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Highlights from this episode include:

  • A common profit mistake that is keeping you broke (1:09)
  • 3 budget issues you have to get under control to grow your wealth (1:37)
  • How to price your services in a way that makes you profitable (5:07)
  • Do you know the financial statistics in your business that can make or break your profit? (9:03)
  • A surprisingly easy way to remove the complexity from managing your money (13:26)
  • How to plan around inconsistent, commission-based monthly income (15:26)
  • The first financial concept all entrepreneurs must learn to build a business that lasts (21:45)
Read Full Transcript

There's two types of people who hear consensual sales in the first go, Oh, Eww, Shawna, that is not what you want to say. There are better words to use and the second type here, consensual sales and say, you know what? You're right. I don't want to talk my way into the sale. I don't want to memorize a script. You just want to work with clients who are excited to work with you. Now that's consensual sales.

(00:28): Okay. So we have a special guest here today. We are talking all about how you can actually keep money, because there's a fundamental difference between making sales and actually keeping the money and increasing your profit. So Don, welcome to the consensual sales show. How are you? I'm great. Thank you so much for inviting me here. I really it's a pleasure. You got it. Can we just kick off right away and you can tell us, how do we keep our money? How do we get rich? That's a great question. And the number one thing is to understand there's a huge difference between just having profit and having income. It is like all the money that comes in the door and you have all this cash in your bank and you think, wow, this is amazing. And I've made all these sales and I met five figures, and then you pay all the bills and you're like, wait, I don't have anything leftover or not as much as I want.

(01:15): Or sometimes we have a cashflow issue and we ended up having to cashflow on a credit card for a month or something. And it puts our business in a little bit of debt and that's very common. And it usually is a combination of pricing, mistakes, profit leaks, and then expenses. Just being a little bit out of control. Can you talk about the pricing mistakes? Absolutely. So if I were to say to you right now, Shawna, Hey, every day that you're in business for the 20 days a month or 24 days a month, what does it cost you operationally to be in business right now? You probably wouldn't be able to tell me. And that's okay. 90% of the people I talked to have no idea what I'm talking about, but when we look at your operational numbers, what it costs you to have the doors open every day, what does it costing you for your phone?

(02:03): What is it costing you for your internet? How about any software you use? How about your payment platforms? All those things wrapped together. And if you're a brick and mortar business, we have even more things like rent and utilities. And we divide that by however many days we're open and then how many hours a day that we work. And, you know, it's funny. Cause for service based businesses, I hear things like, well, I work all the time or you know, you have to put some number there somewhere though, because that operational money needs to be captured. If it costs you $22 an hour to keep your doors open and that's all of your operational needs and everything else that you're paying throughout the month, then when you figure out your pricing, you've got to include that. Most of the time, I see people making mistake because they do something like my labor costs and then a little bit of profit on top of it.

(02:50): And they completely forget that there is a cost of being in business of keeping your doors open every month. And then of course we want to capture your labor. And then we want to add a profit margin on top of that. So a lot of times people don't look at the pricing from these three different prongs. They literally, and I see this a lot with product based businesses. Well, my wholesales, this, so I just doubled my wholesale. It's like, was that enough? Does that cover everything? Or did somebody just tell you in the industry, we charge two times or 2.5, right? So you have to be very intentional knowing some of your numbers so that when you're doing your pricing, you are recapturing all of the money that it's costing you to be in business. And you're fairly compensating yourself for labor. And you're adding a profit margin, a pure profit margin on top. It could be anything you want. It doesn't even have to be equal across services. So you can have one offer that has a 10% profit margin. And one that has a 25. It doesn't matter, but you have something on there because you're going to set that money aside for like growth specifically for maybe tackling some debt. You know, you're going to use that money for growing your business into your vision. And if you don't build it into your pricing, you won't have it to you.

(04:06): This is a really great point because I hate when people ask me pricing questions and that's like the most common question, like what should I charge for this? And I'm like, I don't know, it's gonna take like an hour to figure it out. And then even then like, it's like an experiment, right? So like, then you kind of know like, okay, I can charge this much of this isn't enough. And it's kind of like a, you're so much more than just look into your neighbor and saying, Oh, well, you know, Sarah, she charges thousands. So I mean, that seems fair. Like I'll charge that too. And then it's like, we wonder why we're get to this point in our business where it doesn't feel like we're making any money.

(04:42): Yes. Because one person's expenses and financial needs is different than another person's expenses, the financial needs. And especially in a service based business, we don't want to just pick up a price out of the air. And I do know coaches who say what feels good to you feel into that? Are you confident charging that amount? And that's a great, but you have to have a base place to start from. So if it costs you $22 an hour, for example, to keep your doors open. And that's a hypothetical number I came up with where I think the cost for the month was like 3,500. And then we would divide that by four and it's X amount a week and then X amount of day in it, it breaks down, I think to $22. I think that's the, the analogy, the example. And you know, if you know that, then that's a starting place for you.

(05:26): And a lot of service based businesses, we don't give ourselves a starting place. You're right. We just kind of, well, that's what she's charging. So this is fair. Oh, I should do the same thing, but you actually don't know what your real needs are if you don't have numbers. And that's where I start from, that makes my work very different. Is I want to know the crowd drew. I want you to tell me your dirty money stories let's get in there. Let's look at your numbers. Let's figure out where the profit leaks are, because I know that you're not in business to lose money. And I also know when work your butt off, you should be taking a nice paycheck every other week. You should be taking care of yourself financially. And the only way to do that is to first off, make sure your pricing is correct.

(06:08): Otherwise, everything you sell will not be profitable. So you could be selling things at a loss. And I've seen that over and over again, again, going back to product based stuff. You know, my raw materials are this, and I'm going to add a little bit of labor and then, you know, that's what I'm going to charge. And they have an example in one of my blogs where an actual pricing mistake from somebody was $40 is what they were charging on a $35 thing. When the reality is when we added operational expenses, everything in their compression and closer to 61, cause there's a $21 difference there in her pricing. And without recovering those fees and the pricing, she was actually really losing money. Every time she sold that. And I've worked with numerous entrepreneurs, even with their big ticket items who were like, no, no, no, I must be making profit. I'm charging 1500 for this. And when we dig down and we look you know, I did work with one entrepreneur who was actually paying people $80 to come and work with her on her biggest package because she had huge profit leaks. It was giving away a lot of freebies and her time investment was not being recaptured and paid for.

(07:16): That's super stressful. Is there like a reason why this isn't like common sense? Like it feels so silly to be like, well, yes, of course. Like I need to figure out how much it costs to run my business every day. Like why is this such an afterthought for people or is that a certain person where it's like an afterthought for? Well, so I think

(07:33): A couple of reasons, one is we are told to like put stuff on debit cards, set it and forget it. You know, we're not going to look at our expenses again. We have a general idea of what our expenses are. The other one is, you know, this idea of having a daily operational number. It's just not taught like people aren't taught to think that way, that perspective it's a matter of, this is what I need to make a month. And I get that because your sales are going to average differently each day, a general, general role is you're not going to make the exact same amount of money. Every single day. You're open some days you're going to be lower. Some days you're going to be higher. And I did actually work with a boutique owner who we couldn't do the daily stuff. We had to do it weekly because she's stressed out so badly.

(08:14): If she didn't make her a minimum number in her boutique. But in reality, her best Hills, you know, where like Thursday, Friday, Saturday, so Tuesday, Wednesday, she would drive herself nuts because there wasn't a lot of traffic in the store. But in reality, she always met her numbers and exceeded them every week. So I had to work with her a little differently just because of how she viewed it and her stress level. But we don't, I guess have a lot of training out there about, Hey, this is numbers that you should know. You should know your profit margins. You should know why you're charging what you're charging and how you're recovering those things. And I just, I don't think it's common knowledge because everybody who takes a small business course in finance is going to learn things like how to fill out a profit and loss sheet, right.

(08:58): Or how to hire that first team member or how to use QuickBooks or how to do these things. But the actual getting back into what is going to make my business extremely profitable. Am I as lean as I am with my time, as well as my money. And I am able to maintain in the long term, a really good business that is growing incrementally and each time it is I'm being more and more profitable. We don't talk about those things. When we talk about scaling businesses and stuff, rarely if ever do I hear other coaches talking about, okay, let's look at your profitability and see what makes sense for the next step.

(09:38): I'm so glad that you said that. Cause I recently I joined a program like I have a membership, right. And that went really, really well. All of 2019 brought an 80 people all by myself, like shaking hands, getting them in there. And I wanted to scale it. Right. I was like, I'm, I'm really, really tired. Like if can I get Annie helps. I joined this program and Oh my gosh. Now my expenses are like crazy. Just because the scaling method that is used in this program requires like all these extra tools, right. That I didn't have to pay for that's hundreds and hundreds and hundreds of dollars. And I'm now at this point where I was like, man, even if my growth was slower, I almost prefer what I was doing. And this time last year, because I've got all this, now I got a beast to manage, you know? And now like, and then it's like, Oh, you gotta outsource this. And it's like, this isn't what I expected. And so I'm glad that you said that, because again, there's like these programs out there that teach you how to do a method, but then all of a sudden that method comes with all this extra baggage. If you're never first considering like, if that's the way you want to grow, if that yeah. Maybe you can kind of pick out what I'm saying.

(10:44): No, absolutely. So I am a huge proponent of things called income and profit plans where we actually plan out. When I sit with my clients, we will actually sit down and go, okay, what do we want to make? How do we want to make that? How is it going now? How much are we keeping? How much of that profit will be available for your next hire? How much will be sustainable for you to add that new service? How much will you have for that next launch? If you want to hire a VA for that project, how much? And so I work very hard based on my own personal story, with bad business debt and closing businesses to stay kind of debt-free on these businesses a little bit and keep the ratio of debt to income down as low as we can. That's reasonable. So I don't want somebody not spending enough because they're scared.

(11:32): I want them to spend the right amount of money in their business to make sure they're balancing growth and income with sustainability and protection and sustainable kind of like stable income, right? I want you to be able to run a lie on that every month. And these are not intuitive things. Okay, Sean, so people don't, you know, you don't open a business and all of a sudden starts thinking this way. It is not intuitive. And there are not a lot of programs out there that do address these things. They have the mechanics of scaling down, they have the mechanics and these other things down, but there's really no conversation about is this the right thing for me right now? Because again, they're going to say, are you doing 5k months? If you're doing 5k months, you should get in my program. And I see that across the internet all the time. I see that everywhere, you know, are you making 10 K months? You need to get in my mastermind. You need to get in my program. And I'm not saying that there's anything wrong with that. But the business owner themselves needs to really look at that and understand is this really the right next step for me, based on my income and profit goals, because you want to be sustainable for the long term, we don't want to have just a quick win. And then, you know, a year later burn out.

(12:45): Absolutely. What do you think is a common misconception that you're always like trying to overcome or like break

(12:54): Is money. Money management is, you know, complicated. It's really hard. I have to use complicated software. I have to use spreadsheets. I don't like me doing the money stuff. It stresses me out. And that is because we have not done a really good job. I think of giving people all the options and saying, Hey, listen, your money management needs to fit your personality. Maybe you want to use an app on your phone. Maybe you want to use pen and paper, which I still use pen and paper for a lot of it. Cause I just like to write things out and see them. And what we do is we say, well, you're in a business now, so you must use QuickBooks. You're in a business. You must use FreshBooks. You're in a business. You have to do it this way. And that is a huge misconception because if it doesn't work for you and your personality, you're not going to stick to it.

(13:40): You are not going to be intimately involved in being intentional with your money. You're not going to sit down once a week and do the reconciliation. And I'm a huge believer in getting people like bookkeepers and accountants. I have them, I don't do the eaches. I control the income. I control what comes into my business every month. And I get to decide who and when people get paid and then how much, and that also helps with some cashflow things as well. So my number one misconception is that there's one right way to do this. I work with a lot of people who weren't real fans of spreadsheets and you know what, that's fine. You don't have to do it any one way. You have to find the way that works for you to make sure that you're going to stick to it. I want you to be in control of your money because profit is your impact. The more profit you make, the more impact you can have, you can have impact in the community by hiring people. You can give gifts and donations. You can support organizations and you can't do that if you're not profitable. And that all starts with being intentional with your money and saying, okay, I need to have a plan. I don't have to have that plan or this plan or that plan. I just have to have one and being openminded to figuring out what works best for you and your business.

(14:58): You talk about cashflow and I'm sort of curious, like, how do you approach your cash flow when it's like unpredictable? It's like, maybe it looks different every month. Yes.

(15:07): So I'll give you a couple of tips on that. So the first one is, and people don't like it. When I say this is you take everything off of auto pay because I want you again to be in control of all your cash. So don't let the bank go in and take a $300 payment. When you may not have the money in the bank for that, or it may shorten for something else. The other one is to know which bills you can pay payments on. In the very beginning, particularly we used to pay the electric bill and like two installments week, one and three, or we can do in three. There were no late fees associated with that, but it left cash in my bank and we would pay bills twice a month. So instead of paying every bill, each time it comes in and you're now you have this rollercoaster in your bank account, figure it out.

(15:49): What needs to be paid by this date, what needs to be paid by this date and include your paychecks in that don't live out of your business account and just continually take owner's draws throughout the entire month to cover your bills or swipe your debit card, to make your car payments, make sure that you have a system that you're just going to sit down and twice a month pay that cash will then stay in your operating account until you intentionally sit down and decide what gets paid. Now it is true. There are some things I'll talk about zoom software, or I guess my calendar software, whatever, where you have to pay the $15 a month and it has to be a card and it's a subscription, but limit those, limit those to the fullest extent that you can to only the things that have to be there. And if you do those things, then your cash will sit in an account until your ready to use it. And it can help also ease stress of opening the account and seeing the balance go up and down and up and down. You know, in other words, you're just accumulating all of this once a week, doing the reconciliation and then twice a month setting down and paying your expenses and yourself,

(16:53): Did you get here? Like tell us who you are. Exactly. So, yeah. So how did I get here? I actually had

(17:00): Very successful consulting business with my husband called unique consulting down in Georgia. And we actually were in a really interesting niche. We used to work in unmanned vehicles and unmanned aerial systems now called drones. We used to work putting them in the national aerospace resort, military and defense, and then industry and academic clients. And we had a great time and we did really well and, you know, two and a half years in. And by the way, we, we were making well over 200,000, a year, two and a half years in though my husband had a near fatal accident. He fell 18 feet off a ladder on concrete and suffered a severe head injury. And you know, our business had to close. We had three years of rehabilitation in front of us and when our business closed, we had to face for the first time that we didn't know what we were doing financially.

(17:47): We were doing that cashflow. I just described to such a state that we had about $50,000 in credit card debt. And then I couldn't pay our self employment taxes that year. So I had a lien put on my house for Senate $27,000 by the IRS. So it was about, you know, 76, $77,000 in debt. And we had to figure that out. So our business closed, I went back to work doing what I was doing as a program manager and strategic planner. And, you know, I started to side hustles. I was working as a tutor and then I was also doing some market research online at night. And you know, with this, we just kind of crawled our way out of that and struggled. And we paid off that entire amount of debt in about 39 months. Well, I'm also an attorney, so I don't tell people that too often, they may not like me as much, but I know that's not true.

(18:42): When I was working as an attorney, I actually became a consumer lawyer. I was working for people to help them with their debt issues based on our experiences of almost being sued by creditors, after his accident. It's amazing. They love you when you you're making it paying off thousands of dollars a month on their card, but you know, something happens. You don't have the cash anymore. And all of a sudden they want to Sue you. I mean, it's just the way it went. So I was working with clients like that. And after doing that for a while and trying to prevent garnishments and try and keep people from being sued and working with student loan stuff, it was like, wait a second, hang on. There's gotta be some kind of preventative medicine. I've got to be able to get to people before they need a lawyer, right?

(19:26): I don't want you to get to the point of being sued before you get help with your money. So I went to training and became a financial coach and was working personally as a financial coach for several families, well, many families, but several of my family's own businesses. And we realized very quickly it was the business that was causing a lot of the personal financial struggle because they weren't taking paychecks or it was feast and famine. So they would get late fees one month and then be fine the next month. And then they get another late fee or, you know, an overdraft fee or whatever. And I realized that it literally was this idea that they didn't have their business money stuff settled. They didn't have profitability in a lot of cases and they were not able to stabilize their own income causing stress on the family relationship problems, kids being taken out of extracurricular activities, parts of the year.

(20:23): I mean, all the things that happen when you have bad money issues at home and they will coming from the business because the business was the income. So I really started working on making the business much more profitable. And I developed my approach to business. Money management is starting with something called the breakthrough number based on all of the time I spent doing personal financial coaching. And then I just translated that over in a way that made sense. And it just started working for my clients over and over and over. We started seeing, you know, within just a very short time, they were able to take a stable paycheck home. They were no longer living out of the bank account, like a piggy bank and all of the structural things were in place. And then we started figuring out, you know, the next place to make sales on my strategic planning and stuff started kicking in. And I developed processes for, you know, doing mini pivots. If you will find a new audiences and things and just stabilizing the business. And it all started from the numbers and that all started from our severe debt problem. And now we're going on about seven years ago.

(21:27): So what's one thing that you would have told yourself that, you know, now when this first all started.

(21:32): So the number one thing I would have told myself is learn how to manage cash. People are going to pay late. People are going to tell you they're going to buy something and they don't people buy two months later, whatever, until that money is in the bank, you can't rely on it for anything. And so cashflow management is just not something that's widely taught. I don't think, I think there's a lot of stuff again on profit and loss. There's seven different ways to price your products that you can find online. You know, what is the best funnel for me, but I don't know anybody. Who's really hammering home, this idea of what these are, the steps you need to take care of your cashflow. Totally. And I was actually on another podcast about a month ago, working with again, a financial community. And they said, wait, wait, what are you talking about? Everybody says, you know, set it and forget it, put it on your cards and forget it. And I'm like, if you do that, then you're giving other people electronic access to your money and they're going in there in your bank taking money out. And you're not in control of it because they are. So it's a different philosophy. Yeah.

(22:38): And this is one thing that I've noticed just like, as I'm, I'm helping people navigate the sales conversation. Right. And it's like, and I'm learning the more that I'm serving and the more people that come into my program, it's like, man, this is just a one sided thing. Like, like being able to help you make money is one thing. But it's like, if you're trying to replace income, if you're trying to get your husband home from his nine to five, or you're trying to save money for a down payment, like all of your goals need this other side. And so that's why I'm so glad that you're here today because this isn't, this isn't in my wheelhouse. Like I have to work through these things too for myself. And so I just really appreciate your perspective and this angle, because man, if you really want to make money, you also have to ask yourself, how can you keep it? And how can you make it profitable and all these really great questions that you're bringing up. Absolutely.

(23:24): And you know, the sales conversation is important because there are a lot of people who don't like to make sales or they don't understand how to do it. And you need that side of it to be able to generate income. To me, generating revenue is the thing that primes the engine, right? We don't have any money coming in. You've got an, a very expensive hobby.

(23:42): You don't go into business to operate at a loss, right? You're creating an environment for yourself where you're going to be resenting your business and your clients. And that's not a place where you want to

(23:52): Either. Right? Exactly. There's a show on CNBC called the profit with this businessman, Marcus Limonus. And I love that show because it does a lot of what I do, which is going in and helping businesses turn around. They always have something in the beginning where you started talking about this business and you'll hear things sometimes like last year they generated 2.5 million, but I had a $30,000 loss. Where are people who are like, how, how does that happen? You know, how do you have a loss? Well, you're making all this money. But I mean, I recently worked with a client that was a quarter million dollar a year business. And she netted only 13,000.

(24:30): Oh, ouch.

(24:32): Right. So, and in fact, one month he had a bad cashflow month and had to put payroll on a credit card to the tune of $4,000. So I mean, what you generate and bring in does not indicate the health of your business. Like the way I think people think it does.

(24:48): I'm writing that down, hang out. I was like, Oh my God, I don't know if you've ever, have you ever read the myth? I have not. The email is just this really great book. And it basically starts off that we sort of romanticize the idea of entrepreneurship and he walks you through the story of like, Hey, if you really like baking pies, like everybody tells you, Oh, you should open a business. And then you're like,

(25:10): You know, you'll be able to do what you love.

(25:12): You ended up finding out is that you're like, you're not baking pies. You end up doing all this other stuff. Right. And so I sometimes feel like that is the entrepreneurial trap is like, we're we romanticize the idea of what running your businesses. Like, I'm just going to make these pies because this is what I love to do. And then you end up finding like there's a whole other layer of things that you haven't even considered that are really important if you want to keep making those pies, if you,

(25:40): Yeah, it is very true. I recently read a statistic. 62% of Americans want to be their own boss. I actually started with a blog post and was doing some research. And I thought that was an amazing statistic, three out of five, but you know, not that many are actually going to do it, but did that idea of 62% of the population want to be their own boss. And to me it was like, wow, people must have it in their minds. And it's like, so great. I don't have to answer anyone else. You know, all these things. And so I thought that was very interesting because it's, to your point, people love the idea of being in business, but it's when you know those first year or two, and I've worked with people even 12 years that are not profitable, but they love what they do.

(26:22): And I worked with a photographer 21 years in business and needed to make a pivot and was not as profitable as they could have been. And it's so funny because you never know along your entrepreneurial journey where you're going to kind of stop being in love and start being in stress. And it doesn't matter how long you've been there. So we just have to find there's a passion that has to be there to get you up in the morning, get you going. But you also have to have this kind of decision that you're going to be open minded. You will be open to learning. You're going to be open to finding help if you're getting a problem. Then I think sometimes as entrepreneurial as we think we have to be, you know, Superman and we have to solve it all ourselves and we have to fix everything and we should see what's wrong and we should always know what's going on.

(27:09): And I think that email, that book probably captures very much all the things that are hidden in the entrepreneurial journey that people don't realize they have to do. And that are not in their zone of genius, that they need to get help for. Totally cooled it down. Can you tell us where we can find you? So anybody who's listening? Who's like, man, I gotta check out this lady. I want to maybe work with her. Where can we keep this conversation going on your own platforms? Yeah, absolutely. So I'm known as the entree money coach E N T R E money coach, the entrepreneurs money coach and I am online entree money, coach.com and then any of the Twitters, the Instagrams and the Facebooks it's at entree money coach. So they can find me there. Come follow me on Instagram, starting to do those silly reels. So go check. I know. Right? So you want to see somebody who just doesn't really care? Come check out my realtor.

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