Ep 219: Owning a business is hard.

Hey, everybody, this is David Chudick and welcome to this week's episode of the Weekly wealth podcast.

So you hear me say it almost every week, I love the business owners because I am a business owner.

And today I want to talk very frankly and very seriously to the business owners out there.

These are some things that we're going to talk about that I see business owners making mistakes with all of the time.

And I'm talking startups, but I'm also talking established professional businesses with multiple, multiple seven digit revenues.

So I hope that you enjoy this episode and I really hope that you get a lot out of this one, especially if you're a business owner.

All right, here we go.

Welcome to the Weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

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All right, so over the last couple years, I've really begun to work more with business owners.

And I'm going to say this up front.

Being a business owner is hard.

Okay, hear me say it.

Being a business owner is hard.

Being a business owner is really hard.

There are times where people think that the business owners make a lot of money.

There are times that they say that you don't really have to work if you're a business owner.

You get to just tell people what to do.

But that is often not the case.

And I'm going to start this episode by saying being a business owner is hard.

It's very hard.

And I want to talk today about some of the mistakes that I've seen business owners make and some of the things that I've seen happen and talk about some ways that maybe we can fix those things, but really want to just encourage you to become a better business owner.

There's almost no better financial planning tool for a business owner than just becoming better at your craft of running your business.

So Almost invariably one of the biggest mistakes that I see business owners make.

And this again, we're talking about people that just started their business.

And I'm also talking about medical practices, major business businesses with seven figure revenues.

And that's treating the business bank account just like your own account.

So what do I mean about that?

There are times when you might have a large amount of revenue coming into your business or maybe a big commission check hit or anything like that.

And then what you decide is let me take a bunch of money out of the business and let me pay that to myself and let me go buy stuff, let me increase my lifestyle.

And what I want to really encourage you to do, and this is hard, and I struggle with this as well, is to have a mental fence, build a mental wall between that business bank account and your personal finances.

So there may be times that your business bank account may look good, but don't forget, you have payroll coming up, you have quarterly taxes, you may have accounts payable.

So even though the business bank account might look big, that does not necessarily mean that you're being extra profitable.

You may have expenses.

So let's build a barrier between the business account and your personal account mentally.

And let's do things like let's put ourselves on salaries, so let's figure out ways and let's get a hold of your personal budget and then let's pay yourself a salary every two weeks, every month, things like that.

And then let's also come up with a formula to where on a quarterly or annual or longer period basis, where you would have the ability to pay yourself a bonus and hopefully it would be a significant bonus.

But pay yourself a bonus in the event that the business actually is profitable, in the event that you actually did have a good bit of revenue come in, but you also got all the bills paid.

You also paid for preventative maintenances, you also made sure that you took care of your team.

You're withholding the right amount of taxes and doing all the things that a business needs to do.

So business owners, they relate as, hey, my business just made a dollar, so I made a dollar.

And that is absolutely not true.

The business made a dollar, but you're gonna have expenses coming out of that dollar, so you can't spend that whole dollar.

So what do you think?

How do you pay yourself as a business owner?

Do you struggle with that?

Do you have uneven cash flows?

Maybe a seasonal business?

Is this an area where you struggle?

Let me know, email me davidarallelfinancial.com and let's talk about mindset shifts and let's talk about some ways that business owners can more efficiently and more wisely pay themselves.

Here's something else that I tend to see, and that's that business owners do not know what their revenue, what their expenses and other key financial data are.

So again, I'm not talking about just somebody who started a business and they're in their first few months.

I'm talking about some businesses that have been in business for years and even have seven figure revenues.

So some of the things that we need to know is we need to know where is our revenue coming from.

So what revenue sources, what products, what services are bringing in revenue.

Some other things we need to know is how much revenue have we had?

Not how much money do I think I made or how much money do I think came in, or even worse, how much money would I have wanted to come in?

It's how much money actually has come in and then how much money is owed to me.

If you're a business that maybe has accounts receivable, are you collecting all of the money that's owed to you or are things falling through the cracks and you're not collecting all of your receivables?

So let's make sure we have a good handle on revenue and make sure that we know how much revenue we've had come in, how much should come in, where it's coming from and those kind of things.

And then let's also know our expenses.

Right, because it's not really about how much money you make, it's about how much money you can keep, which ultimately is profit.

Right.

So where are your expenses?

Are you paying yourself too much?

Are you paying late fees?

Are you paying just too many subscriptions that you have a few dollars here and there?

Do you have maybe an employee that's a nice person, but they just really don't pay for themselves?

Do you have any advertisements or advertising expenses that are just not bringing in sales?

So these are the kind of things that as business owners we need to be looking at.

So we need to know the facts.

And you can't really have the facts unless you're on top of your bookkeeping.

Either you personally or a better option would be to pay a competent bookkeeper to keep your books up to date.

And then you can either by yourself or work with someone to make some CFO type decisions, to make decisions that are based on facts, to make decisions that are based on math.

Right.

So do you know your numbers?

Can you find your numbers?

Are your numbers up to date.

If I asked you, what is your year to date revenue, how long would it take you to find that number?

Could you find that number?

So this is another place where a lot of business owners struggle.

And again, I get it.

And remember, we started the podcast off by saying being a business owner is hard.

It is hard.

A lot of these problems I struggle with as well, but we just need to figure out ways to deal with them.

Got to know your numbers, you got to be organized.

And then you have to make business decisions based on facts, not thoughts of facts or what we think the facts should be.

So after we know our numbers, oftentimes what we learn is that we are simply not charging enough.

So many business owners, they undervalue what they're providing to their customers and to their clients, and they simply don't charge enough.

Because when you look at all of your expenses and you say, wow, look at the cost of goods sold.

Look at the expenses that are involved with running my business, I simply need to bring in more revenue in order to make the profit that I deserve and also to pay my team like they deserve.

So take some time and ask yourself, are your products and services, are they priced appropriately, or are you shooting yourself in the foot by not charging enough?

Okay, Be great at what you do.

Provide a great service, sell great products, be great.

And then you can have the confidence to charge the amount that you are worth.

And don't forget, they say that revenue and sales, they solve all business problems.

And to an extent, that's true.

The more revenue that you have coming in, the more minor problems that you can fix.

So remember, we're in this to make a profit, right?

There's nothing wrong with having profit.

Profit is not a bad word.

Profit's a beautiful word.

That's why we're here.

Because it's the profit that our businesses make that helps us to have better lives.

It's the profit that the businesses make that can fund charities and that can do kind things for the world.

So let's make sure that we're charging adequately.

Don't use words like cheap in your advertising.

Don't give the message that you're the lowest price.

Because when you're the lowest price, it's really like a race to the bottom.

The major brands in this world like Porsche and Ferrari and some of the higher ticket items, they never say that they have the cheapest price.

They actually do the opposite.

Sometimes they say what their price is and they become a status symbol.

So how can you position your business as status symbol?

People that use you, they should think that I'm lucky to work with them and I would use their services or products even if they charged more.

So how do you think you price your products?

Are they priced appropriately?

Could you price them a little bit higher and would that create some more margin and some more profit for you?

Let me know.

So speaking of how you charge and how much you charge, let's talk about a pricing model.

Let's talk about subscriptions.

So subscriptions models have revolutionized how businesses operate, offering a steady, predictable revenue stream and fostering a deep customer loyalty.

Whether it's Netflix, endless library of movies, Spotify's all you can listen to catalog, or a monthly surprise for your dog from Barkbox, subscription based businesses have captured the imaginations and wallets of consumers around the globe.

So to download our free copy of the book the subscription economy nine subscription models any business can adopt, go to www.weeklywealthpodcast.com subscription economy.

That's www.weeklywealthpodcast.com Subscription Economy.

And you can download your free ebook.

Okay, so let's talk about one more thing that I see business owners do that maybe is not the greatest idea ever and that's trying to be all things to everybody, right?

So pick what you are really good at and go after that person.

Go after that type of client.

Oftentimes you or we may not be set up to help everybody, we may not be scaled in a way that can help everybody or we may not have the expertise or maybe a certain type of client just simply isn't profitable for you.

So pick what you are good at and then just decide you are going to freaking dominate that market, you are going to own that market and just do what you have to do to be great at serving that segment of society.

So for me as an example, I love working with business owners and that's why I put this content out, is because I want to be the guy that business owners go to.

I want to be the guy that business owners say, hey, he has our back.

He does.

He does what we need, he knows what it's like and he will go to war for us.

And that is my niche is working with business owners because I'm there, I'm with you every day.

So don't try to be everything to everybody.

Figure out who you are uniquely qualified to serve.

What is your product, what is your service, what does it do for the section of society that really needs you and then just decide that you are going to dominate that.

Yeah, it might be A little scary if you turn away some business here and there for people or clients that are not ideal.

But in the long run, I can almost promise you that it will work out for you.

So make sure that you are helping the clients and the customers that you are uniquely qualified to serve and then just turn the others away or figure out somewhere to refer them.

But you can't be everything to everybody.

And finally, do you or does your business rely on any one thing, any one person, any one customer, any one supplier, any one form of advertising, any one advertising platform or anything like that?

So when you are overly dependent on one or two scenarios, what if those go away?

It's like you're not diversifying enough.

You can imagine maybe there's a business and they have one salesperson who's generating 70, 80, 90% of their revenue.

What happens if that salesperson leaves?

What happened if that salesperson dies or becomes disabled or anything like that?

Then a lot of their revenue would go away.

So what we have to do is make sure that we are not overly dependent on any one thing in our business.

Now this is hard because sometimes we get into, into our comfort zone where we know that we have product line that is really doing well for us.

And it's easy, right?

It's easy to not branch out, it's easy to not cross sell.

It's easy to, to not do the things that it takes in order to diversify.

So let's make sure that we are not overly dependent on any one thing, any one platform, any one person, any one customer.

Oftentimes, when you're looking to sell a business, if the business only has a few clients and they're all big and a large portion of the business's revenue, it actually lowers the value of the business because if any one or two of those clients decided not to be clients anymore, it would be a really large chunk of revenue.

All right, so I'd be really interested on if you're a business owner, where are some areas that are causing you stress?

Remember we said being a business owner is hard, but I'm here for you.

I'm one of you and I want to help to make it it not be as hard, but I also want it to become more profitable.

And I want to help business owners to have quality of life in all areas.

That's financial, of course, but it also means just having some freedom, freedom within your schedule because you have your business under control, freedom with your money to do the things that bring you joy with regard to money, and also freedom with regard to being able to give and have a positive impact on the world.

So here's what I'm doing and here's how I can help you.

Be on the lookout.

In the next couple weeks we are going to begin a webinar series.

We're going to talk about some advanced topics for high net worth, high earners, and these are things that you hopefully will be able to do to enhance your financial position.

Now, if you're someone who's a business owner, if you feel like it might benefit you to share your financial statements every month and to make decisions based on your financial statements, that's what I do for some of my clients, actually.

Some CFO type duties.

If you have ever thought about selling your business, go to www.weeklywealthpodcast.com valuebuilderscore and take the Value Builder Questionnaire.

What it'll do is it'll give you an estimate of value, a range of what your business might sell for, and it'll also tell you which of the eight areas of business value drivers you're doing well in and where you're not doing well.

And then that can help you to have a more profitable business today and also to sell it for a higher multiple when you're ready.

So if you're a business owner and you just want to talk, maybe it's financial, maybe it's even some strategic type things.

Email me davidarallelfinancial.com I'm right there with you.

I'm a business owner, I have employees.

I have to make all the same types of decisions that you do.

So email me davidarallelfinancial.com but let's not forget as a business owner, don't neglect your finances.

Make sure that you're putting the right amount of money away for the future.

Make sure that you have have tax planning which I can help with, and make sure that you are making financial decisions that can enhance your quality of life.

Because that's really what it's all about, right?

It's not necessarily about accumulating as much money as humanly possible.

It's about living our lives in a way that we can be proud of.

And yeah, some of that is financial related.

So I hope that you enjoyed this episode.

And remember, owning a business business is hard.

Let's do the things that can make it easier, let's do the things that can make it more profitable, and let's be purposeful with our money.

Before we wrap up this episode, let's remember we have to draw boundaries between our business finances and our personal finances.

And yes, of course, the idea for a business owner is to get money from the business to their own bank account accounts into their own pockets.

But just because the business bank account is doing well does not give you license to take that money and put it in your personal account.

Because there are things like receivables, there are things like seasonal cash flow and we just have to be purposeful in how we pay ourselves.

Let's also remember not to be overly reliant on any one thing within our business.

Very important.

But let's also remember that we don't have to and we can't be all things to all customers.

So find your niche or your niche depending on who you are and determine who you are really good at helping and help that segment of society.

And then also let's make sure that we are charging enough.

I've seen it over and over where business owners, they simply discount their stuff.

Service is too much.

I was talking to somebody who's not a client and he, he does some repair work and he said that other companies charge and I forget what the number was, 1500 or 2000.

And he said, but I only charge 900.

And I was like, dude, why?

I think you're competent.

You appear to be competent.

You appear to really know what you're doing.

So why are you charging half of what everybody else is charging?

And yeah, we have to charge what we're worth.

And remember, it's human nature.

We are all going to spend our resources where we see value.

So if as business owners we are portraying that we are giving a valuable service and a valuable product to the world, then we should not have any problems finding customers and clients who will pay for that service.

So remember, I'm your ally, I'm on your side.

And, and if you want to talk to me, email me davidarallelfinancial.com we can set a time, we can talk about what's on your mind, we can talk about any potential next steps.

And yeah, there's no charge for that appointment.

All right everybody.

Until next episode, I wish everybody a blessed week.

Thanks, have a great one.

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