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Episode 180: Key Business Numbers Every Entrepreneur Should Know – with April Beach and Danielle Hayden

Danielle Hayden SweetLife Entrepreneur Podcast April Beach

This episode is for those in Phase 1 – 2 – 3 – 4 – 5 of the Lifestyle Entrepreneur Roadmap™ Not sure what Phase your business is in?

 

Episode Bonuses:

Who This Episode is Great For:

Do you know your key financial metrics? This episode is for those of you who own your own company but feel like you need a clearer understanding of your business financials and how to grow. Whether your business is established or starting from scratch, this episode will give you knowledge which equals control.

Summary:

Nobody is coming to save you. You’re the beginning and the end of making your business a success. Therefore, if you haven’t been controlling your company financials the way you should, now is the time to start. Danielle Hayden is our guest expert and financial planner for small business owners. 
 
In this show, you’ll learn how and what to pay yourself, what key numbers you need to pay attention to, how to set up your monthly financial calendar, and other key metrics you need to control as the leader of your company – even/especially if someone else is managing the money for you! 
 
If your sales aren’t quite where they should be, you need to have a plan to take control and rebound. Or… if your business is booming and flowing with cash, but you’re so busy you don’t know where the money is going, you need to take control. Regardless, knowledge and control are the keys to grow, scale, and profit and this episode will kick start that process.

Highlights:

  1. Learn how and what to pay yourself
  2. Know what key numbers you need to pay attention to
  3. Set up a monthly calendar to control the finances

Resources Mentioned:


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Full Show Transcript:

<inaudible> You’re listening to the sweet life entrepreneur podcast, simplified strategies to grow your service business and launch a life you love faster with business mental and entrepreneur activator a probate and welcome if we don’t know each other yet my name’s April beach. I’m an online business development expert And I help companies large and small and independent entrepreneurs launch and scale your business online. So glad to talk to you again for another week here on the Sweetlife entrepreneur business podcast really appreciate you listening to the show.
I know there are tons of podcasts out there, and the fact that you keep tuning in here to get your business strategy and support really means a lot to us. And if you haven’t recently, if you are a listener on an Apple device, we would love it. If you’d cruise over to iTunes and leave us a review would definitely help other listeners find our show today on the show,
we’re talking about key business metrics that every single entrepreneur needs to know about your company. But the fact of the matter is this most business owners don’t most people go into business because they’re really good at something, or they love what they do. There are very few people that are great when it comes to the manager side of the business, the financials, and they’re graded actually performing the services.
And so as business owners, it’s common to actually struggle when we’re talking about financials and actually the numbers controlling the numbers behind your business so that your company can grow successfully. And so this particular episode is for those of you guys who feel like you need a clear understanding of your business financials and how to grow your company. So whether your business does established or you’re totally starting from scratch.
This episode is going to give you the knowledge that you need to control your numbers. So here is the reality and our guests today on the show shares this, and this is kind of a come to Jesus moment for some of you, maybe you’re new and maybe you have been in business for a long time, but nobody is coming to save you. You’re the beginning and the end of making your business a success.
And the fact of the matter really is, is that it doesn’t matter how many great people work for a company. When we have problems with leadership at the top, then the company is going to fail. And of course, I don’t know your business, and I’m not saying that you’re a terrible leader. Oh my gosh, you’re totally probably turning off my podcast right now.
What I’m saying is we all have to know our numbers and as entrepreneurs, the fact of the matter is, is it just, doesn’t usually come naturally to want to sit down and crunch all the numbers as a service provider or as a passionate entrepreneur who loves what you’re doing. And so this particular episode is going to help you have a better understanding of,
of what’s going on with the money in your company. At the end of this show, you are going to know how to pay yourself and exactly what you should be paying yourself. It’s always a question that up. And so I made sure to ask our guests that today on the show, you’re also going to know what key metrics you should be paying attention to.
And you’re going to know how to set up a monthly calendar for all of it. And here’s an extra special bonus. If you are listening to the show, it’s the third, fourth week of the month as it is when this show drops in your numbers, aren’t where they should be. Forget the whole rotavirus thing. Just generally speaking your numbers. Aren’t rebounding.
Daniel’s going to tell you what actions you can take to actually help control and rebound your numbers on the flip side of that. If your business is doing really, really well right now, you have cash flowing in that. The downfall is sometimes we get so busy and we’re making so much money. We’re not paying attention to where the money is going. So this episode is going to help both of those scenarios.
And I’m so glad to bring you this information. Again, all of the show notes can be found by visiting Sweetlife podcast.com forward slash one eight zero. All right, let’s dive in.<inaudible> Alright. You guys well, welcome back to another episode of the sweet life business podcast. I am joined today by Danielle Hayden, and I’m super excited to talk to her specifically because we’re talking about money directly about profit,
how to increase your profit and how to make sure all the works that you’re doing in your business is actually leading to the end result that you want and in that’s profit. And I do think that there are quite a few entrepreneurs, which I can’t say this is necessarily a bad thing, but they love what they do so much that the profit actually doesn’t come first.
And so years can pass by. And all of a sudden they can realize that they haven’t really controlled their financial future. So that’s why we have Danielle on the show today. Danielle is a reformed corporate CFO. Who’s on a mission to help rule breaking entrepreneurs, understand their numbers so they can gain the confidence needed to create sustainable profits. After spending over 10 years in a boardroom,
as a corporate finance officer, Danielle is now in her sweet spot as a co owner of kickstart accounting, inc, where she helps business owners with bookkeeping and financial analysis and education. And as the author of the profit planner book series, which super exciting when Danielle isn’t knee deep in the numbers, you can find her hanging out with her. Two kids are competing in the nearest Spartan race.
Danielle, I love that you’re here. Give yourself an intro. Tell everybody, tell everybody a little bit more than, than that. Yeah. I, you know, you gave it such a, an amazing intro because I think you explained all of us entrepreneurs, right? We are so passionate about what we’re doing, that we have to all remember that we’re in business And Our passion,
our mission at kickstart is to help entrepreneurs keep that front and center. We need to be turning a profit and we need to be making money so that we can use our business to support our dreams and our personal goals. Right? What do we want to be doing when we are getting up from our desk to day and how can we support that life as well?
Yeah. And you know, I know before we started recording you and I chatted a little bit and I love the, you asked me, you know, who are your listeners April? Where are they with money? And one of the things that we’ve identified as a company is, you know, we have listeners that are obviously just starting business, but a lot of our listeners have established businesses and they’re ready to grow and they’re ready to scale.
And that’s all of a sudden that time when they’re like, Oh shit, you know, I’m not really in control of the money. I haven’t really looked at the financials of what it takes in order for me to get whether it’s from, you know, a half a million dollar business to a multimillion dollar business, or, you know, for some companies it’s just crossing over like 150,000,
whatever that is, there is like this line in the sand that’s drawn. And so that’s what we’re going to talk about today, which I’m super excited about really how to get to that next level in your business, how to grow and scale your business. And so I thank you for being here. I can’t wait to hear everything that you’re going to say.
So when we’re talking about how to create this sort of freedom, you call it a financial dashboard. First of all, what is a financial dashboard? You know, you don’t hear it that term all the time in the industry. And that’s why I think that this is so important for entrepreneurs. We hear all the time, your taxes, your profit and loss statement,
your balance sheet, look at your financial statements. But how about let’s use something that as a business owner can help us really get in tune with our financials on a forward looking basis, our profit and loss and our balance sheet, those financial statements, those are all historical financial statements. So although that is really important, that dashboard that you do on a more consistent basis can really empower you day to day,
week to week to make the right business decisions on a forward looking basis. And so the dashboard includes our signature framework of pieces of information that we know is really important to your, your business. What I’ve done here is I’ve taken all of the experience I had as working as a CFO. And my job in corporate accounting was to compile all this information and arm,
our CEO and our board of directors and our management team with key pieces of information so that they can go and drive the business. And so I’m taking all that experience from that time. And I’m arming you at the entrepreneur with that same information so that you can go drive your business. Okay. I love it. So what are some of those key metrics that people should be looking at?
You know, what are the financial numbers that every single business owner should know and should be tracking? Yeah. So included in your dashboard. So I want you to pick a day of the week, so this dashboard should be done on a regular basis. So at this time in your calendar, I don’t care if it’s Monday, Wednesday, Friday, every Sunday,
I don’t care what day of the week it is. The idea is that I want you to be consistent. And so on that day, I want you to look at what are your balances? What is your cash balance, which a credit card balance. Maybe you have a line of credit credit, look at your PayPal, balances, everything. I want you to pull all of that information so that you know,
how much money do I have today and how much availability do I have to pull from my credit cards? So that’s figure number one. Okay. Number two, during the same time period that you’re working in your dashboard. I want you to look at all of the people who owe you money, the accounting world, we call it your accounts receivable. So I want you to look at your accounts receivable.
This is going to be the time that you send out collection notices, right? You have the permission I give you permission. You worked for that money. You are to collect on it, send out those collection notices, look at who owes you money, and then use that information to understand where you’re going to be for the week. If you have no,
you have, the client always pays you 15 days after the invoice is due. And that’s 15 days this week and they owe you $10,000. Then you can bet that money’s coming in and that’s going to help you make different business decisions this week. Then if you know that one client who never pays me, I’m probably not gonna get it this week. You know,
not to include that money to make business decisions this week. Got it. Alright, so that’s number two. Okay. Number three. I want you to look at who do you owe money? Right? So in the accounting world, we call this accounts payable, what credit card payments are coming up. So this includes credit card line of credit. If you have a brick and mortar,
you might have a rent payment coming up, your utilities, your cell phone bill, maybe you use zoom or Dropbox. All of these larger subscriptions that you know are coming up, maybe it’s your 10 99 or the branding and website development that you just had done. Anybody that you could owe money to that’s coming due over the next week. I want you to jot that down in this dashboard,
that’s really important because then you can see a full picture, even if you have a lot of cash in your business, but you know, you have some large payments coming up this week. You know, that you need to change the way you make this decisions this week. Maybe you can’t sign up for that new course. Maybe you can’t travel for the next conference.
Maybe you need to wait to pay that. So it can really drive how you make this decisions each week. Yeah. You know, and about that, I know a lot of online businesses, those that don’t have brick and mortar stores and my business included in that there are a lot of software expenses. And I remember it was three years ago. All of a sudden I was,
I was sitting there and I actually realized I had never totaled the amount unless I was looking at like a profit and loss. In hindsight, like you were saying, I never really thought about how much money we were spending on software. And I think we had a really like 35 different charges coming in. Some were only five bucks. Some were 55,
some were 500. And all of a sudden I’m like, Oh my gosh, you know, this is an absolute drain. It’s a huge hole leaving my business that I just considered a necessary evil. And I think a lot of online businesses are like racking up the software expenses too. Yeah. So I love that you said this and just keeping track of what’s coming in each week and making sure that honestly,
that we aren’t frivolously spending on something we don’t need to, but you know, even that dollar 99, Google drive storage, all of these little numbers add up and definitely take away from the province. So super smart. And then the last figure I want you to calculate on the dashboard is your sales. The reason I want you to look at this every week and compare it to two numbers,
compare to what you did last month, what you did last year and what was your goal, right? What was your budget? What was your goal? And the reason I want you to compare it to those three is because it’s second week of the month. And I’m way behind what I did last month, or I’m way behind what I did last quarter,
or I’m way behind my goal. I need to really focus my energy and my activities and my to do list over the next two weeks to really be income generating activities. Are there any deals that I can close? Is there any thing that I can build out for customers? Maybe I have an outstanding project that can be build out, you know, if you’re falling short of last month,
is there anybody who actually didn’t get their bill this month? Right? So maybe there was a billing error. So I would say your, your financials are trying to tell you a story, read the story, right? So I’m two, three weeks into the month and I’m not where I need to be. I need to listen to that story and I need to change my activities for the rest of the month.
Totally makes sense. Totally makes sense. Okay. I have questions. Yeah. Is there a certain profit margin benchmark that accompany would know that they need to be at before investing in future growth? Did that make sense in the way asset? Is there a certain amount of like you’re, you’re hitting these profit margins and now you are in a place. Is there a healthy percentage of profit that would tell a business it’s like maybe a number percentage and indicator that would tell a business,
Hey, listen, you really now at this point in time, you’ve sustained this profit. You’ve grown consistently. Now it’s a healthy time to reinvest in scale more. Yeah, you did ask the question, so, okay. This is the worst answer I can possibly give you. Oh wait, bring it on. Okay. That’s basically, I can’t tell you April,
cause I don’t see your numbers. You know, I always tell people a health, a healthy profit margin is 30%. I could give you that answer 30%, but there’s more to that, right? So it depends on what your personal situation is. It depends on where you’ve already been at in your business. So maybe this is your third year in business.
And the first year and a half was really tough. And you took out a lot of debt in your business. And although you’re starting to turn a profit, you’re carrying on a lot of debt with you. And so with that person, I might say, it’s probably more important for you to restructure that debt before you go and invest more money into your business.
Maybe you’re somebody who you don’t have to take as much money to support your personal obligation. And therefore you have the opportunity to be able to invest bigger in your business right now. And lastly, it depends on what your goals are. I always tell people, you need to sit back and it sounds so cliche and so entrepreneurial, you know, there’s so many entrepreneur gurus who are telling you to set goals,
but I want you to do it a little bit differently. I want you to set financial goals. We had a client last year, who her goal was to grow her top line revenue, no matter what the cost, she was not taking a dollar from her business. She was growing revenue. And so she was doing some Facebook advertising. She had a budget for that.
She was going to conferences. We had set up a budget for her to go to for conferences. She was doing a ton of in person networking throughout the year. And so when we’ve sent her her financial statements and we kept on saying, Hey, although you are not profitable the day we know that this is aligning with your goal, right? And as we came into 2020 really started to see her revenue sore and was an amazing story to tell,
right? Because she really made that investment throughout the year. We saw that return and she said, okay, 2020 is my year to make money for me. Good for her. I want to go on vacation. I want to pay back me. And so now this year, when we see her expenses start to creep up because she gets excited and wants to go buy the next core.
So she still wants to go, you know, we are able to say, Hey, your goal is to be profitable this year. So we need to keep these expenses in line. Is this something that we really need to do in order to sustain revenue? Or can we do without this expense this year? Mm, super great. I love that story.
Okay. So this is actually a good segue into what about self pay? There are a lot of business owners that still, I mean, they could have been in business for seven, 10 years that still aren’t paying themselves. What does that look like to pay yourself? What is that frequency? You know, what are the benchmarks that our listeners right now should say,
Hey man, you know, I haven’t really pulled a dime unless it was just maybe a couple of dollars here, a couple of dollars there. Yeah. So first of all, no shame we have had clients come to us and every spectrum of this story. And the first thing I’ll say is just kind of, don’t give yourself a hard time about it,
right? It, it has happened too many opera entrepreneurs. I think it’s time to break that mold though. So frequency, I would say at least once a month, if you could do it weekly, when you’re doing that dashboard, you can pay yourself weekly, but let’s say you’re somebody who you haven’t done that type of dashboard yet. You’re only looking at your financials on a monthly or quarterly basis.
When you look at that information, that would be the time to get yourself paid. But if you’re doing that dashboard, you have a little bit more opportunity to get yourself paid more frequently. Another thing I’ll say, you know, a lot of entrepreneurs will come to us. Our clients will say, Hey, look, you know, what do I pay myself?
How do I even know what the right number? I feel like, um, you know, I take too much, I’m robbing my business, take enough. I’m frustrated with my business that it’s not supporting the life I want. So the goal is to find a happy medium. And here’s the exercise that I suggest for every business owner to do, take your cash balances in the bank today.
And I want you to subtract between one and three months worth of operating expenses. So go pull out your piano, but take that profit loss statement, take out any of the outliers. So maybe you had a $4,000 legal bill last month or $2,000 branding bill, the things that aren’t going to continuously happen. Okay. So there are those that you can do this in Excel,
just prospects, right? Maybe any payments to yourself, you know, clear those out. Maybe you let go of your contract or last month clear that. So just want you to have a true average of your monthly operating expenses. And you want to have between one and three months. So take beginning cash minus your one to three months worth of savings.
And then that is your true cash balance. That’s what you can take from your business, unless you know, of a big investment coming in the next, you know, month or so. And maybe you subtract that out as well. Yeah. Wow. That’s awesome. And it’s so helpful and yeah, and I love that you said that too. There’s no shame in this because so many businesses just want to,
so many entrepreneurs want to make their business work and they’re just willing to do everything they can, which is, that’s what it takes to have a successful business, but we have to pay ourselves. And it’s something that I struggled with for years. I didn’t start paying myself. I think I was in business for about nine years before I ever started paying myself.
I remember when I first started doing that, did it felt like I was robbing from I’m like, why wouldn’t I leave it in there? You know, I really don’t need this right now. Why would I leave it in the company? But there was something about as a woman that owned two businesses, a hundred percent by myself, there was something about that just for me about that power and authority.
And maybe it’s just the way I am that I was pulling my own money out of that. That just really made me feel good. And I remember it was like a turning point psychologically for me that even I took my businesses even more seriously, if that’s even a something that I could have done, when I really started to pay myself, it was a,
it was a big shift in my mindset about that. And that was a big deal for me. It’s a huge step. I can’t tell you how many times client will come to us. And they’re frustrated because they’re not paying that. It hurts them in their other relationships. Right? So think about your husband or wife, who you’re spending a lot of time in the business.
And if you’re not taking any of that home to help support your family, it can hurt your other relationships and how they’re supporting you in your business. And so we just really have watched people transform from cutting resentful towards their business. So really being able to embrace and grow their business when they start to pay themselves. So if you haven’t taken a paycheck at no shame,
I’ll just sit down, do the dashboard, put it in your calendar and do that dashboard. I gave you the calculator. I want you to take a paycheck as of next month. Yeah, for sure. Even if it’s like a hundred bucks. Yeah. Okay. Danielle, I appreciate all these numbers so much. And for you being on the show to wrap it up,
talk to us about why it’s so important for entrepreneurs to actually own their own success. Nobody’s coming to save you, right? There’s nobody who’s going to come in and wave a magic wand and say, you deserve it. You worked hard enough done give you the magic beat. You know, it’s time for all entrepreneurs step up. And when you can start to really look at your financials,
look at your dashboards are taking home a paycheck. All of those things are really action steps to helping you step into your success. As a business owner, there are all the steps that you need to start to grow and play bigger. And I promise you until you start to have that confidence, there’s always going to be something holding you back. When we work with clients and see them literally morph into this transformation from going confused and lost.
And I’m not sure if I can buy this, I’m not sure if I can pay myself. And then once you start seeing your financials and once you start setting goals, and then once you start paying yourself, these are all building blocks. And then all of a sudden you wake up and you feel confident and you’re like, I’m ready to make this business,
the success that I knew it was supposed to be. Right. Yeah. I love that. Thank you so much for being on the show for your wisdom and your expertise and sharing it with our listeners and sharing it with me. How can people find and talk to us about your books that you’re writing? So are avid readers out there that love to read,
know how to tap into more of you? Yeah. So you can yeah. Find me at profit planner, bookkeeping.com/sweetlife. You can read more about our services and the books. You know, this is where we took our signature framework that we were using with our clients. And we put pen to paper and we really outlined a workbook for entrepreneurs to be able to use,
to set up and then analyze their financials. We see so many business owners who say this whole accounting thing, it’s kind of a big blur. There’s so much to it. I don’t even know where to start. Right. It’s like going on a diet or running a marathon. So what we did was we took all the information. And so let’s break this down.
It’s a 12 week book and every week we give you, you know, two to four pages worth of accounting education, we just set up the foundation for that week. And then we give you one action step per day. So there’s one activity they set up 15 minutes in the morning is your CEO time do that action step. And then you start to feel,
build your confidence. And by the time you’re done with the 12 weeks, you’re like, wow, I’ve got my business financials under control. I feel like a badass. Wow. How powerful. That’s so horrible. I love that. Especially that it’s your signature framework with all your experience and how you’re used to getting entrepreneurs results and small businesses results. So we love that.
So we’ll make sure as well that a link to where people can grab that is in the show notes for this episode. Or you guys can just cruise directly over to profit planner, bookkeeping.com forward slash Sweetlife. Is that correct? That’s it. Yep. Awesome. Thanks so much for your time. I loved having you on the show. It was great to meet you.
Yeah. So glad to be here. And as question comes in, I will, uh, Washington, social media and whatnot. I’m happy to keep the conversation going. Awesome. Me too. Appreciate it. Thanks. Thank you.<inaudible> I’m glad you made it to the end. I hope you found this show incredibly informative. We strive to give you business development,
coaching and strategies that other companies charge you thousands of dollars for. We appreciate you being here, listening to the show and sharing it with your friends tune in next week. For another episode of the Sweetlife entrepreneur and business podcast. Bye for now.