[00:00:00] Fi johnston
Are you paying yourself from your business? It's actually quite alarming to me how many business owners are not paying themselves from their small businesses. If you want to pay yourself more or you want to make more profit in your business, you can do that in two different ways. You can either make more revenue or you can spend less on your expenses.
Intro
But if we want to be able to tip the scales towards the favor of marginalized people, we need to understand the secrets to making money in small business. The more we talk about money and the secrets that usually stay at the golf club, the more likely we are to be able to make money. My mission is to get more money into the hands of.
Good people, specifically good business people like you. This is Money Secrets, the place to learn about the money secrets of successful small business owners. Let's go. [00:01:00] This podcast episode was recorded on the lands of the Wie people of the KO Nation. And I'd like to acknowledge them as the traditional owners and custodians of the land and water where I live, work, and play.
I'd like to pay respects to elders both past and present, and note that sovereignty has never been seeded. This always was and always will be. Aboriginal and Torres Strait Islander land.
If we haven't met before, I am Fee Johnston and I'm the host of the Money Secrets podcast. And on this podcast we talk about money and small business with no shame because money is a part of every single bit of our small businesses. So if you want to pay yourself more, or if you want to make a bigger profit from your business, there's two ways you can go about it.
You can either work on bringing in more revenue [00:02:00] or you can work on spending less. I'm gonna talk to the second part first. Most people probably assume that because I'm a chartered accountant, that my focus would be to start with trying to spend less. Newsflash, it's not. So I do think there is a place for trying to reduce your expenses and making sure that what you are spending money on in your business is giving you a really good bang for your buck.
It's really important that you look at your subscriptions, which my God. The tech stack of a small business is so much more complicated than it was 10 years ago, so we need to make sure that all of the subscriptions we have are actually delivering something for our business. We need to make sure that the kind of coaching we invest in is designed for the stage of business that we are at, which means that we can actually [00:03:00] leverage it.
We need to make sure that when we are spending money on things like marketing, that it matches what we are trying to do in our business at that time. For example, I don't think it's a great idea to be spending money on meta ads in your first year of business unless you are a very experienced business owner or a really experienced marketer, and the reason for that is because.
You don't actually know yet whether where you are sending that traffic is actually going to result in a customer or not. So when you are setting your business up, you wanna be focusing on things that are assets in your business. Things like a great website, SEO, great copywriting, amazing imagery, a social media strategy or a marketing strategy in general training.
Training in how to actually market and communicate what it is that you are doing in [00:04:00] the world. These are things that are great marketing investments at any stage of your business, but things like outsourcing your social media and outsourcing or investing in paid ads. Is something that I recommend for businesses where you've already established your brand, you've already established that you are working with the right customer, that those customers convert when they get to your website, and then when you turn on the meta ads, it's like adding water to a pot plant, right?
So I definitely believe that small business owners need to be really careful about how they spend their money. We also need to be really careful with how we spend our time. So like I talked about in last week's episode, time is our most precious resource as a business owner, and we need to make sure that we are thinking as much about the return on effort as we [00:05:00] spend thinking about the return on investment when we spend money.
So saying all of that, yes, it's important to get our expenses right. And anybody who has worked with me and implemented Profit first into their business would know that I recommend that every single small business out there should spend no more than 25% of their income on their operating expenses. That does not include people, wages or product.
So 25% is my recommendation as the maximum amount that any small or medium business should be spending on their operating expenses. Now, let's move back to the start of this conversation where I talked about the fact that if you want to pay yourself more or if you want to increase your profit, there's two ways to do that.
You either increase your revenue or you decrease your expenses. I've talked a little bit about [00:06:00] decreasing your expenses and how that can be a way of unlocking more profit in your business, but because your expenses only make up about 25% of your income, reducing them doesn't have anywhere near as much impact as trying to reduce your revenue.
And that's why this is the major focus in Good Money Club and in all of the work that I do with small business owners. We are always looking at, are we actually optimizing the revenue streams that we have available? Are we tapping into the best clients that we could be working with? Is our marketing actually representing the value that we are putting out into the world for our clients and customers?
So what I want you to consider is that all of that time that we spend trying to decrease our expenses. Is basically focusing our, our energy on $30 [00:07:00] decisions. I don't give a shit about your $30 a month subscription and the amount of energy that a lot of small business owners spend trying to work out.
Should I go with an annual subscription, which might save me $30 a year, or should I just go with the monthly subscription? In that amount of time that you have spent thinking about that, you could have actually worked on how to make more money come into your business. So, what am I trying to say here? I want you to be spending more time thinking about $30,000 decisions than $30 decisions.
What does that mean? I want you spending most of your energy thinking about how to bring more revenue into your business than I want you to be spending on working out how to reduce your expenses. So let's say if we were thinking about how this might work across the year, you might spend one month of the year.
Working on [00:08:00] reviewing and being really discerning about your expenses. What are the things you're investing in? Are they actually delivering value for you as a business owner? Are they helping you to be more profitable or to be able to work less and receive the same result? Are they doing something that allows you to be healthier or more present or more creative or more connected to your business and to your clients and in your life?
Great.
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So we've one month of the year working on that, and we wanna spend the other 10 months of the year. Yes, you're allowed to have one month off a year. For those of you trying to count how many months of there are in a year, you absolutely need to be taking at least a month off from your business, even though it feels really hard.
So we wanna spend 10 months of the year working on our revenue. How can I increase my revenue without working more? Because there's no point in trying to grow your revenue by just working more. Unless you are right at the start of your business and you are still [00:10:00] building out your client load, or you are a product based business who hasn't launched yet, of course you need to be thinking about how do I work more, get more activity happening and bringing more money into my business?
But once you have established a client base, a set of products or services, and you are out there in the world doing it, now we want to be thinking about. Optimizing the amount of money that you earn for each hour that you work, so that you are able to increase your revenue without working more. One of the reasons I love getting small business owners to increase their prices is because it allows them to work with less clients and earn the same amount of money.
So that could also be your goal. It might be that you are working so much and yes, you are paying yourself a wage from your business, or you are really happy with the amount of profit that you are earning, but you are [00:11:00] bleeding yourself, dry earning it. So in any of these scenarios, either you wanna make more money than you were last year, or you wanna make the same amount of money that you made last year or last month, but you want it to be easier.
Any of those scenarios, the kind of things that we wanna be thinking about is what is my price and is it attracting a premium client? Am I putting myself, my marketing, my positioning, my branding, my communication? Is it speaking to the needs, the desires, and the problems of premium clients? If not, that's where we wanna start.
We want to think about what kind of clients you are attracting, and this goes for any kind of business, product, service, e-commerce, even an influencer. The higher quality your client is. When I say high quality, I don't mean high quality human. [00:12:00] I mean how much somebody is willing to pay has nothing to do with their quality as a human.
What I'm talking about is whether or not they are able to value and leverage and use the products and services that you sell. So we wanna be targeting the client that values what we do the most because that is the client that is going to be able to pay a premium. To receive a premium service or product from us.
So once you've worked out who is the best client for me to be working with, then you can look at what kind of price would that client likely accept, and what would they be looking for in exchange. So what kind of features, what kind of timeline, what kind of scope, what kind of deliverables, what kind of outcome, what kind of achievement?
What kind of transformation are they looking for, and how do I match the price to that? What we're [00:13:00] talking about is actually product market fit, so when you actually have a great product or service and it has the right deliverables, inclusions, features, benefits, outcome. And you are able to sell it to a premium client who can really take what you sell them and turn it into more value.
Now we are starting to work through how to make more revenue from your business in equal or less effort. Okay. So the sort of other things that we wanna be thinking about when I talk about $30,000 decisions, I mean things like going and investing in a new brand or a new website, maybe investing in an incredible integrated marketing campaign.
It could be investing in some coaching with the right person. Hello, I'm a coach. I can help you so much with your business strategy and your money, so please feel free to reach out on my website or on my Instagram, which is Peach [00:14:00] Business anytime. So investing in great quality coaching, training, mentoring, perhaps upgrading your skills, if that means that you are able to then earn a higher amount.
Upgrading your communication and your branding so that you are attracting a better quality client. These are 30 or even 300,000 or $3 million decisions. When you are able to step back and really think about how can I make the kind of decisions and the kind of moves in my business that attract high quality clients, great revenue.
How can I build assets in my business? And those assets might be marketing assets. They might be products that you are able to sell over and over. It might be designs that you are able to sell over and over. It could be downloadable products. It could be a course, it could be a community, a membership, whatever it is.
We wanna [00:15:00] be thinking about how do I use my time, my resources, and my. Effort and energy to create assets in my business that are going to earn me money into the future. So I would much rather that you and every small business owner who hears this podcast episode to be thinking about how do I make $30,000 decisions and how do I stop worrying about $30 decisions?
Okay, so just recapping if you want to pay yourself more. Or you want to make more profit in your business. You can do that in two different ways. You can either make more revenue or you can spend less on your expenses. Both of those will deliver a higher profit or a higher amount for you to pay yourself.
You cannot work on both of those things at the same time. Effectively, and what I recommend is that you spend at least [00:16:00] 10 times as much of your time, effort, energy, and resources, working out how to bring more money into your business rather than focusing too much on your expenses. I really hope this has helped you to reframe how to get more money from your business and into your hands, and I'll see you again next week.
Outro
Thank you so much for listening right up to the end. I hope you enjoyed this episode of Money Secrets, where we talk about the money secrets of successful small business owners. If you enjoyed the episode, I'd love it if you subscribe to the podcast, but leave us a review or share this episode with one of your friends.
I hope you learned something. I hope you got a new perspective and I really hope you enjoyed the listening experience.
