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Episode 247 - How to Set up Your Business for Financial Success in 2025
313 Plays8 days ago
If organizing your business finances is on your to do list for the year, today’s episode is for you. I’m chatting with money expert, Shanna Skidmore, about how to set your business up for success this year.
This episode is sponsored by BDOW!, formerly Sumo, the very best intelligent form and pop-up tool for your website. Deliver the right message, to the right visitor, using our advanced targeting rules. Whether you want to display a pop-up to only new visitors, or generate a unique discount code for those who subscribe to your list, you can get the job done using BDOW!
As always, links and resources can be found in the show notes. Check 'em out over at https://daveyandkrista.com/set-up-business-financial-success-2025-btb-247/. And if you enjoyed this episode, please consider leaving a review over at Apple Podcasts.
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Transcript
Introduction to Financial Planning for Peace of Mind
00:00:00
Speaker
When you go into a year with a plan for your money, there's so much peace of mind. There's so much peace of mind knowing how many clients do I need to take on, how much revenue or sales do I need to generate to make sure that I can pay myself and pay all my bills. That really truly for me and for all of my students and everyone I work with is the goal of this money plan is to know.
Podcast Focus: Branding and Website Design for Entrepreneurs
00:00:25
Speaker
You're listening to The Brands That Book Show, a podcast for creative entrepreneurs who want practical tips and strategies to build engaging brands and craft high-converting websites. We're your hosts, Davey and Krista, co-founders of a brand and website design agency specializing in visual brand design and show it websites. You're listening to The Brands That Book Show.
00:00:47
Speaker
If organizing your business finances is on your to-do list for the year, today's episode is for you. I'm chatting with money expert Shannon Skidmore about how to set your business up for success this year. We're diving into ways to effectively budget as a small business owner, which numbers you should be paying attention to, how to avoid common financial pitfalls, and so much more. We also share a few of our favorite business tools that make money management a lot more simple.
Financial Fresh Start: Free Class by Shannon Skidmore
00:01:11
Speaker
And if you happen to be listening to this episode the week it comes out, Shanna is teaching a free class on Thursday, January 23rd to help give you a financial fresh start. I'll include a link in the show notes. And now onto the episode.
00:01:25
Speaker
Today's episode is sponsored by Badal, formerly Sumo, the very best intelligent form and pop-up tool for your website. Deliver the right message to the right visitor using our advanced targeting rules. Whether you want to display a pop-up to only new visitors or generate a unique discount code for those who subscribe to your list, you can get the job done using Badal.
00:01:50
Speaker
One of my personal favorite features is the show a tab function. Basically how this works is when visitors close the popup, it minimizes to the bottom of the page so that visitors can open it back up if they'd like, but it also remains out of their way while they browse. You can check out how that feature works over at the Davey and Krista website. Also use the code Davey and Krista to save 20% on your subscription. Create an experience on your website using Badao.
00:02:19
Speaker
Okay, Shannon, I am so excited that you're here chatting with me about all things business finances
Shannon Skidmore's Journey from Corporate to Creative
00:02:25
Speaker
and numbers. So you've been on the podcast once before, but it's been a long time and I feel like the business world is always changing. Maybe you don't feel like numbers change as much, but we're going to turn this episode around really quickly. Cause I feel like it's just such a good time of the year to start people off on a good footing as they're thinking about their goals for the year and their business finances.
00:02:45
Speaker
So i'd love for you to lead a little bit through your story how did you end up being like the numbers experts thanks for having me and i am excited you know numbers and money. Is one of the top set goals that were resolutions that people talk about every year and so i do think i'm so glad to come back talk about money and like you said a lot of things and.
00:03:07
Speaker
money and finance and business, particularly business finance, don't change. Benchmarks, metrics, they don't change, but I change and I learn more and the way I teach changes and then the business environment in general changes, you know, how we market, how we sell. So I love that numbers stay constant in some ways. Like for me, that gives me peace of mind. And I think, you know, I just get so excited about this. I love empowering entrepreneurs in their money.
Unique Skills: Psychology, Finance, and Art for Entrepreneurs
00:03:36
Speaker
So how I got started, my background is as a former Fortune 100 financial advisor. So I worked for five years and two years kind of interning while I was still in college. I have a psychology degree, a number, like an accounting, finance degree, and an art degree. And I always joke that I felt like a misfit puzzle until now when I'm like, this is actually perfect. um but Because I feel like it all came together. I feel like I can be this bridge of
00:04:02
Speaker
I get your creative mind because I have one as well. And that and someone who can take your business also seriously. Yeah, you want to be an artist and you want to make really good money doing that and be home with your kids like you can do that and I don't I think now our types of businesses are being taken more seriously. But when I started my business back in 2012, 2013, it was not, you know, you could go sit down with a CPA and they'd be like, let's classify this as a hobby. So I really advised in
00:04:33
Speaker
business owners and their finances for five years, formally kind of in more of a corporate setting. And then I moved over to corporate finance, which is just a fancy way of looking at, you know, I was looking at books. I was helping with pricing. I was working, though, with a fashion designer. That's how I really transitioned into the creative space. And I was hired by their investor team. So think like Shark Tank, but not Shark Tank. So I worked for the investor group and they were helping this fashion designer start and grow her business. And I started seeing that though she was really good at her craft numbers and pricing didn't come naturally to her and she didn't have anyone to ask those questions to. So my wheels really started turning of like, hmm, I see this need, but I have no idea how, Chris, I don't know if you know this, but like I never thought I would own my own business.
00:05:25
Speaker
I am way more comfortable behind a spreadsheet, crunching numbers. like I'm a very friendly person, but I wouldn't say I'm like super extroverted. and so i never i just I didn't see myself being a business owner, but I just kept seeing this happening. These especially female-owned, creative businesses, they don't know who to talk to about their money, feel very intimidated.
00:05:45
Speaker
And so honestly, it just got open the door for me to start this business. And I thought, well, if I can just make enough money to pay bills while my husband finishes his degree, like we'll be good. And so I did it for a year. I didn't even have like a business name. I just was like, yeah, you need some help? I'll help you. Okay. And so I just tried all these things and really figured out what my specific gifting was and how I could help others. So now we're in year 11 officially. And it's just been Yeah, it's been such a dream to empower women and ah small business owners, anyone who feels like, Hey, money really isn't my thing, but I have to figure this out to make it more simple. my My husband always says you have a way of making complicated things simple. And that really is just the best compliment. So I absolutely love what I do, obviously.
00:06:36
Speaker
Well, I'm so grateful for you because I do feel like you're right. Accountants don't typically understand the creative world. They might be even surprised at how much money could be generated by a creative type of business or just like the things that we're purchasing. So I love that like you have this awareness and that you're able to but step into this specific niche, especially from a feminine voice. Cause I feel like you have an amazing sense of style, probably all of that art background. And so it's fun that like you can make business stuff even pretty too. Yeah. I'm like aesthetics matter. And if you look at a pretty spreadsheet, you're much more likely to want to log in.
00:07:12
Speaker
and see it. And so yeah, we laugh it really does now looking back makes so much sense. I'm like, ah let's make numbers beautiful. And let's get a ah comforting color palette for this spreadshee But if you know, you know, like I don't want, you know,
Establishing and Managing a Budget
00:07:30
Speaker
it does. Okay. So we're recording this in January. I feel like January is budgeting month for so many people, especially like business life, personal life. I know that I just wrapped up my books for last year. And so it's time to think about my budget for this year. So what are some ways that businesses can be more effective this year with their budgets?
00:07:51
Speaker
Well, I think, first of all, creating one, if you haven't, you know, but and that sounds so simple, but so many people go into either their personal life or their business life with no specific numbers on paper. And I would encourage everyone listening to set a goal by the end of January to have some type of budget on paper. And I know that can feel very intimidating.
00:08:14
Speaker
You know, it's funny, Krista, I ironically worked in finance for five years and then two additional years. So like seven years total, I had worked in finance, either personal finance or on the corporate side. And I never had a written budget on paper. Yeah. I feel like it's something that you don't really learn. Or it's like, I remember growing up, maybe they taught us balancing checkbooks, but that just feels so dated now. Yeah, I do love it. bolancing in cha but Yeah, they sure don't teach that anymore. Chris, I met in the school curriculum. Darn it. Cause that was so much fun. But yeah, like I worked in finance and I was never taught how to make a budget. I never helped my clients make a budget. And it's so funny because I would say so often, like what this person needs, what this business owner needs or this individual needs is a budget. And a budget is just a plan for your money. And I think if we take,
00:09:02
Speaker
the kind of budget term out of it and just let's sit down and make a plan for our money. Let's tell our money where to go. As Dave Ramsey says, tell our money where to go instead of wondering where it went. I think that's so key and crucial. And so if you have no idea even how to start a budget or where to start, I say just print off your bank statements, personal bank statements, business bank statements, and create two separate budgets, a personal budget and a business budget. We just want to see where all your money is going And I love, I always joke like, budgets like a six-letter curse word or the term we love to hate, you know.
00:09:38
Speaker
And really, when you go into a year with a plan for your money, there's so much peace of mind. There's so much peace of mind knowing how many clients do I need to take on, how much revenue or sales do I need to generate to make sure that I can pay myself and pay all my bills. That really, truly for me and for all of my students and everyone I work with is the goal of this money plan.
00:10:01
Speaker
is to know, can I buy that course this year? Well, let's go back and see how much is in the education budget. And you don't feel guilty. Can I go to Target and buy the new Studio McGee line? I'm just like, did not feel guilty. Like, that's what I love about having this plan on paper. And so that's where I would say to start is you just want to sit down and look at, let's talk business-wise specifically, what are all your bills for the business?
00:10:27
Speaker
How much does it cost you to run it every month, every year? Like get all those numbers on paper. I'm a reverse engineer. What do we need to sell in order to pay all those bills, pay myself, save for taxes? Like it really, once you kind of know the steps, it really actually becomes pretty simple, even for somebody who's like, I've never done this before. I don't even have my personal stuff and my business stuff is all mixed together. Like I know, I get it.
00:10:53
Speaker
But if we can just sit down and be like, what does it cost to run the business? And if you're new in business or you've never done this before, like you can sit down and kind of estimate, pretty good estimate of like, what does it cost? What do I have to have? Okay, what do I need to pay myself? Save for taxes? What do I need to sell to do that? That's where I would start. And again, just start. Get some numbers on paper by the end of January, put a plan, think of it that way. I want a plan for my money this year.
00:11:19
Speaker
and Do you feel like it's better to write it all out and print stuff out or do you like online tools cuz you kind of mentioned on paper I like online tools cuz I don't want to do everything myself but walk me through that like are there recommended systems that you have okay I love it yes you know girl got a system.
00:11:36
Speaker
Well I love a written actually on paper budget and I know that sounds old school but psychologically and mentally like writing something down even your goals like written goals are 40% more likely to be achieved same with your budget like I just want it to be clear so you can write it on paper that's fine but actually I house all of my budgets in Google Drive just in a Google spreadsheet I sell these spreadsheets in my shop all of my students get them in the blueprint model which is my business finance course so All of mine are in a Google Doc and I tell all of my students as I do this myself, I create the budget for the year and then I do not change it.
00:12:14
Speaker
you So a budget, you know, I call it a plan. So your money plan truly is like a estimate, a plan for the year. It's never going to look exactly like you budgeted, like you created, but I don't want to like tweak it and change it all year long because I want at the end of the year for you to go back and be able to compare to what you're doing. So I want, I call it your one year business budget on paper, but I again put mine in a Google spreadsheet and I reference it all the time. I have seen this from you and it's very organized and fancy and pretty. Yeah, it is pretty and I love it and it's super simple and it just lays out again those very, and we've talked about this before in the show, those numbers you need to know in business. What do you need to sell? What are all your expenses? How much do you need to save for taxes? How much do you need to pay yourself? It's right there. It's very clear and it's just your plan for the year. I literally reference it all the time. and Then I would say from there, the key is tracking. like you just don't You don't want to create this beautiful plan, stick it in a drawer and forget about it for the year. That's why we want to keep it
Regular Budget Reviews for Financial Success
00:13:20
Speaker
front of mind. I look at it at least once a month when I go back and I do my bookkeeping. and Then I have a spreadsheet called our Business Tracker, Income and Expense Tracker. You can do this manually. You can do it through just a profit and loss statement if you use like QuickBooks or bookkeeping software. We want to have this beautiful plan. Then how are we doing towards the plan?
00:13:39
Speaker
Are we staying on track? Are we reaching our sales goal? Like, assess, and I do this once a month, every single month. How are we tracking towards our goals? Are there any areas where overspending we need to slow down? Like, so create the plan and then work the plan.
00:13:54
Speaker
Every single month, how are we tracking? So again, I do mine in a Google Doc, a Google spreadsheet and it's, that's how I use it and it's simple and it's easy. Okay. That's really good to know that you put the plan together and that you don't adjust it. So even if you realize like, okay, I need to bring on a team member or my laptop is broken. I need to get another one. That original plan is there and then your actual expenses they adjust based on what actually happened in the year.
00:14:18
Speaker
Yeah. So I really like, and I do this personally as well. I like to have one set plan for the year. Now, if you have a massive life change, so if you ah a baby yeah have a baby, is move, you know, have a massive life change where your expenses in the business are personally really changed, then yes, you can like create a new budget. So like six months in, like plan B. But I always want to keep that original one just so I can look back and see how did we do? Like, what changed? How did we track towards this? And so business-wise, if you're like, Hey, I need to bring on a team member, and you didn't plan for that. And it's helpful to go in and think, Okay, how much do my cells need to increase to cover this?
00:15:03
Speaker
And if you really want to lay out a secondary budget, that's fine. I still want you to keep that original one on paper, because I want you to see how you track toward that at the end of the year. And if we change it every month, then it's like we don't really know. So unless you have, again, like a big life change or, right, you need to bring on a team member and that's totally unexpected, then I would stick with that original plan. And And Krista, you may remember this. I have a course, The Blueprint Model. Krista, I know you love it, you've done it. But I teach all of my students to set their budget at 3 levels. So that kind of helps. So you have your bare-bones k need. Then we have the secondary, which I call your 1. That's like your lifestyle number. That's where I really live is in the 1. That's how I maintain my lifestyle and sanity.
00:15:49
Speaker
And then we have the third option I call Reach for the Stars. And so that might be your, are okay, if I hire a brand new team member, that's my Reach for the Stars number. So we really have planned for different scenarios. Yeah, that's so smart. Are there some other common mistakes that you see people making, especially this time of the year when they're starting to put all of this together? So you mentioned changing their budget. You mentioned not having different scenarios. yeah Are there other ones that you see people like fall into?
00:16:15
Speaker
I think that one of the biggest ones that I see is a budget and a sales in my world, we call them sales projections, which is just an estimated amount of sales for the year. Like what is your financial goal for the year? One of the big things I see is unrealistic goals.
00:16:30
Speaker
And it's hard to set goals. It's hard to say, Oh, I'm going to offer, you know, a new course or introduce this new offer. And you have no idea how well it's going to do, right? And so it's like, Oh, that can be scary to we're just creating an estimate.
Setting Realistic Sales Projections
00:16:43
Speaker
So I think knowing how to set realistic goals,
00:16:48
Speaker
And what I do is I look at, if I see more than a 10% jump in sales, so say I sold $100,000 last year, and this year I want to sell $110,000. That's a 10% jump. That's 10% more. That feels like, okay, that's doable. How are we going to do that? But if I see a student come to me or a client come to me and they're like, we want to do $200,000 in sales. So we're doubling our revenue.
00:17:12
Speaker
Then I'm like, how are we doing that? What is the plan? How are we going to execute such a big jump? If you look at large businesses, they project 1% to 3% growth a year. That's about it. And that feels so small. And that feels so small. Yeah, that's like for a $100,000 business, that's $1,000. It's very small.
00:17:32
Speaker
So Kristin, that's what I would say is just really look at if you don't hate your sales goal, then everything else is a trickle down, is affected. And so we really want to set that a very realistic sales goal. And that's why I do it at three levels, because I want to live in a number that I feel so comfortable in.
00:17:51
Speaker
And if sales take off and we do so much better, okay, great. Then I can hire that team member. Then I can buy a new couch for my office. Then I can do those other things, but I want the sales to come first before the expenses. That's so wise. Cause I feel like I hear so many, especially mindset coaches or business coaches say that you need to have a number that moves you, but I like that you have those three different options. So you have like the safe number, you have the like, I'm going to live here. And then you have the reach for the stars number, as you say.
00:18:21
Speaker
Yeah. Chris, I'm so glad you brought this up because I actually, and I think this is where the psychology background in me comes in. I think it's really important for anyone listening to understand how they are motivated. I know myself personally, I am demotivated by stress. I am demotivated by pressure.
00:18:43
Speaker
If I'm driving in my car and somebody's riding on my tail, I am slowing down. I don't like it. I'm like, give me my space. And so when I worked in finance, I had a business mentor tell me to take on more expenses in my business, to take on staff, to take on an office, to like add these expenses, because that would motivate me to work harder. Okay. I happened mi you i would hate that.
00:19:06
Speaker
It demotivated me. It made me so stressed out. I do not like to get in a sales situation where I need to sell more than the person I'm selling to. like That is so stressful for me. So I learned that. um It's the same like with health goals. And with coaches, like I got played a lot of sports growing up. And if a coach yelled at me, then I, again, like I'm demotivated by that. So you need to know how you work best. like My husband is the opposite.
00:19:35
Speaker
pressure pushes him and he loves it. He thrives. He's like, let's take on all the expenses and I'll just go wear it out. And I'm over here like, could we just not? And so I think that's it. I love that you brought that up, Christo. So everyone listening, how are you motivated? I'm someone who's like, if I feel wide open, then I can run. Like I can sell, I can double our revenue.
00:20:01
Speaker
But if I feel like I have to do that because I'm so stressed out about money. So I personally build my business very lean. I'm very careful about the expenses I take on. And Chris, I think you're the same. like I would rather have six months of our bills saved up before hiring a new team member. And sometimes that's not good. You know, sometimes that makes me wait too long to invest in something. Sometimes I needed more help and I could have paid for it. like So I'm very conservative, but I just know about myself. If I feel pressure, then I don't like that feeling. So that's where I'm coming from. But if you're someone who's like, let me put the pressure on and I'll work harder, then that's great. Set yourself a big goal. That's awesome. Yeah. That's really good to know too. I wonder if it like has like something to do with Eniagram. Which Eniagram number are you?
00:20:49
Speaker
I think I'm a nine and with a one wing. Okay. I'm a one, but maybe with a two wing. So I wonder if it's like certain people, like Dave is at eight, ah say eight or three probably so would love a little pressure. Yeah, they probably don't care about the risk. Dave is like, I'm going to have crazy goals and like go on this crazy diet and all these health optimizations. And I'm like, no, let's just be simple for me. Same. I'm like, Kyle, my husband is so fun and funny. And I love how we, we always come at something the exact opposite, but we want the same outcome. Like, you know, and it just makes me laugh. But
00:21:26
Speaker
He absolutely thrives in pressure. And I'm someone who's like, if you set a goal to and know make $100,000 and you made 99,000, like you failed. You failed, basically your failure. like So for me, I would rather set a low goal and like totally blow it out of the water. Whereas Kyle's definitely a person, my husband's definitely a person who's like, that whole like shoot for the moon if you land in the stars, you still landed in the stars. Doesn't he have like an aeronautical engineering degree? Yeah, aerospace engineering. yeah But it just makes me laugh like, again, you have to understand, and your own side called it, he's someone like, I'm going to shoot for the moon and if I land in the stars, great. yeah I'm like, I'm going to shoot for the stars and I've hit the moon awesome.
00:22:07
Speaker
That's funny. Okay, so you mentioned QuickBooks once and you mentioned some of your systems. Are there any other like favorite resources that you recommend to people as they're seeing through all of this?
00:22:18
Speaker
Yes. Okay. So bookkeeping-wise, well, first and foremost, for anyone listening, and if this is you, know
Importance of Separate Accounts for Personal and Business Finances
00:22:24
Speaker
that you're not alone. If you have not yet separated your personal banking from your business accounts, like that's step number one to make bookkeeping, financial report, like to understand how much your business actually makes. Step number one, get a separate bank account.
00:22:39
Speaker
Is there a way for people to go back and like retroactively separate some of those expenses or is it kind of like moving forward? I would just start fresh. i guess's just I know. That's the one in you, Krista. I get it. Me too. I'm like, I want this to be perfectly done. I need to know all my expenses, but I would just say start fresh. like Don't worry too much about it. I mean, for taxes, you have to know what your business did. That's where sorting through all the bank accounts when they're mixed together becomes really tedious. yeah For anybody who's done that, they're like, yeah, I get it.
00:23:07
Speaker
It's so hard. So just go ahead and separate them out, especially at this time of the year. Start fresh. I always say, even if you deposit a check from a client or if they pay you, you know, through Stripe or something, even if you immediately transfer it to your personal account, you at least have that record of it coming in. So put everything separate in business versus personal. And I think that the IRS rule technically, I haven't read it in a long time, but is you have to have a separate account. Because you might go into a bank and they're like, you have to have a business account. And those normally have fees that come with them, which is why I don't like them. The rule really is you just need a separate account. But I think that banks are becoming sticklers for like, if this is a business, it has to be a business account. So
00:23:52
Speaker
I would just say look for a free account. I feel like some of the online banks are making that a little bit easier to like set them up. Cause we had started our business bank account at a PNC and there are no PNCs where we live now. And they're like, if you want to add more accounts, you have to come in in person and like bring all of these documents. And I'm like, Oh no. So I sign up for another online bank. Cause it just feels like you need a lot less to get started. Yes. I am currently testing out Novo N O V O. Have you heard of that, Krista? No, I signed up for a Relay account. Okay, Relay. Yeah, that's I think what Mike Michalowicz. Yeah, so I did it. yeah So I think Relay, you can have a bunch of different accounts, which is I think the profit first method in the accounting world, we call that like buckets of money. That's what I teach and I love it. I think it's a really simple way to put money into different buckets.
00:24:42
Speaker
Relay I think allows you to do that. What I love about Novo, it's all in one account, but you can separate it into like giving it different purposes. That makes it so much easier for bookkeeping. as okay If you have a bookkeeper or if you're doing your own bookkeeping,
00:24:58
Speaker
you're having to keep up with five different accounts or however many you have. And that is so much work. I didn't want to do that. So I really love Novo because it's still technically just one account, but you're marked money like envelopes for different things. And so it makes bookkeeping really easy, but it also keeps money separate. Like this is my tax account. This is, and again, this is something I teach all my students in the blueprint model because I do, I think buckets of money is really a helpful way to make bookkeeping really easy. So anyways, that's a tangent, but No, that's right. Those accounts. I'm definite not Novo, Relay. I've heard great things about Relay. Again, find something that works for your brain and the purposes you want. I personally did not like having like 5 different accounts. It makes so much work on my end for bookkeeping. That's why I kind of gravitated towards a Novo. But for some people, it works. So
00:25:48
Speaker
I love it. That's a really good tip. I feel like I haven't really moved into Relaylet, so I'm going to look at Novo. And yeah, I feel like all of these different resources are really helpful for people. So I don't know if it's really, don't worry about a tangent. Okay, good. And I will say bank accounts are only as strong as the bank backing them. So that's why I'm i'm a little cautious to be like, I recommend Novo. I've just started using it. I've had a great experience, but I want everyone to know like when you're choosing your bank, look at they're backing. Because, you know, we have seen some online banks go down. But I've loved Novo. And Krista, what I teach, and you know this, and what I want to say about anything with money, I want to teach the concepts, the strategies, the principles behind it, and then allow for flexibility in how it's executed. Because I do think money is something, it's like any goal. It's like,
00:26:41
Speaker
It's not in creating the goal, it's in the action of executing the goal, right? It's the taking the action. It's the same with money. We can create a budget. But if we don't track towards it every month and know if we're staying within those parameters or hitting our ourselves both, the true, you know, key, the true success is in tracking it and keeping up with it. And that's what I want to teach with money. Like, it doesn't really matter what bank account you use, as long as you know This works for my brain. This is why I like this account. And it's the same with bookkeeping. So I use QuickBooks Online. okay I do that too. Yeah, I love QuickBooks Online. I've used it, so it's you know, the accounting background in me. QuickBooks Online is the gold standard of bookkeeping, but I have a lot of people in my community who use different types of bookkeeping. What I say is that all my stipulations are with a bookkeeping software is that it brings in
00:27:35
Speaker
your income automatically from your bank and expenses automatically from your bank. I think most of them do that now, but when I first started, there were a lot of softwares that were more task management softwares that were also trying to be bookkeeping softwares. and it just It didn't work. I just didn't feel like I'm like, stay in your lane, be task management operations or be bookkeeping. and I'm trying to think wave. That's what it is. Wave apps. We used to use that. Okay. Is a lot of my students have found QuickBooks can be quite cumbersome and maybe a little overkill for what some small businesses need. So wave again, I have not personally used it, but I have a ton of students who use it. And then I have Google spreadsheets that I sell in my shop. Yeah. One for business called a monthly business income and expense tracker. So essentially it can replace bookkeeping if you don't want the
00:28:32
Speaker
To deal with a software aspect of that you can just do a Google spreadsheet and I have a great one in my shop I use my own Google spreadsheet because I want to see all the charts and the graphs and everything But the downside of any Google spreadsheet unless is it's manually entered so anytime you enter things manually there's a going to be room for error. And so I use QuickBooks to get my profit and loss and then I enter it manually into my spreadsheet just so I can have those charts and graphs. But the goal again is just to see where your money is going. That is the goal. So what I love about what I do is
00:29:09
Speaker
There's kind of a few people on your finance team, right? So there's your bookkeeper, their goal, or you're probably your own bookkeeper, like for many small businesses. The goal is kind of to stay out of trouble with the IRS. Like the IRS needs to know how much you made this year and where your money went. Not even specifically, you can literally send them like two numbers. Here's how much I sold. Here's how much it cost me. That's fine. It doesn't have to be that detailed, right? So that's like where people start. And where most bookkeepers who aren't trained like the in the Shana world, they're going to give you some reports. But as I always tell my clients, I'm like, This doesn't tell me very much. And it doesn't tell you very much. So my goal is to teach from the CFO background, like the strategy side, let's use these data and reports to tell us a story. And so that's how I set up these spreadsheets.
00:29:55
Speaker
or I teach all my students, like we want these reports to give us data so we can set them up a little bit better. And that's what I do with my one-on-one clients is I do it in our CFO agency side where we set up reports that like tell the story. And then now I teach it on the education side of like numbers. For you, you don't need to just use them. Yes, we want to stay out of trouble with IRS, but it also needs to tell you something. What is your most profitable offer? What was your biggest expense this year? Team software.
00:30:25
Speaker
Those are the things that are really helpful for you as you're strategizing. So again, I get on tangents, but set up the bank account, get some bookkeeping in place. QuickBooks is great. Wave is great. A Google Doc, a Google spreadsheet is great, although it is manual. But my smart husband told me that now you can set up Google spreadsheets to draw in numbers automatically from your bank account. Oh, that's crazy. Yeah, we're getting there. So there's options. Again, what works for your brain? Did he build you one of those for your shop yet? That's what we're working on. Hopefully some like because that would be amazing. Like, that's our goal is like use software and bookkeeping, but make it tell a story.
00:31:02
Speaker
right because that's what we need as the CEO of our business and why do CFO work. The CFO we don't, you know, most small businesses don't have, they're the strategy in numbers. They're the ones who are looking at the numbers and saying, this is what this is telling us. Hey, you're really,
00:31:17
Speaker
your team is 30% of your overall revenue. It should be 15%. Let's talk about that. Like that's the piece that most small businesses don't get. And that's why I'm so passionate about teaching small business owners to do that until they can afford to get their own accounting team.
00:31:33
Speaker
So, Krista, I get so passionate about this stuff because most people are scared of numbers. They're intimidated by them. They don't know where to start. It can feel super cumbersome, and it can be. But we, we don't need to be in the weeds. We need to say, we need to like high level What are these numbers telling me? And how can it help me grow my business better? Like, that's what I hope I can teach others. It's like, you don't need to be your CFO. You don't need to be your own accountant. You don't need to love numbers and spreadsheets. But we do have to have this data, or else we're just building our business kind of flying in the dark. I love how Marcus Lemonis, do you watch the profit? I don't even know if the profit's still on, but that's like my dream life right there, the profit.
00:32:14
Speaker
It's basically like restaurant impossible or where they're going in and like saving hurting businesses. But he does this. It's Marco Salmonas. And he said, if you don't know your numbers, you don't know your business. That's really good. I'm like, ouch, that hurts. But it's true. Yeah. And there's so much power and peace of mind if it's like, Hey, do you want to make enough to send you know go to Disney this year? Like you can make a plan to do that.
00:32:41
Speaker
That's what numbers do. They're a tool. I love how I got to interview Kendra Adachi. Do you know Kendra Adachi? The lazy genius? Yes. I listened to her podcast like not for a long time. I love it. Amazing. She's so fun. And she said that money is a tool, not the treasure.
00:32:59
Speaker
That's really good. good Yeah, thats I love that. Okay, so what are some numbers that people should be paying attention to? Because you said that you could make it really simple and just send your accountant a couple of different numbers. What should we be looking at? Revenue, profit loss. Profit loss has a lot of different numbers on it.
00:33:15
Speaker
So I'll tell you what the IRS kind of, I know not everybody listening is probably in the US,
IRS Reporting: Sales, Expenses, and Wages
00:33:20
Speaker
but for us in the US, what the IRS needs to know when it comes to tax time, they want to see how much you sold. So that's sales, revenue, different terms. Other thing about money, it's really challenging because people use different names for other things. Like the top line, like how much came in? How much came in? How much money came in to your business this year? Top line.
00:33:42
Speaker
of your profit a lot, like the very top. Sales, revenue, how much came in? How much did you sell? They have to know that for the IRS. You need to know that personally. Number one, number to know. I have five numbers that I think every business owner should know. We talked about that before, I think on our last interview.
00:33:58
Speaker
So that's number one. IRS needs to know it. You need to know it. How much did you sell this year? And then what did it cost you to make those sales? Like, what did it cost you to run your business? So that's, you know, there's costs of goods sold. There's overhead. There's general and administrative. But to me, it's just expenses.
00:34:18
Speaker
what went out the door. And so the IRS just needs to know basically, how much did it cost you? Now, if you want to get in the weeds, there's some specific rules around meals, because you can only write those off like 50% instead of 100%. And so, for instance, if you, you know, spent $100 on a meal, you can only write off $50 of it. So technically, you need to track that a little separately. There's some rules around auto expenses versus mileage. There's some rules around If you work from home, like home office expenses. So there are some specific, you know, things we kind of need to track a little differently. But in general, the IRS just needs to know, like, how much did it cost you to run your business? What were the expenses? Okay. And does that include your salary and your team salary or those different?
00:35:07
Speaker
Yes and no. Okay. So your team salary, yes, that's overhead cost. If you're paying them contractors, they need to know as a contractor, they need to know if you're paying them W-2 wages, they need to know because that has to do with how much you're paying into payroll tax. But yes, we need to know how much you paid your team. And then we can, again, if you paid them as a contractor, you have to send a 1099, which I say a 1099. Again, it's one of those things that's like, That's so, feels so intimidating. It's just like a receipt, basically. It's a receipt that says you paid this person a certain amount and there has to be a record that you paid them. And that's what 299 is. It's essentially a record or receipt that you paid someone. Whereas if they're an employee and they're on payroll, so they're getting a W-2, that's the record of you paying them. So yes, that is what I would say is an expense, an overhead cost in your business. Now, as far as your personal pay,
00:36:04
Speaker
It can go a lot of different ways because a lot of people are, depends on how big your business is, how you're licensed, how you're paying yourself. So for anyone who is just taking like a draw, an owner's draw or a distribution from your business, not through payroll. So you're not sending yourself a quote unquote salaried check, which is totally fine. You can just put money in your personal account, right?
00:36:30
Speaker
That does not show up technically as an expense. It's just what part of the leftover money. You get taxed essentially on everything that you pay yourself as a business owner. So I like to look at that separately. I would say that's the fourth number business owner needs to know. So let's run through them again. kind of Number one, how much did you sell top of line? Number two, what were your expenses? Not including how much you paid yourself.
00:36:57
Speaker
whether you paid yourself through payroll or owner's draws. like i just How much did it cost you to run your business? Not including how much you paid yourself. That leaves us with profit, can't net income. That's a third number I like to know because there's some percentages. like If we want to see that profit number, I like to see it at at least 30% of sales. So if you sold $100,000,
00:37:22
Speaker
Again, not including how much you paid yourself. I want to see at least 30,000 left over after all of your other expenses, not including your pay. So that'd be third number. And then fourth is how much you paid yourself. And again, it to me, it doesn't necessarily matter if you're paid on payroll,
00:37:38
Speaker
where owners draw. There's some rules around that. Again, like have a CPA have someone like me like do see if I do outsource CFO services, set that up. It's like once you know you're doing compliantly with how the IRS wants it like it doesn't matter. It's again like, do you like payroll is nice because your taxes are taken out automatically.
00:37:58
Speaker
owner's draws are nice and then you just pay taxes in. like It just depends on how you like to get paid. So that's the fourth number. How much did you pay yourself? And then last, I like to look at how much time you invested in the business this year. So that would be the other resource I would share would be toggle. T-O-G-G-L. that We love it. toggle okay It's my other favorite like secret weapon.
00:38:23
Speaker
love toggle, track your time, which I don't know, Krista, if you feel this way, but I think tracking your time is kind of an art. I had to learn. I never worked in a corporate job where I had to actually track my time. So I had to teach myself how to track my time. And Have a video on it if anybody wants it like just me running through how I set up my toggle why I love it how I try my time but it really gives you a lot of insight into you know if I made $30,000 this year and I I worked a thousand hours man. I wish I could do quick math how much is that
00:38:58
Speaker
$30 an hour? I don't know. I think that's right. Is that good? Is that bad? Did I make more per hour last year or less? What was my most profitable offer? Like, that's where the strategy side comes in and what I love to do for my clients or teach my students to do. It's like, let's look at these numbers and say, how can we be smarter? If I'm feeling overworked and underpaid, why do I feel that way? It comes back to the numbers. And I think so often we have feelings, we have feelings of like, I don't know. Is this going well? Am I working too hard? Am I making enough? Am I charging what I'm worth? Which I just think is the hardest psychological question. adam them I don't know. How much are you charging? How much are you working? That's so dependent on each person. But when you have the data then to look at and back up the feelings with these facts, that's when you're cooking with gas. That's when you can say, Okay, I've got some data here and I can make some strategic moves. So
00:39:57
Speaker
Chris, I hope that answered question, but five numbers I look at. Yeah. And how I track them. That's great. That's so helpful. And yeah, I love toggle too. It's really easy, especially for my team. Cause I, that's how I pay them. Like I look at what they did the last couple of weeks and then I could run that. And it also helps me make sure that I'm using their time in a effective way for the business. Like as somebody spending too much time doing one thing when it doesn't actually make us any revenue. So I love myself too. It keeps me accountable. So.
00:40:27
Speaker
It's very eye-opening, I think, to see where time is going. I had to kind of train myself and train my students, you know, because so many of us, it's really helpful to look at, you know, once you train yourself on tracking your time, you can't do everything at once. You can't, like, answer client emails and then work on a project. You really have to start batching your work in order to track your time effectively. So it really has this, you know, secondary effect of making you even more efficient. And because you have to start kind of batching, that's how you can track efficiently. And so it's really eye-opening, yeah, of like, Where is your time going?
00:41:03
Speaker
Yeah. That's so helpful. Okay. If somebody, we talked a little bit about getting your books set up for this year and all of your budgets and the things to be tracking. What if somebody has yet to go through their stuff from last year? Like what is the best way to actually like close out their books and wrap up 2024?
00:41:20
Speaker
Well, if you're like Kristin and I and have some type of perfectionism in you, it's very hard to not keep up with your bookkeeping and then look back at like 12 months ago, like what was this expense? What was this for? So I would say first and foremost, don't stress out if you are looking at your books or you haven't kept up with them. or And when we say the books, it's just like your money, your bank accounts. Where did your money go? How much did you bring in? Like it's not going to be perfect. And I think that's really hard. But okay, if you haven't kept up with it, just know it's not going to be perfect. But we want to get it as close as possible. Not just I think the mindset of like, this isn't just for taxes. It's not just for the IRS. This is for me. I want to know how much I made. I want to know how much I spent.
00:42:08
Speaker
I want to know where my money went. And then I want to ask myself, is that where I want my money to go? I think that's one of the most powerful questions that any business owner can be asking. If you feel overworked, if you feel tired, if you feel like you need more help, there's money there. I guarantee it. Because when we start looking at where we're spending money, I had one of my students We joke now we call it her Chipotle moment But she said when Shanna made me look at where my money is like actually going like really digging She said I figured out she had taken out a $30,000 business loan because she needed to hire a team member and she said it really felt like you know unfortunately became like a very resentful thing for her her family like
00:42:54
Speaker
but She has this big loan and she's not even taking a paycheck from her business and like, is this business even helping her? right Which I think a lot of people listening could probably relate to. We have to make money at some point. so She sat down and she committed to the process and she looked at where her money is going. She said, I found out that I was spending $500 a month on Chipotle. What? She said my biggest business expense was my taco bowl consumption. And I was just like, and to keep it, I've had the same exact moment. Remember how I told you, I never even had a budget for myself and I worked in finance. So for anyone listening, do not judge yourself, give yourself grace. ish If anybody should have gotten this right, it should have been me, right? And so I remember when I was transitioning jobs, Kyle went back to school, we sat down finally and looked at where our money was going. And I had spent $500 that month on
00:43:41
Speaker
Starbucks, just Starbucks. And so when you're at $500, that's $6,000 a year. And so what she just put some parameters, like instead of going to Chipotle every day, let's just go once a week. Like again, ah budgeting can feel so, again, like it's like a curse word because it feels restrictive. But instead, if you're like, here's my goal.
00:44:02
Speaker
I want to pay down $5,000 at this business loan and still get Chipotle once a week. That's when you will, we will sacrifice what the instant gratification if we are aware of the long-term goal. And that's, so anyways, I got on a tangent, but I think it's just this really cool moment when you start saying like, I have power over my money and I can choose how I spend it.
00:44:28
Speaker
I think, again, the goal for you is not just to not get in trouble with the IRS, which I think it's to say, I want to know where my money went. Because then I have the power, I say, awareness is the key to change. Once you know, so look back at those numbers, so look at how much you made in the last year, how much you sold in the last year.
00:44:48
Speaker
Yes, that's what closing the books means. and If you haven't done this all year long, that's okay. Just know it's not going to be perfect because you're never going to remember. But get it as clean as possible so that you can create a budget and a plan going forward. and Then what I do is every month I call it my money date. Some people call it like a duty day or you know I think there's a finance Friday, whatever your term is going to be. Come up with a fun one because it matters.
00:45:13
Speaker
a money date. And we call it a money date because when Kyle and I used to go out on an actual date. Before kids. Yeah. i And talk about our goals for the month or how much we made and those kind of things. So that was fun. But our money date and do something fun. Go to a coffee shop, whatever, and look at your money every single
The Power of Regular Financial Reviews
00:45:33
Speaker
month. If you have a bookkeeping software and you're doing it yourself, keep it up to date. If you have a bookkeeper, have them send you the reports you want to see.
00:45:41
Speaker
a profit and loss statement. How are we tracking towards our budget? like Look at your numbers. And if you keep up with it every month, it's a lot more simple than doing it once a year. Yeah, that's really helpful. Okay, last question for you. How can some creative business owners stay motivated and disciplined about their finances throughout the year?
00:46:00
Speaker
Usually a lot of really good tips. Maybe we could condense kind of them into this answer.
Viewing Financial Management as Goal Achievement
00:46:06
Speaker
I think the biggest thing to staying motivated and disciplined throughout the year is changing our mindset about why we're doing this. I think so many people go into money and budgeting and bookkeeping with a very like drudgery mindset. It's like the thing in the business you have to do, but nobody wants to do. And when we look at it like I have to do this just so I stay out of trouble, then of course it's going to feel that way. But for me, that's why I try to change the language from a budget to a money plan. I want to change the the language around
00:46:45
Speaker
why I'm doing this. And so if you set a goal, and then you're like, I want to see how I'm doing towards that goal. Or if you set, if you're someone who likes rewards, then that's how I would say to stay motivated. And discipline is just about setting a great habit. So what is the I do my money day on the same day, the same time?
00:47:04
Speaker
in the same place every single month. And I think it's kind of the James Clear Atomic Habits, like, how do we create a discipline? How do we create a habit? It's do it the same every month. And so I think that's for money and staying on track. I have a free checklist, actually, Krista, I think, and I'll send you the link.
00:47:22
Speaker
my money date checklist. You know, what actually, it's a video and a blog post. So I'll send it to you. But it's what I do on my money date every single month. And you all can still it and do it yourself. And just what are the exact steps? I think going in with a plan for that day it will help people stay on track. Because I think often people are just like, I don't even know. I hear this all the time. I don't even know what to look at. What am I even supposed to be doing?
00:47:46
Speaker
I'll tell you. but So get my checklist and I'll be helpful. So make it fun and make it to keep the discipline, make it the same every month. Keep it consistent. That's really helpful.
00:47:57
Speaker
So the week that this podcast episode is coming out, I think you're actually teaching a free class. Is that right? yeah You can tell people more about this class and what they're going to learn in it. Yes. I would love everybody come. It's called a financial fresh start. And that can be taken in so many ways. We can fresh start like with our feelings about money. We can fresh start with like,
00:48:16
Speaker
actually our actions around money, but financial, a fresh start. And we're going to be talking about six money moves that any small business owner can take to cozy up with their numbers without having the meltdowns and the spreadsheet stress. And so it's just going to be some tips and tricks on exactly what we talked about, like what I look at each year,
00:48:36
Speaker
how I'm setting up my finances this year, some tiny tweaks that you can make in your business to see bigger financial wins this year. And again, my goal is just to simplify the business conversation about money. Like, I'm not here trying to get you to recite the IRS code for how to write off your, you know,
00:48:58
Speaker
auto expenses. Like it's not that deep. It's high level, what you need to know, and why you need to know it, and how to track it. So it's going to be very actionable, financial, a fresh start. And I would love for everyone to join. It's January 23.
00:49:14
Speaker
We'll include a link in the show notes too, just so that everybody can find it. It's going to be fun. It's going to be great. Yeah. I'm excited. And I've gone through your course and it's so helpful. You have so many just ways of making money feel more exciting and more manageable. And I really think it's so motivating when you understand what you should be looking at, why you should be looking at it. I think it just makes everything else make more sense. Cause if our businesses aren't making money, there's not really a point in running them. So yeah.
00:49:41
Speaker
I think that's so true, Kristin. Thank you for that encouragement. Like I obviously am very passionate about this because like our business was created, yes, for freedom, right? To do work we love, to have an impact. But there will come a point in every business owner's life where you kind of face the music and say, is this working for my family? Is this working for me? And oftentimes that comes back to the money. Whether, and I don't think most of us started it to make money.
00:50:08
Speaker
But there comes a time, like we talked about, it's a tool, not the treasure, where it's like, I want to pay for my kids to go to Disney. I want to get them into that, that private school that we really want. Like money pays for those things. I want to pay off debt. I want to hire a team member, like we money's the tool. And my goal is to take the fear and get us back to the freedom that money can provide and teach business owners, again, just what they need to know, the high level number. So Christa, thanks for your encouragement. I would love everybody to join the free class. It's going to be great. And I've loved chatting out money today. Yeah, thank you so much for being here with me. I love it. Thanks for having me back.
00:50:49
Speaker
Thanks for tuning in to the Brands of Book Show. If you enjoyed this episode, please consider subscribing, leaving a review on Apple Podcasts, and sharing this episode with others. For show notes and other resources, head on over to DavianChrista.com.