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Business Agreement

Running a business without written business agreements puts you and your clients at risk for misunderstandings. It puts you at risk of not getting paid. And further puts you at risk for chargebacks, where the client goes directly to the credit card company and claims fraud after receiving services. Without a written agreement, you will likely have to refund any money you’ve received, even if your policy is “no refunds.”

Business Agreement

All About Business Agreeements 

 

 

The truth is that contracts, or as I call them business agreements, do not have to be complicated, written in legalese, or 20 pages long to be enforceable. What they need to be is yours, not someone else’s copy/paste, clearly written, including all terms, and signed.   When I say do not “copy/paste” someone else’s, I mean do not copy/ paste. There are formats online you can follow, but don’t include things you don’t understand and just change terms just because they have it in theirs.

 

 

Here are the main things to include in your business agreements.

Business agreements:  Be Clear and keep it simple.

 

Nobody likes legalese. Nobody. Drop the “whereas” please. Just say it clearly and keep it simple. If the program lasts six months, it lasts 6 months. If there are 4 monthly payments, say that. People want to know what they are signing up for. It doesn’t have to be fancy, lengthy, or in legalese to be enforceable. You can have a legally binding agreement written on a napkin in a bar (there’s a law case on this!), not that I’m suggesting that approach.

 

Business agreements: Include QTIPS

 

The specific terms need to be spelled out. You can use QTIPS to remind you to include these things:

 

                Q: Quantity  (6 sessions, 2 bracelets, 5 massages, etc.)

                T: Time of Performance (15 days, 6 months, 1 hour)

                I: Identity of the Parties (You and the name of the client/ customer)

                P: Price

                S: Subject Matter (what are they specifically buying? Coffee? Coaching? Copywriting?)

 

When you include the above terms of your agreement, there isn’t much room for misunderstanding. Just make sure you are specific. Don’t say “fruit” if you mean “orange.” It can be a single sentence, “This agreement between Me and You is for Six 30-minute life coaching sessions over 6 weeks for $350.00.” All the terms are there. You know what you are giving, and they clearly know what they are getting.

 

Business agreements: Spell out the policies

 

This is where people often leave out things that come back to bite them. If you have a no refunds policy, you must put it in writing, in the agreement with the terms, and have it signed. If you offer refunds or replacements within 30 days, it must be in there as well. The policies are the actual guidelines within which you run your business. If you require a deposit, if you require pay in full before a VIP day, if the customer pays shipping, you must let your people know this BEFORE they complete the purchase.  

 

Many times, I see entrepreneurs who have policies develop only after an incident. You must be more intentional than that.  Walk through the customer journey in your mind and find the sticky spots where they may have a question or an issue about your product or service, and how you want to resolve it.  If someone doesn’t like your policies and chooses not to do business with you, trust me, it is far better than the bitter dispute with the credit card company over the chargeback later.

 

 

Business agreements: Get any changes in writing

 

If you make changes, and they do happen, just put them in writing and sign and date them. “You and I agree to change our agreement to include XYZ.  This change is effective immediately.”  Do not rely on the memory of what you said on the phone, and the out of context email isn’t any better. Take a minute and “memorialize” the change.

 

 

 

Business agreements: Be prepared to enforce the agreement

 

This is the part of business nobody really likes, but this is the reason you have written and signed agreements. You must be prepared to enforce them. In my own business I allow people to pause coaching for a month or two if life happens, because I understand that life happens, but we don’t just “cancel” the agreement because life happens. We pick back up and finish out the terms of the agreement. I’ve never had to actually go out and enforce anything, because I have great clients, but if that day ever came, I will. This is business. My livelihood depends on my clients keeping their word, and their own business growth and development relies on it too. You must view this from an objective place and understand that if your clients don’t keep the agreements, your business could go under. Be stronger than that.

 

Finally, Having an attorney look over your agreements is a wise decision. I don’t just say that because I have a law degree. Attorneys went to school to spot gaps and look for language that is written in a way that can be interpreted differently than you think it means or is ambiguous.  If you are skipping the attorney for now, but don’t have written agreements, set aside time to follow the above steps and get your agreements together now. 

Financial Tips for Your Side Hustle

Here is the final installment in our “financial tips for” different industries—Financial Tips for Your Side Hustle. This article is for anyone building a business on the side of a full-time job or on the side of another business.  Creating a side business and growing it to allow you to replace your 9-5 and go full time into entrepreneurship is an exciting journey. Here are a few financial tips to help you make that happen.

 

Financial Tips for Your Side Hustle

 

 

Start Your Separate Personal Financial Identity immediately

 

From day one, treat your business as a business. Separate your banking, get a debit card for business expenses, and have all income from all sources deposited into the account. Just point your PayPal, Stripe, Square, or whatever you use to the business account.  Pay your expenses from that account. You will file a different tax schedule when you own a business. Keep receipts and treat it like the real business it is right from the start.

 

 

 

Have a Pricing Strategy That Gets You Into Profit Quickly

 

Many times, when entrepreneurs begin side businesses they start off with pricing that is often too low to make much of a profit. This can be because there is the feeling that the venture is for “extra money,” so making even just a little bit is “fine.” Yet, the best strategy is to be priced correctly from the beginning, so you aren’t just breaking even or worse, losing money with your side hustle.  You are in business to make money, and that means pricing yourself to include your real costs, your paycheck, and some profit to make sure you have capital for growth.  Follow this link (Mastering Your Cash Flow (kartra.com)) for my free three part pricing formula.

 

You don’t have to lose money the first few years in business. See this blog post (5 Tips for Maximizing Business Profits (entremoneycoach.com)) more tips to maximize your profits.

 

 

Set up for your Self-Employment Taxes and pay them at least quarterly

 

Part of treating your business like a business right away is to set yourself up to file your taxes as a business. In the U.S. if you are a sole proprietor that means a schedule C.  When you file that report of self-employment you will need to pay your self-employment taxes. Make it a habit from the start, and you will always be in compliance with the IRS. I learned this lesson the hard way, and ended up owing over $27k in self-employment taxes back the year of my husband’s accident when we lost our consulting business.  We did not set ourselves up, and taxes were an afterthought. Oops.

 

It’s easy to set up to pay your taxes online, visit https://eftps.gov and register. They have to snail mail you a PIN so it takes a few days to set up, but once you are enrolled you can easily make online deposits into your “tax account.” You should deposit 20-30% to start, based on your other job, tax bracket, etc. Visit your accountant to figure out exactly what is best for your situation. But just do it. I withhold when I take a paycheck, I don’t even wait for quarterly anymore!

 

 

If you are going to scale and leave your 9-5 have a plan

 

As you are scaling and building your side hustle to become your full-time gig, I always recommend having a plan. It won’t be perfect, and it will probably change, but you should know your numbers, have some money squirrelled away, and keep debt down so that the payments, if any, are manageable on your new entrepreneurial salary. Plan your income and profit each quarter, knowing how much you need to make to pay everything, including yourself.

 

And know that sometimes businesses take off faster than expected, sometimes they take longer.  Have a real conversation with yourself around what the minimum number of sales or clients you have to consistently have to make a move. It doesn’t always have to be a calendar date! Make your plan around events that happen inside your side hustle and celebrate every milestone.

Financial Tips for E-Commerce Sellers

For the past few weeks, I have been doing a Financial Tip series. This week, we will be focusing on Financial Tips for E-Commerce Sellers. In this blog, we will tackle 4 topics that would allow E-Commerce sellers to take their businesses to the next level. 

 

 

 

FINANCIAL TIPS FOR E-COMMERCE SELLERS

 

 

Know what you are REALLY being charged to use the platform

 

If you are using a shopping platform such as Etsy, Poshmark, Shopify, or E-Bay, know that there are considerable fees that can be a part of each transaction. If there is an embedded payment service, there are transaction and interchange fees for taking payment. Then there are fees for listings, advertising, and renewing items on the platforms. These are common, and the cost of doing business with these services. Just know what they are. I had a client one time on Etsy who ended up paying almost 40% of an item with advertising (someone bought through the Etsy ad link), listing, shipping, and payment. When we looked at the numbers she didn’t realize it was so high.

 

 

 

Get your shipping down with pre-paid services

 

I got this tip from a friend of mine who mails out about 100 packages a week! There are places to buy pre-paid labels for the postal service here in the US to get shipping costs down. My husband has used Pirateship (Free USPS shipping software | Pirate Ship) to ship some packages from his coffee business, and it saved his customers anywhere from $1.50-$4.00 per package. That’s significant!

 

A few others to check out are:

 

If you are reading me in the US, another thing to do is to contact your local business development specialist at the United States Postal Service. They can give you referral codes for vendor partners to create your shipping labels at no cost! My husband had a short conversation with our local post office and had promo codes for five vendors the same day!

 

 

Maximize profits with good pricing and good transaction records

 

I frequently see pricing mistakes in this industry, and often it is because entrepreneurs just double or triple their wholesale costs. It would be better, and more accurate to do a breakdown of operating costs and labor that should be included above the wholesale price of an item. Finally, I like to see an added profit margin.  If you need a good pricing formula for any product or service grab my free resource.

 

Often times I see labor as a sticking point in pricing goods.  If you are a reseller, don’t forget to include the time it takes you to shop, take photos, upload and list items, and pack them, when you calculate pricing.  If you are selling items that you make, know how long it takes you to create the item you sell, and make sure that is considered above your operating costs and the actual wholesale cost to make, photo, list, advertise, and sell the item.

 

Once you figure out your operating costs, please include the costs of using the platform that we talked about above, consider adding a flat labor cost to every item, and then a flat profit amount. For example, you can add $10.00 to an item to cover labor and profit above what you need to recover to make the sale. If that isn’t enough, you can go up, if it’s too much, you can go down.

 

 

Another key to ensuring you are maximizing profit is to keep meticulous transaction records. If you need to pay to relist the item, that additional fee is coming out of your profit margin. Know exactly what to pay for everything you make and everything you sell. If you paid $23.00 for a designer item to resell on Poshmark, you need to record that amount.

 

Estimating what you paid or what it costs to make something is an easy way to lose money in your business. What you paid is the starting place of your pricing structure to make money in this business. You can use a spreadsheet, just a notebook, or some software, whatever feels good for you, but don’t skip this step.

 

 

Check your expenses and margins quarterly

 

A lot of things can change in 90 days in ecommerce. Set aside time to review the expenses in your business. Look at the time you are taking to create and list your items. See if your shipping rates are still working. Look at your platform expenses and make sure that you adjust prices as necessary to cover any new increases.

 

Take the time to check your profit margins as well. Is one platform outperforming another in sales? Are your margins staying relatively consistent or are you going wildly up and down on certain items? You can take an average sale at your average price in a few categories and look for trends. If you typically sell items at $35.00, $60.00, and $85.00, look at a few sales in each of those price ranges. That’ll keep you from feeling overwhelmed at the idea of reviewing 1200 transactions! Make sure everything you sell makes a profit. Likewise, limit your losses. Because I know that sometimes lose a little bit to move something stored in inventory for a while.  

 

There are million-dollar eCommerce businesses built every year around the world. People love point-and-click convenience. The ability to get items that aren’t readily available where they live and unique online finds.

 

Financial Tips for Coaches and Consultants

This article is relevant for all service providers, but I’m focusing on coaches and consultants who use the online space to make sales and provide services. Here are a few financial tips for coaches and consultants to make the finances easier, and better, for service providers!

Financial Tips for Coaches and Consultants

 

FINANCIAL TIPS FOR COACHES AND CONSULTANTS

Have a financial structure for money management and taxes right away

 

I see service providers frequently live out of their own personal accounts for a while. It’s so important to set up your business bank account and to create a system for withholding taxes and paying yourself as soon as you can.  Typically profit margins can be larger in the online space, because the cost of doing business is minimal, and I see many entrepreneurs make the mistake of treating their revenue as, “it’s all my money anyway.” This co-mingling makes it difficult to hire contractors, such as a social media manager, because you shouldn’t pay business expenses from a personal account. This can create a tax nightmare.

 

You must pay self-employment taxes on your own paycheck, and if you are using the money in that account, even for business purposes, it be your own personal money. Create a separate financial identity from the start. Get a business bank account. Set up your online deposit with the Internal Revenue Service or your home tax agency and make sure you are withholding and depositing your taxes. Pay yourself every two weeks and let the rest of the money sit in the bank until you get paid again or must pay bills.

 

Calculate everything in your pricing, and know your numbers and your margins

 

My next tip is one that I get some pushback on, I want you to calculate your numbers and know your margins. The reason I get pushback is because people frequently want to “feel” into their pricing, which isn’t a bad thing, but just make sure your feelings are profitable. 

 

I worked with an entrepreneur who was losing money on her most expensive package. By the time we calculated the hours, the services and additional bonuses and things provided, her $1500.00 package had a net LOSS of $80.00 per client. OUCH. In fact, her most profitable package was $195.00. It was extremely hard for her to hear, but it was the truth. Her lower cost packages were covering her losses. She was very frustrated in business, and that was why.

 

You need to know how much you need to make, how much you are legitimately profiting, how many things you need to sell, and at what price, to grow your business strategically and sustainably. Please get your numbers.

 

Stop feast or famine with payment plans and signature offers

 

Coaching and consulting can be feast or famine, and the income can be very unpredictable, especially when you are starting out and haven’t built up your client base. To stabilize your income quickly, please have payment plans available for anything you offer over a certain dollar amount. You get to decide, but I have a client that offers at least 2 payments for anything over $299.00. I have another client that starts at $500.00 and still another that starts at $1,000.00

 

When you offer payment plans you are giving people access to your programs and services at a price point, they can more easily afford, and you get to project income out into the future. Just make sure you cover any additional interchange fees, the fees charged by the bank for running the card each time, in your pricing. Based on the dollar amount, that may be just a few dollars. Again, this is your decision.

 

I know there are some people who do not recommend extending payment plans beyond the length of the program or service the client is buying.  I understand that there is a risk that they will get the service and not pay the remainder. But, while there is a little risk that someone will not honor their payments, generally people follow through, and if you have good policies and procedures surrounding payments (discussed below), you can protect yourself from these instances.

 

Have policies to protect you from chargebacks and from giving refunds if you do not offer them

 

Do not accept anything without a payment agreement. I have a podcast episode, “Get it in Writing” that talks through the basics of what should be in an agreement. I want to talk here specifically around payments. Protect yourself from chargebacks. That is where someone complains to the credit card company or payment portal, and the company gives them the money back- straight from your account. If you do not have anything in writing that says, “no refunds” or “all sales are final” then you will not win against the payment vendor.

 

Make sure that your terms and conditions are required for EVERY sale you make. Take the time to draft them or have an attorney help you and post them inside the sales process. For longer programs or bigger ticket items, send a follow-up agreement in writing to clients. There are a few people in the world that will try to take advantage, and having good, clear, and acknowledged policies surrounding payments will protect your income and your business.

 

Coaches and consultants need to protect themselves financially. I have a special place in my heart for this group of entrepreneurs, because it’s where Mike and I started with UNEQ Consulting in 2011, and I wish I would have had these tips, and had taken this advice back then.

 

 

Author’s Note:

If you enjoyed this blog about Financial Tips for Coaches and Consultants, feel free to visit my other blogs and resources

Creative Business

There are many, many handmade creative product businesses. Whether you make jewelry, paint pictures, created wooden or porcelain gifts, or make something else, you are a creative product business. I have clients who make soaps and lotions and clients who make artwork and gifts. I find there are a few key areas where creative product businesses lose money, and I have a few tips to help your business stay profitable.

 

Creative Business

 

 

 

Tips for Creative Product Businesses

 

 

 

 

Know your actual costs to create your product and include your labor

 

  • Include all the items it takes to create your product, paint, paper, beads, yarn, wood, labels, shipping boxes, lotion bottles, etc. and your operational costs. For my easy formula for pricing anything guide visit:  https://entremoneycoach.kartra.com/page.pricing .

 

  • Calculate how long it REALLY takes you to create each product, and then calculate your labor cost, per piece, that you want to recover in your pricing. Don’t shortchange yourself, the number is the number. Make sure you have the true costs so you can make pricing decisions that reflect your actual time spent.

 

  • Make sure to also include your shipping materials, tissue paper, bubble wrap, stickers, boxes, and any other items you use to ship your items above actual postage. A flat handling charge may be a good, transparent way to do this, or if shipping is included, add it into the price.

 

  • Finally, know your fees for Etsy, Shopify, eBay, etc. if you use any of these selling sites. These can take a pretty significant chunk of profits if you use all their features and advertising offerings. Think also about the table at the fair or the farmer’s market booth. You must consider the cost to sell your product in your pricing.

 

 

 

 

Have a custom option available for customers and charge appropriately

 

One way to increase the price of an item is to have a custom option available. I’ve worked with clients who personalize items, and clients who create custom items for occasions such as weddings. Having some sort of customization available for people to buy can increase your revenues and margins. This can also be a way to resell to customers who need your custom item again in the future, such as for gifts.

 

You need to charge more for the extra time to tailor the product to your client’s specific wishes. Anytime you veer from a standard item, you need to have a charge. Whenever someone orders something custom, please get a deposit. It doesn’t have to be half, it can be a smaller percentage, but get some financial commitment from the buyer before you start creating your one-of-a-kind work.

 

 

 

 

Watch your discounts, coupons, and bonuses

 

I see creative entrepreneurs constantly markdown items, which cuts into the profits.  A coupon for signing up for the email list, then free shipping, then a bonus trial size, then some other thing, and all the sudden you lose money on the sale. I know that many, many people try to compete on price in the creative space, but what you create is unique because you create it.

 

I don’t recommend discounting items often, or buyers will expect them and just wait to purchase until you markdown again. Offering a 10% off coupon with a newsletter signup may be ok, or even a free shipping option on a minimum purchase. Just make sure you have the margin to offer them. I worked with a client one time who barely broke even after offering her discount coupon, after the Etsy fees and advertising costs.

 

 

 

 

Have policies on product changes, returns, and refunds, and stick to them

 

Things can happen in shipping, the item ordered may not be exactly what the customer expected, or there may be another reason for items to need replacing or returning. Protect yourself with clear policies on shipping and tracking shipments, how long you will accept a return, and when an item will be replaced at no or little charge.  Create a policy that all sales are FINAL on custom items.

 

When people order products online, they have several guarantees offered by payment vendors such as PayPal. They can begin a chargeback or complaint and receive their money back- from your account.  Unless you have clear, understandable policies in place, you probably will lose any dispute and be out however much your item cost plus the additional vendor fees. 

 

There is always a demand for beautiful handmade items for gifts or for any occasion.  I know someone who buys a great pair of new handmade clay earrings every other week. She just loves them. Too many creatives under charge for their items and lose money in their business. Following the tips above will help you stay in profit and have the money to keep on creating what you love. Do you have a specific question related to your own business? Reach out and let’s chat!

Food Business

Do you have a food business? Whether it is a cottage business like a home bakery, or a restaurant, or takeout place, there are a few key things you can do to stay in profit in your business. Here are some financial tips for food businesses. 

Food business

 

 

Financial Tips for Food Businesses

 

Know your real food costs on everything you sell and have good margins

 

  • Make sure you calculate your food costs, don’t guess. Take the time to know what it really costs you to create that dish or bake that cake. All the costs involved. Include costs of packaging, labels, and labor, to calculate the true prices. Consequently, that container adds to the cost of delivering the food, as do any food labels– whether it is served in-house or sold online.

 

  • Don’t forget operational expenses and waste costs in your pricing scheme as well. For instance, every business has fixed operating expenses such as rent, internet, and phone. However, as a food business, you also must include waste and other costs like linens, that other industries do not have to include.

 

  • Watch your margins. If you are producing food products, I like to see 60% or better, if you are reselling items, I like to see north of 35%. You will save money, and will have higher margins, by buying ingredients and producing items in-house versus re-selling food that was already made.

 

Watch your inventory spend

 

It is VERY, VERY, VERY easy to overbuy inventory in a food business. In fact, suppliers give volume discounts. It is important to remember that any money you have tied up in inventory is money that you do not have available for other things.

 

Keep in mind how often you can get a delivery from your suppliers. Is the savings of $10.00 worth the additional $77.00 in your walk-in or freezer?

 

Good inventory management will allow you to have better cashflow. Knowing your top sellers and the items that need to be on a regular schedule of ordering will prevent the “feast and famine” orders swinging hundreds of dollars each week.

 

Have an emergency fund and keep debt low

 

Lots of things can happen that affect revenue in your business. If you have bad weather and your restaurant doors are closed for a day or two, or a shipment of your cookies gets damaged and needs to be replaced, it costs your business money.  Relying on the public to decide to eat out or order in on a given night isn’t always predictable. Keeping some cash stashed is a good idea to offset any lower revenue months. Typically, quarter one each year is brutal on food businesses. Having the money set aside to cover any income dips can be the difference between staying in business and not.

 

Along the same lines, keeping debt low is important. Most of the inventory in food businesses are perishable and aren’t available as collateral to take out an emergency line of credit if needed.

 

For example, the depreciation of equipment also can make the food business equipment a little riskier for the bank to loan on for full value.  In addition, not having a lot of debt in the business can also make a difference in the success of a food business in a slower season.

 

Create a sinking fund for equipment repair and replacement

 

Food preparation requires equipment. Ovens, fryers, stovetops, refrigerators, etc., are commonly found in restaurants and home food businesses. These pieces of equipment will often need regular maintenance, and at some point, replacement. Creating a separate fund early in the business where money is parked for these specific needs can ensure that if a piece of equipment goes down, the restaurant budget doesn’t struggle to cover the repairs.  This fund truly protects the business from expensive appliance repairs that must be made to keep the business running.

 

 

Author’s Note on Financial Tips for Food Businesses:

 

Using these tips will help to ensure that your food business operates with finances in the black. You can protect yourself and your business from the most probable money issues facing your industry by:

  • getting good margins
  • only having the necessary inventory
  • having an emergency fund and keeping debt low
  • saving to maintain equipment.

 

Did this blog bring you a bit more clarity?

 

Then visit our linktree below for some useful resources!

 

https://entremoneycoach.com/linktree/

“I don’t know what I am going to make.” I hear this statement all the time, and when your business is fairly new, I get it. But even from the very start, you should understand your capacity and availability to predict your revenue.  Whether you are a business or a service, you should be able to figure out how much you can make in a given time and create a path to get there.

 

 

It is so important that you figure out a predictable revenue at every phase of growth. Using these numbers can help you make the best business decisions regarding whether it is time to scale. The first thing you have to do is get your pricing right. If you need a pricing formula that will help you price any product or service for profit, you can find it in this blog: How Do You Calculate Selling Price? | Entre Money Coach .

 

Once your pricing is where you need it to be, we can talk about your capacity to make products and services for predictable revenue. I’m going to use a recent example, a client of mine who is starting a coffee roasting business.  We calculated his pricing based on operations, cost of the beans, labor, packaging, and shipping. We also figured out both a wholesale and a retail price for his products, because part of his model is to be on consignment in small local stores.  Here’s how we went from pricing to predicting monthly revenue:

 

 

 

 

  1. Capacity and Availability

 

Roasting coffee takes a certain amount of time per batch and based on the roasts and origins times can vary. But we averaged the time it takes to roast a batch, and the number of bags of product he can make in each roast cycle. That number alone will limit his capacity to make more than a specific amount of product each day. 

 

So, based on roasting time and resting time before packaging, we calculated the maximum amount of product that can be made per day, and then per week.  The cool part is that you can decide how much and how often you work. My client wanted to be part time to start, so the amount of product produced was also determined based on his availability and the number of hours he wanted to work.

 

 

 

 

  1. Number of items of each type to sell at each price

 

My client has two package sizes of roasted coffee beans right now, a 3oz size and a 12 oz size. How many of each size he makes, and sells, each week can help him predict his income. Some will be sold at wholesale, some at retail, with pricing at each size. Based on the number of wholesale and retail orders, plus the product he makes, without orders, to sell that week we can predict how much he will make each week, then month, then quarter. These numbers need to be reviewed at least every quarter.

 

For example: He sells 20 12 oz bags and 10 3 oz bags in a week.

 Ten 12 oz bags at $10.00 wholesale becomes $100.00 and ten 12 oz bags at $14.00 retail is $140.00.

Adding ten 3 oz bags at $2.50 wholesale is $25.00. With this mix of products, he will gross $265.00 this week on 30 total bags, mixed in size and price.

 

This is his “predictable” revenue. He can make more or less by selling more at a retail price instead of wholesale. This is just one small example of how knowing your “mix” of capacity. That and knowing your availability, audience and price can be brought together on paper. Doing this will allow you to predict how much money you will bring in.  I want to note that this isn’t actual sales at this point, but a very solid estimate.  You CAN predict your revenue, even as a new business.

 

 

 

Ready to plan your revenue for Q2 2021? Join me Saturday, March 13th for the three-hour Revenue and Profit Planning workshop! Visit https://entremoneycoach.kartra.com/page/quarterlyintensive for more information!

 

 

Money management should align with your personality and the way you like to do stuff. Radical, right? I believe one of the biggest obstacles that business owners face when it comes to money stuff is the idea that there is only one “right way” to do it. This software. Or that spreadsheet formula. Or these guidelines. But if we are really honest, there are actually very few things that have to be done a specific way. Tax and employment filings, sure, but the way you track and manage your business money is up to you. The method you choose just needs to be in a manner that protects your business records and would stand up to an audit, just in case.

 

 

 

What is Aligned Money 

Management?

 

 

So, what is aligned money management? Managing your money in alignment with your financial style, so you stick with it (even if you never learn to enjoy it).  When we try to force ourselves to use a system that doesn’t naturally work with our style of doing things it rarely works. This is a common issue, and it often creates a struggle and resistance to doing the things that support our business growth.

 

A great place to start is with your financial personality (If you don’t know which personality you best identify with, visit this blog to learn more).  It’s important to know how you currently relate to your money. Particularly your business money. For example, do you ignore or obsess over your financials? Whichever it is you can then begin to work with your money in a way that feels relatable.

 

 

 

MONEY MANAGEMENT STRATEGIES

 

Next, we need to examine your comfort level with different management strategies. How are you tracking other things in your business now? Are you a pen and paper person? Do you prefer software or spreadsheets? Do you like more automation or are you comfortable entering data points regularly? Your natural comfort level with certain approaches can easily translate to your financial tracking.  There are templates for paper and pen tracking, apps and software, spreadsheets, and computer formats available for anyone and any budget.

 

Finally, it’s time to start trying things out and being open to tweaking your approach. If you know that pen and paper is how you like to do things, grab some templates, and try them. If you like automated software,  start shopping for one that feels pretty intuitive for you. Many have free trials, so try them. If you like spreadsheets but don’t know how to set one up, get some help creating one that works for you. If you are really at a loss for where to start, hire a money pro to help you. Ask your accountant or have a session with a financial coach.

 

 

 

AUTHOR’S NOTE:

It can take three months or so to get into the habit of managing your money if you don’t do it now, so make sure you build in some grace and room to make mistakes or forget stuff. Particularly your internal processes. If you are worried about the most important compliance things like taxes, turn them over to your accountant so you have the knowledge that they are done correctly. You CAN create a money management strategy that works for you, your needs, your personality, and your organizational style. Making sure your money approach is comfortable and aligned will help you stay consistent with your finances.

 

 

 

ANNOUNCEMENT!!!

 

Our Book Club for The Profit Accelerator for Small Business begins in a few days! You have free exclusive access to the club when you purchase your copy of The Profit Accelerator for Small Business book on Kindle or paperback.

 

 

 

Want to make next year’s annual expenses easier on the monthly budget? You can protect your monthly income by starting what I call a “Cyclical Fund” (C-Fund). When you start your Cyclical fund, you will deposit a smaller amount each month towards these costs and save enough over 12 months to have all of them covered when they come due! The alternative is what most of us do now, having to pay the large bill is all at once out of one month’s income. That can be very stressful and hard on your monthly spending plan!

3 STEPS TO START A CYCLICAL FUND:

1. MAKE A LIST OF ALL YOUR NON-MONTHLY EXPENSES. INCLUDE THE THINGS THAT RENEW QUARTERLY, SEMI-ANNUALLY, AND ANNUALLY. MOST BUSINESSES HAVE ABOUT 5-6 OF THESE. THINK ABOUT:

    • Business and professional license renewals
    • Subscription renewals for things like software
    • Membership fees
    • Annual domain and website renewals

2. TOTAL UP ALL OF THESE EXPENSES AND DIVIDE BY 12. THIS IS THE AMOUNT OF YOUR MONTHLY DEPOSIT.

3. SET UP AN ACCOUNT AND MAKE YOUR FIRST DEPOSIT. 

Do not open a savings type account if you will make frequent withdrawals to pay these bills as they come due. In the US, “Regulation D” limits the amount to free transfers or withdrawals to six each month. Then the bank can charge a fee for every subsequent withdrawal.

 

 

 

These 3 steps are a surefire way of starting and growing your cyclical funds!

It’s so easy to get frustrated when we forget when the annual bills come due, and of course, they still come due.  Start your Cyclical Fund to put a little away each month to cover what you will need. The stress is really reduced when the amount you need for an expected expense isn’t squeezed 100% from the same monthly budget.  Take time this week to sort this out and you will have a jump start on next year’s renewals.

There’s still time to join the  Q1 2021 Income and Profit Planning Intensive Session to have an actionable plan for your business offers, income, and profit through March 2021.

Visit this  link to register,  the next workshop is on December 12th.

 

Q1 2021 Income and Profit Planning Intensive Session

 

Business money management doesn’t have to be intimidating or complicated. I’m going to give you a four-step foundational framework for your business that covers the four key areas that I believe are the most important to help your business thrive financially. This framework can easily be remembered using the mnemonic “DECK.” Discover your Breakthrough Number, Establish your financial protection, Create your money management system, and Keep more profit. 

 

Discover Your Breakthrough Number

 

This first step is critical to knowing your numbers. You cannot begin to plan or to project anything without knowing your minimum number that you need to bring into your business. This number consists of your four walls of business; access to buyers, critical operating expenses, inventory and product spend, and payroll and payroll expenses. This is the first number that tells you how to be self-sustaining and includes your own paycheck and taxes.

 

Establish Your Financial Protection

 

Now that you know how much it really costs to stay in business every month (at the bare minimum), how do we protect it? Creating a cyclical fund for annual expenses and an emergency fund are two ways to protect your operating account and monthly cash flow. The Cyclical fund is created by making twelve small monthly payments to cover the amount you need for those larger annual expenses. Just add up the license renewals, memberships, and other fees you pay annually or semi-annually, divide by 12, and deposit that littler amount into a fund every month to cover expenses without a huge hit to the budget.

 

For the emergency fund, your first goal should be about three times your breakthrough number. This will ensure that you will cover all expenses including your paycheck. That number may look at little big at first, but adding a little to the fund each month, or committing to a percentage of profits until it is full will get it filled quickly. Once it is full, it just sits there! You don’t have to do anything with it, unless there is an emergency.

 

Create your Money Management System

 

This is the step that many people overlook or ignore because it may seem intimidating. You don’t need fancy software or complicated spreadsheets with calculations to manage your money. You must have a system to track what comes in and goes out (every dime) and a system to plan for future expenses and projects. Because you have your breakthrough number already, you know what your minimum expenses are. We add in any debt payments or project costs here, and make sure that we have a written spending plan.

 

How you write it is up to you! Do you like using an app on your phone? A spreadsheet? A notebook? A template you created?  The beauty of this step is that you decide which tracking and planning system works best for you!  The key is to find the system you will love and use again and again.

 

Keep More Profit

 

My first rule of business is, “don’t lose money.”  My second rule is, “keep your profit.” The first one everybody gets. It’s the second one that I find people tend to overlook. Once we start making money in our business, we seem to find a place to spend it! It seems that there is this point, a bottleneck if you will, where everything coming in is going out. Knowing your profit on everything you offer is critical to avoiding this issue. You must make profit on everything, but the profit doesn’t have to be equal across things. For example, you can have a 10% profit margin on one thing and a 25% margin on another. It depends on what you offer and what it costs you to provide it.

 

My challenge to you is to have a profit figure in mind that you want to keep every single month.  Next step is to create a plan to get there. For example, if you want to make $1,000.00 in PROFIT (not income) what do you have to sell, and how many, to see that figure? Having profit in mind and not just income will give you the money you need to expand and grow and turn your business into your vision.

 

You can find information on each of these steps inside the Facebook group: Stacking the Financial Deck and in the First Steps to Profit Course which is available for a limited time for $27.00.