I'm in Champaign, Illinois. The home of the University of Illinois. We're about a two-hour drive, south of Chicago and about 100 miles west of Indianapolis, two cities with NBA basketball and NFL football. Champaign has no major professional sports. It's just not that big of a city, but the city does boast some attractions besides the university: collegiate sports, fine theater, a host of high tech companies, and perhaps best of all, there are some great places to eat. As I mentioned before, we're going to meet some interesting people from the business community and we'll start with a great bakery. This is Sweet Indulgence. I know this place well. Each Saturday I visit the bakery for a sweet breakfast of lovely cinnamon rolls. The other favorite of mine are the strawberry muffins. Okay, I need to get focused here. Missy, I just wanted to start by just getting some background, introducing yourself kind of how you came into the world of baking. The world of baking. Well, my name is Missy Holste and I went to school for nutrition. Okay. So I know what not to eat, and that's why I got into baking sort of that way. Just working in food service. So did you always have an interest in baking? Yeah, I did. My grandma baked so she taught me the fundamentals of baking and so it was always interesting to me from her. Then when I graduated from school, I worked at Sweet Indulgence as a cake baker. Worked there a few years and then kind of did the tour of the bakeries of Champaign and Panera and some different businesses and then ended up having the opportunity to purchase this five years ago. All right. So what do you think now being an owner and what are some things that stick out as highlights? Stick out as highlights? I think the biggest surprise for me has been that labor and those costs and staffing has been about the most difficult thing for me. That's been the biggest surprise. Is it identifying qualified bakers or is there a lot of competition? It is. There's a lot of turnover because being a small business we're not able to keep people for years and years and years so it's kind of a transition job for a lot of people. I think the turnover in that. How do you identify people? Do you know people? Sometimes it's through friends, sometimes we'll get just people walking and a lot of times people that are interested in baking are going to come into bakeries and try to get jobs because there's not a whole lot of bakeries to work at. And especially a bakery like this which is a from scratch bakery where we're doing all our cakes and icings from scratch. So, that's a good opportunity for someone especially straight out of school. Okay, to kind of learn the ropes from that kind of thing. Yeah. What are some things that you really enjoy about being an owner of a bakery? I think just being able to come in and create what you want it to be. Try to create the atmosphere you want it to be, have control over that, have control over your menu. It's nice as a small business we can say, "You know what, we want to be closed for a couple days after Thanksgiving just to rest up." In a big corporation you're not going to be able to do that because you have to stick to all of their scheduling. It's right. But I think fundamentally being able to have control over what we're selling, what we're doing. I'm going to kind of turn the tables a little bit and move on to something a little bit more financial. So first off, I know that you're not an accountant but what do you think accounting is? Well, I did actually started out in accounting in college but I only made it like one semester. I maybe still don't know what accounting is, but basically it's... I always kind of look at is money coming in money going out. I know that's very simplistic and probably isn't what accounting actually is but to me it's always like you know you're spending this on this, you have to get in at least that or more to make a profit. So, that's kind of balancing those. We had a conversation several months ago and I told you that I had a student that wanted to own a bakery and you said, "Tell her to take accounting." Yeah, take accounting and take maintenance like equipment maintenance. Those two things would be very good. I mean I'm very lucky because my brother is my partner in this and that's what he does. He's a CFO for a company, so he's the one that's making the charts and showing me the balance sheets every month and telling me where we're needing to cut costs and where we're doing well. It would be nice for me to have a little bit better understanding of some of that, but I'm lucky to have him or at least have someone around who knows about those things. Missy gave us her take on what is accounting and I'm not dissatisfied with her response. But I always like to get a second opinion. So I traveled just a couple of miles to meet up with another important business person in our community. My name is Jed Bunyan.I started out as a student in an accounting and got my degree in accounting and I moved to Champaign and I was a runner and at that time, this is many years ago, 36 years ago. There wasn't a place to buy running shoes. So myself and partner decided that we wanted to sell running shoes, and it was a very easy entry into this market at that time. We just called up the shoe companies. They were all very small and getting started themselves like Nike and New Balance and ASICS and Brooks and we just called them up and said, "Hey we want to sell your shoes." And they said, "OK, how many do you want?" And that's what we did. I called my father and borrowed some money from my father to start this business. I have a funny little story when I called my dad. I said I'd like to sell running shoes and you have to remember, back 35 years ago there weren't that many people running and that's not like it is today. And my father said, "Well after you sell the first 100 pairs of shoes to the folks who run in Champaign, who are you going to sell shoes to then?" And he had a point but I just had this intuition that sports and athletics and fitness were going to be something in the future that was going to grow and that's kind of how we started on it. Basically we started on a shoe string. Yeah that's that's how I would describe it, and over the years the business has grown every year to the point we are now. Okay, okay. So that's kind of the history. Now have you always been in this location? No, we started a very small campus store about 800 square feet which was very very small. Now we have about 7000 square feet in this building. But we started there, we moved to another location that was larger. We moved to another location that was larger and then 11 years ago we built this building. We decided that we wanted to own our own property, and so we built this building then. Champaign isn't that huge. So where do the people who buy your shoes come from? Well that's a very good question. For a store our size and the amount of inventory we carry, this market probably would not support that but we're kind of a regional store. We will draw from about 100 to 150 miles around here. Folks will come to buy shoes. We're a running specialty store and we will carry running shoes and sizes and widths and selections that are hard to find in their small local communities. And if you're a serious runner, shoes are ultimately the most important thing that they fit and they're the right models for your feet so people will make an effort to come and drive to our business so yeah we draw regionally from about 100 to 150 miles and that's how we're able to have such a large store and such a large amount of inventory. All right, nice. Kind of shift a little bit because you mentioned that you have an accounting background. Yes. So let me ask you this, how would you define accounting? Oh gosh. In any business and particularly in any small business, accounting is what gives you and keeps control of your business, your costs, your profits, your inventory. That's one of the integral most important parts of the business, that if the folks running the business aren't accountants or have an accounting background, they certainly have someone working closely with them that does. I think that just absolutely to have a successful business, you have to understand accounting and understand the debits and credits and know where your money is coming and going and then your inventory. Accounting is incredibly one of the most important aspects of running a small business. OK. I agree with you by the way. Yes. So you guys generate financial statements then? We do. Luckily, I was an accountant. When you mentioned my background, I graduated in accounting and I worked for a public accounting firm for two years. I found that I wasn't particularly successful there and particularly good at that work but it was a great training background for me. That was my background of being an accountant and going to work for a public accounting firm to begin with. OK. Two good thoughts about what is accounting from two folks who rely on accounting. Although a bit different, neither perspective about accounting is wrong. But I must say I have a slightly different idea about what accounting is. We'll check back with Missy and Jed as we move through the course. But I want to offer my perspective about the question on the table. What is accounting? What is accounting? As I've taught accounting in the classroom for over a decade now. I've adopted the perspective that accounting is fundamentally about measurement, where measurement is the assigning of numerals or other symbols to represent the magnitude of an attribute of a phenomenon. Let's unpack that a bit. Let's say I'm in a classroom teaching a group of students. Now phenomenon represents an object of interest. In other words, it's the object I wish to learn about. For example, I might wish to learn about the tables at which my students are seated. Now the attribute represents a characteristic of the phenomenon I'm interested in learning about. And the measure assigns numerals to represent the extent to which the object of interest has the characteristic of interest. For example perhaps I'm getting tired from lecturing and wish to lie down for a rest. In this case, my attribute of interest might be the length of the table to see if I can fit on top of it. Here, the measure assigns numerals to represent the extent to which the table has length. One thing to keep in mind is that a phenomenon can have many attributes and the attribute of interest can change. So consider that a trickster student thinks it would be funny to accidentally nudge me off the table. In which case the height of the table becomes more important. Then enraged by the trick, I want to scare the class by chopping the table in half with my bare hand. So the thickness of the table becomes the attribute of interest. Okay, you get the point. Now one thing I want you to notice about our example is that you could easily observe and measure the attribute of interest. But consider this question. How happy is the baby? If we analyze the question, we find that phenomenon is the baby and the attribute of interest is the baby's happiness. The challenge is that assigning numerals to represent the extent to which the baby has happiness isn't easy because we can't directly observe baby happiness. However what we could do is use something that we can observe as a proxy or substitute for the attribute, baby happiness. For instance, we might count the number of times the baby smiles, we'll call that smiles per hour. We're not really interested in smiles per hour but it substitutes for the attribute of interest, baby happiness. So we call smiles per hour a substitute attribute. So what does a baby smiling have to do with financial statements. Well, this is the big takeaway from our first lesson. Financial statements are themselves substitute attributes for what I call the three measurement questions. One, what do you own? Two, what do you owe? And three, how did you perform? Keep that in mind as we make our way through the financial statements and you'll have a greater appreciation for what the financial statements are and ultimately what they can do for you. Until next time, be well.