newer entrepreneurs. And so I always have my advice to my newer entrepreneurs. So I’m curious what yours is what, you know, what do you recommend? What are? What would be some tips for those, like kind of the things again, that you wouldn’t be that you would miss? It’s just not obvious if you’re starting a business or in a new business? And what would be some of the top mistakes that you see those that are starting a new business? what it what mistakes are they making pretty
Unknown Speaker [12:09]
Tatiana Tsoir [12:10]
there are so many of those mistakes, to be honest with you. I mean, and that’s the reason I actually wrote my book is because I no longer work with starting companies. But what I’ve noticed over the years is that they ask the same exact questions, they have the same exact concerns. So and the problem is that often because they’re starting out, they don’t have a lot of budgets, so they can’t afford someone like me, however, they need someone like me most. So I wrote the book to bridge that gap to give people who want to start a business, a how to guide to basically start a business and do it smart, and manage their money, numbers and taxes better and start better. So that later when they actually do make the money, they can actually afford to hire someone like me, for their business. And the some of the most common mistakes. I mean, there’s like I said, there are quite a few. One of them is thinking that they need a partner, I am naturally against most of the time against partnerships, because I think that having a partner has to be extremely strategic. And there are very few cases where we actually having a partner works works well for for the person. So often people think, well, I’m a little scared of starting this business. And let me get a partner and share that risk with them. Without realizing that actually that creates more of an anxiety leader down the road kind of as you grow together or grow apart. Another thing is, and that’s kind of a big one is many people who start a business, kind of stick their head in the sand like an ostrich and ignore their money, their numbers, their taxes and think that it’s going to happen on its own. But the fact of the matter is that it never happens on its own unfortunately. And the more you ignore it, the worse it’s going to be. And it’s true for profit when it comes to profit when it comes to taxes. And when it comes to money managing money as well. Like you said, you mentioned cash flow management, because it’s one of the most critical things that a business owner can learn to do. And the clients that I work with, there are quite a few clients that I’ve worked with for over five years in a row and we work together monthly, you know, sometimes weekly, and most of them have become over the years, masters of cash flow management. And the key ingredient of them becoming masters was actually changing their mindset to embrace the fact that you need to deal with cash flow. If you run out of cash, that’s it, your business is done. You can plug the holes but if you don’t have a handle on your numbers because you don’t know what’s happening In your business financially, it’s it’s a slippery slope from there. So that’s one of the other biggest mistakes. Another mistake is not putting enough emphasis Well, I guess not spending enough time on selecting the right entity for you. Often people defer the choice to internet to illegal website, to lawyers forum or whatever, because they’re trying to save money. So I understand the reasoning behind it. But I also know how critical entity choice can be. I mean, we’re talking about two groups of people, people who start doing their business under their own name, that’s a separate conversation, because they, at least you have to have something to protect you from lawsuits and you know, unlimited liability from people going after your house or your cars or whatever. But then once you actually have an entity, does it serve your short term and long term business and personal goals? That’s a big one. And I’ve had clients who came to me and they would say, well, we heard that the S corp is the best Well, maybe maybe it’s the best for for you. But maybe it’s not. Do you have other businesses? Like let’s talk a little bit about what how would your personal life is like, what are your plans for this business? Maybe there’s something better that you can do maybe there’s more than one entities that you can form? So that’s those are the kinds of three major ones.
Krisstina Wise [16:36]
Yeah, that’s a really good and I see the same mistakes. And do you have any advice? I mean, no, I mean, I know it goes deeper is that we want to look at some, what’s the long term goals of the business and the short term, but let’s really vision out because based on answering these types of questions, it’s really going to determine Are you going to go in LLC? Are you going to go and escort? Do you have a rule of thumb as to where one might end up in one category? And when might make the other?
Tatiana Tsoir [17:03]
Yeah, sure. So in my book, I actually developed my own proprietary matrix to choose and it’s, it’s geared towards small businesses. But here’s the thing, not everybody knows exactly where they want this business to go right away when they’re just thinking about it. So a good rule of thumb is that LLCs are the worst from a tax perspective. However, they’re the best from a conversion perspective. So if you just want to start something, and want to try things out, and you’re not sure how it’s going to work, and how much of an investment it’s going to require, start with an LLC, because then you can convert it to something else. Now, I don’t think that there is one entity, cookie cutter solution for everyone. Because there are entities that have their pros and cons, every choice has their pros and cons, I am a big fan of a at least a two to three entity. multi tiered structures, basically, depending on the business, and all of those things are done not just to separate the business into let’s say, departments, or revenue streams, or let’s say you’re a designer who’s also selling furniture, those are two different businesses. And those the implications, the tax implications that come along with those choices are actually huge. So the rule of thumb is that if you don’t know just start with an LLC, but as soon as you start making a profit, make sure that you convert your LLC reach out to a tax planner who can convert your LLC or maybe convert this LLC and create another entity so that you can maximize your tax savings legally.
Krisstina Wise [18:54]
It’s good advice and I didn’t realize it that the LLC was easiest to convert. Thank you for that. That’s a new piece of information for me. And I do like the multi tiered structure at all a lot. I mean, I have a lot of LLC, where I have an S corp that’s stacked underneath or you know the stacking is really a big part of of the of what I call the the ecosystem of your overall business structure like you said if you have different ways you make money it’s really nice to create it in a in a in a map so to speak like where monies are going to flow again I love I love money flowing that cash flow. So right on I’m really curious about well let’s talk another thing that what I read when I read your material that really stuck out that I’m like, Yay, is your you like everywhere in your websites, bottom line, bottom line, bottom line, and so much what I see in these entrepreneurial circles and, and atta boys and girls and the awards and recognitions, it’s all based on top line. And again, I think a lot of small business owners don’t understand really the difference between top line and bottom line and bottom lines aren’t the only real thing that matters, and we’re not reporting bottom line, we’re just bragging about the top line. So Ken, again, from your perspective, would you talk more into that?
Tatiana Tsoir [20:09]
Yeah, absolutely, I’ll actually I’ll do better, I’ll share a story that I think is a little kind of hilarious. A little embarrassing to the number of years ago, when I just had my children there were young. And I basically just started my practice, I needed to supplement the income. So I started looking for, for a full time job just for a couple of months, maybe a year to supplement the income and to give us a boost financial boost, while I was kind of building my own business. So I got an interview for a CFO position at a footwear company. And I met with an HR person, and she said, you know, we just crossed $10 million mark of top line revenue. And I was like, that’s exciting. And I was thinking to myself, they can really afford me. So like, my ego was really talking, you know, loud. And then I met the CEO, and the CEO was like, seemingly excited. He wanted, he was pumping. He was excited about this whole thing, his company, his business, and he was excited to be able to afford to hire a full time CFO. So as we were talking, he said, Well, we just secured a second round of funding $14 million, and so on, and so forth. And I said, Well, that’s awesome. But are you guys profitable? And he looked at me, and he said, huh. And I was like, are you profitable? He’s like, we’re not scheduled to make a profit till you’re three a night. And I was probably rambling, something. I don’t remember what I said. But natural, I didn’t get the job. But it just shows you how many people think that having a huge top line is everything. And the fact of the matter is, is that it’s just their egos talking, there’s nothing, nothing else that I can say about that. Bottom line is everything. And the business owners that I see succeed are the ones who grow from profit, who know exactly how much profit they have. And here’s the thing, profit is different from your salary, your compensation as an owner, because your compensation is for your services for you, coming to work, managing the business, doing whatever, sweeping the floors, if you have to, but profit is a reward for you for starting this business for taking this risk, and it has to be worth your while. If your profit is not zero or not worth your while, then why are you in business? And if you don’t know what your profit is, then why are you in business just to create something beautiful, that’s not a goal in and of itself. Now, the truth is that businesses that grow from profit often grow slower. But their growth is often much more feels much better for the owner and for the accountant. I have a client who started a business a startup in 2011. And he is about to sell the company for multiples of millions of millions of dollars and it took him years to grow. But after five years in company, you know staying in business, none of his competition was around. He grew from profit he did it slowly he did it smart. And like I said it may take longer to grow from profit. But I think that’s the only right way to grow business.
Krisstina Wise [23:52]
Hallelujah. Yes. And and you know, something I say to you I’m curious if you agree with it is that’s the job as a business owner, we’re to be good stewards of the money of the business and it’s our job to maximize an optimized profit. And the revenue is just a means to get to profit. But you know, in the end, that is a profit it’s you know, that is our pride like wow, and with it almost shows it’s our skill set as an owner to see how much profit we can create out of a business that says the more profit we can create, the more bottom line has that grows. That means my skills are a business owner real because there’s all these different components of a business not just making the money and the top line. That’s one piece that’s easy for a lot of people. It’s how do you manage the business in a way and build it in a way that it has profit leftover which is like you said, the reward to taking the risk and all the hard work and you know, all the the sweat equity we put in and sleepless nights and so on and so forth. Nobody else has to worry about.
Tatiana Tsoir [24:56]
Yeah, yeah. And think about this. I mean, and this What a lot of business owners kind of get wrong. They think that it’s the accountants job, or the bookkeepers job to manage their numbers and profits, and so on and so forth. But I have an analogy that I use to say that, well, when you go to the dentist, you don’t expect the dentist to actually make your teeth healthy. You have to floss, you have to brush every day, twice a day, you have to rinse your mouth or whatever it is that you need to do to get your teeth healthy. The same thing with the business, you can’t expect another person who doesn’t have skin in the game, to treat your business the same way as you do. And you can’t expect someone to care about your profit as much as you do.
Krisstina Wise [25:52]
Man, amen, sister. Absolutely. That’s a really good metaphor. By the way, I’m not gonna borrow that one from you, if you don’t mind. I love it. Yeah, and it’s right on. And, and what I what I do is I have a money school and I teach business owners to understand their money, get to know their numbers, and really get, you know, this desire to create profit through knowing their numbers, and manage their cash flow, and really doing everything that we’re talking about. And I find it fascinating that all these business owners and entrepreneurs that I work with, I’m guessing you find the same that they’re really great at making the money, but they’re clueless, clueless as to the financial kind of just the financial stability of the real financial bones of their business, they really just abdicated, thinking, I’m not good with numbers, I don’t want to know the numbers like this. That’s the CPAs job. So, you know, it really is. And that’s really why I mean, why I wanted to bring you onto the show, because I could tell like you have the same message like no, no, your numbers, know your numbers, know your numbers want to get good with your profit. Yeah,
Tatiana Tsoir [26:59]
absolutely. And I, that’s how I work with my clients, you know, I do the work for them. So I manage their books, I manage their taxes, but it’s not on me to make your business profitable. It’s, at most at best. It’s a collaboration, I support you and what you want to do, but only you can decide what’s best for your business, I can give you suggestions and how other people have I’ve seen done it, and so on and so forth, but I can’t make your business successful.
Krisstina Wise [27:28]
Right on. Alright, let’s switch gears just a little bit. Let’s move over to tax planning and a little bit and in this tax planning is I just stay out of it. And I do really depend on my tax strategists and planners like you to help me, you know, really optimize maximize for the best tax savings. Where do you see for small businesses, again, what are some of the mistakes that you see small businesses making with their where they’re probably paying more in tax than than they need to.
Tatiana Tsoir [27:58]
So I’m just want to kind of explain what tax planning really means. Because there’s a lot of misconception when it comes to tax planning, and then I’ll come back to the mistakes that I see. So tax planning is different from planning for tax payment, because when you do planning for text demons, you don’t create any strategies that actually lower the amount of tax. So tax planning focuses on creating legal court approved IRS approved strategies that allow you to shift income or take advantage of the multiple structures and benefits and deductions and use fringe benefits are the things that typically are available for a very limited entity types and, and businesses. And bring that to a small business tax planners are usually cost much more. But the beauty of that service is that you get an immediate return on investment. So basically you’re in you investing in in the tax planner pays for itself and, and more. So what I see most many small businesses that I’ve come across over the years, kind of get wrong is the attitude. Like I said that going back to the commoditizing accounting service. The attitude, oh, I’ve had this client and I’ll tell you a story. It’s probably best illustrated with a story. I had this client that I worked with for 10 years at least. And I was doing sort of like an outside controller work for them. So they’ve had a couple of investments and they needed accounting level reports. The bookkeeper could not produce you didn’t have enough knowledge. So they hired me to do that. And I’ve worked with them for over, you know, close to 10 years. And I’ve mentioned a couple of times, you know, give me your tax business. And he always said, well, I’ve been with this guy for 20 years. He gives me a good price on No tax prep fees. And I said fine, because I don’t do price competition it my prices are what they are. And if you can, you know, if you don’t want to invest in yourself by investing in me, that’s totally fine. So then I got trained in tax planning, and my first call was this client. And I was like, Listen, do you want me to take a look at your numbers before the year is over? And it was actually three or four years ago, when, in December also, it was about two weeks before the end of the year. And he was like, Sure. So I looked at the numbers and, and I saw that he could have deferred $40,000 in tax, but the window for that opportunity already closed. Then I started looking, I asked him, would you like me to look deeper into your books and kind of analyze what could have been done and so on? And he said, Sure, please do. Because I’m good at bookkeeping, I was a bookkeeper first and then I became an accountant. I started looking into his books, and I saw that out of $400,000, that he made that year 300 was actually qualifying for capital gains for a much lower tax for 20%. Tax as opposed to a 37%. Tax. Basically, it was a difference of about $80,000 in tax. And it was an immediate switch. I, you know, he didn’t even ask how much it would cost him to do it. He just said, Let’s do this. So I amended his last year’s taxes, I get him the $80,000 back. And then going forward, I made the setup to make sure that he pays the least amount of tax legally. And once he said, you know, maybe a year into working together, he said, I’m never making any decision without talking to you first. So that’s kind of that’s what businesses business owners are often missing. You know, you think that the accountants can be qualified by the amount of refund that they get you or how aggressive they are with deductions. But the reality is that first of all, tax return is your own responsibility. So if they’re aggressive with deductions, and you get audited, too bad, you’re responsible, not them. And also seeing the value of paying for someone who’s a tax planner, who can actually throughout the year, create mechanisms for you to pay less tax like I do, because once the year is over, it’s too late. You can’t do much you can maybe do a couple of deferrals. But that’s about it. So that mindset shift is probably the number one thing that people miss.
Krisstina Wise [32:46]
Yeah, very good. And I don’t I make very few, if any big business decisions without talking to my tax planner strategist first, like, let me thinking how can I structure this, you know, and because I’ve structured things the wrong way and selling an asset or whatever I do that it’s like, oh, my gosh, I just, you know, Miss big opportunity. So I’ve learned that lesson myself the hard way, thinking I was just paying to get my, my taxes, my prepared and, you know, missing really what the strategy is. So thank you. What about so we’re approaching when this airs, that might be the new year, but but right now, the, when we’re having this conversation, we’re approaching the end of 2020. What do you recommend into beer for for businesses? What I see and the reason why I ask is because I see a lot of accountants will tell the business owners spend all of your money, like get all the money off the books, so we can deduct everything. And again, there’s no profit if we’re expensing everything. So I’m curious what your point of view is on that when you’re, you know, as part of the tax planning, and the business owners are looking at how to close out their books.
Tatiana Tsoir [33:57]
So what I do, actually, and I’ve been working till 10pm last night, creating this the structure for a client, end of year, can beer bear a couple of opportunities with it. 2020 specifically, is unique because in this year, many business owners made a lot less than they normally would, or maybe lost money. I have a couple of clients, not many, but a couple of clients whose businesses were very much affected by by the pandemic. And with them there is something called a Roth conversion. So that’s a strategy that I actually was executing for a client last night to convert a traditional retirement account into a Roth when you have a year of loss or very low income. Because when you do this conversion, you make pre tax money taxable so you pay tax on that conversion, but the money then grows after tax and you never pay tax on it again. And it’s great to do in large chunks when the income is down. That allows you to accumulate tax free money. And the beauty of that tax free money is that you can, let’s say, when you retire, start collecting Social Security, Social Security is non taxable unless you have other income. And Roth IRA distributions, since they’re not taxable, they’re not counted, so they don’t make social security taxable to you. So you can accumulate a lot of money in a Roth account, and then retire very, very comfortably without having to worry about your Social Security being taxable. Plus, right now, we are in the historically low tax rates, tax rates that are on individuals right now are the lowest they’ve ever been in the United States. So chances are when you retire, or when I retire, taxes will be much higher. So getting after tax money, will actually allow you to keep more of your money. So that’s a great strategy at year end, and it only the only issue is that it’s has to be executed before the end of the year. And I’ve been doing projections for clients looking at the numbers, making sure that I don’t miss anything to make sure that I convert only enough to not have them write a check for taxes so that maybe their pre payments or withholdings, cover the tax for that. Certainly the expenditures like you said, but I never tell clients, you know, go spend as much as you can, so that we can deduct it, the problem is that you don’t want to spend just for the sake of spending. Profit is first. So and I’m a big profit first fan. But profit comes first. So if you think of you know that you’re going to purchase something in January, maybe it makes sense to speed things up and purchase it in December. But don’t go and spend your money just for the sake of spending money just to get a deduction. I don’t see, like a really good reason to do that. I mean, there are certain strategies, like for example, not billing your clients, so not sending them an invoice, let’s say from December 1 to December 16. until January 1, in that case, it’s legally allowed to not have to recognize that income, you just don’t build your clients. But those are kind of more simplistic strategies that business owners can do.
Krisstina Wise [37:31]
Thank you, I’m glad that we aligned there as well. Alright, just a quick switch of gears again, I read that you’ve studied price psychology, and I’m really fascinated by that. So would you share a little bit about about that, like, What do you know about it? What is it? Why did you study it? And you know, what are some some cool tips you can share with us?
Tatiana Tsoir [37:52]
I psychologies by far was one of my favorite topics, because it’s super fascinating and fun. And the reason I started looking into it, and there was a course offered by a colleague that I met at a conference and I was like, Okay, this is great. This actually will allow me to help my clients manage their prices better, because in reality, so very few people are confident in their prices. I mean, the apples of the world, and so on and so forth. But often people don’t, especially when they’re starting out, they don’t know what to charge. And I was in that camp. Also, when I started my own tax practice, I didn’t know how much to charge people. And what happened was that I was grossly under charging my efforts. I was charging people $600 for corporate tax return and basically opening myself up for questions throughout the year, not charging for them. So I ended up working a lot. And my bank account didn’t reflect me working a lot. So when I came across this training, I was really excited in the first two hours of the training. I just it just blew my mind. And the basics, that pricing strategy has to be a strategy also not just like a random number that you think is right for your product or service and not what other people charge because you’re not other people you’re you. And so when price ecology start with with the kind of two basic choices, well one basic choice, first foundational choice, and that’s picking a camp, low costs, low price leadership or high value leadership. And those two are kind of two different camps because when it comes to low price, the business focuses on value and cutting costs. That’s all they do and old businesses and we know who they are IKEA is of the world Southwest Airlines of the world. They focus on making money on low margin, high volume and being known as the lowest price in the industry. So quality is not even a question there and the companies kind of feel the same Meaning that companies that compete on price have that cheap or affordable feeling about them. Now, high value differentiation, companies, they all are all different because they all enhance or emphasize the different value that they sell. So Land Rover, when it came to the United States many years ago, it was double of an SUV price of any other SUV that was sold in the market. But they were not selling you an SUV, they were selling you a car that you can take off road. And even though you’re driving to the grocery store, you could still take this car off road and go go wild. So it’s pricing plays a huge role in in that, but high value differentiation companies know what their value is. And they’re selling to a specific customer with a specific problem or gap or our or need. And that’s how the hellofresh of the world appeared, and so on and so forth. So first, you have to pick a camp. And the problem arises when you don’t when you kind of don’t know, are you trying to compete on price, are you trying to be high value like, pick one, and stick to it. And accountants actually fall into that middle category where we often don’t pick a camp and we’re like trying to compete with other accountants, but then we really are doing a lot of work. So that’s, you know, it’s the same, it’s the same thing and applies the same way. Price psychology talks about the fact that our brains perceive a price to be bigger, if it’s bigger visually, if there are more digits, if there are decimal points, there’s $1 sign. So notice how fine dining restaurants, they never put the price in with decimal points, or dollar sign or make it big. It’s first the dish title, then the dish description. And then matter of factly, kind of little price, tiny digits with no decimals and no dollar sign. It’s very strategic, because they know they want people to focus on the dish, not the price. And I mean, if you are going to fine dining restaurant, you kind of expect that so she can afford it, you don’t go to that restaurant.
And that’s just the introduction to price psychology. But I’m fascinated by fascinated by it, because it allows us price better. And a couple of tips that I can leave the audience with and when it comes to price psychology, is if you’re a service business, have menu pricing, three packages have been found to be optimal. Because when it’s two people feel like they’re kind of put into a box, they’re kind of limited. And they end up not choosing at all, when it’s more than three people feel overwhelmed with selections, and they end up not choosing at all. So three is kind of the optimal choice. And statistically 60% of people will buy your middle package. So if that’s the package you’ll sell most, make it make sure it’s valuable and price it so that there is enough profit to make it worth your while because you’re going to be selling a lot of those packages. When it comes to products, it’s a little different strategy, but still look at Apple, Apple knows that once you add an iMac to your cart, you’re in what’s called the buying mode. So then even if you’ve selected the lowest option, then you go through a series of upgrades. And you’re offered usually two choices, at least for an upgrade. Do you want to increase your harddrive to one terabyte or two terabyte, you know, add $200 or $300? Do you want to increase your RAM and then you go through the series of these upsell offers that are much smaller individually than the cost of the computer and then you end up with a $5,000 computer in your cart. So look at how the masters of the world do it and apply that to your business. Don’t just look at other professionals and try to compete with them and you know, charge with what they think is right. Who’s to say that your business isn’t different. Who’s to say that your product isn’t unique. Make sure that your price reflects not only the value, but also your has your profit built in solid profit built in the price.
Krisstina Wise [44:26]
And I love that I want to do some more study there as well. I’ve read some books on it. And even in something like if you go to a Best Buy and they have the TV selection, they have the very low one. And then they have one that’s $20,000 and then just shows the averages that people tend to go to that middle so they have three or four selections and then 60% buy that one that’s, you know, in between. So I love that. Well thank you so much, man, you are just a wealth of information. And we’re closing in on our time together. So I’d love to ask you a few questions. These are a little bit more personal All one sit. Tell me say Christina, if you really really knew me, you would know that what’s something that most people don’t know about you?
Tatiana Tsoir [45:13]
Most people don’t know that I love spending time well, not actually no, that was from the time my family but they don’t know that I love ballroom dancing. I love Latina, a lot, salsa, salsa, rumba, cha cha, all of those things, I love learning more. And I’ve been going for classes for years, different different times, right now I’m in I’m in a break, but I love doing that. And that’s something that’s very artistic and very on accountant, like,
Krisstina Wise [45:47]
I’m just gonna say it’s so an accountant, like I love that about you. Oh my God, that’s such the juxtaposition. Awesome. Tell me as a brag moment, what’s something what’s a some success that you’re really proud of?
Tatiana Tsoir [46:02]
You know, this book that I have coming out in a few months, it’s if I could go back in time and start this journey, or I was about to start this journey, I don’t know how to do it again. Because, yes, it’s such a great work. Meaning that it will help people start businesses better and save money and save anxiety. But it’s it’s been a very tough journey. It requires a lot of commitment, a lot of discipline, and a lot of brainpower to make that happen. And it’s a long haul process. And people like me, we like things done quickly. Like I put in an effort, I want to see results tomorrow. But with the book, it’s actually like a year and a half, at least some people spend three, four years working on the book. And it’s just something that I’m really proud of, because it’s finally actually being printed as we speak. So I’m actually really excited that it’s coming out very soon.
Krisstina Wise [46:59]
Congratulations, that’s big. On the flip side of that, what’s a what’s a failure or something looking back has been a big lesson like oh, my gosh, I I screwed that one up.
Tatiana Tsoir [47:11]
So my personal failure or like something that I should have seen come in, maybe
Krisstina Wise [47:18]
I should have seen coming and just those things, you know, we it’s great to have these successes. But I love people like part of what I love doing is I share like, Oh my god, I made these biggest mistakes, if I can save you from making this mistake, because you know, I was naive, or whatever the case was. So I love sharing the mistakes. So maybe we can help others avoid the same ones.
Tatiana Tsoir [47:38]
The first mistake that’s kind of big and small, it’s kind of medium size, I guess, is that not charging enough? In the beginning, it’s very hard to change how you price with the existing clients, once they’ve been your client for a year or two. All of a sudden, they don’t understand why they should be paying you more because you know, since they’ve been paying you so little before I’ve gotten used to paying 600 Why should I pay you 5000. So it’s really hard to bounce from that. So I think that if I have taken the time to actually price my service better not looking at other professionals, that would have been that would have been great. And then like halfway through my practice building my practice, I answered an ad for like I was looking to supplement some income. So I answered an ad for a CPA who was looking to sell his practice. And he wanted someone to come and work for him for a couple of years and then eventually transitioned the practice out. He already sold it once before. So he was serious. And it didn’t work out. The firm didn’t take his clients seriously. It was a traditional firm, he had a high value pricing company. And you know how they say, when something happens to you, you, you know, it’s for the best. And I was so he basically reneged on his on our agreement, and fired me on a Saturday and gave me some reasons that are not true, because he wouldn’t have fired me over email if that were true. And I just thought then, like, What is the reason for this, you know, like, what could possibly be good about this. And actually, that prompted me to go and get trained to tax planning, go and get coached, get my life back, build a better business, where I actually feel that I’m transforming people’s lives when I work with them and write a book. If I had stayed in that practice, then it was about four years ago. If I had stayed in that practice, I would have never gotten to where I am today. So it’s not a mistake, per se but I mean, I guess I should have seen it coming by It’s something that is good to know when you’re just starting out that to keep your eyes and ears open for an opportunity, but also not limit yourself to just this one plan be okay with the fact that goals change and plans change. And they’re usually for the best.
Krisstina Wise [50:20]
That’s a good thank you for sharing that. I heard something recently on a podcast that I thought was really good because I talk about it sometimes when we think when we make decisions we’re looking at at it like it’s a forever decision, as opposed to sometimes things are just temporary. So we can make decisions for short horizon a time versus this is for the rest of my days. And the the podcasts the way they phrase that was, this is a stop, not a stay. And you know, just to be thinking like, Hey, that was a good stop some good lessons, and you know, wasn’t gonna stay there. Alright, so one final question to wrap this up is that I close all these episodes working to bust a myth, is there a big fat lie out there that you’d like to call out?
Tatiana Tsoir [51:01]
Sure. And then there’s quite a few. But this one thing that really aggravates me, because it’s unnecessary. People think that when they start a business, if they didn’t make money, they don’t have to file taxes. And that’s not true. You have to file taxes. And in fact, even if you lost money, especially if you lost money, you’re better off filing the taxes and claiming that loss because that loss can be huge in the future when you do make money and actually can pay less taxes. So may not be an immediate tax benefit. There’s no tax do but actually, you can set yourself up to pay lower taxes later. And that’s a lot of something that a lot of people get wrong.
Krisstina Wise [51:43]
Awesome. Well, Tatiana, thank you so much for your time. I love your energy. I love your wisdom. I love your point of view, and all the advice that you offered it I fully fully agree with. So thank you, and thank you for this year and a half journey for this book that’s coming out. I know we’re all going to benefit from that.
Tatiana Tsoir [52:01]
Thanks so much, Krisstina for having me. It’s been a pleasure.
Krisstina Wise [52:04]
My pleasure. If you enjoyed today’s show, there are a few things you can do as a way to say things. First, simply hit the subscribe button to the Wealthy Wellthy podcast. By doing so it helps both of us. You’ll never miss an episode and it helps me and my ratings. Second, if you’re so ambitious, please leave a review while you’re at it. Third, just keep doing what you’re doing and continue to share the Wealthy Wellthy podcast with your tribe of friends and colleagues. On another note, although you likely listen to the podcast when remote keep in mind that there are links to the guests and their work in the show notes that you can find at WWE podcast.com You can also find a WWE podcast.com the latest information on my upcoming events and other things I’m creating to serve you in our mutual quest to live a Wealthy Wellthy life. Thank you so much for listening. See you next time.
What We Covered
[2:19] Who is Tatiana?
[6:53] Share with me the common pitfalls small business owners not knowing their numbers make.
[11:42] What is your advice for new entrepreneurs?
[16:38] Do you have a rule of thumb of what type of entity would work best for a given business?
[19:40] Can you talk to the bottom line instead of the top line.
[27:30] Where do you see small businesses paying more in taxes than they need to?
[33:23] What are your recommendations as we approach the end of the year? How should people close out the year?
[37:38] So tell me about price psychology.
[45:01] Krisstina if you really really knew me you would know that?
[45:55] Tell us a brag moment!
[47:00] Tell us one of your biggest failures.
[50:22] Bust a myth for us
“You can’t expect another person who doesn’t have skin in the game, to treat your business the same way as you do. And you can’t expect someone to care about your profit as much as you do.”
“People think that having a huge top line is everything. And the fact of the matter is, is that it’s just their egos talking, there’s nothing, nothing else that I can say about that. The bottom line is everything.”
“The business owners that I see succeed are the ones who grow from profit, who know exactly how much profit they have.”
Share The Show
Did you enjoy the show? We would love it if you subscribed today and left us a 5-star review!
Click this link – Wealthy Wellthy Podcast
Click on the ‘Subscribe’ button below the artwork
Go to the ‘Ratings and Reviews’ section
Click on ‘Write a Review’