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Wholesale products

I get this question a lot from my clients because wholesale products requires the sharing of profits with the retailer, so the margins are lower in your business. While it isn’t right for every business, I have helped several clients with very successful wholesale and consignment lines of business that rapidly grew more income, greater audience following, and ultimately a larger retail base.  Here are a few reasons that wholesale and consignment can be great for your business.

 

Wholesale Products

 

 

Wholesale Products: Larger orders than individual sales

 

When any customer buys you should do a happy dance. But when a wholesale customer buys it’s a bigger order and a bigger happy dance. If a customer buys one, a wholesale order can buy 12. Even with the loss of margin, you have more volume, and you make more income.  Just make sure your numbers are right on the wholesale and retail prices.  Know your production, packaging, and labor costs.  I have several clients with retail margins over 60-80%, so wholesale margins are still beautiful even sharing 25-40% with a retailer.  Take the time to build a solid relationship. Give them the product knowledge and watch how your business customers begin to promote YOUR product when people ask for suggestions.

 

 

Wholesale Products: Introduction to their audience

 

And the reason you don’t mind giving margin to the retailer is… because you are being introduced to their audience! They are paying for their storefront, labor, overhead, etc., and you get to be an option for the customer base they spent time and money building.  They are making something, and you are still making something. It is a win-win. You get shelf space, physical or virtual, and the visibility.

 

 

Wholesale Products: Reordering more frequently

 

Another aspect of wholesale is that there are more frequent orders from the buyers. Individual consumers buy maybe a few times a year (depending on the product) but businesses are going to order as they are selling. A key here is to be organized and to be a great account manager. Know the business owner’s intentions with your product. Learn what is selling and what isn’t.

 

Again, build that relationship. Make suggestions, call, and ask for the reorder (don’t make them run out first), and for the love of all things holy, don’t take it personally if an item isn’t a hit with their audience.  The reorders from a business are generally larger than an individual order, so more volume, more income, more chances to serve the business owner and their audience.

 

 

Converting fans to direct retail

 

This happens frequently. After a time, the customer may begin to order directly from you, at retail.  This happened to us with the coffee business. People bought our product from a local store, then joined our Facebook group, then directly ordered from us.  I’ve seen this happen with several clients of mine as well.

Make sure to have your website or online store on your product label.  But please note: DO NOT undercut your wholesalers with deep discounts online. It’s very disrespectful and will cause you to lose wholesale business fast. The retail price is the retail price. If you buy from me, from them, or from the other them. The ONLY time I’d think about discounts would be if something is discontinued or you are discounting wholesale as well, the margin remains the same for the retailer.

 

One last thing, consignment can be a great way to test out a relationship with a potential wholesale customer. Offer to let them try it out in their business for a time, say 30-60 days, and after it sells out, you would be happy to have them as a wholesale customer. The difference is that on consignment you are paid only after an item sells. In a wholesale account the business customer owns the item once they are purchased at the wholesale price.

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!

Registering Your Business

Are you ready to form an LLC? I’ve seen quite a bit on social media lately about forming a Limited Liability Company to create a business. I want to remind you that not everyone needs to rush into creating one to have a business.  It can protect your personal assets from being reached to pay a judgment if it gets sued.  There are important decisions to be made about an LLC.  Make an informed choice based on where you and your business are at right now. 

 

business registration

 

An LLC has some great benefits. But, it also has some responsibilities that not enough business owners are aware of. 

 

Here’s the skinny on forming an LLC:

 

 

Form an LLC: It Creates a New Legal Entity

 

When you form an LLC, it creates a new legal “person” who will have its own legal identity. You and any partners become “members” of the organization. The organization is the “citizen” of the state where it is formed.  Typically in the state where the member(s) live. You are creating a new structure. It needs to be treated that way, even if you are the only member of the business. Depending on where you live you may need to renew your entity each year and file to keep your LLC in operation. Additionally, the LLC will have a separate Employer Identification Number (EIN) for taxes, and you must maintain separate bank accounts. 

 

 

 

Form an LLC: All the Business Income Belongs to the LLC

 

One of the biggest issues I see is that people create an LLC to protect their personal assets, which it can, but they use the LLC bank account as their personal piggy bank. In order for the LLC structure to work, and to protect you, the finances MUST be kept completely separate. The LLC pays you as the owner.  Either by a paycheck or through an owner’s draw. You don’t swipe the business debit card to pay personal expenses. Ever.  If you do, the courts can conclude that you didn’t actually treat the LLC as a separate person and that you are really the “same person” as the business, so they can go after your personal assets. It’s a little complicated and beyond the scope of this post, but I cannot stress enough how strictly you must keep the finances clean with an LLC. 

 

 

 

You May Not See Tax Benefits Until You Reach a Certain Income Level

 

Another reason to create an LLC is there can be some tax benefits to the business owner. Depending on the tax structure of the LLC, such as an S-Corp, personal income taxes are being paid on the income the owner actually takes as salary or draws, not on the income that is remaining in banks at the end of the year- which belongs to the LLC.

 

Tax structures and whether the LLC is taxed as a “pass-through” to the member’s personal taxes or as a separate entity is a little outside the realm of this article. But you may be surprised to know that the benefits may not be that great until you pass a certain income threshold. Until your business makes a certain amount in profits, the difference in the amount of taxes may be minimal.

 

 

 

 

Understand the Benefits AND the Costs

 

The many companies preparing and submitting LLC documents to the states are either assuming business owners know all the details, or they are focusing so much on the protection they fail to talk about the expense and the upkeep of creating a new entity. In some states, the renewals can be quite substantial. For one of my clients, her LLC renewal is $800.00 a year.

 

Weigh the costs against any assets that may be at risk, and of course any potential tax savings you could have.  Long story short, not everyone needs to rush into an LLC when they first start a business. Talk to a tax professional about any potential tax benefits, and know your state costs and rules before you create your new business entity.

 

Need free resources for your business? Check out our resourcelinktree

 

make a decision

.I have personally fought the deep fear that I was going to make a wrong decision. I have lived with “analysis paralysis” and turning the same question over and over in my head while trying to figure out every possible outcome. It was exhausting and my business was also stuck. I finally realized that not making a decision IS a decision. I was choosing to keep spinning my wheels. 

 

What If You Couldn’t Make A Wrong Decision

 

Perhaps you have a decision to make that you just can’t. And it is keeping you stuck. Perhaps you have been holding off finding a VA or new software or marketing support. Maybe it’s a financial decision. Maybe it’s the decision to enter a new market or offer a new service.  I want to give you a quick and easy process you can use to help you make the decision. What if you couldn’t make a wrong decision?

 

The Cost-Benefit analysis for this is a simple tool. It shows you if the benefit of something in your business will outweigh the actual cost of having it.  I am a HUGE proponent of the cost/benefit analysis. But the cost/ benefit is a tool that shouldn’t keep you up at night.  I made the biggest mistake with this process by not committing to implementing the best course of action that the tool revealed.

 

 

 

 

I feared that even if I picked the “best” one, it may be wrong for the business. But what if I couldn’t choose “wrong?” What if you couldn’t? Your mindset has to be that you will go with the decision. The decision based on the knowledge that you have when you use the tool.

 

The easiest way to work a cost/ benefit tool is to sit down and handwrite all of the costs and benefits of the decision you are trying to make.  And you use this tool for each decision point. You can handwrite it on a piece of paper, or use a computer program. I am personally a pen and paper and coffee and relaxed environment kind of girl, but you do whatever will allow you to think clearly.

 

 

 

 

Be specific. For example, a Virtual Assistant will save you time that can be better available for money-making activities. Email Automation can make sure nobody who opts in for your newsletter falls through the cracks. And continue to list the benefits that you will personally receive in your business.  Then look at all the costs, financially or otherwise, of implementing the thing.  

 

Many times, when you write it all out, an investment is a “no brainer” and your business will benefit so much you need to add whatever it is, now.  On the flip side, if you are wondering whether to keep something in your business, you can use the same approach. If the benefits (be honest) are not enough to justify the cost, you don’t keep it.

 

 

 

 

Author’s Note:

 

But here is the key, you cannot get it wrong. When you use this tool with the best information you have, your decision is the best you can make at the time. Period. Not making any decision and spinning your wheels is a decision and one that isn’t moving you forward.  Try this tool the next time you have a business decision to make and commit to implementing what comes out on the paper. You will be amazed at how much stress is gone because a decision is made, a course of action is taken, and you can now focus on the next thing.  On one last note, rarely is any decision permanent, so move confidently on the best one that reveals itself to you the next time you feel stuck.

business strategy meeting

As entrepreneurs, we are often asked if we have a “business strategy” for just about everything. Social media, marketing, growth, operations, and on and on. But what does it mean to have one? The word strategy, as defined by dictionary.com means, “a plan of action or policy designed to achieve a major or overall aim.”

 

business strategy meeting

 

In all honesty, it can feel a little overwhelming to think about everything that needs to be planned in your business. On the other hand, operating without any plan, that is, just winging it in your biz, will cost you time, energy, and money because you will be trying to hit your targets in the dark. The truth is that you need an overarching plan for your vision, then mini-plans in each of the action areas.

 

 

 

 

Must Fit Into Your Bigger Vision and Goal

 

You want to go from New York to Los Angeles in the car. That’s the goal, get to LA. There are so many different routes to get there, but we can probably agree that you need to have a starting road and you need to be going west. Without looking at a map or GPS or having a strategy to get to your destination you could end up anywhere else costing time and money.  It is true that your starting route may change, and you may end up on a different interstate- but as long as you hold the vision of getting to LA, you will be ultimately moving west. Make sense?

 

My question to you. Where are you going? What does this look like in the future? What is your vision? This is your very first strategy assignment, create a picture of where you are going. This is where people look out 3 months, 6 months, a year, five years. But for now, just pick a timeframe within 2 years and grab the picture in your mind. Now we need to hold that vision to create a plan to get there. Write down this vision and your goals.

 

 

 

 

Must Lead Into Action Plan

 

Some of us love to plan. I do. Unfortunately, sometimes we replace action with planning. Planning is preparation, and I am so guilty of this when I have any fear or resistance around taking the next step. The best use of strategy is to translate your plan into actions that you take every day, week, month, towards your vision.

 

This is where multiple strategies are developed. For example, the social media strategy, marketing strategy, and webinar strategy must nest within the bigger vision. To do this, look at your written vision and goals and describe what each plan needs to do to support your journey. If your business is product-based you may have a strategy that includes sales to both wholesale and retail audiences, so your sales strategy needs to address how to support both.

 

The actual number of plans will vary by business. If you are in manufacturing, you will have strategic needs that aren’t necessary in the coaching world. At a minimum, however, I think just about every business needs:

 

  • A marketing strategy (with a social media plan)
  • A sales strategy
  • A customer acquisition, service, support, and retention strategy
  • A clear strategy for delivering the products and services to market

 

With these four strategies defined for your business, you can make decisions and take action every day aligned with your bigger vision.

 

 

 

 

Must Be Reviewed At Least Twice A Year  

 

It is so true that businesses start with one thing and ultimately evolves. You may start with a single idea and grow it into several lines of revenue. You may need to meet your customer a different way as the industry changes. The strategy will also evolve and grow with your business.  So, creating your strategy isn’t a “one and done” event.  Reviewing it twice a year is a great way to see if your goals and vision are still aligned based on the daily real-world business things.

 

If you aren’t a natural planner, I get it. I hope you see how important it is to have an overarching map and strategy to get to your vision.  You’ve been given a vision, and your entrepreneurial purpose is to reach it. If you need some help with planning your next moves, grab a spot on my calendar for a chat, I have an intensive 3-hour session available that is intended to get your plan reviewed and if needed, back on track to support your goals.

“I don’t pay myself; I just take a little bit here and there when I need it.” I hear this phrase all the time from entrepreneurs. Even from owners of businesses with employees. They just don’t take a check. But they do get paid. Here are some of the top objections to setting paydays, and some reasons you should really do it in your own business and for yourself.

 

Payday: image of someone counting money

 

 

 

1. Setting paydays: It’s all my money anyway

 

Maybe. Depending on the structure of your business that money belongs to your LLC or corporation. If you are a sole proprietor the argument can be made that yes, it’s all yours.  But you are earning it in your business and keeping business and personal finances separate is important. Now, I know some business owners that still use their personal accounts for business transactions. They accept credit card payments to their personal accounts. That creates kind of a mess for business expenses. There are fees for accepting cards, and these are co-mingled with personal money. And oftentimes, business expenses are missed when they are mixed in with the personal.

 

Separating your finances is one of the easiest things you can do that protects the integrity of your business record keeping. All of your payments earned in your business go into the business account.

Your expenses stay clean and you can still get your money from the work you do in your business.

 

 

 

2. setting paydays: I don’t need take the extra step to write myself a check.

 

Taking the extra step to pay yourself protects your business and personal cashflow. Here’s what I often see happen. The electric bill is due, and “just this once” you are going to use the business debit for your personal expense.  Or you just write a business check to the orthodontist because it is just “easier” than taking a check and depositing it in your personal account.  In both of these very common occurrences you are potentially messing with your cash flow.

 

If you dip into your account throughout the month for expenses you are increasing the chance for a cash flow issue.  There are always things that can happen to your income. You can have a chargeback. Or you can have a client pay late. Or you can have a down sales month. Many times, unexpected challenges affect our business financially for a time.  If you set two days a month that you would take time to write that paycheck (for what you really need to support your personal expenses) you allow the cash in your business to build up throughout the month. For example, instead of 8 draws on your cash for personal bills, you would have two.

 

 

 

3. setting paydays: I don’t take that much anyway.

 

The tax liabilities on small business owners can be huge where the taxes aren’t withheld when money is taken from the accounts. More than once when the books are actually reviewed did the entrepreneur have to do a double-take to see what was actually taken. Owner’s draws, those little withdrawals from the account for personal use, add up and they are taxable as self-employment income.  In the U.S. you have to pay Social Security and Medicare taxes on your personal income. It is very easy to take a little bit each week, and not pay taxes on it. Because it doesn’t feel like very much.

 

 

 

 

AUTHOR’S NOTE:

In reality, you can set up a process to withhold and deposit your taxes every time you take a paycheck. Having an online payment portal to the IRS is easy in the states.  You can make a transfer when you pay yourself.  Over the course of a year, it is very easy to take $20k or more from the business and not feel it. $20k a year is only $1667 a month, which is a little over $400.00 a week.  Pay your car payment and insurance, grab a little bit for groceries, and buy a birthday gift for your mom and you can easily hit that a month. You will then owe taxes on that $20k.

 

Take the time to set yourself up to protect the integrity of your business records, protect your cash flow, and protect your personal income by setting up paydays for yourself. Taking a check every other week is a great way to also predict your income for your personal expenses and allow you to have some income security.

Every small business needs money pros. A money pro can be a bookkeeper, accountant, financial coach, or payroll service. A fractional Chief Financial Officer (CFO) is another type of money pro, and there are others, so this list is not all-inclusive. Not every business needs all the pros, but at a minimum, I advocate for every small business to have the services of a small business accountant for tax preparation every year. This post isn’t about finding your pro by getting a referral from someone you trust, which is always good practice.

Woman conducting an interview to find her money pro

This post is about making sure the pro you hire is a good fit to help you with your financial needs. Not all accountants have the same services. Some reporting styles will work well for some people more than others. You need a pro that will be an important part of your team for business compliance, planning, and growth. And it may end up being more than one pro.  You need to get what you need to meet your goals. 

 

 

 

 

FINDING OUT YOUR MONEY PROS

 

What support do I really need? This question actually covers two areas in my mind. What are the mechanical money things I need done, like running payroll or filing taxes, and the organizational and mindset support you need, like regular email reminders. There are a variety of services that can manage the mechanical. What are the financial things you don’t want to do? Or find too complicated? Find the pro that can do them. But make sure you also consider the personal touches needed to keep you on track. If you need a monthly phone call or email, request one. I know people who have weekly or bi-weekly meetings with their accountants. I know others that only need a letter with their completed quarterly return to sign and file by mail.

 

 

MONEY PROS AND YOUR COMFORTABLITIY

 

What level of reporting and understanding am I comfortable with? Let’s be honest, not everyone can read a financial report and understand it.  It’s definitely not in the zone of genius for most entrepreneurs. But what good is having the reports if you can’t use them? If someone just generates a report can you use it for projections and growth decisions? Perhaps for you it would be better to have quarterly in person (or virtual) meetings to review the numbers and understand what they mean for you. I have several quarterly planning clients because their accountants only do reporting for compliance. So, they work with me to do planning and projections. Get the pro or combination of pros that makes you very comfortable using the data to drive your decisions.

 

 

 

WHY YOU SHOULD HIRE A MONEY PRO

 

The phrase,Just because you ‘can’ doesn’t mean you ‘should’’ includes financial matters.  Are you still running payroll when you should have handed that off already? Struggling with your taxes again because you don’t want to pay for help? Having money pros can also reduce the potential mistakes that can cost your business. Having a bookkeeper, accountant, payroll service, CFO or coach for planning and growth are all pros that can help you avoid costly mistakes. Tax mistakes can have penalties and interest costs. Not withholding the right amount of money from your employee’s checks can also have penalties. Just like not having projections and growth planning each quarter can affect your profit margins and goals.  Keeping your books inconsistently can also cause a financial crunch, and you can miss indicators that business decisions need to be changed.  As soon as you can, get professional support.

 

 

 

FREQUENCY

 

Finally, how often do I need to see my pro? For many of us an annual checkup by a physician or medical practitioner is on the calendar for our health. For others there are weekly appointments to the chiropractor or regular visits with a specialist. Approach your financial pros the same way. What are your goals? You will likely need to see more people more frequently if there is an issue, less if you have a good management practice in place.

 

 

AUTHOR’S NOTE:

 

Don’t be afraid to just book a session with a pro for an hour if you need one. Go get that consultation and have your questions answered if you need it.  Thinking that you must retain a money pro for every week, or every month can prevent people from getting the support they need. These pros work for you and need to be a good fit for your personality, business culture, and financial needs.

 

 

 

 

 

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