This next article features some great training from Thrive15.com, one of the most entertaining business schools in Florida, that talks about balance sheets. Clay Clark, US Small Business Administration Entreprenueur of the Year, & Caleb Taylor dive deep into why balance sheets are important!
Caleb Taylor: In fact, we believe it so strongly we have a lion's statue outside of our office that we have etched it into. Just come on over here to Tulsa. 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 every-day life," because if you don't this episode could be more meaningless than Spencer's date this weekend. Spencer? Yeah. Hi, Clay.
Clay Clark: Hi.
Caleb Taylor: I love sitting next to you. I love going through these definitions with you.
Clay Clark: I feel like there's a force field of awesomeness that separates the two of us. I hope that I burst through that force field.
Caleb Taylor: I don't want to ruin the force field. Let's just join force fields as we define the balance sheet.
Clay Clark: You always have to one up me. I'm not there. Move on.
Caleb Taylor: That's fine. 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, exciting way just for you in five minutes. Today's definition is the balance sheet. Clay, why do we need to be spending time talking about the balance sheet?
Clay Clark: Again if you are in a business, you're going to find at some point and someone's going to ask you, "Can I see a balance sheet?"
Caleb Taylor: Sure.
Clay Clark: We have investors right now that are investing in Thrive. They'll say, "Can I see a balance sheet?" I used to go, "Who is that," or "What was that," or "Balance sheet? Yeah. I can get you a balance sheet."
Caleb Taylor: Is that just like a sheet that has your weight on it?
Clay Clark: I didn't know what it was. Chance is that you don't know what these terms are. You look ignorant. When you look ignorant, people then shy away from doing business with you. They're not usually kind about it. They just usually don't come back. Most people when it involves money in business, they just don't come back. They're not going to be patient, come back to you and explain it to you on the third attempt. If you meet with a banker right now and if you're watching this, you've ever wanted to start a business, you go to the bank and the banker says, "Could I get a balance sheet," and you say, "I don't know what that is," you're not going to get a loan.
Caleb Taylor: Right but we're 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 yo. 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 the liabilities.
You can spend tens of thousands of dollars at one of many business schools in Florida, or you can pay $50/month at Thrive15.com to learn from successful entrepreneurs that have built businesses and want to share their secret sauce with you!
Clay Clark: Let's go ahead and dive into each one of those words. Let's just break them down.
Caleb Taylor: Do it.
Clay Clark: Assets, that's stuff that you have of value.
Caleb Taylor: Good.
Clay Clark: Assets, that's stuff that you don't owe money on. It's stuff that you have of value. An example of what is not an asset but a lot of entrepreneurs call it an asset is furniture in your house. You're not going to go sell that furniture for usually within ten cents for what you paid for it. Try putting an ad out there for a used bed.
Caleb Taylor: Just try.
Clay Clark: You're not going to get very much money or return on that. A car, very little assets there. Banks aren't going to give you that asset or count that as an asset on your balance sheet but an asset would be like what if you had 1,400 clients who had already paid a deposit for your services? They've already paid. 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 is like a house that's paid for. An asset is like a tractor or a truck, that sort of thing. That's what an asset is.
Caleb Taylor: What about liabilities then?
Clay Clark: A liability is stuff that you owe money on. It's stuff that cost you money and stuff that you owe money on so stuff that sucks money out of your account, expenses. These are things that are like 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. That's a cable bill, pay, pay, pay. A car payment, pay, pay, pay, a liability.
Caleb Taylor: Then what about he net worth? Talk to us about the net worth.
Clay Clark: When you take your assets and you deduct your liabilities, what's left is your net worth.
Caleb Taylor: Then how does that fit into the balance sheet?
Clay Clark: If you have $100,000 of assets and you have $66,000 worth of liabilities, $33,000 would be your net worth roughly.
Caleb Taylor: Then how does that all fit with the balance sheet?
Clay Clark: This all goes together into that one sacred document that we call the balance sheet. That's what I hear in my mind every time I think of the word balance sheet.
Caleb Taylor: Really?
Clay Clark: I didn't think of you doing that.
Caleb Taylor: I thought I sensed that sound. Why do we need to be just focusing on creating this because my time is limited. I don't think this is really necessary for me to do in my business.
Clay Clark: 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. I started my first business by working construction. I saved up every dollar I had and then worked as hard as I could. Even though all I had was $15,000, that could have been $1 million to me. That was every dollar. A lot of us watching this, that's all the money we have in the plant is $1,000. We're putting every dollar and every minute of time we have into our company. Then we get an opportunity to get a loan, to grow our company, to advance and really expand or to lease an office space. We go in there.
One lady last year, she wanted to lease an office space. She's in her 40's. I almost cried. I was seriously sad. The person who was going to lease the space to her, the landlord, said, "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 says, "I'm trying to put it together." He said, "If you don't what it is, I'm not interested in doing businss with you."
Caleb Taylor: Practical steps for us.
Clay Clark: True story I swear to God.
Caleb Taylor: Practical steps, we make a list then of our assets and our liabilities, put that on the sheet or what do we do here?
Clay Clark: What we need to do is we need to get ... We have a very detailed training on how to actually the build the balance sheet itself. We're just hitting all the terms here but you need to have a bookkeeper make this for you and keep it maintained constantly. Again, we need to have a bookkeeper or you need to become a bookkeeper yourself.
Caleb Taylor: There you go. This is important. It's worth your time. You've got to do it. Thank you, Clay