My Separation Story…Of Separating My Two BusinessesNov 06, 2023
First and foremost, I have to apologize.
Listen, I’m not typically a clickbait kind of gal. But in this case…c’mon, I couldn’t resist!
I am sharing my separation story…but it’s the story of how I separated my two businesses.
I have been working through this process for the last year and a half. My businesses have run together for the last four years, but they were really two completely separate businesses, and I came to the realization that they just didn’t make sense together.
My first business was, of course, my bookkeeping business. My bookkeeping business involves actual bookkeeping services and selling bookkeeping templates for business owners. Then came my second business: coaching for bookkeepers.
A bookkeeping business and a bookkeeper coaching business might sound like they could run together, but honestly, they ended up turning into one convoluted mess.
So today, even if you think you only plan on having the one bookkeeping business—even if you haven’t started that bookkeeping business yet—I want to offer a word of caution about this so you don’t end up in the same mess as me.
Align Your Actions With Your Desires
First and foremost, what I want you to understand is just how freaking hard it is to change all of this stuff after the fact.
So even if you’re just getting started in your bookkeeping business, I want you to hear the five-years-removed version of choosing not to properly separate your bookkeeping business from other business ventures. There’s a lot of trouble you can get into when you don't set things up with your actual desire in mind.
I have to laugh at myself a bit, because I’ve preached setting your bookkeeping business up for what you want it to become in the future, not what it is now, since the very beginning. So I keep thinking…why on earth did I put my bookkeeping business and my coaching business together?
This would have been so much easier if I’d set things up the right way to begin with.
So, with that in mind, the question that I want you to ask yourself is this: are the decisions that you make and the actions that you take now actually aligning with your desires for the future?
I’ve been working through this for eighteen months now. It started out seeming easy enough, but the further you get into it, you realize that it has a big impact on all of your marketing, all of your emails, all of your payments coming in and going out, the legal side of things, and everything in between. It ends up being a convoluted mess. So I’ve been beating myself up a little bit and resenting past me for putting myself in this position.
I can say all I want that I didn't know, and that I couldn’t have known then…but the truth is that I did.
I knew that I was building something that was going to be big. That passion drove me through doing all of the things that I did in the last four years.
Ever since coaching became a clear calling, I knew the potential that this business had, both for income and impact, and I worked very intentionally and very methodically through most parts because of that.
But when it came to how I set up my entities…that's where I dropped the ball.
My desire was to grow two different types of businesses that both succeeded. I wanted those companies to be assets, and I wasn't treating them like that.
So instead of asking what the impact of this decision will be if you don't succeed, which is how a lot of people make bad business decisions, you need to ask what the impact will be if you don’t make that decision, and then you do succeed.
If you ask the first question instead…guess what you're doing? You're telling yourself that not succeeding is more probable, which is problematic by itself. You are literally betting on your failure and not on your success, which doesn’t set you up for success at all.
Now, one thing I want to be clear about is that the decision to separate these businesses as separately operating LLCs is that there was no real tax impact. There was no tax-planning element to this decision; it was more about death planning, actually.
Here’s how the story goes…
About a year and a half ago, I knew that my financial life needed to get in better shape. I could afford to hire a lawyer to come up with a will, trust, and estate. I wanted to make sure that if something happened to me, my home wouldn't be at risk, things would pass very well to my kids, and there would be no probate.
So I went through this process, which honestly wasn't that hard once I actually got into it, but it was daunting and overwhelming at first. And yes, before you ask…there's a cost element involved. I spend around two or three grand getting all that sorted out.
Nobody likes spending that money. But the peace of mind it offers is completely invaluable.
Part of working with the lawyer involved talking about every bank account that I have, and as we went through the minute details, it showed me the risks of continuing to run both businesses together.
One of the things that I was told that led me down this road was that I could change the ownership of my bookkeeping business to the trust now that the trust exists. That way, if I were to die, the bookkeeping business and its assets would transfer into the trust, which would be for the benefit of the kids.
That sounds great, right? But then I started to actually think about what would happen if I died. And if I passed away right now, with the way I am currently operating my bookkeeping business, it will die immediately. So while I have an invaluable asset in both of my businesses, nobody knows how they run but me. I don't have it documented anywhere. And while I have a team, they wouldn't absorb my clients without me.
So I realized that I needed to be thinking about real succession planning. But the problem was, I couldn't even begin that process, because I knew that the legal structure of my bookkeeping business was wrong.
I realized that because, while operating my bookkeeping business and coaching business together, if somebody were to even try to come in and look at my financials and look at my Kajabi and look at my email, their brain would explode. They would not understand why I was doing certain things.
To me, there’s a method behind my madness. And while I talk about a lot of it here, I don't talk about the back end of my business to anybody, so nobody would know why I'm paying for certain things. And if they were to try to sell a bookkeeping business, because that would be the best thing that you could do if you died as a bookkeeping business owner, whoever bought that would probably not also purchase the coaching side of things. And if they’re together, there’s no way to separate what’s happening there.
With my courses set up the way that they are, they also won’t be able to sustain if I die.
So, if I had died at the time of all these realizations, my kids would have totally lost the asset that I built, and that would suck.
They’d get the cash in the bank, but the business wouldn't be able to operate. And if you tried to sell one, it would quickly become very convoluted.
So I had to take steps to get myself out of the mess that I created. But that wasn’t easy to do…
After the Fact
Now, I would not consider myself a lawyer, but I would consider myself to be pretty bright. I can usually be taught things pretty easily. And yet, it took me a while to wrap my head around the legal structure of all this, not to mention figure out how I could make the changes to what I had in place.
If you're starting with a blank slate and already know what the ideal structure is, you can just do those things from the get-go. When you've already put something in place that is continuing to run, you’ve got to keep doing what needs doing in your business, even as you’re trying to change it.
It's hard. And because it’s hard, it’s much easier to put it on the backburner and to continue to have things go wrong because you're not taking the time to do it right.
The best time to get your business set up right is before you are making money, even if it costs you money.
I'm sorry that most people don't want to hear that, but investing in the structure and the systems and the support and the skills that are going to get your business up and running…that’s worth it.
Sometimes you’ve got to put the money into the business before the business starts bringing money in. And when you do that, you then have the ability to grow it smoothly instead of growing it, then having to uproot it all to keep it from running amuck.
So…where do you go now that the businesses have split? Let me show you!
Bookkeepers go here: www.katieferro.com
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