Q3 Ups, Downs, and Expectations

As we approach the end of July, we are looking at the future of business for the remainder of the year. The Big Bill has passed and we ponder the impact on business growth. We are also looking at what companies are doing at this time and want to share our observations, because it's not looking good.

This episode of Books & The Biz will take a look forward and discuss what you as a business owner needs to consider as you look forward to the final 5 months of 2025. Hint, now is the time to take action!

[00:00:00.00] - Alice

Hello. Welcome to Books in the Biz, a podcast that looks at both the financial and operational sides of success. Please welcome our hosts, Dan Paulson and Richard Veltre. Dan is the CEO of Envision Development International, and he works with leaders to increase sales and profits through great cultures with solid operations. Rich is CEO of the Veltre Group and a financial strategist working with companies to manage their money more effectively. Now on to the podcast.

[00:00:44.18] - Dan Paulson

Welcome to the Friday edition of Books in the Business. Rich, how are you doing today?

[00:00:51.08] - Rich Veltre

I am doing fabulous, except it's hot.

[00:00:54.21] - Dan Paulson

It's hot. It is very hot. Damn hot, real hot Yeah, crazy.

[00:01:01.15] - Rich Veltre

Crazy hot.

[00:01:02.12] - Dan Paulson

Snakes butt in a wagon rut. I'm doing the polite version of what was a Good morning, Vietnam.

[00:01:12.12] - Rich Veltre

I saw a post yesterday that I thought was really funny. It said, Mother Nature, whatever you're baking, it's done.

[00:01:21.03] - Dan Paulson

It's burnt or it's jerky at this point. One of the two.

[00:01:24.28] - Rich Veltre

It's done. So yeah, crazy stuff.

[00:01:29.04] - Dan Paulson

It's cool here Well, cool being mid '80s for another day or two, and then we're going to get back up in the '90s again. So I feel your pain. I feel your pain. So know what's coming in a couple of days for you. Anyway, so here we are. Clients got in the way yesterday, So we moved this to Friday, but I think we still got some good stuff to talk about, because believe it or not, it is the end of July. August starts next week, and I'm just curious how companies are preparing for the end of the year. So we've ended Q2, we're well into Q3. And in my opinion, we should be starting to think about how we're going to wrap this year up before we even start getting into 2026. And there's been a number of things happening. I know from the financial end when we talked, you have pointed out a number of potential, I won't call them issues because we don't know if they're issues yet. But there are definitely things going politically, economically, you name it. It's all happening. I also look at operationally, talking with different people. There's some stuff I'm going to throw in, too.

[00:02:41.14] - Dan Paulson

But this is going to be the what's going on, and maybe what we need to prepare for coming in the next five months that are happening. So Rich, let's start off with you a little bit. So what do you see the next five months of the last five months of 2025 looking like?

[00:03:05.06] - Rich Veltre

Well, I think there are still some unknowns, right? Because you do have this political and financial changes that seem to be constantly changing and continuing to change on a day to day basis. We seem like, okay, we have a focus, and we're going down to the left, and then all of a sudden, what? No, we're not going to do that today. We're going to go down here this time. Oh, we don't really know what we're going to do. So let's go back and try the first one. So to a certain extent, there is still some of this uncertainty that I could understand why people might not have a clear picture, but you probably should be doing something at this point. The big question is, with the whole trickle down theory, if tariffs become an issue, how much is it really going to trickle down to you? Because how much does it trickle down to the individual piece that you sell or the hour that you provide a service for? You should be considering, there might be a little bit of tariff, but maybe you do things in a range. But you should be predicting, at least, what you think you're going to do from now till the end of the year.

[00:04:20.21] - Rich Veltre

How is all this turmoil affected you this far? And how much can you continue to see it affecting you going further? Or is it not affecting you at all? So let's figure out what to do when you're not being affected by it. And then, not to really go down too much, the tax side. But you did have this big bill that got signed almost coming up on a month ago. And like it, hate it. I think majority of the turmoil around it is not tax or financial related. It's the Medicare and the who are we getting bumped in the And who's not going to get a service. And we always get that when there's not everybody can be happy, right? So there's a big turmoil around who's not happy. But from a financial standpoint, there's a big amount of changes that are coming through that are effective in 2025. This isn't one of those bills that, hey, we signed it, and it's good starting in 2026. This is a good now. The R&D credit change is now, and there's a chance to go back and actually amend going backward for the last few years and actually having an advantage of going ahead and doing that and getting money back in your pocket.

[00:05:38.11] - Rich Veltre

Then there's the 100 % bonus depreciation. If you're buying equipment, that's now eligible in 2025. As I understand it, there's also a piece that nobody seems to be talking about, but the 100 % bonus depreciation is available to people who want to buy a building, a building that has a technology behind it. If you're buying or building a building in order to use it for a manufacturing or tech center, anything towards that degree, it's now eligible for a hundred % bonus depreciation. That's never been available.

[00:06:16.17] - Dan Paulson

That's impressive.

[00:06:18.12] - Rich Veltre

Bonus depreciation was only on items up to a little bit on the 15 year. So five year, seven year, you could get 100 % write off. Now, you're talking about being able to write off a building Building. So there's term limits. There's timing that it has to happen. So these are things that people should be looking into so they can figure out there if there's an advantage to going ahead and doing something, forget the tariff stuff.

[00:06:44.08] - Dan Paulson

So does the building have to be built in 2025, or can the project be started?

[00:06:51.29] - Rich Veltre

Can be started.

[00:06:53.02] - Dan Paulson

Okay.

[00:06:53.19] - Rich Veltre

So at least this is the way that I've read it so far. This is the other problem with this bill, right? The politicians are popping champagne corks and saying, Hey, this is great. We did this. This is all great. The IRS is saying, We're 27 % people down. We don't have anybody that could put out the guidance on how to actually get this done. So when will we get the final guidance? I don't know. But up until this point, at least we know that this is applicable. We may not be able to act as fast because we may have to wait for guidance, but it's here, right? And we can start to at least plan and say, this is what we expect is going to happen. And if it helps you, you really do want to know that, because September 15th, they're going to ask you to make another quarterly payment, quarterly estimate, based on what? Last year?

[00:07:43.13] - Dan Paulson

Right.

[00:07:44.04] - Rich Veltre

That's before the law. So, again, this is the thing that you need to be having this conversation about.

[00:07:51.03] - Dan Paulson

Yeah, what's crazy to me about... So I'm going to back up a little bit. You talked a lot about different potential tax implications and the fact that There's still a lot of unclarity around what's going to happen there. But you said something that I thought was very interesting because I've heard this from multiple people, either other service providers, potential clients, or even clients. We're not going to do anything until we know what is going to happen. And to me, it's never a successful strategy to just sit on your hands and wait for something to happen, especially especially things that are beyond your control, because what you're doing is you're giving competitors an opportunity to jump in and potentially do some work while you're sitting on your hands, is really what it boils down to. And I've The number of people I've talked to that said, well, we're just going to wait and see. And this is notorious business thinking is, well, we're just not going to do anything until we know what's going to happen. I don't know about you, but We've been through this type of precedency before, and you're not going to know what's going to happen, because what's happening today could change tomorrow, could change next week, could change in a month.

[00:09:11.22] - Dan Paulson

So if you're sitting here waiting, well, when that next change happens, are you going to sit and wait again? And then when that next change happens, are you going to wait again? And to me, that is destructive behavior to your business, because you're just giving other people who aren't going to sit and wait the opportunity to step up and do something, take some form of action. I understand the whole, well, this is stuff beyond my control, like the tariffs, for example. You brought up the tariffs. We don't know what's going to happen with the tariffs, and we probably won't know for sure anything, if ever, because everything is always changing around that. If you're going to sit there and wait to make a decision on, are we going to raise prices? How are we going to absorb this? Well, okay, there's some things I can look at and say, depending upon what impact you think you're going to have, you might want to wait a little bit closer to see. But there's other things you can be doing in your business to improve. Right now, I would look at optimization. So me as the operations guy, I'm looking at saying, okay, where can we streamline?

[00:10:25.06] - Dan Paulson

Where can we automate? Where can we implement new technology? Where can we systematize Where can we look at our old systems and streamline those back to maybe get some time back, get some money back that way? Because that's within your control. And that will improve no matter what is happening in the outside world. And I still see companies saying, well, we're not going to rock the boat. We're just going to leave things as is. I'm like, the boat's rocked. It's going to continue to be rocked. So you might as well step up and find ways to improve. And I'm just not seeing companies step up and do that.

[00:11:04.29] - Rich Veltre

Yeah. I think there's definitely ways to do it without it being this knee-jerk reaction all the time.

[00:11:13.28] - Dan Paulson

And I think that comes back to something that you and I have said a lot, where we go against being reactive and making yourself proactive.

[00:11:24.14] - Rich Veltre

I believe in the long run, you make more money, you have more profits, you have more goals that are achieved if you're proactive about how you go about getting them. If I sit down now and I say, Look, AI is here. If you ask me, and maybe I'll be digressing here, but we were talking about it yesterday that AI is being marketed as all of a sudden it just showed up. It just showed up. It's taking your jobs. That's media hype. A lot of that is the way that the language is presented. The fact of the matter is, AI has been here. It's just keeping on getting more and more improved. So we're not at a cliff at this point, where everybody should just jump off because you're going to lose your jobs, and you're going to have nothing that is anything good because AI is taking everything over. No, AI has been here, and people have been arguing and talking about it for years. It's just now it's starting to actually show what it can do, and you're starting to see some of those effects, and everybody's making it doomsday. And if you ask me, I think that's another opportunity.

[00:12:46.01] - Rich Veltre

And maybe this is more in your realm, and you probably have an opinion on it yourself. But if I look at AI and I say, I can get things done faster, or it can do things that I I don't want to do, and then I can actually shift and pivot and go and do something that I do want to do, then isn't that optimization? That is. Isn't it the same thing we're talking about? That if you really want to make your business into something that's going to have not only current optimization, but maybe it's making more profit, so it's increasing in value. There's other avenues here that get affected by, maybe I should look at AI. Can it help me? Does it really cost Do I have to do a full-blown AI implementation on something? I'm not really sure, but the companies that we're talking to right now, companies listening to us, maybe you need to take a look at it. Is it something that can help you out?

[00:13:44.19] - Dan Paulson

Well, and AI is, in my opinion right now, fairly cost effective for small to medium sized businesses. And what I have found that AI is actually good for is handling repetitive tasks, I'll say, fairly simple tasks. I mean, you can do some more complicated things with AI if you choose to do so. It's still not perfect, though. It's still not a human being. And there are certain aspects of it that I think if you try to completely dehumanize everything you're doing, it's going to be very difficult to get the results that you want, because we still all need that human connection. And I don't know about you, but even when AI is sounding pretty good and sounding almost like a real human being, there's still things you can tell where it's not quite there. It doesn't have the same level of personality. And the one One of the things our brains are good at picking up is when something just seems a little off. Now, that said, doesn't mean you can't use AI, for example, in chat programs on your website or even some call center work, where maybe the first thing they're talking to is an AI bot.

[00:15:07.22] - Dan Paulson

Is that a bad thing? In my opinion, no. As long as there's an easy out, so that if you need to talk to a human being, you can do so. What frustrates me is when people implement this technology, thinking it's going to be the end all be all, and you can now eliminate all your support staff, because the machine is going to answer all your questions. And then you find out that And 80 % of the questions it can't answer, because you can't predict everything. And even the AI bot can't predict how it should answer certain questions. So you run into that problem. But look at what you do, Rich. I mean, I would see number crunching, anything related to the financial accounting side, whereas those repetitive tasks that maybe don't... There's the analysis side, which I think it can find anomalies, and maybe you can use AI to easier find when somebody's embezzling from you or things like that. That is harder for a human being to notice, because while we might have an analytical side, you're not dealing with full on analytics all the time. You're dealing with a human being who's also going to have different nuance in it.

[00:16:19.29] - Dan Paulson

And let's face it, we get blind to certain things at times, especially if the person who might be taking from us is somebody we know, somebody we like, somebody we've worked with for a number of years. The machine doesn't care. So it can look at it. And when it finds these errors or these outliers, it can start pointing those things out and say, well, you need to look at this or you need to look at that. One of the things we had a guest on a few weeks ago that was talking about robotics. We're all dealing with a situation now where we don't have enough employees. Well, when you look at AI, do you also look at robotics and start realizing that robotics is starting to get a lot cheaper? And when you start figuring out what the robotics can do versus the human being, robots don't get sick. Now they might break down and you'll need to repair them. But that adjusts where the humans are working. It doesn't eliminate a job. It just creates a different job that is probably going to be better paying anyway. So I see a number of opportunities when we look at it.

[00:17:23.26] - Dan Paulson

It's just, are people willing to make that investment and willing to act on it now, or are they going to wait until everyone else has done it, and then they're going to jump in at the last minute and try to play catch up? And that's, unfortunately, typically that's what I see in business. I think that's our nature. Business tends to be fairly conservative in a lot of ways. And then we look at these companies that Excel and succeed and grow rapidly. And we go, well, what did they do? Well, they were forward-looking, not backward-looking. And so many of us are backward-looking that we don't realize the opportunities in front of us.

[00:17:59.25] - Rich Veltre

I I totally agree. In my side, just to add to what you're saying, the financial side, I agree with you. Ai, I'm testing it for a bunch of things. I'm testing it for due diligence type work. I'm testing it for tax return type work. I'm testing. And to a certain extent, I'm looking at it and saying, Okay, very patterned how I want to implement where we're going to use it in the workflow. Because I have found those errors, right? I wrote a report out, and I let ChatGPT do a bunch of it. And what wound up happening was it took everything that I had written and changed it to a bit. And when I read the conclusion, I'm like, that wasn't my conclusion. It was different. But I was able to see how it came up with it because someone told me the other day, the AI is good at what it does, but we You also have to be good at how we ask it to do it. And that is where a lot of times the error happens, because the AI will just run with what you tell it, but you need to be able to be sure of how you tell it to do what you want it to do.

[00:19:14.09] - Rich Veltre

Because if you do it wrong, it can go into something. And if you don't check it, it's got a different result.

[00:19:24.19] - Dan Paulson

Yes. Well, and AI, as you add more stuff to it, especially if you're adding, I'll say, redundant information, it keeps taking that original stuff and morphing it. I don't know if you've ever seen AI images that have been re-AIed again and again and again. So let's say they start out with a beautiful woman in a bikini, and they keep pumping it through AI. By the time you get to the end, you can't even recognize what it is. And you would think, well, this should be improving the outcome. Actually, because of the way AI works, it's thinking it It needs to modify something. It needs to change something. But it's, again, not working the same way our minds work. So what is changing isn't always improving stuff. It's limiting it. And I find that even in some of the stuff that I do, because from a systems on the process side, AI can be a great starting point, but it's not a finish point. There's still a lot of nuance that goes into figuring out how to create a better procedure that if you just allow AI to do it and say, well, that's good enough, check box, and away we go, it's not going to produce the results that you want.

[00:20:34.00] - Dan Paulson

It's going to get you about 80 to 90 % of the way there in some cases, but there's still, again, the people quotient needs to be plugged in because as you said, how you enter that information affects the output. And what you think you're saying is what you feel might be correct may not be interpreted the same way by the machine.

[00:20:59.02] - Rich Veltre

Yeah, I think that's the part that concerns me a little bit about, especially with some of our processes. I think that having it do the administrative side of it makes a lot of sense to me. And I'd like to make sure that that works. But basically, all it's doing is taking something and breaking it up and sending it to who it's supposed to send it to, not necessarily writing it and then distributing it where nobody's looking at it between those points. The quality is the concern for me. The quality of what gets disseminated really has to be the thing that overrides for me. So if you can show me that the quality is there, I'm all in because technology before headcount has been something I've been saying for a long time, because if you go the old way, it just becomes add more people, add more people, I have more people.

[00:22:01.22] - Dan Paulson

And there's nobody to add.

[00:22:02.19] - Rich Veltre

That's the best thing. What?

[00:22:05.04] - Dan Paulson

I said there's nobody to add, really. I mean, we're already struggling with we don't have the right people trained for the right jobs. That's one problem. But the other problem is a few Future generations are starting to shrink by a lot. So as we look at our future and everything from the people who are going to be taking care of us to the people who are going to be doing these tasks, there's fewer and fewer people for that. So it's going to get a lot That's what we got, tighter in the labor market. So we do have to look outside of just human beings and throwing a body at it, because that was always the old fashioned way of doing things. I just don't see that, especially in the next 10 years, being an outcome that we're really going to be able to achieve.

[00:22:46.05] - Rich Veltre

Understood.

[00:22:51.02] - Dan Paulson

So let me ask you this, because we went down the AI and the robotics and stuff. Let's bring it back, though. So we're in Q3, we're a full month in. There's five months left. From your perspective as a financial person who, again, looking forward instead of looking back, so we're not really going to worry about the taxes so much anymore. We're going to say, okay, I got five months. I've got goals for the end of the year. What are the things are you focused on financially to make sure that if you are in a company, you're trying to hit those goals?

[00:23:27.10] - Rich Veltre

I think I've been telling people the same thing. You're not 100 % sure on your revenues, right? Because those require inputs from someone else. They have to buy in order for you to have a revenue. But on the expense side, I say to people, look, stay lean so that you can hit your goals. If you go too crazy on your overhead expenses, you wind up putting yourself in a, gee, I people buy. And I don't think that's where anybody wants to be right now. So my gut says, stay lean, especially on your overhead. Decide what you're trying to do on the AI, the projects, the CapEx. If you have stuff that you can get done where you're able to actually put some of these things in place, and you can start thinking about 2026 with that CapEx, that makes a lot of sense to me that you should be looking at it that way. Because if 2024 If the five doesn't go as well as you wanted to, you really do have to still be looking to, well, how do I get into 2026? How do I move in and get past this and actually have a new direction?

[00:24:42.19] - Rich Veltre

If there's some other way that you think There's another way that you think the world's going to go. You may want to either follow it or decide that you're completely against it. Again, this is all proactive thinking. It's not, how did I do in the first two quarters when everything was topsy turvy and no one was really thinking about the long term effect. Think about the long term effect, but then look forward. So I think the focus needs to be on keeping your expenses down, keep your company as lean as possible without causing further disruption with people being upset by you being too lean. But I think that's the key. The expenses are always the thing that you can control.

[00:25:31.26] - Dan Paulson

Yep.

[00:25:32.21] - Rich Veltre

Well, it- Way more than it feels.

[00:25:34.09] - Dan Paulson

Yep. And I agree with you on many things. And there's also part of me that's saying this is also a good time to invest, but invest wisely. So, Yes, you shouldn't be a spendthrift and just blow a bunch of money hoping that things are going to work out fine. At the same point, I think why is investment in capital in things like I talked about? Improvement, optimization. What can you do to get the business so that it is more profitable with what you have versus just going out and blowing a bunch of money? We talked about technology here, but where does that investment in technology make sense? Where's the ROI? Where can you show that, hey, if we spend some time and some money on this, it's going to actually be a market improvement. We might need less people. We might be able to better utilize the people that we do have to get better results, better quality better service. Because to me, that's going to... From an operation side, the things I always look at are quality and service. If your quality and service is better than your competitors, that puts you at a huge advantage.

[00:26:43.07] - Dan Paulson

Because when people come to how They're going to spend that dollar, especially if they have less dollars to spend or they have limited dollars to spend. They will spend more money on something where they know they're going to get greater value than they will on just buying the cheap. Now, is that true 100 % of the No, some people are just going to... There's always those people who will buy it the cheapest way possible and then buy it five times over and actually spend more money. Can't do anything about those folks. But if you look at the bulk of the people, they would rather buy once, know that it's going to be taken care of. No, they don't have to buy again. Something that probably ties a little bit into the financial side as well, but I'm looking at from the operational level. If there are those opportunities to buy goods or services that are at a higher risk that their prices are going to go up significantly in the next couple of months, but you can get them now at today's prices, and you can inventory that, and you know that inventory is going to turn within the next three to six months, I would say, go ahead and make that investment.

[00:27:45.26] - Dan Paulson

Now, maybe you don't agree with me on that. I know I have certain issues about holding costs, and having a lot of stuff sitting on hand, praying it's going to go somewhere. But at the same point, I'll just take the example of the local appliance stores around here. They're all advertising that we have plenty of inventory. We're going to beat the tariff because we have stock on hand. So you don't have to worry about your refrigerator going up by 20 or 30 % if you buy now, because we have it now. So there are some situations where I think making that investment makes sense. Again, it requires analysis, and this is on that type of thing. That's where I'm going to point to you. I'm going to say, Rich, come in, look at this. Does this make sense to spend the money now and have the inventory on hand, or should we do something else? And I think that's really where companies need to make those investments, is they need to talk to people who are going to look at things from a different perspective. So instead of just shut take the thing off and not spend a dime, look at how to spend money wisely to get better results.

[00:28:51.09] - Rich Veltre

Yeah, I totally agree. I mean, everything requires analysis, right? Because I could tell you, yes, go buy that because you're going to get it cheaper and pre-tariff and all that good stuff. But I don't want to see people running out there when they don't have any cash.

[00:29:08.11] - Dan Paulson

Correct.

[00:29:09.19] - Rich Veltre

So there's your analysis part, right? So I look at it as way the difference is. If you can do it now and it doesn't put you in a hole, then yes, do it now, because long run saved you money. If it's going to put you in a hole, short run will put you in a hole.

[00:29:29.18] - Dan Paulson

So And cash is king. And if time is good, tight. So whatever you decide to do, it has to be for the good of all of your analysis, not just for one piece.

[00:29:42.04] - Rich Veltre

So your priorities, you might be able to get one or two of your priority items done. Maybe the other three still have to wait. You have to deal with it. But your analysis will be key. But I totally agree with you. If there's an opportunity for you, if you don't have your analysis, if you don't do what we're saying to do and proactively look at how you can get ahead of things, and you don't have those meetings, and you don't have those analysis done, then you're just one of those people that's sitting. But have the analysis know, hey, I can only get one done. Well, One done is better than none done.

[00:30:17.09] - Dan Paulson

Exactly. Yeah, that's where emotions take over rational. And let's face it, we're human beings. We function off emotions before we deal with the rational side of things. And if you let the emotional side, which is usually fear, take over, you will sit, and you will wait, and you will watch, and the opportunity is going to pass you by. So that's where what we're talking about makes total sense. And we really should, as we try to look at things proactively, be making sure that we are doing that. We're not letting our emotional side drive any actions, because otherwise we're just going to sit around, and we'll twiddle our thumbs, and we'll hope tomorrow is going to be a better day. But if tomorrow is not a better day, then we'll wait till the next, and so on and so forth. Rich, any last minute pontifications from all our discussions here that you would tell somebody before we sign off for the day?

[00:31:20.24] - Rich Veltre

No, my biggest one was the same one I said before, proactive versus reactive.

[00:31:25.23] - Dan Paulson

Exactly.

[00:31:26.22] - Rich Veltre

Just look ahead and go towards the Our goal here.

[00:31:30.23] - Dan Paulson

Yeah, I agree with you 100 % on that. So that ends our show for today, this Friday edition. Finally, Friday. We will see you back at our normal time, Thursday, and next week. We'll actually have a guest in, who's probably going to share some similar thoughts when she talks about employment, both from the job side and from the employee side. So Leah Callis is coming back on next week, and she's going to talk with us about some of her observations, which are also tied into this discussion as well. So Rich, thanks again for joining me, and we will talk to you next week.

[00:32:05.26] - Rich Veltre

Sounds good.

[00:32:07.03] - Dan Paulson

All right. Bob, take it away.

[00:32:09.28] - Bob

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