In the March 2008 issue, I wrote a profile about Dave Putits, a Cornwell Tools dealer based in Temecula, Calif. Over the course of the day, it became apparent that Dave’s wife, Chris, had a big influence in the business. Beyond just “doing the books” on orders/returns etc., she has the entire financials of the business systemized, including tool budgets, truck maintenance, vacation planning, rewards points and more. She was even applying her system to another Cornwell dealer’s business, and has recently added another.
Chris talked candidly with me about starting the bookkeeping for her husband, adjusting household and truck budgets and managing the money for two other trucks. Here’s some of Chris’ advice, in her own words:
When we started Cornwell, we had no clue. The old theory is, ‘repurchase what you sell.’ OK, well that works, except when you need to buy something that somebody wants, where does that money come from? You’ve already repurchased everything you’ve sold, and now you need to buy something you’ve never sold before. I was really struggling. How do you make this work?
I can add and subtract, I figured I could do this. I just had to figure out how. It started with the general grasp of how to handle the money. I remember thinking, ‘How do I know if we’re over-spending? How do I know if we’re not spending enough?’
For about the first three to four months, the business took care of the business, and we lived out of a savings account. By about the end of four or five months, our income was picking up, and I figured there was enough income that the business could support us. But I had to figure out how.
I take a percentage intake every week and give Dave that number, minus the deferred payment/extended pay to Cornwell. I take what they’re allowed to spend every week, minus the deferred, and whatever that number is, that’s what you’re allowed to spend for the week. That’s it.
My goal is to have no tool dealer ever to have debt on a credit card. I pay their credit card bills; I pay them in full every month. No finance charges; but obviously you’re racking up the points, which is intelligent. I’m big on points. Love the Capital One credit card. I like it because they’re racking up their points, I’m paying it off, they’re not having any interest, and no finance charges. There are some free air miles for you to go to your tool rally.
I work a system that allows for you to have vacations, depending on what your needs are. I budget the money for the dealer so they know what they can spend the following week, and there’s enough money in their checking account to take care of their needs while they’re on vacation, because you’re on your own business money.
I have money set aside weekly for our rally. I have money set aside for a personal vacation, and I have tool dealer money that my husband can spend when he goes to a rally. Obviously, this year, business is down; you adjust for what you’re bringing in. I allow a percentage for taxes, I also pull out 2.25 percent every week and it goes into a savings account. I just keep it in my checkbook where I have a ledger sheet that I track.
In my business checkbook, I have about 25 different categories, and they include truck insurance, liability and cargo; diesel; computer system; truck maintenance.
You’re going to need tires on a truck eventually, so I calculate that they’ll probably replace them every 5-6 years. Take the cost and work it out weekly, over a 5-year span. At the end of that 5 years, when he needs it, you got it. Plus a little extra for the alternator, the door lock, the handle, etc.
I budget for everything, even bad checks. I took a look at my business for the last six months and figured out how many bounced checks I got. If you’re not compensating for that bounced check fee, you’ve now lost some money in your business. It’s bad enough that he wrote a bad check and you lost the money … but now you got hit with the fee on your end.
A lot of tool dealers fall into a problem because they feel rich. You’re walking home, you’ve got a $1,000 wad in your pocket, and are feeling happy with that money. Then, they make the biggest mistake. They dip into it and take $5 to go to lunch. They rob their till.
I take every bill that a person has in a year. I mean every bill: Car registration, kids soccer, ballet lessons, child care, etc. I need to know every bill that you will spend some time during the year, down to the miscellaneous expenses of even taking the kids out for a Happy Meal. I have to work closely with the dealer, to know all the debt, because unless I know all the bills, I can’t account adequately for the whole budget. Your bills change. You should be reassessing your life and bills every three to five months.
INSURANCE, 401K, ETC.
I want everyone to be debt-free. I want tool dealers debt-free, I want them with health insurance, I want them with life insurance, and I want them to start putting money away for retirement. And most people think that’s really hard. It’s not when you live weekly. Plan out a little bit every week.
You should have a 401k for retirement. You need to be putting some money in somewhere — a mutual fund, a CD. It’s pulling out money weekly. We’re tool dealers, we don’t do anything by the month.
Tool dealers are a little different breed. They don’t all think about what happens if they’re not going to be there. You work a job at State Farm, or Chase — you get life insurance, usually from your job. We’re tool dealers, nobody does that for us. You need to do that for yourself. If you can’t afford whole life, don’t do whole life. Do term. Do a 20-year term.
On the tool truck, it looks like you’re making more than the job that you left, but you have a business. And you’re still not taking care of things, life insurance, health insurance, 401k. It’s really easy to fall into the trap of ‘I’m going to borrow some money from the business’ then you don’t put it back. There are little ways that you shortchange yourself without really realizing it.
It just comes down to living within your budget — anybody can do a budget, it’s just living within it becomes the issue.
DOS AND DON’TS
• You should be reassessing your life every three to five months. You really should be reassessing your bills… You’d be surprised at how much things change.
• Know your finances. Don’t underestimate what you spend.
• Live within your budget; anybody can do a budget, but living within it becomes the issue. Stick with it. Especially when you’re new, it’s even more critical.
• Biggest mistake: Don’t rob your till.
• Tool dealers should have life insurance. I don’t think that’s something you wait until you have money for. That’s not fair to your spouse.
• You should have a 401k for retirement. You need to be putting some money in somewhere — a mutual fund, a CD — and adding in money weekly.
• If you pay your tool bill on a credit card and are paying it off without interest or finance charges — then you’re racking up points. That’s free air miles to go to your tool rally.
• No toys (RVs, wave runners, four-wheelers, etc.) for three to five years. Make sure your business is solidly off the ground first.