How Daniel Messeca Redefines Financial Wisdom for Entrepreneurs

[00:00:00] Hector: Hello and welcome to another episode of the 'How to Scale a Business' podcast. My name is Hector Santiesteban and I will be your host, your guide for today. Our special guest today is Daniel Messeca and he is the founder of Kraftwerk Capital. And we're going to talk about money and finances, financial planning.

[00:00:14] Hector: Daniel, thanks for spending some time with us today. I would like to approach it in the sense that so many business owners treat their finances like they're an individual, not realizing that they're now running a business or scaling requires a different approach to it.

[00:00:27] Hector: Anyways, all that to say, thanks for hanging out with us.

[00:00:29] Daniel: Yeah, I really appreciate you having me on.

[00:00:31] Hector: We mentioned on our pre call that you do a variety of different things, and you've got a variety of different projects rolling, but this Kraftwerk Capital is the one that may be most relevant to our listeners, but take us into a little bit of your background and then also a little bit about what you guys do with your clients.

[00:00:44] Daniel: Sure. So I think I have a unique background in that a lot of people who work their way into the career of financial planning and financial advising come at it from a different walk of life before that. I always wanted to be a financial planner. Maybe makes me weird, but I really love this work because it pairs the math aspect of finance with just the human element of learning about people and being able to problem solve. Every person has their own unique situation.

[00:01:08] Daniel: And there's not one thing that works for everyone. We need to find what works for you. And that's what's exciting for me.

[00:01:14] Hector: Well, I just want to highlight that point that you said that bringing the numbers and maybe the more practical side with the emotional side. I think that those worlds aren't, joined enough. And I think that that's why people don't have the success or they're not in the position or place where they want to be at. And I'm speaking selfishly or most importantly about myself because I know exactly that.

[00:01:31] Daniel: Yeah, because everyone academically knows what they should be doing. And if in a perfect world, everyone would be doing that stuff. But still, we find a way to ignore the important things in favor of things that are more immediately gratifying. And I often give the example of going to the gym or working out.

[00:01:46] Daniel: Like we all know what it takes to be healthy, yet for so many of us, and I'm going to include myself as well, we just can't do it. And sometimes having a trainer there or an advisor there just gives you the accountability to go and take action. So in some regards, that's what we are. We're an accountability partner. Someone who you can share your goals to and make sure that you're making progress, and if you're not finding out what the problem is and what the obstacles are and overcoming them together.

[00:02:11] Hector: What's interesting is, I remember early on in my business, I had someone, they were called a profitability coach. The challenge was that I didn't seem to be receiving that information.

[00:02:21] Hector: Cause I look back and I'm like, well, if I had a coach, if I was working with someone then this is what they're supposed to do. What, happened? And the only thing that I can come to is that I was not receiving. He was talking, I wasn't hearing any of it. And if I was hearing, I wasn't listening and executing on.

[00:02:34] Hector: And so I guess my question is that do you run into, a lot of resistance that comes and maybe even it's subconscious or the individual doesn't even realize that that resistance is there.

[00:02:43] Daniel: Yeah, totally. One of the first questions people ask me when they're interviewing a financial planner is " What should I be asking a financial planner to see if they're the right fit for me?" They're the common questions you should ask about whether they're a fiduciary, what their fee structure is, and making sure you're comfortable with the general way they operate. But I think more important than any of that is, are you comfortable with the person you're talking to? Do you like them? Do you enjoy talking to them? Do you communicate in a similar way? Because like you said, you could have the best financial planner out there, but if you can't hear and internalize what they're telling you, it doesn't matter because you can't act on it. So just making sure that you're comfortable with the person you're working with, makes it so much easier to implement their recommendations or to even be open communicating your goals to them. It really just needs to be built on strong communication

[00:03:29] Hector: Are there any other, gates, if you will, or any other stages that you feel are necessary for a business owner to be willing to not only hear, but then also execute on it? Are there some things like, "if we don't have this in place, none of that other stuff really matters." Do you have those kinds of things in your head?

[00:03:47] Daniel: A little bit. If you're approaching something from a place of desperation, it's very hard to be successful. So just either being able to step back from the situation if it's not good and understand that it's going to take some time to get a plan in place and to start seeing results, which can be hard to do, especially as a business owner who lives inside of your business like you live and breathe with everything that's happening in that business or just building a safety net like an emergency fallback of cash to make sure that you have time to focus on yourself and the big picture plan instead of working in the business and operating day by day.

[00:04:20] Hector: Yeah, I don't like to make these personal coaching sessions, but. I'm going to lean into this one a little bit here because I think it'll help the listener. I've realized recently that there was some internal resistance. Frankly, like I realized that there was a lot of negative associations with making a lot of money.

[00:04:34] Hector: And so anytime I would reach a certain level or certain place, then. there would be some self sabotage things coming into play. And I think that the challenge is that when you have a business, you're now bringing your financial habits into the business. They get adopted, if you will, into it. And so. In a situation like that, are there ways that you help someone to get past that almost purely emotional part of the money where it's like, "Oh my goodness, this is freaking out my insides." So I'm going to go blow it. Right? Because this is too uncomfortable for me to bear.

[00:05:04] Daniel: Yeah, it's not really our job to overcome. Our job is to present information and it's by showing trade offs. So every decision you make has an opportunity cost. Let's see if we can quantify what that is. And maybe we still make the same decision. Maybe after you see everything you say, you know what?

[00:05:19] Daniel: " Thank you. I don't care. This is what I'm gonna do." Well, at least you know what the ramification is. I could have had this path, but I'm choosing this path and maybe that's okay. But that's really our job is- to show what it means to do one thing versus another and then make an informed decision or at least an active decision rather than defaulting to a habit that might be good or bad because that's what you've always done.

[00:05:40] Daniel: For example, some people are so Averse to debt like they don't want to carry any debt on their balance sheet, whether that be their personal balance sheet or their business balance sheet. Well, we're coming out of a period where loans were like free almost. You could pay a couple percentage points on a loan and use your money to reinvest in your business and grow faster.

[00:05:59] Daniel: But some people just couldn't stand seeing the debt on the balance sheet and would use all of their resources to pay that down as fast as possible, which may or may not have been the right move for them. But for some people, they could have done that and it still would have been okay, right?

[00:06:12] Daniel: it would have still been a productive use of money, even if it would have been better doing something else with it. But for some people that may cause a problem because if you pay back alone, you don't have that money anymore and you lose liquidity. So just teaching what that opportunity cost of having the cash on hand, whether that be to reinvest or to create liquidity for your business versus putting it back in the loan and showing the interest that you save and then seeing where that leads you.

[00:06:35] Hector: Yeah, it just seems and perhaps I'm just speaking from a personal point of view, but that's all I have plus along with the experiences that people aren't really thinking about money the right way or not in an optimal way, or there's not an accurate understanding of what it is.

[00:06:50] Hector: And I'm sure that that's why you feel so sure, you know, that's part of why you feel so strongly about what you do is because you're just like, they're slamming your head against your hand, trying to figure out why people are doing what they do. But when you're saying these things, it's like, man, I'm not factoring that in.

[00:07:03] Hector: And I'm someone who likes to think that I'm pretty conscious about some of these decisions. And my understanding is so far away from that, that I can't help, but think that other people are just, I don't know if even blind is the right word. They're just ignorant, frankly, to the power of what money can actually do.

[00:07:19] Daniel: Yeah. I think at the end of the day, money is a tool and you can use it to accomplish your goals or to build whatever you want. You can build a lot of things with different tools. So you just have to understand what you're trying to build and how money can help you do that. But a lot of people don't get great financial education ever.

[00:07:34] Daniel: Like if you didn't go to school for finance, you might never have learned about money because it's not happening in high school or middle school and not by default in college. And it's very taboo at home. So if you don't have a mentor or a business coach or someone who's willing to talk openly about it, you're kind of blindly walking around trying to pick up tips here and there. We're lucky to be in an age where there's so much great free information out there as long as you're finding the good stuff, either on podcast or YouTube or other websites that are valuable. But there's also a lot of bad information, so you have to be careful about where you end up.

[00:08:06] Hector: Yeah. I think we've done a good job of creating some context for our listeners in the sense that if they didn't think that they should wake up to their money mindset or think about, how they might be thinking about money in a limiting way. I think we've done a really good job of that. What I'd like to do when we get back from break is talk about, you know, Daniel, you're right. But now what? What do I do? Where do I focus? Where do I look? We only have so much time and energy and attention and focus in a day. So how do we make the most out of it while still running the rest of the parts of our business. And so we're going to get into that when we get back from break.

[00:08:43] Hector: Hey y'all. Today's episode is brought to you by Amplafy Media and we are a podcast and content creation company. Well, we like to think of ourselves as genius makers or creators because chances are, if you're listening to this, you probably have a passion, a product, a mission, a message, a service, something that you want to get out to the world, but don't necessarily have the time, the team, or the tech skills to be able to do it. If that's the case, we can help. Go to Amplafy Media dot com. That's a m p l a f y media dot com. You can also check the show notes for info. And with that, let's get back to today's episode.

[00:09:14] Hector: So Daniel, I don't like to think of myself as a fear monger, but pain is a, very big motivator. And so I think that we've highlighted some pain over the first little bit, but now what I'd love to do is give some people some direction or some action, items or, even some, pillars or to bring some practicality to this, because, you know, we talked about the emotional side so what are some things that people might be able to do to start bridging or blending these two things, if you will?

[00:09:38] Daniel: Yeah. I'm a big fan of automating positive money habits. There was a movie, I think it's from the eighties or early nineties called "What about Bob?" And he had mental issues and his mantra was baby steps. Take baby steps to get from here to there. And I think that's a good motto for business owners who are trying to take positive actions to help improve their finances, whether it be personal or professional. And I would set up a small positive habit. So, for example, most business owners, I know their greatest asset is that business and they're not focusing on saving elsewhere, which can be very important. So maybe set up whether it be a retirement plan for yourself or your work if you don't have one and put a small automated amount into that account each month, have it invested, and that doesn't take a lot of mental effort, that doesn't take a lot of administrative effort. That's something that can start to run in the background and is an easy first step to feeling like you're doing something positive for yourself, and not very complicated.

[00:10:38] Daniel: So whatever you can do that's low hurdle, low effort, but it's going to start nudging you in the right direction, I think is a great place to start. And even if you do one thing and then don't do anything else for a little bit because you feel like you can pat yourself on the back for it, that's still better than doing nothing.

[00:10:53] Hector: Yeah, that automation thing comes up a lot. And it seems like because there's so much, let's call it mental energy that comes along with these things. Right? And so many opportunities for us to not make that choice that if you just automate it, for me, it's like having the same clothes in the closet.

[00:11:10] Hector: Like, I love the idea of wearing the same shirt every day if I could. Like that idea where you don't have to think of it because it's saving you mental energy that you can utilize on other parts of your business I think is huge. For someone who is, you know, they've got multiple departments, maybe they've got multiple team members. For someone who's got a little bit more complex of a situation and maybe they perhaps still find themselves in a place where they haven't put a lot of forethought into their finances... is there any advice that you might give to helping them to unscramble or, untangle if you will, some of those things that may have already gotten some momentum in the wrong direction,

[00:11:45] Daniel: Sometimes it's valuable to take a step back and do an audit and having a third party can help a lot. That's what we do a lot with our clients, whether they just be individuals, because running your household is the same as running a business or whether it be with business owners or executives is just have someone look from the outside. They don't have all the baggage that you do of having dealt with it forever, and they might be able to see small tweaks that can put you on a better track. So I think that's really helpful because it also doesn't require a ton of your time. You need to get someone up to speed on what's happening, and then they can run with it and come back to you and say, " here's what we found."

[00:12:18] Daniel: It's possible you may have someone like that internally if you have a CFO of your business or a finance manager who can maybe focus on a project like that. But a good financial planner should be able to do that for you to, again, looking at the business or at your life as a business owner, because you're so busy focusing on growing this project that you have.

[00:12:38] Hector: Yeah. Any favorite, hacks, tips, apps, you know, things that you're like, "well, this is something really cool that I've found some success with and you might enjoy, you know, there's so much FinTech happening and it doesn't even have to be new stuff. It might even be old things. But is there anything bite sized that comes to mind that people might get some benefit from?

[00:12:56] Daniel: I'm notoriously not an app person. I'm sure there's some good ones.

[00:13:00] Hector: well, that's good to hear

[00:13:01] Daniel: yeah, I think a lot of apps are not very valuable at the end of the day. Yeah, I have nothing. I think probably,

[00:13:07] Hector: well instead of that, because I think that that's what a lot of listeners are going. Okay. Well Daniel What's the app I can download? What's the course? What's the book I can read? You know, so instead of having that perhaps short term superficial approach where they think that the medicine is going to fix me. Right? What's the more integrated holistic approach that might solve some of that stuff?

[00:13:27] Daniel: Yeah, here's something you probably won't hear a lot. There's a great Writer on behavioral finance. His name is Morgan Housel. I'm a big fan of his. He's been on our podcast before. And one thing that he does that I think is really enviable and that I've tried to copy as well is when you're trying to understand finance, you don't necessarily need to read finance books. You can read around the subject to learn lessons that can apply to you in finance. So whether you're reading about other historical figures or historical events or science books, you can often take a lot of lessons away from what you're reading in those subjects and apply them to your financial life. I've gotten a lot of value out of reading non finance books, and it just helps you see things in a different perspective and maybe gives you a mental break from thinking so deeply about this one issue that it offers clarity. So just reading

[00:14:16] Hector: Do you think though? And I'm just playing devil's advocate. Do you think that's because you're also so immersed in that world that by getting outside of it, you're able to see some of those connections? Whereas if someone

[00:14:25] Hector: is not, is not as immersed in that world, they might for, for someone who isn't as immersed in that world, are there favorite resources or books or something that you like to point to that say, like, well, start here, or read this book or, you know, something like that.

[00:14:40] Daniel: so Morgan Housel wrote a book called the psychology of money that I think is a very easy to read book. The chapters are basically like blog posts, so you don't need to sit there and read it front to back. You can read little chapters at a time and still have takeaways at the end, and it speaks to not the nuts and bolts and the math of finance, but really the behavioral aspect and the habits that you can put in place to be productive because, getting wealthy isn't very exciting. It can happen in a very boring way. But for someone who has this entrepreneurial spirit like you and I do, we want to build something and see instant gratification and, see it go from zero to 100.

[00:15:16] Daniel: But a lot of people get wealthy going from 0 to 1 to 2 to 3 and not going backwards. That's the key. So that's a great book. I recommend it to everybody. The other thing that I read, or that I read that I recommend and I need to look up the title because I always mix it up because it's so similar to another thing is a richer, wiser, happier by William Green. So I'm a firm believer that if you copy things that people do that have worked, you're probably on the right track. So that book highlights some of the greatest financial minds in the world and what they do with their days and with their money.

[00:15:49] Daniel: I thought it was really interesting to get perspective on what other people are doing, because maybe that's a good starting point for you too.

[00:15:56] Hector: Yeah. I love that. Psychology of money is a great book that probably should pick up again. What about you, Daniel? People want to get more connected with you, find out more about your world or what you guys do. Where's the best place to go?

[00:16:06] Daniel: The best place is our podcast, 'Check your balances'. I co host that with my partner, Ross Anderson. It's a weekly podcast that focuses on personal finance, investing and business. We try to put something out that's evergreen every week so you can go back into the catalog and look up a subject that's important to you and hopefully it would still be relevant.

[00:16:24] Daniel: or if you wanted to get in touch with us. Our website is, Kraftwerk Capital, LLC dot com. You're welcome to check us out there too.

[00:16:31] Hector: Cool. All of you listeners that have made it here. Thank you so much for sticking with us. We would love and appreciate a rating or review wherever you get your podcasts. And if you know someone who's in the midst of scaling their business or could just use some direction with regards to their finances, please send them this episode and go out and get connected with Daniel.

[00:16:47] Hector: Let them know what you're up to. And, as always thanks for being a part of the tribe. We'll see on the next one later. Y'all.