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Show Notes

Want to listen to this podcast on the move? Prosper and Profit is available on Apple Podcast and Spotify, don’t forget to subscribe while you’re there.

I know that you’re amazing and passionate about what it is you do in your business….

But you didn’t necessarily realise when you started that you were signing up to have to learn the business side of things. If that’s you then there’s likely two key areas of your business that you are currently avoiding that is stopping you from paying yourself more, freeing up time, reducing stress and feeling fully in control of your business.

What are the two key things you’re avoiding and need to start empowering yourself around? Dive into this episode to find out.

In this podcast episode I mentioned:
Free Resources on my website. Access these here: laurajohagan.com/resources/

If you want to chat about working together to set your business up with Profit First and improve profitability, book a call together here

Connect with Laura:
Website: www.laurajohagan.com
Instagram: @laurajohagan

 

Episode Transcript

Hey, Hey, Hey, and welcome to our first official episode of prosper and profit. I’m excited. I’m thrilled. And I can’t help but be curious to see where this takes us all together and really intrigued by the opportunity to get to know you the listener better. So, thank you for being here, however you found yourself here.

I am grateful that you’re here. And thank you for joining us on this first episode, you might be listening to this months or years potentially after this episode is first gone live. But many of you are going to be with me on this journey and joining in from the start. And so for that, I am so grateful. 

I’m going to ask you to share this episode at the end of the episode. But what I thought was important is to dive in and share value with you. So you can see why you would share this out with the world and why you would get behind this and how you could help me. So, let’s dive in and talk about these two key topics. I want to bring some fun to this because I know. These are two things that many, many business owners don’t want to look at. They’re avoiding it. They’re ignoring it and I wanted to start a conversation around it because this is going to become some of the foundation for you getting empowered around your business and we have to talk about some terms we have to explore in the business side of business. I know you are fantastic at what you do, whether you have a bricks and mortar, health and beauty business, whether you’ve got an online health business, whether you’re a coach, you’re some sort of service provider. I know you’re amazing at what you do and you but you didn’t necessarily realise when you started that you were signing up to have to learn the business side of things.

This is what many of my clients experience and so this is our chance to do it and we’re doing it in a really conversational way. I hope this is really accessible and bringing down those barriers that we often think there is around resourcing ourselves with education and empowering ourselves financially. So, let’s have a look at the two things that most business owners don’t want to look at.

The first that I want to touch on today is cash flow. Cashflow. Now, you might’ve heard the saying before, cash is king, right? And the thing is businesses can be highly profitable on paper. But cashflow is one of the reasons that businesses ultimately don’t succeed and get tripped up because they can’t meet the needs that they’ve got in their business in the day to day because of a cashflow crisis. 

Let’s use the example of a hairdresser and how a cashflow problem could occur there. So the hairdresser is seeing their clients in the salon and they’re fully booked for the next three months. Now we know those clients do not pay for that service until they come in and get their hair done. That’s how it works. But in the meantime, before that next tranche of clients can be served, that hairdresser has to buy the product. Pay rent, pay electricity, pay their staff, all of these things. And so what can potentially happen is you can have a fully booked business but the cash coming in isn’t sufficient for the cash going out. Or the cash that came in was used for something else and there is not enough cash available to purchase the products or pay the business costs that are required to deliver the services that are coming up. Now I’ve used a hairdresser as an example, because I have hairdressing clients, but this is the same in every business. 

You can relate this to any business. A builder building a house would sign a contract to build the house. They get progress payments as the building develops. At some point, they are going to have to buy a huge amount of materials. This is something that we’ve seen in the building world. They’ve got to buy the materials before and get the building to a certain point before they can get the next progress payment. And so if they’re to pay ataff wages, maybe they had to make a tax payment. Right. They have to then go and buy materials. They might not have enough leftover to buy the materials. They need to complete the phase to get the next progress payment. Right. Often in business, what can happen is we have to make payments in the now to be able to deliver on services to collect money later. Right. And that can be the cause of cashflow challenges. So if you’re not a builder and if you’re not a hairdresser, just think about and relate to how this looks in your business.

Cashflow can be a problem. Even if you’ve got a highly profitable business. Taxes is another example where cashflow can be a problem in a highly profitable business where funds haven’t been set aside for the debt to the tax office. And that can create a crunch and some stress too. Cashflow is basically how the money moves through your business. I like to think of it like the tides, I live on the gold coast, so obviously beach analogies are always going to speak true for me. But when we think about the tide on the beach; the tide comes in and the tide goes out and there’s a natural flow that happens. And that is really natural in business. 

Money comes in, money needs to go out and we want to make sure that we have adequate cash to do so. Many business owners in my experience cross their fingers. Think that hopefully everything will be okay. Hopefully, this will just, you know, sort itself out. Hopefully there’ll always be enough cash. They’re not necessarily proactive with it. And this is how they can get tripped up and this is why I love the cash management process that I teach my clients. 

It’s the Profit First system and it’s so game-changing because yes, it’s called profit first and it’s about setting aside profit and increasing the profitability of your business. And we’re going to talk about that in a sec. But it’s actually a really savvy cashflow process for business owners to take charge and take their control back around cashflow. And so next episode,, I’m going to talk about what is Profit First and how it works. But ultimately, what I want you to understand is that there are tools that are very simple for managing cashflow. Now they do require some foundational setup work and that’s something I love doing with my clients as well. But I usually have my clients set up with profit first within the first month of working together. And many of my clients love it because it’s so visual. It’s so simple to do. And they know that they have got things covered.

I even had a conversation with a client yesterday and she just said she, she just loves it. She loves logging into her banking app, being able to track her cash flow. Sitting down and doing her weekly allocations. We’re going to talk about what all of this means in another episode. But this is someone who initially just felt like all the numbers and the money just isn’t my thing and has really transformed. What it’s meant is she’s been able to take control over more things in her business. And she’s able to make really smart and savvy decisions because she’s making these decisions based on data. She can see what’s happening. And the great thing is too, it stops people from getting themselves into those cashflow crunches, or if a cashflow crunch is inevitably going to occur, they pick it up much sooner so they can get to work on fixing it. So, what I wanted to share with you is that cashflow probably doesn’t need to be as complicated as you think. And we don’t need these really overwhelming multi tab spreadsheets.

I teach my clients Profit First, we use a simple Excel calculator that I set up for them and bank accounts and they’re able to run off and implement it. I’ll do an initial assessment for them and tell them he is how we need to do it in your business. And here’s where we ultimately want to get to in your business, but it can be much, much simpler. Then you’ve been thinking. 

Right. So question for you just to something to sit and ponder with. Is why am I avoiding looking at my cashflow? Is it time for me to change that? 

Probably why am I avoiding it? I feel like I don’t know how I don’t have the tools. I don’t know where to get started. And I’m offering you right now that there are resources out there. You could look at Profit First, the book. You could check out some of the resources on my website. I’ve got some resources there that are free, that can help you get started to figure out how you could begin implementing profit first in your business or we can work together and do the whole thing together. And do a really deep dive on improving the whole financial health, the whole financial position of your business. 

The second thing that I see business owners don’t want to look at, or the business owners that are in my world, because this isn’t probably true for all business owners, but the business owners that I speak to that kind of are attracted into my world. The second thing they avoid looking at is understanding profitability. And figuring out, is my business actually making a profit?

We’re going to talk about why profit is so important again, in another upcoming episode, because I don’t want to bombard you with too many things at once. But understanding is my business fundamentally profitable and why or why not? Is incredible data because ultimately a profitable business is a sustainable business. And again, we’re separating profits out. Some people consider profit is the salary or the wage that they pay themselves in their business. In my methodology and the way I think about it, we separate those out. So you should be able to be being paid a wage or a salary in your business for the work you do in there. And there should still be a profit over the top of that. 

And so in my experience, a lot of business owners aren’t looking at this. And again, I think it’s because don’t know how, overwhelming to get started with they’re busy running the day to day, seeing their clients, treating their clients, their patients, you know, in their business. They’re busy doing that.  And it’s not the most natural area for them to look at. It’s not something that really can be avoided forever. And especially if you want your business to grow, especially if you want to be able to step out of your business more, especially if you’d want to hire a team, especially if you want to make all of these decisions that support your ultimate lifestyle and your ultimate vision for your business. Right. 

Understanding profitability is key. And understanding what are the things that are driving profitability in the business? What services are most profitable? Are there services that are unprofitable? Could we be deleting those? Is my pricing profitable. Right. Is my staffing ratio right? Are my staff working at a high enough capacity, right? They have charged hours or the hours of service with clients. That’s revenue generating. There’s all these different leavers that can be pulled on is how we’d speak about it in the finance world. So there’s all these parts of the business. 

Almost think about it, like strings on a guitar. Right. There’s all these different strings. You know, that the guitar’s got that peg thing at the top, obviously, very musical and technical here. And you can tighten those to get the sound right, where you want it to get to. So, you know, oh that one’s a bit off, I’m going to tighten it or that’s too tight, I need to loosen that. And it’s almost exactly the same in your business, but think about each of those strings as all of these different areas in operations of your business, that can be tweaked. So like I mentioned, pricing staffing, capacity of your space, service menu. There’s all of these pieces that can be tightened, loosen tweaked to make your business more profitable. But if we don’t know, with the guitar, using that as our metaphor here, if I don’t understand how a note should sound, it’s hard for me to tune it.  And so if I don’t know the data around is this service line profitable or what capacity are my staff operating at? Or what are my fixed overhead? What are my materials costs is? Is my pricing, correct? To take all of this into account, if we don’t have that data, then we can’t necessarily effectively tweak those strings because I might be tightening something on the guitar and actually turning it off pitch because I don’t know the sound it should get to. I’m working off incorrect information.

What I often see is sometimes business owners do have a really good read, just intuitively on what’s happening in their business and the work that I do, the profitability analysis, really confirms that. And sometimes it’s really surprising, right? Sometimes it’s even surprising for me. It’s like, oh, it sounded like from what you were speaking about and what you’re explaining, it was X, Y, and Z. But now we’ve got this data and I’ve done this deep dive, actually it’s A, B and C. Right. And so sometimes we don’t, I should say always, we don’t want to be making decisions off I think it’s this or it might be that. We want to be making decisions off data and this profitability work and starting to really unpack the layers that build up profits in your business is so important. And as you can see from this conversation, it informs smarter decision-making, it informs pulling the right leavers to actually increase profit. It starts to inform growth strategy because it’s like, oh, this thing over here is highly profitable and working really well, while we’re spending a whole bunch of time over here on this thing that’s not profitable. Let’s delete that and double down on this as an example.

All of the data, all of the information, same with marketing, it’s a really common one. How much should I spend on marketing? Well that depends on your business and where it’s at and it’s really important to be looking at that. How much should my running expenses be and what proportion of that am I willing to put on marketing and what are the results I expect that to generate. This is all data driven, right? And so just knowing that when you come to this data, you start to run your business more efficiently, more effectively. You get to do that beautiful thing called working smarter, not harder. And this is why it’s often such a gateway for my clients to reduce their hours. It [solves problems in your business, right? In terms of, if your business isn’t profitable, if you’re getting a cashflow crunch, this data is going to show us exactly why. It just informs great operational decision-making.

It’s so empowering as a business owner to be able to sit down and have a conversation and be like, I know this has happening, we need to consider these decisions, I’ve thought through these, I’ve done some financial scenarios on these and again, these aren’t all things that you need to do yourself. Right? These are things that you could partner with someone like me or whoever is the right support for you in, in your world to do all of this, but suddenly you’re not making decisions any longer based on trial and error. Or so-and-so down the street did this, so maybe I’ll try it too. You’re making decisions based on your unique business, because if there’s one thing I know for sure, businesses are really unique and just copying and pasting what someone else is doing in another business, that might be on a different street location. And so has different rent, has a different number of staff staffing it, has a different number of square meters, has different service offerings, that we didn’t consider all their. They’re doing these service offerings and we predominantly do these ones, well of course, that’s not going to work for me. Right.

We can suddenly come back to what’s true for us. What’s true for our business. And make really smart decisions. So, I hope that’s shown you a little bit today. About why these two things; cash flow and profits are worth figuring out and understanding in your business and you know, it might just unblock the thing that’s keeping you exactly where you are in your business and open up a whole new level of success. That’s what we’re here for. More financial reward, more success, more time back in our, you know, lives, more money back in our pockets. 

And all of this is unlocked through this! Not to mention the impacts on stress, that has a cost too, even though it’s not a financial cost. So I hope this has opened up your mind today and you can consider, maybe I can open up myself to having a look at this financial information. Or if I genuinely don’t know where to start, reach out and start a conversation with someone who can, because I know for sure. That many, many, many business owners, this isn’t their natural element and working with someone to get you set up and have a knowledge transfer, put the systems in place that then empowers you to be able to have more insight yourself across this is really what many business owners need, because this money side of things, this financial data is just not their natural way of thinking. So today we’ve spoken about cashflow and profitability. 

I know they’re topics that make business owners eyes want to glaze over. They’re topics that they don’t necessarily want to talk to or think about but when we think about what that unlocks and how that creates paying yourself more, freeing up time, reducing stress, being in control of your business, making smart decisions, having more financial reward come to you. The benefits of this is just so great. So I hope that’s given you some food for thought today.

As I mentioned at the top of the episode, this is our first episode together and so I would love for you to help me A) get to know you and B) get this out into the world. So it would mean the world to me. If you screenshotted that you’re listening to this, share it on your social media of choice. I know for many people that is Instagram and tag me in and let’s connect there because I’d love to hear your takeaway, what you thought about this episode, what you want to know more of, what’s confusing. All of those things. Like I said, I really hope this can be the beginning of a two way dialogue and we can have conversations offline and in the DMS and then I can bring more to this podcast around the topics and themes and questions that you all have. So it would mean the world to me if you share this. Help me get this out into the world. It would mean the world, if we connected on social media, my main platform is Instagram. That’s the easiest place I find to chat and connect with people so @laurajohagan is my handle there. And stay tuned for our next episode, where we’re going to dive into and explore more about this topic profit first. 

So I cannot wait to share that with you. Thank you for being here with me today. And I’ll be back in your ears very soon. Bye.