Episode 176: Can you be more frugal in your business?
Are you aware of how much you're spending? In today's episode, Fiona points out how most are so focused on looking at what's coming in, that most don't look at what is going out with the same amount of focus. Tune in!
Topics discussed in this episode:
Introduction
Frugal February
On Business Costs
On how to minimize business costs
Helpful tools
Being really clear and honest with your money
Conclusion
Get in touch with My Daily Business Coach
Resources and Recommendations mentioned in this episode:
So often people are not aware of how much they're spending. We are so focused on looking at what's coming in, that we don't necessarily look at what is going out with the same amount of focus. We're so concerned with my business hitting this many figures, or we took in this much this month, or we had a really good December. That's great. That is awesome. You should definitely be looking at that. But at the end of the day, that revenue, that total revenue doesn't mean anything. If you don't have anything left over if it's all gone straight back out.
Hello and welcome to episode 176 of The My Daily Business Coach podcast. I'm Fiona Killackey. I am your host. I'm also an accredited business coach, an award-winning author, a speaker, mom, dancer, cook, and chef baker. I love baking. So if anyone's out there and it's got some really great baking recipes, send a DM my way @mydailybusinesscoach, but I am here. I'm on the podcast and today it is a coaching episode and that is where I'm gonna dive deep into one kind of business element. You can really think about your own business. You should be able to implement some of the tactics that I'll talk about immediately, we're gonna go deep. But before we do, I just want to pay my respects to the traditional owners and custodians of the beautiful land that I live on.
I work on, I just have had so much from which is the Wurundjeri people of the Kulin Nation, and I pay my respects to their elders past, present, and emerging and acknowledge that sovereignty has never been ceded. And I also pay my respects to any other indigenous Aboriginal people that may be listening from other parts of the world. So today we are going to talk about money.
So I want to talk about something that I've started doing in my business. Well, I kind of always done it, but I've been a lot more intentional with it recently. And I think it's going to be a great one for many of you listening. So if you want to, if you can maybe grab a pen and paper or greet your notes, note app out on your phone, because you may want to jot down some things that we'll be talking about today. So let's get stuck into it, shall we?
All right. So depending on where you are in the world, and I guess where you are in your life as well, you may or may not have heard of things like dry July, which is where people don't drink alcohol for the month of July here in Australia, where I am, there is a huge alcohol exhaustion rate. I should, I don't know what you would call it. A huge uptake while drinking. And so dry July is a chance for a lot of people to kind of quash how much they're drinking and sort of look at, can I go a whole month without drinking? There are, I think a lot of people also do that in February. I don't know-how, what the little tagline is for that, but you get what I mean, there are also things like November, which is here in Australia, it's for November and men traditionally grow a mustache and it's for charity.
And so you, you would've heard of different months that are about X, Y, Z, sometimes they're related to a cause, sometimes they're related to your health. Sometimes they're related to something completely different. But today, I wanted to talk about one that has been around for many years when I was researching this. That makes it sound like I did a whole lot more research than I did, but I was looking for who actually came up with this concept. And the earliest thing that I found was from 2004, which didn't really tell me much. But then I found a blog article from a woman. I should have really written down the blog. You can tell that I didn't do a great research job, but that was from 2008. So this has been around for many years and I'm sure it was around for a long time before the internet.
So what is it? It is Frugal February. And since this is coming out right smack bang in the middle, February or near, I wanted to talk about Frugal February in relation to business. So if you Google or a kosha or whatever, your search engineers, if you put in Frugal February, you'll often find a whole lot of information about saving money domestically. So looking at your rent, looking at your mortgage, you know, potentially looking for a different mortgage provider, looking at insurances that you pay. And it's really a lot of the time it's about, can you eat the food that's in your fridge and your pantry at the moment so that you are not spending money on food. Could you buy or use a coffee machine at home? If you have one rather than buying coffee all the time.
And I know this is all sounding very privileged, very aware that for a lot of people, life is frugal every single month. It's not that they have to go on this thing. So let me point out that as well. Cause I am aware of it as I'm talking about this. The other thing that I should point out is that I am not a licensed financial advisor. I'm not an accountant, so we are gonna be talking about money, but just keep in mind that whatever I'm talking about, it's just general advice. And it is not in any way supposed to suffice for you to talk to your accountant or an actual financial advisor. But we are talking about money. We're talking about Frugal February. And like I said, you can find a whole bunch of things online about how to do this in your home. So you know how to reuse things, how to make your own cleaning liquid, like a whole bunch of things.
And what I wanted to do is take this from a small business perspective. So whether you decide to do Frugal February next year, or you could decide from listening to this on the 10th of February, let it go for the next couple of weeks that we've got left of February, or you could decide, it doesn't need to be a catchy name like Frugal February. Maybe you'll do frugal March. Maybe you'll do frugal June, who knows. But what I wanted to talk to you is about looking at the essence of what frugal February is in relation to small business. So Frugal February, as I said, it's really about cutting your costs. It's about being frugal. It's about looking at ways that you can reduce your expenses, that you can be getting more bang for your buck, as they say. And so when it comes to business, a huge reason that people fail or have to close their business is around a lack of cash flow.
It is about too many bills coming in, not enough money was there to help. There is actually a financial guy in the US called Dave Ramsey. He can be quite polarizing, but he has this saying, and now I'm gonna again my great research skills, I should have looked it up before I started recording, but it says something along the lines of there's too much month at the end of your money. And so what he means by that is that you run out of money before your next payday. So with small business owners, whether you are self-employed, whether you're a freelancer, whether you actually are an employee of your company and you get paid a regular wage, like the other people that work for you, you wanna be always making sure that there's money left in the bank. Now, sometimes your money is gonna go down.
Of course, you may have huge parts of the year that have greater expenses. I know people that are in the product-based businesses, often you'll have to pay a huge amount for the product to be made before you actually get that cashback from your supplier in your stockers and everyone else I'm well aware of. So there will be dips and ebbs in your year. But Frugal February is really about looking at what could we make a dent in? What could we start changing in the way that we spend money? And in this instance, on this podcast, in our small business, so in business, you can divide it into you five or six things or four or five, and they can be the HR. They can be people, they can be marketing, they can be financed and, the different departments for today.
I thought in this exercise, what I'd get you to do is think about your business. And again, even if you just work for yourself, you might be like, “well, I cover every single department,” but if you could think about your business in terms of four departments, so you've got marketing, you've got operations, you've got finance and you've got production. So even if you sell services and it's all online and you're like, “well, I don't produce a product,” you still produce a service and that will have costs attached to it. So I'll just go over those four again, in case you wanna make notes or just sort of write up four quarters on a page. You've got marketing, you've got operations, you've got finance, you've got production. And what you wanna do is think about the costs that each of those departments incurs for your business.
And of course, when we talk about costs, we'll have fixed costs. Like things you just can't change, or you can't change very easily. So those might be things like rent. If you are on a five-year lease on a shop, you can't necessarily change your rent really quickly. So that's a fixed cost. A variable cost is Facebook ads, or it is, maybe an app that you're using that really is actually being used or not. That's a variable cost. You can change that. So under each, you might wanna just start jotting down. Under marketing, what are my fixed costs? What are my variable costs and anything that you can think of. So you might be like, okay. Websites are a huge part of our marketing. That is a fixed cost. We need the website where you're on Shopify Plus. This is a percentage that we have to spend on marketing.
Again, you may have, you know, all sorts of variable costs. I know in our business, we use so many platforms, so many apps, and tools, and we're actually calling a huge amount of them because often things do the same thing. They act in the same way. For example, we pay for Planoly, which is an Instagram scheduling tool. And we also pay for Tailwind, which is a Pinterest scheduling tool. Now, when we started paying for them, they were really new. They hadn't, well, Tailwind maybe had been around a little bit longer, but definitely, Planoly was Instagram. Tailwind was for Pinterest. And over time, over the years that we've had both of those platforms, they have evolved. So Planoly, now does Pinterest, and Tailwind now does Instagram. So we're essentially paying double for two platforms that do pretty much the same thing. Obviously, they have different tweaks and nuances and definitely different user interfaces, but it's looking at things like that and going, do I need to be paying for both of them?
Or could I potentially just take one of those down? So the first thing is to kind of map out the departments that you've got, and maybe you are a bigger company and maybe you have a HR department that is recruiting people. Maybe you've got a sales department that you think is a huge expense, but also obviously, hopefully bringing in a huge amount of income as well. But you wanna divide up your page into, or just sort of write a list with different headings of the different departments. So like I said, you can just do the four most common, which are marketing operations, finance, and production. And basically, then you're going to list out what there is a fixed cost, what is a variable cost? You could just list all your costs and then put a V or an F next to it. And then the next thing that you're going to do, and this can be really tedious.
And this is often a part where people go. What too much work not doing it. You've got to be thinking if I'm trying to be more frugal. If I'm trying to get more cash back into my business, remember I talked about a lot of people's businesses failing because of a lack of cash flow and a lack of profit. It's so important to scrape that money back wherever you can. And sometimes we will find it through this exercise. I totally forgot about that thing that we are paying for every single month, even in my own life. I know, say, for instance, I use the Apple News app and I pay for Apple News Plus, and that is about $15 a month Australian. And at the start, when I used to pay for that, it was like so exciting because I used to buy a lot of magazines and I used to have not just the cost and it, everything that comes with those magazines, but they would then just sort of go out the door to the up shop.
And I was often getting these subscriptions to magazines and I was hardly even reading them sometimes. And so what I did was like, “you know what, I'm not gonna have that.” I'm going to go and invest in Apple News Plus. So I get all these magazines and I'm gonna read them. Now, I did that for a while. I'll probably read the magazines for a year. I was like, “yep, that's great.” And then I stopped taking my phone into the bedroom, which was a really good thing. And I just realized I'm not using it that much. Now that is something that I've actually given myself a three-month limit. And I'll get to this in a second to be like, how often am I going to use it in three months? And then at the end of three months, which I put into my calendar, if I'm not using it, it goes so sorry Apple Plus.
And if I start using it again and I'm actually getting my money's worth then awesome. But if I'm not, I may just go back to buying the odd magazine here and there. So I know I'm digressing a little bit, but what you wanna think about is with all these things that you've listed now, the tedious part is actually going to your bank account or to your bookkeeper or to whoever is looking at the finances, opening your app. If you have it and try to search for these things and find what they cost. And you're going to try and put this into an Excel sheet or somewhere that you can easily add up all of these small costs. What I always find, and I do this myself, is that you think but that's like, that's $14.99 a month. It's not that much. Or that's $3.99, or Dropbox is only costing me this much, then I also have iCloud and then I also have the cost for Google Drive and I've got all three are doing the one thing, what should I use?
And so what you wanna do, the tedious part is literally taking, if you've put it on a notepad, if you've put it in your apple notes or, whatever platform you've put this list in, you wanna then transpose that into a Google sheet, into an Excel sheet, into some sort of way that you can add up all of these. Now you may be using Xero or MYOB or anything else like that. And depending on how it's set up, you can have a look at your expenses that way. So if you've got that set up really well, awesome. If you have got it set up to a point that might be something that you wanna look at in the future, but if you have not got set up or maybe you're not using one of those platforms, then good old Excel is fine.
So you will literally put in all the things and you might decide that you'll put a fixed cost column and you can put a variable cost column. And what you wanna do is find in your bank app or your bookkeeping or Xero or whatever you've been using, how much you're actually paying per month against each of these? And again, people will say, I'm not actually spending that much. I remember doing this years ago and I was full-on shocked at how much I was spending. I was like, “Are you serious?” And it was in the thousands for a very small business. It was myself. I wasn't looking at the staff costs of myself and the VA and some other people that we use from time to time. I was literally just looking at costs associated with different websites.
Different URLs are still paying for. I'm one of those people that likes to go and finds a URL for any idea that I have. And then suddenly I'll be getting a renewal notice three years later and I'm like, “nothing ever happened with that.” And I don't need to be paying for it. I was just really shocked. Website costs, platform costs, subscriptions, memberships that I'm in, that I don't ever use. When I was in my first year of business, I thought I needed to join so many different memberships. Didn't find much out of a lot of them, just a whole lot of things that are coming out of your business bank account that you, or, if you don't have a business bank account set up, I would highly suggest going and doing that as soon as possible.
But if you don't have it, you set it up from your normal account, but really looking at this and then assessing, do we use this? Is this benefiting our business in any way? Now there are a few ways of doing this. You could literally color code stuff in the traffic light system to be as green. Absolutely. We need it orange. I'm not really sure red. We don't use it. No one's touched it for ages. This was something. Maybe somebody came into the business, they set you up with this. You don't use it, get rid of it because this is all about Frugal February. Remember the concept is to tone down your spending, to look at where you can get cashback into the business. And again, you might think, “well, I'm only paying $15 a month.” $15 a month is $180 by the end of the year.
And what could you be doing with that $180? And again, depending on where you're at in your life, or what your circumstances are. Some people may think, well, a hundred and 80, that's not too much. That's fine. Other people might think, wow, 180. I could have a night at a hotel with my partner. I could buy a ticket to that conference that I wanted to go to. I could go wild at a stationery store and get all-new fun things for my desk. There's so much you could do with $180. I could take that $180 and I could put it towards a cause that my business really supports. And what could that do for somebody else? So even if you are looking at some of these numbers that are coming up in your Excel sheet against all of your expenses, whether they're fixed or variable, and you are thinking it's really not that much, I would actually urge you to look at that times 12.
And again, you might have another column that’s for monthly cost annual cost and fill in the annual cost by multiplying that number by 12 and look at how much they spending over the cost of a year because it's scary enough sometimes just in your month. But if you are looking at your month going, it's not that bad. Have a look at it through the year and really think about, could I take some of that money and actually employ somebody on a part-time basis so that I could get some hours back? I know I work with interior designers quite a bit, or I work with architects, landscape architects, and people that use CAD and other sorts of drawing services. And maybe this money that you're gonna save is enough for you to hire somebody for five hours a week to do some of your CAD drawings or to mock these things up for you, which is actually then gonna help you take back time to do something else in your business.
So that is really what Frugal February is about. It's about figuring out where in our company? Where in the business? Are we potentially spending money that we could save? We could bring back and do something else. Now, another part to this is the actual time that is being spent. Now, not necessarily on this exercise. And I get that, there'll be people listening to this going. I just don't have time to do that. And it's similar to, “I don't have time to change my mortgage.” I don't have time to do X, Y, Z, which could potentially save you a whole lot of money. I will try to make the time. But the other part of it is sometimes we can't see the expense. It's not an easy number that's in front of us. It may be things like, you know, analyzing our, you rushing jobs, in which case often you'll have to pay more.
You're paying a higher fee for things not getting done in time. So for example, this here podcast, I have a great podcast editor. His name is Scott Stronach who runs sound mind editing. If anyone's looking for a podcast editor, he's amazing. He does so many podcasts. So, if you need him, get in quick, but Scott is great. He's such a good guy. We worked for the whole time that I've been doing this podcast, he's amazing, but he has a rush fee. So if I don't organize myself to get my podcast done, he has to rush. It has to be a rush for him, which therefore incurs a fee. So if I was to look at my podcast to expenses, and I'm not saying that I'm doing this Scott, cuz he'll be editing listening to this. But if I was to look at that and for whatever reason, I thought, “that's a bit high.”
I would also need to look at myself and be like, ”am I giving him adequate time to work on these so that I'm not incurring a rush fee and he's not incurring the stress of having to rush this.” Similarly, I see this all the time with website design, where people have a new collection or they have something else big coming out and they've been talking about getting the website done and maybe they've even got a website designer. Who's like, “yes, I just need this and this and from you.” And then they have stalled installed. And so then they're putting a lot of pressure on the website designer to get this thing up and running for the new collection. And then their website designer has to up their fees of course because they're now working crazy hours and they're stressed. And so yes, they should definitely up their fees.
And so the person is now paying more for the brand for this new website that could have been avoided if things had been planned out. If we had a strategy, another way that I see money being kind of wasted quite often is there's no strategy in marketing. I see this all that time. Somebody says you need good SEO. Someone who doesn't really understand SEO is like, “awesome, Tell me an agency,” I mean, they may well understand SEO as well and are also like “awesome, Tell me an agency”, but when they go to an agency, they spend a huge amount of money. I'm talking sometimes six figures and then they feel like nothing has changed financially in the business. And that is because there was no strategy. There was no looking at SEO in relation to everything else that we are doing with the business and everything else that we are doing on our website.
This is not an SEO episode, but there's an off-page SEO, this on-page SEO. And often what we see is people trying to literally just rank higher. And then what they do is not spend any time on the actual funnel or the full buy cycle on their site. And so they spend all this money with an SEO agency, the SEO agency like, “I got you to page one.” And then they don't see any great conversion in their sales because maybe the SEO people got all this traffic, but the traffic doesn't do anything when it gets to your website, it's like inviting 10,000 people to a shop where the shop is not set up to actually take sales or to even showcase what they sell. So that is another example where you might look at your fees and be thinking, that could have been better.
And we could have had a better strategy so that we could best utilize this agency that we are working with. Sometimes it'll be other things like staff, you might have staff that has turned over a bit or maybe staff that came in, and then you decided to remove them from the business after a certain amount of time. And you could again, look at that cost and be like,” that was a big, huge expense”, but also was it their fault, or where they set up for success in your business? So was there good onboarding, did they know what they were doing? That sort of thing. So when you're looking at your expenses, it's not just the actual money. It is also, what's the story behind some of those bigger expenses that you may, you know, put in when you are looking at this.
Obviously, the whole point of this episode is to just get more awareness around your money, and for Frugal February, it's really about, okay, what can I cut back on? But overall, this exercise is really about how to get a stronger relationship between you and your money. Money is a huge part of why people go into business. Yes, there are values and freedom and I totally am on board with that. There's a huge reason why I'm in my business because of freedom, but let's be real. The money is also good. I earn a lot more now than I used to earn as head of marketing for a major company, with a huge amount of stress that came with that. And it was a full-time job and I was expected to be on after-hours and weekends as well. So yes, freedom is there. The money supports that well, so you wanna not turn a blind eye to this or not be listening to this and thinking of another thing I have to do, or this is just gonna show me a really confronting situation with my money that I just try to hide.
I don't wanna look at it. And what I can say is that I've worked with literally thousands of people and the more that you can be upfront and real about your money, the more transparent you can be about your money, the more aware you can be of where your money is actually going. The better it is for not just you, but the people around you for your whole community. The more we can be open about this, the better it is for everyone. And I have seen, I get to see inside so many businesses. I get to see their financial records. I get to see what they're working on. I get to see their expenses. I get to see sometimes inside their Xero and their MYOB and their QuickBooks and accounting software. So often people are not aware of how much they're spending.
We are so focused on looking at what's coming in, that we don't necessarily look at what is going out with the same amount of focus. We're so concerned with, oh my gosh, my business hit this many figures. Or we took in this much this month, or we had a really great December. That's great. That is awesome. You should definitely be looking at that. But at the end of the day, that revenue, that total revenue doesn't mean anything. If you don't have anything left over, if it's all gone straight back out, and this is what you can see often I hear these people doing these podcast episodes or doing things like, “I earned X amount of multiple hundreds of thousands of dollars in a month.” And then when you listen to it, they've actually spent almost two-thirds of that on advertising or on something else.
So it's not a true reflection of the profit that is in those people's businesses. And I, likewise I see people all the time. I have clients literally from $5,000 a year where they just want to make enough money to go on a holiday through to about 60 million. So I really do see a spectrum. And I can say that just somebody's earning 10 million does not mean that they've got a huge amount of profit. And it's like, “all that stress, all that energy.” When maybe somebody else out there is earning 80,000 and they've got a huge amount of profit left in the business. So what you wanna do in Frugal February, or any time of year at all, is to get really clear, where is my money coming in from, but what am I spending it on? Where is it going? So often we hear people go, I don't know where all my money goes.
And this is about making you not one of those people. So making you be someone who says, “I know my money goes” and a bit too much of it is going here. So I need to call back. And this is exactly what I'm gonna do. I'm gonna look at the various options that I have to call that back. So that is it for today's coaching episode, all about Frugal February about really taking the time to map out what are the different areas of my business? What are the fixed costs? What are the variable costs? What could I call, what could I take or remove from that? Am I really using everything that we are spending money on? And then also, how am I the problem? How am I as a business owner? I was gonna say all your team but let's be real.
You need to be, it stuffs with you. The buck stops with you. So, how am I potentially costing the business by rushing things, by not having a strategy, by not being aware of stuff, turning a blind eye to things, thinking it's all okay. As long as we've got enough coming in, it's really about being really clear and honest with your money. So that is it for today's episode. If you would like the show notes, you can find them over at Mydailybusinesscoach.com/podcast/175, as this is episode 175. The other thing that you might be interested in if you are listening to this and you're like “I'd need some more inspiration around my money is episode 166.” We did that just at the very start of January with Amanda and from Endurance Financial. Now Amanda is actually a licensed financial advisor and she gives really good insight into what small business owners can do to really diversify their wealth, but also just be really conscious of where their money is going.
So episode 166 will link to it in the show notes. Thank you so much for listening. I hope whatever mindset you have around money, that this episode has been helpful. I hope you're not berating yourself. If you're like, “my expenses are a little out of control.” Knowledge is power. Now, you know that, and you've got somewhere to start rather than ignoring it and seeing debt creep up or things just go unpaid or, or just getting into a situation where you potentially have to close your business. So this is my little way of helping anyone that's out there. Look at where's my money going? How could we call back? And what could we do to make a really successful and sustainable long-term business? That feels awesome with where we're at in life and our values and beliefs. All right. That is it. Thank you so much for listening. If you found this useful, please share it with a friend. And if you found it useful as well, if you could just leave a review, it really helps us get found. Thank you so much. Bye. Thanks for listening to the My Daily Business Coach podcast. If you wanna get in touch, you can do that at mydailybusinesscoach.com or hit me up on Instagram @mydailybusinesscoach.
