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This business coaching episode is all about maintaining your balance sheet.

Results-Focused Training, Tools, and Workshops from Expert Business Coaches.

Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Lesson Nugget: Knowing these terms will help you deal with the people you are doing business with more confidently.
  • Liabilities: Things that you owe money on.
  • Balance Sheet: A statement listing a business's assets, liabilities, and net work, or equity (the difference between the value of the assets and the liabilities)
  • Ask Yourself: Do I have and accurate account of my assets or was I including items that are not truly assets?
  • Net Worth: Assets - Liabilities = Net Worth
  • Assets: Things that you do NOT owe money on that have value.
  • Lesson Nugget: Having a balance sheet will help you know your financial situation and avoid living a small life.
  • Lesson Nugget: Hire a bookkeeper or become a bookkeeper, either way keeping track of your balance sheet is important!

digitaltutors for accounting and time management

-My name is Caleb Taylor, and I'm one of the hosts here at Thrive15.com, the website provides training on marketing, sales, time management and more. Today I guess the exciting opportunity to sit next to Clay Clark, the very pale and fearless leader of Thrive15.com. Today, we're focusing on accounting and we're going to be jumping into the definition of the balance sheet. He'll be explaining to you why it's important for you to understand its meaning and to use it in your business. Here at Thrive15.com, we believe that knowledge without application is meaningless.

In fact, we believe it so strongly we have a lion statue outside of our office that we have etched it into. Just come on over to Tulsa and you'll see what we're talking about. As you're watching this episode, please continually ask yourself, how can I apply what I'm learning here into my business and my everyday life? Because if you don't, this episode could be more meaningless than Spencer's date this weekend? Ah ha! Spencer! All right, Clay.

-Hi.

-I love sitting next to you. And I love going through these definitions with you.

-I feel like there's a force field of awesomeness that separates the two of us, and I hope that I burst through that force field.

-I don't want to ruin the force field. Let's just join force fields as we define the balance sheet.

-You always have to one-up me and I'm not bitter. Move on. That's fine. So what we're doing here as you might have seen, we're taking definitions that you need to know and boiling them down in a fun, interesting, and exciting way for you, just in five minutes. And today's definition is the balance sheet. Clay, why do we need to be spending time talking about the balance sheet?

-Again, if you are in a business, you're going to find at some point, someone's going to ask you, well, hey, can I see a balance sheet? We have investors right now that are investing in Thrive. And those say, well, can I see a balance sheet? And I used to go, what? Who's that? Or what was that? Or balance sheet? Yeah, yeah. I'll get you a balance sheet.

-Is that just like a sheet that has your weight on it?

-I was like-- I didn't know what it was. So what happens is, you don't know what to-- you don't know what these terms are, and so you look ignorant. And when you look ignorant, people then shy away from doing business with you. And they're not usually kind about. They just usually don't come back. And most people, when it involves money and business, they just don't come back. They're not going to be patient and come back to you and explain it to you on the third attempt.

If you meet with a banker right now, if you're watching this and you've ever wanted to start a business, and you go to the bank and the banker says, hey, could I get a balance sheet? And you say, I don't know what that is. You're not going to get a loan.

-But now we aren't judging you here. We've created the search bar. If there are any terms you don't know, type them in. We're doing these to help you. So let's define this real quick here. Balance sheet is a statement listing a business's assets, liabilities, and net worth or equity, or the difference between the value of the assets and liabilities.

-Let's go ahead and just dive into each one of those words. We'll just break them down. Assets. That's stuff that you have of value. Assets. That's stuff that you don't owe money on. It's stuff that you have of value. So an example of what is not an asset, but a lot of entrepreneurs call it an asset-- furniture in your house. You're not going to sell that furniture for usually even $0.10 for what you paid for it. Try putting an ad out there for a used bed. You're not get very much money on return on that. A car. Very little assets there. Banks aren't going to count that as an asset on your balance sheet.

But an asset would be like, what if you had 1,400 clients who'd already paid a deposit for your services. And they've already paid-- and they owe you money. 1,400 people that owe you money, clients that have already committed to working with you. That is an asset. An asset would be like a house that's paid for. An asset would be like a tractor or a truck, that sort of thing.

-So what about liabilities, then?

-Liability is stuff that you owe money on. Stuff that costs you money. Stuff that you owe money on. So stuff that's sucks money out of your account. Expenses. These are things that are like, oh, by the way, you owe money on this every month. As an example, a phone bill. Every month, you have to pay, pay, pay. That's a liability. A cable bill-- pay, pay, pay. Car payment-- pay, pay, pay. Liability.

-Then what about the net worth? Talk to us about that.

-Your net work is when you take your assets and you deduct your liabilities. What's left is your net worth.

CALEB TAYLOR: And how does that fit into the balance sheet?

-So if you have $100,000 of assets and you have $66,000 of liabilities, $33,000 would be your net worth, roughly.

-Then how does that all fit with the balance sheet?

-This all goes together into that one sacred document that we call the balance sheet.

-Ah!

CLAY CLARK: That's what I hear in my mind every time I think of the word balance sheet.

CALEB TAYLOR: Really?

-I did think of you doing that--

CALEB TAYLOR: I thought I sensed that sound. So why do we need to be just focusing on creating this? My time is limited. I don't think this is really necessary for me to do in my business.

-This is very important for you to do because if not, you're going to live a very small life in terms of your business. You're going to have very small goals, very small dreams. A lot of people out there, I started my first business by working construction. I saved up every dollar I had, and then worked as hard as I could. And even though all I had was $15,000, that could've been a million to me. That was every dollar. A lot of us watching this, that's all the money we have on the planet is $1,000. We're putting every dollar and every minute of time we have into our company.

And then we get an opportunity to get a loan or to grow our company or to advance and really expand or lease an office space. And we go in there-- one lady last year, she wanted to lease an office space. She's in her 40s. I almost cried. I was seriously sad. And the person who was going to lease the space to her, the landlord said, well ma'am, I'd like to see a balance sheet. She didn't know what it was. She didn't have these terms. 48 hours later, he calls, hey, I need that balance sheet. She's says, well, I'm trying to put it together.

He says, well, if you don't know what it is, I'm not interested in doing business with you.

CALEB TAYLOR: So practical steps for us--

-True story. Swear to God.

-Practical steps. We make a list then of our assets and our liabilities and put that onto a sheet? What do we do here/

-What we need to do is we need to get a-- and we'll have a very detailed training on how to actually build the balance sheet itself. We're just kind of hitting on the terms here. But you need to have a bookkeeper make this for you and keep it maintained constantly. And again, we need to have a bookkeeper. Or you need to become a bookkeeper yourself.

-There you go. This is important. It's worth your time. You've got to do it. Thank you, Clay.

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