Why your margins look better than they are

Mikula, it's great to have you as well. Great to be here.

Yeah, I I took a bit of a long track to get into what I'm doing here and I I suspect I'm not the only person that is like that. I graduated with a degree in finance from Clemson in 2013. And the first half of my career I really spent floundering in in different sales positions. you know, I I enjoyed human interaction, I enjoyed being around other people, enjoyed talking money with folks. never really found my stride with with what I was working in. I spent time doing financial planning, which also enjoy and and do a a fair amount of on the side. spent time in employee benefits. And I think around the time that would have been like 2015 or so that I I started doing benefit sales that I started to build a and direction that I wanted to take my career. Ultimately where I landed is that I wanted to either run my own business helping people with money or manage someone's business from a financial standpoint. you fast forward to two thousand seventeen or so, my wife and I, then fiance were talking about marriage. sales didn't seem to be a viable option long term and decided to make the move over into accounting. I actively run it away ran away from accounting in in college and it took a few years to come around and and wouldn't you know it, I've actually come from a long line of accountants as it were. going back to a a great grandparent. So it's somewhere in me that just took a while to come out. I started a bookkeeping freelance in order to parlay that into full-time work and it worked. It was successful. I found out fairly quickly after that if I kept that bookkeeping business freelance just running in the background, it could turn out to be fairly lucrative. And it wasn't until about 2020 that that I started to understand there that there was more potential in this business than I originally gave it credit for. so really since about twenty twenty two, Iron Gate Financial Partners has been a full-time operating business, not at all. what I expected to be doing now close to 15 years after college. But I very much enjoy what I do. I very much enjoy the people I work with and that I work for. And I think we make a an a material and positive difference in the people's lives that we work with.

you know, there there are really two answers to this. So the first one I'll give was back when this business was a side hustle still, right? So if I'm speaking to someone who is thinking about just getting into running some sort of business or picking up some sort of hustle to generate extra income, you know, really where I had to spend time in was understanding my process while I was working full time. And that's not an easy thing. you know, y you can you can approach processes and systems timidly or you can attack them. I chose the attack route. So there were multiple nights where I would work a you know an eight, eight and a half, nine hour day. I would come home, my wife and I have four kids now, which is insane to think about and I love it. but there were times when we had, you know, our oldest daughter up at night screaming her little head off at one o'clock and you know I've got her in basically in my room away from mama's bedroom so she can sleep some and while she's crying I'm trying to think about how a specific journal entry is supposed to happen for an adjustment for a client I'm I'm working on right so a lot of really long nights just kind of beating your head against the wall trying to understand how to best serve your customers or your clients and then the other It the the thing that that helped for that time was working freelance sites. So so being really creative with how to generate business without having to spend a bunch of money on advertising. I thought freelance sites were a fantastic way back then and I suspect they still are today. So that's for someone who's just starting out, right? And and then once I moved from side hustle or part-time into full-time work, I had the benefit of doing this for about five years on the side before taking it full time. So I knew pretty well not only what I needed to improve on and what my process was, but also the areas that I, you know, that I wasn't particularly great at that I needed to find someone to outsource that work to, right? There's a common the common theory running around that you absolutely need to wear all the hats in the business as you're growing it and you need to do all of those things well. But the the second you can start to push off things that you're not exactly strong at so that you can focus on the things you are strong at. And that works worked in spades for this business.

Yeah, we we don't really look at industry specifically. There may be maybe a handful of industries that I won't touch because I just don't have the the background in them like You know, something dealing in cryptocurrency. I would love to know more about crypto. I'm trying to learn about crypto. I haven't figured it out yet. So I kind of stay away from businesses that deal primarily with that. If there exists some form of of Bitcoin mining or cryptocurrency inside of the finance function. But other than that, you know, manufacturing companies, engineering consulting firms, we have a handful of those right now as clients. SaaS businesses. Are a good go-to home services. Industry is not so much the issue for the type of business I run. It's more about where are you in your life cycle as a business owner, right? So the way we break it down, Just to make it easy, is let's say we're looking at a business owner, you know, one person wearing 10 hats, doing maybe like two or three hundred thousand of revenue in a year, is is doing really well as a startup or as a small business. However, the the type of work that we provide or the type of accounting help that we provide tends to be a bit rich in price for that type of person, right? So really The Where we start to see value in our business is once a a firm is reaching about one to two million in revenue. that's on the low end. And then on the high end, we're, you know, we've worked with businesses that do upwards of 28 million annualized per year. So the band is fairly broad if we're looking just at small business owners. and on the low end of that, you're just starting to come into a point where you're actively able to push off and outsource work to others, you've probably got enough going on in your business that you really are starting to get behind or just starting to reach the limits of your understanding of accounting. Unless that's what you did for school. And so those those business owners typically derive value from us and that we help put together solid processes for accounting around the accounting close for that person, start to build a monthly reporting cadence just to look and get familiar with how your business looks and operates. We were talking about this momentarily before recording, but if you run let's say you run a service business, right? And you think your margins based on off of some preliminary reporting that you're looking at is 80%, but maybe you're not including things like labor, like your own labor into that number. Well, you're actually looking at an inflated operating margin or gross margin. Right. And it's hard to be able to trust numbers when you don't have clarity around what those numbers are actually saying. So both from a compliance standpoint, just making sure that the back end general ledger is set up correctly, and on the front end, making sure that the PNL is is giving you the type of information you want for your specific industry. those those are really kind of the two value add areas that we that we operate in on the smaller side. And then then on the larger side it's, you know, specific tax strategy, it's AR collections, cash flow management, all the, you know, the fun bells and whistles or hype words that you might hear. by you know your typical influencer in the in the small business space. and really past that, you know, once you start seeing firms in the 30 to 40, 50 million dollar space, you've probably got like a fully built-out accounting department at that point. So our band of of value is really between that one and 20 million space, which I think is where most small businesses are anyway.

Yeah, you can I mean you can break all sorts of things down from there, right? So you've got someone with a just a cursory understanding of accounting and finance who maybe took an SBA loan out to start their business and they say, Okay, well, I I know at least that this loan payment needs to be categorized as a loan payment in itself. Well, there are several tripping hazards if you will there you could think that your loan payment is an expense on the PL when in reality it's kind of a split between the actual principal of the loan being paid down and the interest that the SBA is charging you to have that loan. Right. And the interest is what stays on the PL but the loan itself goes to the balance sheet. So that's a that's a very common surprisingly common mistake even with businesses that have like a you know maybe an intro-level bookkeeper on staff, someone who maybe took some classes to do bookkeeping. Let me be clear. Good bookkeepers are worth their weight in gold. They can take a lot off of your plate. But they do still have a limited skill set, right? And then CFOs, on the other hand, are typically much more experienced, but a lot more expensive too. So you've really got to be able to find a good balance between the type of work you're doing, like the level of complexity from an accounting standpoint that your business requires and how much volume your business is outputting. Maybe you need someone that just does invoicing and that's all they do for your business. that's perfectly. acceptable right and and with the the prevalence of AI today some of that stuff is absolutely dynamic and changing at the moment Some other common mistakes are going to be payroll related, right? How do I how do I push my team's payroll into the balance sheet and the profit and loss statement? And how do I, you know, if I have benefits, good night. if you, you know, if I've got a company that administers benefits for me, well then I've got to also reconcile what the company's paying for any particular type of insurance and what the employee is paying, and that, you know, for larger the larger your business gets, the more isolated that position becomes until it's just a full-time person doing nothing but that. And so for small business owners, that's one, that's just not a feasible way to go about administrative work. And two, like who in the world expects you to understand benefits invoicing and the the payroll cadence and how that looks if you're trying to accrue payroll. Right? Like these you didn't start your business to do that. you started your business to build a widget or to to sell a service. So there are there are definitely some consistent stumbling hazards that I run into more often than not. And then, you know, you've got other other places where their entire books are just a mess. And then and then you've got some folks, you know, like consistently with engineering folks, their books are actually very clean typically, but they Are lining up against the capacity issue. Like they just they don't have time to handle the books themselves anymore. So it really depends on what your background knowledge is and accounting, how complex your business is, like where your funding sources are coming from. And it can just it can go exponentially more complex or as simple as it needs to be.

Yeah. I there's a you know, we're sitting in the latter half of twenty twenty six right now, as of the time that this podcast is being aired. So today we see businesses like OpenAI, Anthropic, Grok, Gemini, right? They these are leaders in the in the US based market at least, and you've got you know, Quinn and and several other open source applications that are really where the state of accounting AI exists today is a bit more efficiency, but nothing substantial yet. Right? I I don't think we're looking at a massive accounting job layoffs in the next year necessarily. you know, we can pontificate all day long about what's gonna come when and how you know, how revolutionary it will be. And I'm sure there are going to be some pretty big disruptions, even in the space that I occupy, say in the next five to ten years. But what I have become more aware of consistently is that in order to use these systems that AI generates or to use the AI itself, whether agentic or chat based you really need to have a background knowledge in what you're seeking so that you know what questions to ask and how to interpret those answers. The system can be spot on with diagnosing whatever problem it is. Like if you if you just go into you know, Claude today and give them a stripped down general ledger for a business, it can rebuild the entire PL. But if you don't know how to read a PL, that's not going to be much use to you. so it it really is going to come down to who can best utilize the strengths of the system and who knows how to interpret the data both going in and coming out.

It may even do the right thing, but how will you find out, right?

Yeah, I I think if I had to give an honest assessment of where AI is at in the accounting space, it's really good. Like I'm not going to sit here and And suggest that you know we're decades away from seeing automated accounting functions. And there this may not be the episode to get into it, but there are absolutely ways that you can leverage multiple systems or that you can create environments for the hallucinations to be minimized. but I think at the end of the day, it really comes down to your baseline understanding of what it is you're trying to solve, not just in accounting, but you know, say A quantum physicist trying to run new new models through their system, like I wouldn't have the first clue of what I'm looking at based on the output of whatever that person provides. And if I am relying on that level of understanding in accounting, thinking that I can build an accounting system or you know, vibe code an accounting system and understand all of the in and outs, it's not realistic.

Up you know.

Certainly in a growth mode. we've been growing between 15 and 25% year over year for the last since basically since we we opened full-time. I've taken a dip into acquisitions more recently, say over the last 15 months or so, have been on the prowl for businesses to buy, specifically accounting, accounting and finance businesses that deal in the type of work that. we do. so you know there there's a Decent likelihood in the next 12 months that we'll be growing through acquisitions. We're committing a fair amount of our revenue right now to marketing and growth. just hoping to fill in the capacity that we have with our team who are phenomenal folks, every last one of them. and hoping to continue growing the team that we have in place.

Yeah, I I've taken a an atypical approach, so you're not gonna find me on social media very much. you can find me on LinkedIn. We do have a website, IronGate Financial Partners.com. But really, you know, if you want to get in touch with me, just use that website and send an email. I'm I'm still very reachable as it were. And and obviously the website's got plenty about what what it is we do, but anytime anyone has questions they can just reach out and ask. I'm happy to help.

Thank you, McCullus. Appreciate it.