Episode 28: Money Matters: How Small Business Owners Can Survive and Thrive Through Their Financial Goals
One of the first topics Fiona discusses with her clients during a session is money - How much are they earning? Are they earning enough? What is their financial goal for their business? And in this coaching episode, Fiona shares her thoughts on why it’s important to assess how much money you should earn to survive and thrive. Listen now as she talks about why money discussions can be awkward (for some) but completely necessary for a small business owner’s growth.
Topics discussed in this episode:
Introduction
Why talk about money
Survive figure
Parkinson's Law
Thrive figure
Online course about Money Mapping
Join Fiona’s contest
Resources mentioned in this episode:
Episode transcript:
Hey there. I hope that this finds you well, you're having a good day. I think we just need to appreciate every good day that we have this year. And you're just surviving, not just surviving, but that you are surviving powerfully, surviving this strange and surreal year. So you're listening to Episode 28 of the My Daily Business Coach podcast. Today is a coaching episode. And I, Fiona Killackey, will be talking you through one of the most important tactics or exercises that you can complete as a small business owner or even just a person going through COVID-19 right now.
This is just as important, although, I mean, not just. It's it's an important exercise for anyone, regardless of whether you're a small business owner or not, but especially if you're a small business owner. So before I dive in, I wanted to say another massive, massive thank you to everyone who's been sharing my business book, Passion, Purpose, Profit. It came out recently. It came out on the 2nd of September in stores across the globe. And I actually can't see it because I am in stage, full lockdown in Melbourne. So I'm not allowed to go anywhere. And I'm just so beyond beyond beyond beyond thankful for every single person who has snapped a photo and shared it with me on Instagram. I'm at @mydailybusinesscoach. I'm also really excited to see some new reviews on iTunes for this podcast. So thank you. Thank you. Thank you.
I actually wanted to share one that has come in this week from Kayleen, who has said, “I just discovered My Daily Business Coach. And my gosh, this podcast is addictive. I get so many pieces of info that unlock me being stuck in my business. I binged the whole lot in a weekend and now I'm frantically working away. Thank you, Fiona. I'm very thankful for the work that you do.” Thank you so much, Kayleen, for leaving such an awesome review. I love that you've just discovered me and I love that you binge, because that's also how I tend to work when I've discovered somebody new, “I'm like, oh, well, what have they done?” And then I just, yeah, I binge as well. So like minds. And thank you for leaving that review. I love hearing how this podcast is helping small business owners. So thank you again for taking the time to leave a review. But speaking about helping small business owners, let's get stuck into today's coaching episode. \
All right. So in today's coaching episode, I am gonna be talking about - MONEY.
I know I can almost feel fearful clenching up or getting tense or being like, “oh, my gosh, do I really when I listen to this?” Because for most people, a lot of people, money is still such a taboo topic. I mean, I personally believe that it shouldn't be. It should be something that we definitely discuss more often and openly. But we can have all these different feels around money. We can believe that if we earn X amount, then we're not successful. Or on the flip side, that life begins if we could just get to Y revenue. Money can also be such an emotional thing for people. It can right or wrongly equate to their self-worth or where they see themselves in the world or where they see themselves having gotten to for their age or for their friendship group or whatever. And it can sound weird when we say it out loud, but money can be such a sensitive topic to discuss with people, and especially when it comes to small business owners. There is this idea around that business is only successful if it hits this much in revenue or even sometimes when you hear these people being like,” oh my gosh, I made this much.” But it's actually not the full story because maybe the profit is far, far, far lower than that. I've heard of people who've gone to certain masterminds and they've told me that, yep, we met this person and they just brought in X amount of millions of dollars from, say, a cost launch. But what you don't see is that they've also spent X amount of millions on advertising and staff and resource. And so what they actually brought home was way, way, way, way, way smaller than that.
So money is just such a minefield. But despite this, it is something that we have to discuss. And when I work with my clients, it's one of the first questions that we get stuck into, because if you don't make money from your business, you don't have a business. And in Australia, where I am from and located - in hard lockdown right now, there is Australian Bureau of Statistics and they look at what's happening, what's changing. They come out with the facts each year. And what they've come out with recently is that I think it's just and it's like 49% or something of small businesses will fail within three years. And one of the leading reasons is cash flow and just not being able to either stay on top of their money not understanding that money situation. And so I definitely want to dive into that as soon as I start working with people so that they are not in that situation three years down the track.
And when I was writing my book, Passion, Purpose, Profit, even in the title, it was crucial for me to include an entire chapter about money and to ask people to get really honest with themselves about how they feel about money and why they might feel that way and how they kind of money mindset has come about and also how much they truly need to be bringing in and what financial success genuinely means to them. And it's really important to them not to anyone else, not to their business besty or to their partner or to their family or to, you know, randoms in a membership group that they're a part of. What does it mean to them?
So today in this coaching episode, I want to discuss an activity that I think is absolutely essential to any and every small business owner. It's something that I get every person I work with to do and to do and to action as early on as possible in the time that we work together. Now, I must say today as well that today's episode could be triggering for some people. It can be awkward to listen to maybe depending on where you're up to in your business. You might even have this on speaker in your office. And you're like, oh, no, no, no, I'll turn this off. Listen to it when I'm at home and alone and away from my staff. But I would urge you to be really aware of those thoughts that come up and to question why they do. What is it about talking about money that might make you feel uncomfortable or less than or any other kind of negatively tied to emotion that might come up when people talk about money? What is it about money that makes you feel those things as a small business owner and the other thing I wanted to point out quickly before we get stuck in is that I have zero judgement around what people earn in their business.
And when I work with clients, a lot of what I do is to really help them with their systems and processes and setting up their business in a way that they have confidence to run if they have time and energy back. And we definitely need to look at the money because we, you know, your marketing should also be layered on top of what your business objectives are. And you can't have a marketing strategy if you have no business strategy. And so I will do a lot of kind of work around that. But definitely we have to talk about money at the start and it can bring up all sorts of questions. And I kind of wanted to put it out there that I have zero judgement. You know, I work with companies who want to, you know, make $10,000 a year. And I have other clients who are looking at revenues of 30 million pounds plus, which is almost double in Australian dollars. And when I consult to larger companies, I can be working with companies that are turning over billions.
Money is just a way to trade things that we find a value in, and each person and each business will have their own ideas around financial success. So keep that in mind as well when you work through this. I have seen inside many, many, many, many, many businesses, some with amazing profit margins, some with crappy profit margins to start with. I've seen, you know, people really struggling and in tears on the phone with me or on Zoom, you know, when they come into coaching sessions. I've seen other people be like, “oh my God, we're making millions. And we didn't expect to do that so quickly.”
So I have seen a whole gamut of people’s money situations. And definitely what I'm going to talk about helps regardless of where you are. So just keep that in mind. Oh, my goodness. This is a long intro. Let's get into it.
All right. So let's start this off with a question. Can I ask you a question? How much do you earn in your business? Now, I know right now things might be a little bit different because it’s 2020 and a lot of businesses have to swivel a little bit or a lot and completely pivot. But how much do you earn?
And do you have a rough wage or salary that you pay yourself? Maybe you just pay yourself a lump sum at the end of each month or each quarter, depending on how things are going in the business. Or maybe you are an employee of your business and you pay yourself a set wage every fortnight or week or some other frequency, or maybe you don't take a wage at all and everything goes back into the business. So that's the first question. How much do you earn in your business?
And the second question is, if you pay yourself something, where did you get that figure from? Where did you come up with the idea for what you were going to pay yourself, especially if you're paying yourself a salary or a wage? Where did that idea, that figure come from? Was it just that that's what you were paid at your last employed job? Is it the wage that you think you should be earning at this particular stage in your business, is it less than you think you should be, but maybe you're doing things differently for tax reasons? Is it a number that your friend told you that you should be making or a competitor has gone on Instagram and said what they're bringing home? And you're like,” oh, OK. That's what I should be doing.”
Perhaps you're matching your partner's income or or any kind of other reason. And it could be really so many other different things. I have worked with hundreds of small business owners, 1-on-1 in business coaching and in group coaching. And I've taught thousands more via my speaking gigs and online courses and e-books and all of those things. And the most common response I hear about this second question, which is, you know, where did you get that figure to pay yourself? Is that what I was earning before I started my business? Now, in some cases, that's good, because perhaps you know that you can live within that income and that net wage. It could also be that you have certain bills or other things set up and you need to pay well, you need that same amount of money at a minimum to cover all of those costs in your personal life or in your household. But I also think it can be a really bad way to calculate what you need to pay yourself.
So one of the first things that I get people I'm working with to do is to come up with a survive figure. And yes, it sounds exactly. It is exactly self rather, it is the figure that you need to survive. And within that is how much you need to pay yourself as a small business owner. So I don't know if you own a home, but if you do or if you've ever thought about buying one, you may have met with a mortgage broker. When my husband and I bought our home in 2015, I think it was early 2015. It was the first time that either of us had bought it. So we used a mortgage broker to make things a little bit easier. And I believe he really did. He helped a lot. One of the things that he asked us to do was to come up with a number, the amount of money that we would need just to survive, which, you know, that makes sense because this is an important figure to identify where you're looking at the most expensive thing that you'll ever invest in, which is a house. And when we met with the mortgage broker, we were absolutely shocked at the survive figure he told us was standard for our lifestyle. So at that time, we there was two of us, my husband and myself, and we had one child and we were renting in the inner city. And that was our household. And so he came up with this figure and he said, well, this is average for your lifestyle two adult, one child rent household. And I thought, we are so different. You know, I was so naive. I was like, we don't have expensive taste. You know, we don't we certainly don't spend anywhere near what he's saying. And a few minutes later, we did the calculations and I just sat there stunned because the mortgage broker worked through our expenses and he tallied them up. And he arrived at basically the same as this seemingly outlandish standard figure that he'd mentioned moments before. And it really was a bit of a shock. I mean, it wasn't. I knew it's almost like, you know, what you're spending money on. I knew I was doing the accounts in a house and I knew what the rent costs. I knew what the health insurance cost, the new car insurance and all of those things.
But you don't often sit down and really add those things up. And so, you know, it's a fact of life. Things add up and you might think, oh, totally. And yet when he presented it, it was like, oh, my God. Well, look at every single little thing that we're spending each month. And he was the first person to really relay Parkinson's law to me. And in relation to money. So Parkinson's law, if you haven't heard about it, it first came out in a book in the 1950s called Parkinson's Law The Pursuit of Progress. And it's the idea that work expands to fill the time available for its completion. So if you have five hours to do an essay, you'll take the full five hours. Whereas if you had two hours to do the essay, you would somehow figure out how to get it done in two hours. So that's the idea of Parkinson's Law - that work expands to fill the time available for its completion.
And so my mortgage broker basically applied the same concept to money. The more you have, the more you will spend. And I know that there have been studies that I've seen around, you know, everyone's happiness. I don't know what it was. It was like seventy five thousand dollars or something a year. You know, that's the that's where people are happy. And anything above or below, anything above really doesn't make you much happier, I guess, in terms of finances. I know that some study I really should have looked it up before I started recording this.
But if you can Google, I think it's like the happiness wage or something and it comes up. But basically there is this concept in that study and in the Parkinson's law that my mortgage broker was going through that the more you have, the more you will spend. And prior to going through our household expenses with him, you know, I thought I just genuinely thought we spent less than we do. So I was earning, you know, more than I ever had. But I was also spending and I was spending on small stuff that actually wasn't that important, you know.
The takeaway here - I was spending on just some random things that you buy that just add up and you kind of forget in your head that you bought them. And I had a general idea of the big item costs, like the rent and the insurance. It's like I said about before, but I wasn't watching all the smaller expenses that were over time adding up. And by understanding the amount of money that we needed just to survive, we were able to then plan out so many other things. So I think it's the same with small business. By understanding the amount of money you need to survive in your business and contribute to your household or your personal life, you can begin building out the revenue goals for your business.
So when I decided to resign from my executive role and start my own business, I looked at where I could cut back on spending and I worked out the bare minimum that my business would need to bring in so that I could run that business and have all of the things that I needed to run it, such as good equipment or certain subscriptions that I would need or certain marketing and other things. And I looked at the bare minimum that the business would need. But I also looked at what would the business need to bring in so that I can get paid and I can contribute to our household and pay myself a wage. And these calculations, it gave me the confidence to resign from that well-paid job and start my own business.
So your survive figure is basically the same. It's the number that you will need to run your business and if applicable to you in your lifestyle, contribute to your household or your personal life expenses.
Now, for some people, they won't be contributing anything, anything to their household or their personal life expenses. You know, they I've worked with people who definitely have said, yes, 100 percent of whatever the business brings in is mine. And I don't have no household requirements or that's covered somewhere else. Or perhaps they are in a situation where, you know, they don't need to contribute to bills or childcare or mortgage. Whereas for others, their business might be the breadwinner in their family and their household. And they may have to contribute quite a bit to the household or their personal life expenses, as well as to the absolute must haves for the business itself. So you want to first consider your survival figure. So what are the non negotiables for your business, such as commercial rent or stock or website expenses or insurances or basic marketing or your wage or that of your staff, you know, your staff's wage and wages. And then you also need to think about like what you would need to pay yourself or contribute in some way to your household or your personal life expenses.
So there's kind of two camps. There's your business. What does the business need to just, you know, keep operating and operating at all? And then what are you paying yourself that is going into your personal life or your household expenses? So that is your survive figure. And what I love about this is that it's applicable to your needs, your individual needs. It's not some arbitrary number that your last employer plucked out or that some, you know, employment survey in the world says that you are worth to work in this particular role or that some other random person told you because you run X or Y type of business and that's what those businesses make.
And I can't stress that enough. It's important to do this work and come up with your specific survive figure. My figure might be very, very different to somebody else's. And likewise, my figure might be way less or way more than somebody else's. So, again, coming back to that, no judgement. This is your figure and you need to figure out what you need to survive.
Okay. So let's face it, that exercise coming up with your survival figure, your non negotiables can be difficult. It can be depressing. It can be deflating all sorts of other D words. But, once that is done, it really, really helps you plan things out for your business. And especially with everything going on right now with COVID-19 and businesses having to really shift and accommodate and make changes and do so much maneuvering, I guess, is that I believe that knowing how much you need to just cover the necessities is key. It might be that you're not making as much as it usually would this year. And by understanding the minimum that you need to bring in and being aware of that, you could actually alleviate some of the stress. And it could help you see that, yes, while you might need to pull back on some things, maybe you're not getting as much income coming in to the businesses as usual or your profit margins have changed, on the whole, if you identify a survivor figure and you know that you're meeting that, then you know that you're doing okay.
Another good thing about working out your supply figure is that once you have that, you can work out another number, which is way more fun to do. So let's talk about that one.
All right. So we did the you know, sometimes it's not depressing, but sometimes it is depressing the work of figuring out your survival figure. And now it's time to zus it up a bit, have a bit more fun and work out and come up with your thrive figure. So I know rhyming survive, thrive. It's not like you don't say those two words put together all the time when it comes to money. So survive and thrive. The thrive figure, just like your survive figure, it's pretty obvious. It's in the name. It's the number that you would need to feel like you are thriving. So this is where you're going to take your survival figure, which is important that you've done that first and then you're going to add to that figure all the things that you'd like to do or to have or to buy or to action in your business and in your personal life. So, again, just like the survive figure, the thrive figure is going to be unique to you. So it's, you know, it's totally up to you what the thrive figure looks like and how each person defines what thrive even means to them will differ. But it's really about all the extras that you'd like your business revenue to contribute to. So for some small business owners, these might include renting a new studio or, you know, expanding your office space. It could be travelling regularly to network or research industry trends.
Now, I know that travelling internationally might be a little hard at the moment, but maybe you're thinking I really like to go interstate to see this or that or even just within your own state where you live or your territory. You know, having a look at different industry things or even just paying to kind of travel. You know, it's somehow like pay for it right now. I was supposed to be literally getting on a plane soon to go to New York and go to the F@st Company Innovation Innovation Festival. Now, I can't do that, but it might be that I'm investing in the online version of that. So, you know, whatever it is, it could be taking extended annual holidays. I try and give myself all of January off depending on how well the business is done, because I used to work in retail. And if you've ever worked in retail, you know that January is not when people tend to have holidays because you've just got through the biggest quarter of your life. You're also doing sales periods. And January, where I'm from in Australia is summer. So I try and take that time off. Now, that is going to have a direct impact on what my business is making, depending on kind of what I'm offering for passive income products. Maybe not so much, but if I'm doing physical like workshops or working one on one with people and I cut out a whole month of the year, that is going to have some impact. So, again, different extras might be taking extended annual holidays, like I just mentioned. It could be updating or implementing uniforms. It could be providing your staff with bonuses. A good friend of mine runs a amazing agency. And one of the things that she offers her staff is a trip to any festival in the world or any conference once a year. So, I mean, what an amazing thing to offer your staff because they're learning and you're also being a recipient of that learning. It could be donating to charities of choice. I have another friend who is working really hard in a sort of seven figure business to take some of that money and use it for a particular charity and really make an impact in that charity of choice. So that could be something else in your thrive figure, what you're kind of pulling out. What sort of things that you're adding to the survival figure. So donating to charities. Updating or upgrading of equipment. I'm literally about to buy the new iPhone and I'm very excited about opening another physical store, shooting more frequent campaigns. Maybe you would like to do more professional photo shoots, but your budget so far hasn't allowed you to do that. So maybe on your thrive list is that you'd actually be doing them every quarter or every season or every collection. And so that's another thing that you might put down. It could be working with celebrities or influencers. You know, it might be that you have a particular person you would love to get on an event, bill, for your business or do something else and so you need to put the money in for that influencer or that celebrity or that person. It could be hiring staff, hiring your first staff member, or it could be hiring more staff so expanding. It could be buying an investment property. That is one that I see quite often on my clients when we look at what they want from their business. And part of it is security. And so in that might be buying a second, you know, an investment property for them.
It could also be saying, you know, paying yourself a certain salary. I would like the business to be making this much because I would like to contribute this much to, you know, I'd like to retire my partner so that they don't have to work. Maybe you live with your parents in a multigenerational home and you want to allow them to stop working or some other, you know, put them going, let them go on holidays or something else.
So those are just ideas. There are so many that, again, it will be individual to you as to what your thrive figure looks like. So you can see how much more fun, firstly it is to come up with your thrive bigger. But it's not just about having these fun or envisioning, you know, all these great stuff happening in your business. It's about knowing what you're aiming for financially with the business. And importantly, more importantly, why? Why are you aiming for that? It makes it then far less about, oh, I need to hit seven figures or eight figures or 21 figures and more about what is actually important to you, to your lifestyle, to what you went to your impact to be and then what financial success means to you. I can't stress that those last two words enough to you. Not anyone else, to you. And the other thing is that aiming, you know, just for your survival figure, it's not enough. And right now, in covered maybe it is enough just right now, but long term, just aiming for a survival figure is going to lead to resentment and burn out. And you're just working, working, working purely to meet 100% necessary expenses.
Having a thrive figure allows you to work and enjoy what you're doing because you can see the impact that that extra money is having on your business and potentially on your personal life and also on the community at large. If you're that way inclined.
Now, if you want to dive deeper into all things money, I have a short online course. It's about an hour and it has a workbook attached and it's all about money mapping and it dives into everything that I'm talking about today in more detail. And obviously being a video course, you can opt in and out of it. You can come back to it anytime you need and you can grab that via the link in the show notes or via the My Daily Business Coach Shop, which is just at mydailybusinesscoach.com/shop. I also go into this in more detail and with lots of ways to map this out in my book, Passion, Purpose, Profit, which is out now at your local bookshop, or you can find it online. So again, a link to those places in the show notes. You can also just google Passion. Purpose. Profit. if you are able to, of course, try and support a small business bookshop or gift shop and buy it from them, because then you are also reading about small business and, you know, helping your own, but you're also helping another small business by shopping with them.
So I know that money can be such a taboo subject and really it shouldn't be. I mean, most of us have some sort of financial goals around our business. And so we should like I've mentioned in this podcast, my book has recently come out and the title for it says it all. I mean, you can have passion and you can have purpose, but if you don't have a profit, you're not going to stick around much longer. And that is what you know, too many places come out and say, you just need the passion and you just need the purpose. You absolutely need the profit in order to stick around for yourself and be fulfilled and confident with your business, but also to have an impact on your community at large. So I really hope that this episode has helped you consider how you might look at your finances in a different way, how you might stop comparing yourself to others in your industry or to friends or family or who else is talking to you about their money and really understand what you need to thrive and not simply survive in your business.
So this episode comes out Thursday, the 10th of September. And if you're listening in real time, firstly, thank you. But it also means that you're eligible to win a free one on one coaching session with me, as well as one of five signed copies of my new book, Passion, Purpose Profit, which I mentioned a bit today.
So how do you do that? Well, it's pretty simple. I would just love to know what you think of this podcast. And the easiest way to do that is to leave me a review on iTunes, just like Kayleen did.
So my team and I check these reviews and we will add those people into a random draw to win these prizes. You can also enter by simply sharing this podcast over or any episode of this podcast over on Instagram. So just make sure that you tag @mydailybusinesscoach so we don't miss it as well. So the competition, the winners of the competition will be announced Tuesday, the twenty ninth of September 2020, and the competition closes for entrants at 11:59 pm Melbourne time on Tuesday, the 22nd of September 2020.
So make sure you get cracking on that, I guess so that you and I potentially could be talking about your business. As always, the show notes for this episode, including a full transcript and links to everything that I've mentioned can be found at mydailybusinesscoach.com/podcast/28 because this is episode 28.
Thank you so much again for listening. If you love this episode, if you found it useful, I'd really appreciate it if you could share it with another small business friend because they might find it really helpful to maybe you can even talk about your money numbers together. Thanks again, and I'll see you next time. Bye.
I have a short online course. It's about an hour and it has a workbook attached and it's all about money mapping and it dives into everything that I'm talking about today in more detail. And obviously being a video course, you can opt in and out of it. You can come back to it anytime you need and you can grab that via the link in the show notes or via the My Daily Business Coach Shop, which is just at mydailybusinesscoach.com/shop.
The show notes for this episode, including a full transcript and links to everything that I've mentioned can be found at mydailybusinesscoach.com/podcast/28 because this is episode 28.
Contest:
I would just love to know what you think of this podcast. And the easiest way to do that is to leave me a review on iTunes, just like Kayleen did.
So my team and I check these reviews and we will add those people into a random draw to win these prizes. You can also enter by simply sharing this podcast over or any episode of this podcast over on Instagram. So just make sure that you tag @mydailybusinesscoach so we don't miss it as well. So the competition, the winners of the competition will be announced Tuesday, the twenty ninth of September 2020, and the competition closes for entrants at 11:59 pm Melbourne time on Tuesday, the 22nd of September 2020.
