We discuss budgeting, mapping out your profits, and a method for identifying tech expenses. Tips and strategies for small businesses, solopreneurs, coaches, and consultants. Free up your money and plan for success on a 3- to 5-year horizon.
People, shows, things we mention:
Billionaire Buyer: https://www.cnbc.com/billion-dollar-buyer/
Cindy Crawford melon lotion (infomercial): https://www.meaningfulbeauty.com/
Richard Branson: https://en.wikipedia.org/wiki/Richard_Branson
Phylecia Jones: https://www.keepupwithmrsjones.com/
Shark Tank: http://abc.go.com/shows/shark-tank
You’re listening to the Third Paddle podcast recorded at the Vandal lounge in the beautiful southeast Portland, Oregon. Why the Third Paddle? Because even the most bad-ass entrepreneurs get stuck in Business Shit Creek. Tech Strategist Jen McFarland and business strategist, Twila Kaye are your Third Paddle, helping you get unstuck.
Hello and welcome to the Third Paddle podcast. My name is Jen McFarland, your resident tech strategist, and I’m joined today by Twila Kaye, your resident business growth strategist. Hey guys. Hey, business growth strategist, growth strategist. Because today we are talking grow, grow, grow, both growth and we’ve also got our resident, you know, cat wrangler. That’d be Liz Zirk. She’s been trying to reign us in all day trying to get this episode done. We’d love you Liz! You’re awesome. We love you. It’s really hard for us sometimes to reign ourselves in and focus, which I would say that for me personally it’s really important and I’m gonna really be listening to your segment on how to map your profits because budgets and forecasting it just doesn’t sound that sexy to me.
I’ve never been a big numbers person – before I started doing technology, I was an artist and an abstract painter. So, um, numbers. Is there anything you haven’t done? I mean really not much. Not much. Haven’t jumped out of a plane. I do love that. I’m always willing to explore, you know. So today we are going to talk about budgets and forecasting, mapping your profits and then like how do like forecast and budget for your tech needs? You know, because let’s face it, technology, it might in your business be one of the most expensive things that you have that’s a necessity, you know, other than personnel. Absolutely. Absolutely. Absolutely. You know, so, uh, Twila, why don’t you kind of start by like talking about, you know, how we go about this, you know, mapping and budgeting. I’m so excited about this because this is a, you know, an episode prior we talked about, uh, you know, your zone of genius, right?
I love that word, the phrase Zone of Genius because it’s really where it lies. And, and I love talking about mapping out your profit’s, um, because that’s where your growth comes from. Simply put, your growth comes from mapping out your product fits. Um, you know, the first thing that you need to, that you need to really get a handle on that I, um, I see as a, the struggle is real for many solopreneurs and small business owners is they’ve never really taken the time to physically map out what they have to offer and what all their income streams
are. And you know, for coaches and consultants, that’s pretty easy, right? You know that you have like a coaching program or you have an online course or you have a book that you’re going to sell that type of thing. Um, but you know, even those product based businesses out there, you’ve got different streams of income coming in because you’ve got different categories of products that you’re offering and it really is about, first of all knowing what all your offerings are, what all those profit streams are for you, and even product-based businesses, you can have a passive income stream. It’s about knowing what you have to offer in and where your money’s going to come from. Right. You know, and earlier today I was on a call with some of my colleagues and we were all kind of talking about, you know, kind of what we have to offer and how to articulate what we have to offer.
And you know, I think that for a lot of us, even before we get to the passive versus, you know, active service based income, that’s like if your business started somewhat organically, I think this is especially true for a solopreneur. You may not have mapped out all of it or you’re really thought about it. I mean, you’re just every day going day by day. Right? And then it just makes sense. All of a sudden one day to add on another profit stream and there really hasn’t been a plan to it. There really hasn’t been a strategy to it. It just made sense. And so you did it right and that’s where a lot of times we get hooked up is uh, or hung up, I should say, not hooked up but hung up as they’ve hooked up means something else that could be wrong.
But yeah, it kind of does. But hey, we couldn’t get hooked up to, but it is where we get hung up is not really mapping that out and you should really be mapping that out on a quarterly basis. Does it mean when you say mapping your profit’s like can you kind of step through the mouth and now your, your profit streams is knowing exactly where you’re making your money for a product based business. That would be in retail sales, it would be online sales, you know, just a number of different various ways, right? That you’re, that you’re actually bringing money in the door. Coaches and consultants. It’s is Your Group coaching program? Is it your training and development? Is An online program, is that a book? Is it? What is it? Right? Where are you making money? Where is money gonna come from? And you have that part of it, forecasting how much you expect to sell, correct.
That’s the next piece of it, right? Is then you get into the forecasting of OK, from each one of those revenue streams, what money am I going to make? Right? So it’s where do I make my money, what money do I make from it, and then the next piece of it is how am I going to make the money? What do I need to do to make that money that I forecasted? Like how much is it going to cost you to actually do that? Well, that’s a part of it so that you can create your budget. That’s actually the result is all of that will tell you what it’s gonna cost you and how you can actually create your budget, right? Because how you make that money would be, OK, I’m going to have to do some advertising. I’m going to have to do some pr that will cost me money.
I’m going to have to do some direct mail, I’m going to have to do some online marketing, right? And then you can, you can go ahead and budget off of that. So we map it out and we, the results are we map out our profits and then the budget will tell us how much of that is actual revenue, right? Because we’ll go through the right, right before casting of revenue tells you what revenue you’re going to generate, and then you can see, OK, then you have to look at how am I going to generate that revenue that I’ve just forecasted and projected that will tell you what your costs are going to be. Because if you’re going to do some online marketing, if you’re going to do advertising, if you’re going to do media and pr, if you’re gonna do, um, whatever it is, if you’re going to expand inventory, so how many people do you talk to that don’t have a budget at all?
It’s in the 90 percentile, especially with solopreneurs and small business owners because of exactly what you just talked about a little earlier, Jen. We organically grow right? But like, we get this idea to start our business or were pushed into doing our business, maybe we’ve been downsized and accompany company or let go or whatever. And so, you know, all of a sudden this entrepreneurship thing is upon us and we’re just trying to figure it out day by day. OK, no, that’s fair. So, um, so your advice then is if you haven’t mapped it out, if you don’t have a budget, get on the train. You got to get on the train and you really have to, um, you know, my, my dream house has an entire wall that is nothing but a whiteboard, right? It’s a white plate. It’s a whiteboard. White Wall is what it is.
And you know, on a quarterly basis mapping out, OK, you know, I offer this coaching program, I offer this book, I offer this whatever it is. And then I’m forecasting, OK, if I have a hundred people that purchase that program or that book at this price, this is how much money I’m going to make. Or when I was in a product based business, when I owned my gift basket business, I had different lines of product, right? I had different gift basket line, so I knew exactly from my sports line I could get x number of sales at an average price of choked out how much you’re going to sell. It’s wild-ass guess WAG. No, it’s not a wag. You have to do your market research. You have to do some competitive analysis and see, you know, what other people are doing in your industry, what they’re selling, how much they’re selling, what you think you can do, and with coaches and consultants especially, you have to really look at your time and yes, you’d love to have 51 on one coaching clients that are paying you five grand a month.
Yeah. Do you have the time to serve 50 one-on-one clients at five grand a month? Not and do a good job, right? So you have to be realistic. You have to look at your time, you have to look at what inventory. If you’re in a product based business, you have to look at what inventory you have, what all products you can offer or do offer and just kind of project that out. And some of it is a little bit of a wag, you know, because you have to have that a little bit, but then you go out and you make that wag happen because that’s your projected goal.
So I worked with a lot of people to um, you know, and the methodology I’m going to share with you actually started out just helping my clients find the money to afford the services that they need. I work with a lot of people who are like kind of start out in this place of like, well, I mean I just, you know, I’m up to here with tech. I’m not gonna spend any more money on these tools. And talked other times about putting up with the things that are broken. So when I talk about like forecasting and budgeting for your tech needs, the first step is really figuring out how much, how much it’s costing you. Because if you don’t know, that’s a great place to start. What I suggest to people is that you look at everything. If you have a PayPal business account and a credit card and or maybe several business credit cards, if you have employees that are empowered to make purchases on your behalf, look at everything, the recurring payments, the programs, the Apps, apps on your phone, computer, tablet, and how much the website costs, whether it’s, you know, domains and hosting, and then your developer tech maintenance, security.
Please tell me that you’re paying for security of some kind or have apps on your website. That’s for another episode, but just a little aside. Yes, please. Anything Technology related that you’ve purchased over the past year to support your business. So what I suggest to people is that that list of everything, um, is actually your starting budget.
Yeah. Then the next step that I encourage my clients to go through is to make the tough cuts. If you’ve made that list of everything, you know, like my dad says, dollars to donuts, you’re welcome dollars to donuts. There’s stuff on there that you’re not using because we all find things and we’re like, that’s pretty cool. I think I need that, you know, um, and it, and honestly if you go through your all your recurring payments and you find things that are not tech related, you can cut those as well. Like this, you know, I’m just talking about within the service area that I help and consult with people about if you have a tech manager, you know, find out everything that everything from them, you know, so that you can make an informed decision because you don’t want to cut something that actually is being used.
But just because you don’t know about it, you also need to talk to other people. So if you have, you know, just make sure you get everyone in the room, even if it’s just you and your other personalities and figure out what everything is, don’t pinky swear that you’re going to use it in the next year. Um, get rid of it now if you haven’t used it even for like a month or two like I would challenge you to get rid of it. You know what I, the first time I did this, it was too long ago. I need to do it again. You know, I was amazed because I think I saved. And this was in my first year of business. I think I saved myself like $400 a year. So this new leaner budget. This is your new tech budget #urwelc.
Yeah. And I love that you’re talking about this because our friend Phylecia Jones, who we mentioned quite a lot, she’s our resident and Budgetologist, right? Like I learned this simple, simple trick from her and it’s the same thing that you can do for your business budget and then you can get down to the nooks and crannies with your tech budget and your marketing budget and everything else, but you employ the same thing. You know, she had me take my wall in my house and put a piece of paper, three columns, make three columns on it, and it was home business savings, and then I had to go back through my bank statements, my credit card statements, all my financials for six months and write down every transaction on a sticky note and then put it under the category that it belonged to. Either it was an expense for my home and expense for my business or it went into savings and what happened when I did that was I saw all the spending that was happening that didn’t need to happen in both the home and the business area and that nothing was getting done for savings.
And so then I was able to kind of take all of that. And you’ve got to do that for every area, right? Like generally you’ve got to do that so you know exactly how much money you can spend on your business because you have to know how much money it costs you to run your household first. How much money you have to put in savings and then what’s over for your business.
Right? And what income’s coming in for you to be able to do that. And then you can start taking every area of your tech, your marketing, yourselves, all of that kind of stuff. We’re talking about tech because I’m most important right now. I know, I know you are just always most important technique is most important because it’s the biggest part of our lives now, which you might not be your favorite thing, but yeah. So, so just kind of created like leaner budget and I would say that actually joking aside, you know, yes, you have to do it for your home. And in fact, that’s something that Jon, my husband and I, we do probably twice a year, but probably we should be doing it quarterly. Well, you have to know how much money you can invest in your business overall. So you know how much you can even spend in your tech or anything.
Right? Like if one of the things you’re feeling overwhelmed and you want to hire a VA, well you can’t do that unless you know you have the budget for it, just because you can, you know, write a check right now and it’ll clear the bank doesn’t mean you have a budget for it. Correct. OK. So now we found a little bit of money, right? Because we’re winnowing down our budget, we’re actually creating a budget. So then the next step, and this is the part where, you know, we’ve talked about in the past, kind of forecasting out what those needs might be like, you know, I like to take that broader holistic look at like where your business is going in the next three to five years. So then the next step is kind of the tough part, right? Like I’m planning your projects, so I really encourage people to identify those core business needs for the next three, six or 12 months, you know, like what’s bugging you, what needs to be addressed, you know, is this your computer, is your website, is it a CRM, is it, you know, a database.
And I just want to remind people that a tech budget is different from your social media marketing budget, you know unless you need to buy software or hardware to support that effort. So this is kind of like when we get into the super nerdy like schedule c tax stuff, just remember that like, you know, advertising, see schedule C, sweat nine. That’s what nine years in a, in a tax agency will do to you. You know, when you go in and you really start itemizing your expenses for your business. I want you to think of your tech budget in those terms. Like we’re talking about software, hardware, security, apps, these are all things that are like separate. So you can’t just be like, well I use my computer for social media. So that’s my tech. And the answer is no. We’re talking about, you know, new computers, servers, all of these types of things.
So when you think about what your priorities are, just remember that like when you get a new computer that’s a project, not only does that cost money, but it also costs time because you need to lie. Anytime you get something new, it takes time to implement and cut over and you have to set it up about some of the companies that I go in and help and business strategy and one company in particular that I worked with, they wanted to do a whole overhaul and so it was new phone banks, new computers, new everything, right. New typewriters even because there are still some things that typewriters are needed for, believe it or not in this day and age, but it was all of that equipment, right? That had to be done and we had to budget for it, but OK, you go buy a new computer. Who’s going to set that up?
Especially for the small business owner who’s going to set it up. Do you have a person or do you need to go find a person that’s going to come in and get it set up? Or you know who’s going to do the maintenance and repair? If something goes wrong or you gonna pack up the computer and take it to geek squad at best buy or you know, are you going to call it a mobile tech? On, that’s what I mean about like, you know, it takes time to implement and cut over. I mean you can’t just, you can’t just expect it to be, to be simple. A project I worked on once was the, uh, we were just updating the print servers at a large company that I worked out and that was like a couple months, you know, to update that so that all the printers would still print to the right printer, you know.
And so there’s some complexity around like, so think about that. That sounds like something so simple that it, you know, when you’re dealing in scale, um, these things can, can be much more difficult and if you don’t plan and prioritize the projects, you know, that’s how you end up with a computer that’s eight years old. And if you do have a computer at eight years old, really you need to plan a project around replacing those computers. Anything over five years, especially a laptop. You’ve got a really have a plan in place for replacing that. Or you need to be using a program like a crash plan, which is the one that I use to make sure that all of your information is backed up because they can only last for so long when we’re talking about tech projects were also talking about the equipment that supports you, that keeps things going, um, because that’s how we end up with that day, um, that we go to our computer and it’s not on.
And then you have that moment of, Oh my God, where, what happened with everything, you know? And so that’s why you need to really think about all of these pieces, prioritize the projects and then after you’ve thought about the time to implement it and cut over for a tech project, um, I would say that like each project needs to have a 20 percent contingency. And what that means is you plan out how much it’s gonna cost for all those times that things don’t go the way that you expect. If you’ve ever built a house, you know, a 20 percent contingency. It’s called the general contractor. And he always puts a 20. But yeah, when we had our kitchen redone, it was like, Jen, I need to talk to you about an upcharge, you know, and I’m like, Oh God, it was like my least favorite word for about three months.
But you can count on that in business as well as you can on building the house or anything else. It’s always going to cost you more time and more money always. So just build it in because then you’re saving yourself headaches down the road. Then the hardest part, right? Like you’ve like mapped out what you, what your most important things are for the three, six or 12 months, um, but then you just have to real high as it like. You got to hold yourself to that budget because things are gonna happen that you don’t expect. So if you have actually been holding yourself to that budget, it will reign you in a little bit more. Um, so that you can avoid that Shiny Object Syndrome, which leads me a shiny object syndrome. It leads me directly to what happens when you don’t map and forecast your budget. Please, can we talk about this shiny objects syndrome while not just syndrome, but what happens when you don’t do this budgeting and forecasting and can we just say #closeyourdoors?
Yeah, yeah, yeah. If you don’t plan and you don’t, but,
and you don’t budget. I mean, you know, the biggest thing that can happen is literally you’re faced with closing your doors before you ever even get started. And I know this is a really scary subject for especially startups unless you’re going for funding. If you’re going for funding, you have to do all of this budgeting and forecasting to even go to a lender or cap venture capitalist or Kickstarter or whatever you’re going to do for your funding. Um, but for those of you who aren’t going for funding and you’re thinking about starting up your business and you’ve heard this sexy word out there, a bootstrap, um, remember, bootstrap means you got a budget. And so if, if after everything, after your home expenses and after your savings and what business expenses you have now, if you’ve only got $700 a month left to invest in your business, you’ve got to spread that $700 out in your tech, in your marketing and your sales, in your cost of acquisition, your customer retention, um, your operations, your personnel, um, you know, and that’s not even hiring employees as per se, it’s hiring contractors and everything else.
You got to know what everything is going to cost you and if you need the money, and if you don’t have enough money to cover that, then guess what? You got to go make the sales that, we’ll cover that. But if you don’t know these numbers, um, you will be closed before you’ll ever be open.
I think that’s a good point. And I think too like even if you’re like, Eh, you know, I’m just starting up, it’s OK if I lose some money, you know, I’m just kind of getting that thing going. You know, it’s so funny because I was a write off for the last business for a loss. Come on, guys. Let’s be real. Remind you that, you know, IRS actually categorizes your business as a hobby. If you lose money for more than like three years over a five year period or something, then they stopped allowing allowances for you.
So there’s consequences to that. So. All right, so, so the first, the first thing that happens is you close. So say you know, close. What else happens if you don’t map or forecast, your computer crashes and you don’t have anything. Yeah, you don’t have the money to replace it. You don’t have the money to keep your business going and it doesn’t necessarily mean that you have to close, but it does mean. And then you’re going and getting yourself overextended. Write like I talk about my idol. Tilman Fertitta quite a bit as well. And, and he was just saying, if you don’t watch the billionaire buyer, um, I highly suggest that you watch that show on the CNN business channel
billionaire buyer and it’s all about him and that he’s giving the opportunity to small businesses to gain his business with his brands. And he was just talking, there was an episode just the other night of these farmers in California who were raising organic chickens in a special way that was really creating like a better quality product and they tested the product in his restaurants versus what they’re already using. And it just won hands down. So we gave them a deal. They were trying to bootstrap it, right? Like they didn’t know if they could scale to even meet his business demands because they didn’t have the money and they didn’t know where it was going to come from. So we had them go through and do all of this, you know, go through, let’s project how much we can make, let’s project, um, if you’re going to need more land so that you can raise more chickens and what you’re going to have to do right to do that. And he talked about how on his third restaurant, when he opened his third Landry’s, he had to do it on credit cards and there was a time that he did not even think that it was going to fly and there he was going to be in bankruptcy or whatever, you know. And that’s the story of every entrepreneur. Every entrepreneur has had that moment in their life where it’s just like, Oh God, I don’t even have one more set and I’ve overextended myself. And that’s what you do when you don’t create these budgets.
I just see that the most in the field that I have where, you know, I, I have customers and friends in the entrepreneurial world, you know, they’re looking for that quick fix. You know, it’s almost like taking diet pills and thinking sales copy on the sales pages that they’re selling stuff to you on the Internet is so, so compelling that you just buy and you think, yeah, 27 bucks a month, that’s nothing or 97 bucks here, you know, OK, I can do that and I can do a payment plan
is so compelling and you know, and especially when we’re tired and we’ve been working all night, you know, and then you sit down and you watch that or you’re just, you’re not even working. Right? And you’re like sitting there on Facebook and this ad comes up that says, you know, you’re gonna, you’re going to be a millionaire in six weeks and your brain says that’s not possible, but then you’re tired and you’re like, alligator brain comes in and says, but what if it’s, what if it is possible as possible? You know, in the nineties, start buying Christie Brinkley melon lotion, right? When and Crawford, let’s not talk about that, about that. That’s another episode.
Look, I do kinda like infomercials a little bit and if you would like to talk about how that works than I am glad to talk about falling asleep on the couch … and I’m addicted to infomercials and I come from a long line of people that are addicted to that. But I guess what I’m saying is we don’t look for the easy answers. I mean the, the, the, the, the, the best thing that you can do is map out and forecast and budget because if you don’t, you’ll find yourself wanting to, you know, fall for the ads and, and just jump at the next thing, create another program, do, do another thing. Um, when the reality is that sometimes, even though it may not seem as sexy, you know, staying the course is actually like the way to find success. You got to map it all out and it, you know, we talk about this quite a lot because we talk leadership a lot in your business, right?
And being the pilot of your plane or the CEO of your business and being able to make smart decisions. And you know, just recently I had a, was working with a client and we were talking about this and mapping out his budget and everything that he was spending in his business and why and, and all of that, you know, he wanted to check out and I said, look, you can’t check out on this because you need to know every day where your numbers are because you’ve got people calling you on the phone that are, hey, we noticed you’re a realtor and I think seo would be really great for you. And they start telling you all the great things that Seo can do for you and you know, then you get sold on the phone and then you’re like, wait a minute, how much money is this that I’m spending?
Right? It just allows you, when you know your numbers, it’s sexy because it allows you to make really great smart business decisions. I think that’s so great. And it, it also helps you when the, when the phone rings, not, you know, the phone or the Internet comes to call in with the next grade. Offer the infomercials. I mean, whatever it is, it gives you that, that informed decision, you know, sexy that is sexy as hell. When you can make a really smart, informed decision. It is.
Unless you’re Richard Branson who’s call to action is, screw it. Let’s do it. I mean sexy in itself. Branton is sexy in his. He’s also got billions and billions of dollars. So if he decides to make a decision, you know, he has the budget and if you think that man doesn’t know his budget and when he speaks, he could make. I was just going to say, even though he says, screw it, let’s do it, it’s because he knows he can screw. He’s got gardens and he can do it. So don’t, don’t look at your idols. You know, like, I really appreciate Richard Branson’s approach to leadership.
Don’t look at your idols and think, you know, well, they say to just do it, you know, whether it’s Nike or Richard Branson, you know, the thing of it is they are also in a different position than you. So you, the sharks to know your numbers when you come on the show, right?
Yeah, I gotta I gotta watch a little more Shark Tank. You talk about that a lot. Um, so I think that you know, we’ve done a pretty good job of laying hammering this out. You know, I think when really talk about budgets, shit, creek, you know, what we’re really trying to do is help you protect you and your business so that you don’t close your doors so that you don’t find yourself one day with, you know, something that isn’t working, whether it’s your supply chain or your tech. This is, this is one of those places where you may be in Shit Creek right now and not know it. Um, so we’re trying to help you educate yourself and educate your business. And if you’ve got the budget and the forecasting all mapped out, then this is awesome. And you know, you know, but if you don’t, it’s the only way to grow.
It’s the only way you’re going to grow your business is, is to budget and forecast and know your numbers, know what you can and can’t do, what money you’re making, where you’re making it from, and how you’re going to make it. You got to know that. So if you have some stories or, or, um, any insights that you can lend to us about, you know, your budget and forecasting, maybe some of your nightmares, a nightmare scenarios around what happens if you don’t, you know, map your profits or forecast for your, for your techniques. Um, be sure to email us at info at third paddled and hey, Jen, hey, what, what if we just put out there, Hey Phylecia, are you listening to are going to be on the show? And she’s gonna talk, sexy resident budget technologists who doesn’t know she’s our resident budgetologist, but we believe that she’ll come on the show to come on the show were manifesting that will actually, you know her.
So there’s that. So that relationship there is that relationship. And so what we’re sharing with you is that we will be revisiting this topic again, so please send us your questions, comments, stories, um, anything, and you know, when we do bring Phylecia on, we’ll take those to heart and, and ask her some of those questions because the show is only great, you know, because you’re here sharing with us, um, if you would like to subscribe and continue to get updated about the third pedal podcast, I really encourage you to go to our website through pedal.com and opt in. We’re still offering the “10 Ways That You can Avoid Leadership Shit Creek” ebook.
So, with that, I think we’re going to sign off. So thanks again for listening.
Thank you for listening to the Third Paddle podcast. If you like our show and want to learn more, check out our website at www.thirdpaddle.com or leave us a review on iTunes. Send questions or topic ideas to firstname.lastname@example.org. And don’t forget to tune in each week to get even more technology and business tips to help you navigate business Shit Creek. The Third Paddle podcast is sponsored by Foster Growth at https://jenmcfarland.com and Twila Kaye International at www.twilakaye.com.
Jen McFarland is a business systems expert, podcaster, and blogger. She’s helped hundreds of businesses and thousands of podcast listeners make better business decisions. Jen’s passion is helping women-owned businesses get the growth tools they need to meet their 3-5 year business goals.
Are you starting a business? Confused about how to grow? Check out Jen’s Picks, my favorite business growth tools.