Most founders never know this one number

Thank you. Thank you for having me on the podcast.

Yeah, so Yeah, yeah, yeah. So I I thought I think I always wanted to start my own thing, but I never really had the sort of confidence to do it. I started off quite young. I didn't go to university and I didn't go I dropped out of college really early and I went straight into the world of work and did my accountancy studies just at home by myself, put my myself through the qualification and did a bookkeeping job on the side. and just realised I just had such a passion for finance. Like I really enjoyed the job. but not just doing the job. Like I could see sort of I think the wider picture and I wanted to be much more involved in like the commercial side of the business and I wanted to be important. I always wanted to have a good important role in any business that I worked for. And I always thought if I get into finance, people will always respect me. Like, you know, I think that's a good that's a good subject to go down. So yeah, I just worked my way up in my roles. and then but was always in in agency. So worked f first really for a online marketing agency. And then moved to London and worked for a branding agency. And then I had my first child, so decided to go freelance because the nine to five didn't really suit my schedule at the time. And then freelancing turned into magic digits. So we ended up acquiring quite a few clients at that point where I needed to bring some help on board. so that was the sort of start of magic digits, really. and then we've just grown since then and I've really try and specialise in a particular sector. So PR and marketing was an area which again I've got agency experience and I thought there was a lot of opportunity in the P PR and marketing sector where we could really help. and give, you know, I think one thing about us is that we're we're a very straight talking agency, but we're also very approachable and we try and really understand the founders of the business and we get very involved with the clients that we work with. So I think that really suits PR and marketing agencies and why they want to work with us because we have that sort of more personable approach when we do their finances. so yeah, that was sort of how how we how I got to to sort of start magic digits really.

Yeah, well, I mean, a lot of the time the founders are very busy and they they you know, they may not have the budget at first as well, or necessarily know what's out there for them with that support. So a lot of agencies we work with might just have someone who's doing their books, just keeping their receipts up to date and their banks up to date. And then at the end of the year they have an accountant that comes and files their accounts to company's house, job done. But what we try and provide is that more in depth service where we work with the agencies on a daily, weekly, monthly basis, preparing the management accounts information, working with them, showing their numbers. And I think by working with PR agencies, we really as well try and present our numbers in a way that works with them. And we have some clients that are much more driven by graphs. And visuals rather than actual lots of detail where we have some other clients who just like the numbers and as much data as possible. But we're able to adjust that based on the different founders that we work with. And I think there's a big area where we're able to come in and really take that pressure off some of the founders and just give them that financial confidence so that they can actually go do what they're good at, run their business and actually step away from the financial side of things and be very confident that that's being taken care of in the background.

Yeah, absolutely. I mean, we see that loads. There's things that we bring in, you know, that founders are not doing when they try and do their own books, or they potentially bring someone in who isn't as experienced as they should be. So, you know, you think see things go wrong like receipts not being coded correctly, claiming things that they shouldn't claim, not claiming things which they should claim. Posting VAT incorrectly and making you know their VAT returns are then wrong, and either they can owe money to HMRC or end up having to reclaim more back. you know, not necessarily knowing what number they have to be hitting every month to make the desired amount of profit they should be making as a business and how to get to that number. knowing as and when to hire, when not to hire, having that person who can direct. them with those decision making processes, I think really helps. and just, you know, anything from even revenue recognition, you know, you might invoice a client £20,000 for something one month, but not deliver the work for another three months. Now, if that's the case, you shouldn't take all the revenue in that month. You need to understand how to spread that out and costs associated with it. Fab is never going to know how to do that, really. in terms of a management accountancy pack and tracking that, but your accountant should and should do that for you, which actually gives you more accurate data and numbers of how the business is actually performing. So, you know, there's lots of ways which, you know, we we we help and and you know make sense of of the numbers that they're actually working with.

Absolutely. I don't believe for any second that accountants are going to be replaced by AI. I think there's certain aspects of their role which can be replaced and should be replaced. I don't think we should be wasting time doing things that we can do quicker. One, it's more cost to the business. People cost a lot of money. If you can speed up a task by AI and it delivers the the same, if not a better result, do it. Like there's no reason. you shouldn't be using those tools. But there's nothing, I think, having a person, a real person who understands those numbers, who knows what they're working with, who understands a client, to can have an actual physical conversation with a client and make sure they do something to get what they need out. As an example, you need a receipt from a client to close off the month. There's no you can set up a thousand reminder processes to get that done. People can ignore that because it's a robot, they're not getting spoken to. If you actually physically get on a call with someone and you say, I cannot post your accounts or get you the numbers you need because you have not physically given me your receipt and hold that person accountable, that is so much more effective than a system or to remind you to do something that you can just turn off. So I don't believe that in that regard. People will ever be replaceable. I also think, in terms of the reconciliation tools that I've tried to use with our bookkeepers to auto-reconcile things, they're not correct still. We see lots of errors. We see things getting reconciled to incorrect codes where it guesses what code they should go on based on a previous transaction. Who's to say that what you spent that on previously for office expenses? Is office expenses this month, even though it's a different supply. You don't know. It's you can't guess that. You have to actually find that information out. And VAT rules, I've seen things go through with VAT that shouldn't be claimed because there's certain rules and thresholds for every type of receipt of how you claim that. And unfortunately, the systems are not smart enough yet to do it. Not to say they won't be, they might be. And again, if we can find An auto-reconciliation tool to speed up the bootkeeping process that is efficient and does it correctly. That will be a game changer. Unfortunately, a lot of bootkeepers could lose jobs, but in terms of accountancy businesses, you could make a lot more money because your staff costs are not as high. What I'm trying to do with Magic Digits is have a core team of experts. My team are brilliant. I would necessarily not like to add many more people to my part. But what I don't want to do is remove any people from that part. And I want them to understand my business and excel in whatever role that they're doing to manage all of these functions below them to ensure that there's a really smart and smooth process. and then also when it comes to management accountancy, I am using AI. We've I've been using it to develop my management accounts reports. I can do like a click of a button and generate a management accounts report, but I had to tell that program everything I needed it to do. And I'm still perfecting it and I'm still making it better. But the system can't tell me what is a good report to show me. I can tell that what I need to say and what needs to go into it still. And still I need to go into that report and I need to it might say this cost was higher because of this in the month, but I still know why and what to do about that and what does that mean for the future. There's a lot of ways in which we can use the eye that which is really going to benefit for us. And I'm absolutely here for it. But I don't think people need to freak out as much as they are. I think, you know, there's still the need for us. But the thing is, what makes a difference is you do have to understand it's happening and you do have to get on board with it. And I wouldn't for a second say sit back and it'll be okay. You do have to learn the basics and you do have to understand how eye is impacting your job. But You don't need to stress too much, I don't think.

Yeah, I mean we do some stuff with, you know, like aiming email management. I've got some things set up for email management that really helps me with my to do list, that makes me a bit more efficient, that helps draft my emails to clients, that helps prioritize my timelines. I have things personally that I use, which you know, I've set up my own budget trackers, like I've set up I've, you know, got it to, you know, manipulate my own bank account and tell me where I've spent too much money where I shouldn't have. And give me, you know, suggested ways and better suppliers. And there's like once you get into AI and you look at all of this, you know, great stuff it can do, it can be really fun and really exciting actually to see what you're able to get out and the time savings you can have. but yeah we use it for like loads of those reasons, reports. We're very trying to ease it into the team very gently. I'm very excited about it and I wish I had more hours in the day to spend on it. Unfortunately, I'm doing a lot of my AI development outside of working hours because still have a business to run. And those day-to-day tasks are still there. They're not going. So, you know, we've still got to carry on with the day to day as it stands. And in the background, I'm looking at what can we do to improve. but I would say, you know, with I suppose my train I thought what I was speaking about.

Yeah, there was a reason I was gonna say that and I can't remember what it was. so annoyed. I totally got out of my head. Anyway, we'll move on.

Yeah, absolutely. I mean, if you're looking at it from j a finance perspective and not talking about AI in any way, I would say the most important thing is hire a good accountant, find a good accountant, make sure that you have someone who really can give you the best advice. Get your personal tax situation sorted. Make sure that what you're taking out of the business isn't draining the business of money. Make sure that you are saving enough money personally for your own tax bills and you're looking at the best way and how to be taking money and extracting it from different sources to, you know, in the long run, put you in the best position possible. Looking at, you know, how does that impact your business and what does your cost look like within that business? And just making sure that you're very clear on what number that is that you have to be bringing in every month to cover everything. And at what point are you running a business which cannot function without those, you know, without bringing in those certain costs and at what point is it a dangerous position. So just by having that really general oversight of just that one simple number, if your break-even number, what do I have to bring in this month? I think is a very powerful number to have because then you know exactly what you need to be delivering and bringing in. And then in terms of the sort of AI world and say you know, obviously PR marketing agencies are being affected very differently to how accountancy businesses are being affected. obviously it's there and it is affecting everybody. I would say, you know, it's invest time in it. Make sure that you are setting time aside. I think if you're a founder, one of the greatest pieces of advice is I've ever been given was make sure that you are working on the business and not in the business. and that basically means that you are able to improve the company as much as you can and not get lost in the day-to-day, which is very easy to do. And to be honest, I would say three out of the five days a week I get very lost and work in the business because I care about the company and I want to deliver a great job. But you will never grow your business if you do not get out of it. so yeah, I would say that's sort of the the main sort of tips I would give.

Yeah, I mean, look, like it's been stressful. Like some days are very stressful, but I think the main thing I'd say is is, you know don't don't get too stressed. Sweat the small stuff, like, you know. don't sweat the small stuff, sorry. Like it's it's very easily to catastrophize and to think everything's falling apart when the reality is it's not. And you need to look at the bigger picture. And a bad day doesn't mean a bad week, doesn't mean a bad year. It just means you have to brush yourself off, get back up, go again the next day. I always say get an early night, like when you've had a rough day, go to bed early and wake up and go again. And I can guarantee tomorrow won't be as bad as yesterday. And it is hard to be a founder and you do have those days where you want to give up. But I would just say, you know, if you really want it bad. get up and go and and it will come to you. You've just got to really work at it. and I think in terms of, you know, looking back, if like mistakes I've made, like mistakes are the reason where I am today, like it's, you know, mistakes are a great thing to do because you learn from them. The only bad times if you don't learn from them and you redo that mistake. So it's saying make mistakes, learn from them. It's going to improve you as a person. But yeah, I think overall it's very much to to just try and not get too stressed by it. Try and enjoy the ride as much as you can really. 'cause it it is bumpy.

Yeah, I I all

I yeah, I lost quite a bit of money out of the business. I lost some revenue and I'd hired too quickly and I got in debt for a little bit actually, to be honest. So I was behind on a couple of bills. because I didn't want to let any of my team go. and I knew the revenue was coming, but it was taking a while to come in. And sure enough it did. But there were a few rocky months, and I, you know, couldn't take a full salary. Because I wanted to make sure I could play my team. And, you know, at that point I definitely did feel very, you know, lost and not knowing if I wanted to do this and was the stress really worth it. But because I could see ahead, because I was working on my pipeline and I could see that business coming, I just had to work hard to get it in. You know, and I knew there was a timeline on it. I knew at what point I would have to stop. if if that revenue didn't come. But thankfully it did come. but it's I would say that was a definitely that was a period of time where I really did struggle. But you know, all businesses will go through that. You will not make profit every single month. You will make months where you make losses. and where you do hire too quickly. And when that, you know, new piece of business doesn't land next month and lands a month after and it puts you back. It's all about having a plan and having reserves. And the one thing I didn't have then because it was quite early on was reserves. so having a cash pot available for those rainy days is really important and making sure that you are focusing on cash a lot. So profit is of course key. And obviously, if there's no profit, there's no cash. But whereas you can just cash is queen, I always say, and make sure you are protecting that at all times. and yeah, that would be one of my greatest like tips to founders is. Make sure you're doing your cash flow. Make sure you have your eye over it weekly, not monthly. weekly is the best source of cash management. and you'll normally be all right. If you've got a good cash balance, you'll figure it out. Because I've got businesses who've made losses for eight months, but because they have good cash reserves, they're still here and they're still operating and they're getting through it. So, you know, it's it's always a a good thing to focus on.

It does, yeah.

Don't want to grow too much at the minute. I'm very happy where we are. We've got a very good team. I have two very small children still. I well say small. It was small when I started. I still think they're babies. I have an eight-year-old and I have a six-year-old. And my time is incredibly important, split across work and my family life. So there's a balance there. I think when my kids are teenagers, I'd like to probably push pretty hard and grow quite, you know, quite a lot. and that's sort of in my sights for the next sort of three yeah. I'd like the next it I'd like in the next three year to be steady and safe and just e not too hard, easy. and after that I'd love to grow and sell the business eventually, potentially think so, maybe not, but that's sort of the idea. But I'm not in a rush, you know. Like it's for me, I just wanna do good work and make you know, my money from it and provide my children with, you know, everything I can provide them with and give a really good working environment to my team. I think that's one thing that I really focus on is trying to ensure that everyone who works at Magic Digits is happy and looked after and enjoying what they do. And so if I can create an environment for the next, you know, how many years I'm doing this for a safe environment for people that work in, that's really important. and deliver great work to our clients and grow some businesses and, you know, save some businesses. That's sort of the main goal for for the next few years, I would say.

it's LinkedIn's the main one, really. Yeah. If you can get me on LinkedIn and then yeah, we can connect from there if if you want to have a further chat about anything.

Thank you. Thank you.