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When starting a new business, there are lots of things you have to consider and learning how to manage business money tops the list.
In this episode, we are here with Ingrid Thompson of Healthy Numbers. She’s an author, a podcast host, and one of Australia’s foremost authorities in the area of getting ready to start a small business.
Ingrid talks about tracking and dialing in the most important numbers in our businesses and why we should do it.
Start looking at all sorts of numbers including how many calls you take, how long you spend on the phone with someone, how many clients you need to talk to in order to make a sale.
As you watch the profit increase and revenue growth, you start to understand where the money comes in and goes out.
The finances is the best place to start when considering your numbers.
Break-even is where you pay yourself the right amount of money and you cover all your costs.
If you’re having a lot of customers and a lot of money coming and going, you can use one of the MYOB or the Xero packages.
You can use your calendar or HubSpot to track the time spent with each customer.
When spending a big amount of money in business, make a decision if it’s an investment for the long term or an expense that needs to be recovered immediately through sales revenue.
Create a dashboard, choose two important numbers to track, not just your Facebook likes, and track them for the next six months.
When people buy from you, it’s not about the amount of money they paid you. It’s the investment they made for trusting your business.
How To Manage Business Money – Transcription
We’re going to talk about numbers today, how to manage business money, get your numbers dialed in, your finances in your business, how much time you’re spending with clients versus how much money you’re making, and all of it.
We are here with an author and a podcast host, Ingrid Thompson. She is one of Australia’s foremost authorities in the area of getting ready to start a small business.
We’re so thrilled to have you here talking about healthy numbers in your business, the act of creating healthy numbers in our own businesses, and how to manage business money
How To Manage Business Money – Have Healthy Numbers
Can you just tell us a little bit to get started about what does it take to know that your numbers are healthy in your business?
That’s a great question. Thank you.
Firstly, you have to want to be looking at them.
How To Manage Business Money – Look At Your Numbers
It’s amazing how many people when they are in a business that they’re keen to get their website going. They’re keen to get their products up and running and take care of their customers but when we look at numbers whether that’s how many calls we take, how long we spend on the phone with someone, how many clients do we need to talk to in order to make one sale, those are all the sorts of numbers we really need to be looking at.
The more we get involved with taking stock of the numbers in the business, it becomes more interesting.
Especially as you watch the profit increase, revenue grows, you start to understand where the money goes in terms of looking at expenses and costs. The numbers are just endless. Every single aspect is about numbers.
How To Manage Business Money – Having Healthy Numbers Across All Aspects Of Business
Lots of people get terrifically excited about their Facebook and Instagram page numbers, how many looks at them and their likes. That’s all part of the number’s journey.
The business is called “Healthy Numbers” because we actually want numbers to be healthy across all aspects of the business.
When we’re just starting to consider what our numbers are in our business beyond our Facebook likes, what is the best place to start? What is the most important highest priority best place to start when we’re learning how to manage business money?
Best Place To Start On How To Manage Business Money
Absolutely, the finances is the best place to start on how to manage business money.
The first thing to understand is how much it costs to run the business. For a lot of people running a business, it’s a laptop, a good internet connection, and apart from that, there are probably not a lot of other expenses. There’ are always little monthly ones that sneak up so you can see that it’s not a very expensive business to run.
However, by the time you had your insurance, your monthly charge for your email campaigns, and your monthly charge for Zoom or whatever else you use to host webinars. These can all add up and when we have an idea of how much that is and how much money we need to make every month, then we get what’s called a “break even.”
How To Manage Business Money – Breaking-even
Break-even is where you pay yourself the right amount of money and you cover all your costs. That’s break even. Then, everything else after that is profit. It’s a really simple calculation to do but that’s the most important one first.
Then, after that is the customers and conversion rates and that gets a little bit more complicated but that again is quite basic; how many calls you have to make, how many calls you take, how many inquiries do you have before you make the sale, and that’s basic conversion.
Those are two really important ones to really watch out for when learning how to manage business money.
Do you recommend any certain software or something that you like to use? I know one of our guests recommended just using a Google template for tracking your numbers which is something that I like to do.
What do you recommend?
Software On How To Manage Business Money
Well, for the finances, depending on how much is going on. If you’re having a lot of customers and a lot of money coming and going, one of the MYOB or the Xero packages can be very beneficial on how to manage business money. They can also help if you’re creating a product to keep track of the invoices coming in and paying those invoices on time.
For the first couple of years in my business, I had an excel spreadsheet. In fact, the first year, I started off making a sleepwear product. It’s a woman’s cotton sleepwear. I had a notebook and a pencil. My costs are written on one page and my income on the other page.
How To Manage Business Money – Know What Method Best Works For You
It’s important to track your numbers whatever is going to be the easiest for you. – Ingrid Thompson
What I say to people is “What is something that you’re going to do?” Like if logging in to Xero is onerous and fiddling around with excel is too much for you, if a notebook and pencil is the best way for you, then do what is going to help you keep track. That’s the most important thing on how to manage business money.
How do you track the client conversions or what’s a good way that you think people can do that especially when you’ve taken into account the expenses of maybe driving and seeing a client or refunds if you’re selling digital products and that kind of thing?
That’s a great question and that’s where I guess some of the stuff where I can really help on how to manage business money.
How To Manage Business Money – Track Expenses and Time Spent On Each Client
Like if you’re using constant contact or MailChimp or campaign monitor for emails and you’re having how much traction are you getting, how many people opening emails, how many conversations of emails go back within forwards to actually track a prospect who then becomes a client before they actually buy.
If you’re actually having meetings with people and tracking your times, it’s such a great question in terms of tracking how much time is actually spent on each customer. That’s a crucial aspect on how to manage business money.
I think there are some really wise decisions to be made about spending quality time with each customer in the beginning, really understanding what it is they want. Again, that can either be tracked through your calendar or something like HubSpot that allow you to track the time in there that you can say you had this meeting and it took an hour to drive there.
How To Manage Business Money – Consider The Preparation Time
There’s also the preparation time. I think people underestimate that when learning how to manage business money.
If you’re going to have a meeting with someone, you don’t just jump in the car and get there. You actually spend an hour researching their business, having a look at what they’ve sent to you in the past, how many of your emails have they opened, what has been the conversations up to this point so you’re actually prepared to go and have that meeting. That’s part of your preparation time.
I think when you sat to add all of that up, the cost of acquiring a new customer can be quite significant. That’s why when we talk about retaining customers it’s so important. It’s because that’s another measure that’s tremendously neglected by a lot of people. It’s what is the retention rate or the attrition rate that leaky bucket, people flow in the front door but they’re leaving out through the windows in the back door.
How To Manage Business Money – Know The Cost Of Acquiring A New Customer
If you get five new customers this month, do you have those five customers each and every month going forward? If not, where are they going? Why are they leaving? Why are they making alternate choices?
The cost of acquisition of a customer is probably a lot higher than most people would consider.
That’s a great question. Thank you for that.
So what else do you think we need to know about numbers and how to manage business money?
How To Manage Business Money – Look At What Costs You
It’s really important to look at the ones that cost you.
I worked with a client and she was selling a beautiful product. Every time she sells the product, she actually lost money because it was costing her more to put together the product than the revenue she was getting for it.
I think often when people are selling a product, and I know a lot of people who have online products. Because they haven’t actually factored in the total cost, the actual revenue doesn’t cover the cost of actually setting up the product.
How To Manage Business Money – Factor In All The Costs Of What You’re Doing In Business
I’ve just created a new website, written a book, and created an online program. If I’m going to factor all my hours into how much the website costs, how much my time has been over the last six months and the last couple of years putting together the book, there are a lot of books to be sold and online programs to sell in order to cover those.
Making a decision about is that an investment in my business or are these expenses that actually need to be covered?
In fact, the reality is that for me, if I send my book to someone, the cost of the postage and the purchase is really my cost. For me to then go back and say “Well, these are two years’ worth of effort going into creating the book.” That’s an investment in my business so that becomes an asset in my business as opposed to an expense. That’s a decision to make when you’re actually looking at the numbers.
How To Manage Business Money – Decide If Something Is An Investment Or An Expense
What are the things that are investments in your business and that therefore are assets?
It’s not that you don’t recover the costs but they’re part of what the business is worth in an overall sense. That’s something to have a think about when people are making big investments in their business like websites and online programs. It’s because to try to factor back the costs of creating those, it would be very difficult to calculate and recover.
I think Apple is a great example of that, that phone that we buy. We pay a thousand dollars for an Apple phone. We’re paying for all the investments but if we really were paying for all the investment, would we ever be able to afford an Apple phone?
Does that make sense?
It really does.
Before we go, what is the one big action step that you say Thriving Launchers go out today and do and make sure that you have dialed in for your numbers?
How To Manage Business Money – Create A Dashboard
I think the one big action step is to actually create what’s called a “Dashboard” and choose maybe two or three really important numbers to track and it’s not just your Facebook likes. You’re going to track those anyway.
Really dial in on how much it’s costing to run the business, how much profit you are really making, and how much you are paying yourself like really get handled on some of those financials. Then, have a really good look at the cost of acquisition of new clients and see what it is that it’s costing to acquire new clients. Then, how much value do you really place on those people once you have them?
Learn How To Manage Business Money And Appreciate People For Trusting You
It’s because I think it’s not just that somebody has paid you money; $20 for a book or $79 for an online program. What they’ve actually done is they’ve had a huge amount of faith in you and they’ve invested a lot of their time and energy in making the decision to purchase that.
I think we underestimate. It’s not just the number of the $79 in our bank account or whatever that money value is. It’s the investment that that person has made by trusting your business and to have a really good appreciation of that not just about the number.
How To Manage Business Money – Appreciate The Investment Made By Someone
It’s not about the amount of money someone has paid you. It’s the investment that person has made by trusting your business. – Ingrid Thompson
I think that’s where it can be quite misinterpreted that numbers are the only things “Yes, I’m six figures,” but people are having faith in your business and handing over their hard earned money for what you’re offering.
How To Manage Business Money – Track Your Numbers For Six Months
Have a dashboard, pick a couple of numbers, and track them for the next six months.
Ingrid Thompson of Healthy Numbers. We’ve been talking about how to manage business money, and get your finances and all the numbers in your business tracked and dialed in.
Thank you so much for joining us today.
I encourage you all to go out and do that action plan that Ingrid laid out for you. Keep thriving everyone.