February 21, 2024 • 30 mins
Today, we're unravelling the intricacies of finances—specifically, the seven traps that might be stealthily holding you back from scaling your business.
What We're Talking About:
The 7 finance traps that could be hindering your scaling journey.
Why It Matters:
Bad finances equal no business. Many women navigate their business financials quietly, leading to situations where they feel trapped or ill-equipped to handle their financial reality. Knowledge about finances is key for taxes and, especially, when scaling with a team—ensuring you can confidently pay your people.
In This Episode, We Explore:
- The significance of understanding and managing your finances.
- Common traps entrepreneurs fall into when it comes to money matters.
- Why addressing these traps is crucial for your business's health.
- The impact of financial stress on your overall business experience.
Join us as we dive into these finance traps, providing insights to empower you on your scaling journey.
🚀 A healthy business starts with a solid financial foundation and we want you to build a stress-free, thriving business.
#MoneyMindset #BusinessFinances #FinancialFreedom #ScalingSimplified #WomenInBusiness #FinancialEmpowerment
Connect with Us:
Share your thoughts on this topic with us on Instagram @pipharland and @iamgeorgiafitzgerald. At Scaling Simplified, we're dedicated to supporting fellow female business owners on the exciting journey to seven figures and beyond and we always love to hear from you. 🚀💼
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Georgia (00:00):
Welcome back to another episode of the podcast.
(00:02):
And this week we aretalking about finance traps.
So a few weeks ago, we went intoa bit of depth about the different
areas of your finances and yournumbers that you should be tracking.
And this week we're going to talkabout some of the finance traps that
you might be falling into that arestopping you from scaling your business.
So Pip, I'm going to come to you.
(00:24):
Why is it so important for us tothink about these finance traps?
Pip (00:28):
Well, I think as a business owner, really, when it comes
down to it, the entire point of abusiness is to make profit, right?
The entire reason for having a businessis technically, if you're using the,
the official meaning of businessis to understand your finances.
You need to understandyour finances for that.
And I know a lot of us build businessesfor many other reasons, not just to make
(00:50):
money, but it's really important that weunderstand the money that we're making in
our businesses so they can be efficient.
They can be effective.
They can support us in the lifethat we're trying to build.
And then also we need to understandwhat's going on in our businesses,
just from a statutory perspective.
So we need to understandhow much money we're making.
So we pay the right amount of tax.
So our accountants can do ourtax returns for us and our
(01:14):
financial accounts every year.
So it's just really important thatwe don't get ourselves to a place
where we ignore everything because.
Our business isn't our hobby, right?
So we need to know the numbers.
And I think when it comes towomen, sometimes we have been
taught in society that, you know,you don't talk about numbers.
And I know this is a massive thing,, from an English perspective, you
(01:35):
know, you don't talk about salary.
You don't talk about numbersand it's a bit of a taboo thing.
And actually with a small business,you need to understand your numbers.
And so we've spent all this.
time in our life, like avoiding numbersand the financial conversations and
finding them a bit awkward often.
And so it's really also learning tofeel confident stepping into this
(01:55):
area where often we've not beengiven a lot of confidence from people
around us in stepping into this area.
So we can really manage the situationourselves and be in charge ourselves
and not be reliant on anyone.
I always think if you're running thebusiness, you should know everything and
you should never be reliant on anyoneelse to tell you exactly how your business
is doing, you need to know yourselfso you can be making those decisions.
(02:17):
Yeah,
Georgia (02:17):
I think that's really true.
It's so important to be on top ofthose numbers to understand the
numbers, but also, as you say, justget really comfortable talking about
money, talking about the cost ofthings, talking about the value of
things, understanding what other peopleare paying in similar situations.
I think one of the really bigbenefits of, , joining even like
(02:38):
these mastermind, coaching mastermindsI found is how open everybody is.
At talking about money.
So it's really easy to get a goodhandle on actually what are the
things that I need to be considering,you know, further down the line.
So I don't get tripped up or whatare actually people paying for?
Like what equals a good service?
What's a fair wage?
Like, you know, wheredo we stand with this?
(03:01):
And I think when you're startingto think about scaling, you're
going to have to bring on a team.
That's one of the key things.
So the sooner you can think about.
What will the cost be?
And what do I, what am I hoping toachieve by investing in that team?
, you can get much more comfortable withthe numbers of how you're going to
pay people and why it's really worthbringing someone in to pay someone.
(03:24):
And I think the other thing is it is so.
Stressful when we don't know what'sgoing on with our money, like
money can be really stressful if wedon't understand it, or if we think
about it as something that's scary.
So if we're actually just reallyopen about it and really considering,
okay, this is what's coming in.
This is what's going out.
(03:46):
This is the plan I canmake to deal with it.
We can be much more prepared for what'scoming rather than it feeling like.
A really stressful kick in the stomach.
So there are heaps of mistakes I'msure that we could all be making as
we're starting to scale our businessesand think about our finances.
(04:07):
What would you say are some of thebiggest mistakes that people are making?
Pip (04:11):
question.
I mean, I think the biggest one isjust ignoring your numbers or not
tracking them, just hiding from them.
So I think it's really easy.
As you say, if you get stressed aboutmoney or a bit stressed about what's
going on in the business, and thisis, it's such a normal feeling to
have is that you then hide from it.
Right.
And you're like, okay, I'lldeal with that next month.
(04:32):
I'll deal with it.
When my accountant sends me his littlenote at the end of the year going, Oh, you
know, can you send me everything through?
And.
So I think it's really important that youmake sure you start getting comfortable
with your numbers as early on as possible.
And even if that makes youuncomfortable, you don't really
know what they're telling you.
Go get help, ask somebody and justget used to checking in regularly.
(04:53):
And I know we talked a lot about whatto check in, in a previous episode.
So we can always link thatin the show notes for you.
But if, if you don't know what's going onand you don't have that data, you don't
know, Which products are selling well,or which clients are paying on time.
You can't then make decisionsproperly in your business.
Yes, you can think something's going on.
You're like, Oh, I think thisproduct selling really well.
Or, you know, I really think thatthis client has brought me in a lot
(05:16):
of revenue, but you don't actuallyknow without looking at the numbers.
And so it's really hard to make.
really good decisions unlessyou have those numbers.
And I think also you need to know thenumbers so you can be saving for tax
and all those other aspects as well.
But I think the biggest thing is justgetting into the habit of starting to
track your numbers and not ignoring themwhen everything feels a little bit scary.
(05:38):
Yeah, that's
Georgia (05:39):
so true.
And actually, it's not justthe finance numbers, is it?
It's not just knowing likewhat's coming in and out.
It's, , looking at what arethe most valuable assets that
you have within your business?
What are the most valuablerevenue streams you have?
And therefore, which team members areContributing to those revenue streams,
and they'll each have KPIs, , around whatthey're trying to do, how they're trying
(06:03):
to contribute to that revenue stream.
And I think for every teammember, there's usually one number
that's really important for them.
So that could be the number orthe percentage of people they are.
are converting into lifetime clients,or it could be the number of five
star reviews they're getting a week,or it could be the number of clients
(06:26):
they're delivering to, or the numberof sales that they're bringing
in each month, or the number ofconversations they have each week.
Whatever that team member is, there'ssomething that you can measure and
that they sort of need to be measuringto know that what you're paying them
each month is a return on investment.
So it all comes back to that ROIthat we've talked about before.
Pip (06:47):
Yeah.
And when it comes to you mentionedassets, we also want to think
about what's happening withour business in the long term.
I think we can often be so stuckin the midst of things that we
forget what the big plan is.
Is it the We are going to need toget some money to come in to invest
in something big in our business.
Are we going to need to go raise finance?
Are we looking to sell ourbusiness in the future?
(07:07):
Are we actually just looking for it tomake a lot of profit that which we then
pull out, which is then our pension?
You know, we've got to think about thelongevity of our business and how this is
setting us up for the future and not just.
Well, the, you know, the moment hereand now, and knowing those numbers and
understanding, and it's often not evenunderstanding what questions to ask.
It's just even understanding who you needto speak to, to try and find the questions
(07:32):
you need to ask about setting yourselfup and whether that's setting yourself
up in the most tax efficient structure orthe right business structure, or you're
pulling out your profits in the right way.
, which again comes back to, you know,if you're in a mastermind or some kind
of group, I find this is where I oftenfind lots of new ideas around this.
And it's really kind of sparks thoseconversations, but if you don't know your
(07:52):
numbers, then you can't get yourself to aplace where you, you do know what's going
to happen for yourself in the business.
And I think it's really sad when womenwork really hard to create amazing
businesses and because they don't havethat long term plan, they then can't make
the money that they want to on sale, orit kind of fizzles out and they don't
actually get that long term financialreward that they really deserve from the
(08:13):
incredible business that they've built.
Yeah, that's
Georgia (08:15):
so true.
It's really about thinking about thelong term future of it, isn't it?
So that financial planning, , monthly,quarterly, annually, but as you say,
where you want that business to go.
And I've had conversations with anumber of clients actually recently that
are starting to think about that fiveyear plan and saying, you know, well,
actually I know in five years, I don'twant to still be working this business.
(08:35):
I want to be selling it.
So I'm kind of reverse engineering.
Where I need to get to with everything tobe able to sell that and that's thinking
about how that, how you're going toinvest in team, how you extricate yourself
from doing everything in that business.
Like what, what are the figures,like, what do you need to
think about as you get to that?
So that's so important.
(08:56):
Now, I know you mentioned taxes.
I would say, is that kind of number twoin terms of things that you need to think
about when it comes to finance traps?
Pip (09:06):
Yes.
Yes.
Absolutely.
Hit the nail on the head.
So I know you've heard thisbefore, but the money coming into
your business is not your money.
Okay.
You can't just say, Oh, brilliant.
We've got loads of sales.
This is my money.
Off I go.
I'm going to buy myself a newbag or go on a new holiday.
The money coming into your businessis your business's money, right?
And so we need to understand.
(09:27):
From there, what our costs are, andthen whittle it down to what our profit
is and what our taxable profit is.
So we can understand how much we needto be putting aside and saving for our
taxes, because there is nothing worsethan having a really great year, and
you feel really good about yourself,and you're like, yes, the business is
really finally taking off this year.
And then, bam, the tax bill comes through.
And you have...
(09:48):
No idea how big it is and it's justgoing to hit you when you suddenly have
to scramble around to find that cash.
And, you know, I see the face you'remaking that like everybody has either
been there or knows of someone who'sbeen in this situation before, right?
And it's just the worstsituation to be in.
And yet we don't need to putourselves in this situation.
(10:08):
We can be saving.
our money aside every monthwhen we know what's going on.
And then it's really nice becauseyou know, when that tax bill comes
in, it's just the best feeling to go.
Yep.
Here's the money paid off.
And you know exactly whereyou stand within the business.
So saving for taxes isdefinitely a huge one.
You need to get into the habit of doing.
(10:28):
That's such a big thing
Georgia (10:29):
to think about the money coming in as not your money, because
it's a really easy track to fall into.
too, isn't it?
And the more you can automateit and sort of directly, direct
debit money out of your account,straight into your tax account.
So you don't even look at it, you know,you, you haven't got time to be sad about
(10:49):
the handbag that you didn't get to buy.
You can, it just, it justhappens automatically.
, okay.
So yeah, taxes is definitelya thing, but I, I also think
thinking about that as well.
Is not building enough of thatprofit margin into things.
Would you agree?
Like, how do you goabout that particularly?
I mean, with a service based business,I feel like it's slightly easier.
(11:11):
You know, you've got morecash that you can manage.
You can do things slightly differently,but I know that product based
businesses are your specialty as well.
How do you manage that in a product based
Pip (11:23):
business?
So you're right, service basis isa lot easier to build in a profit
margin because generally youstart out and it's just your time.
So it's more about valuing your timeand then the small costs you incur.
Where with products, you have the costof the product, you often have a cost
of developing the product potentiallyto begin with, and all the other things
that come with it, like, you know,packaging materials and shipping and
(11:45):
import taxes and all those kind of things.
, now there are loads ofdifferent ways that you can.
calculate, profit.
, and I actually have afree workbook on this.
So if you want to know how toprice your products, , send me
a DM and I can send it to you.
Maybe we can do a fun episode on this.
Cause there's loads of differentthings you can look at whether you're
service based or product based.
, but the thing that I wouldalways say is that you want to
(12:06):
have some pattern of how you.
Manage your profit every,for every product or service
that you are developing.
So with product based business,you'll generally have a margin that
you want to hit, a target margin.
So you'll know that you have tosell the product for say, three
times the cost or five times thecost of what it costs you to make.
And then you look at the marketand you go, okay, is this cost?
(12:30):
Where I think it should be,do I have a premium product?
Can I charge more for it?
Am I trying to competeon, you know, cost price?
You know, you really need to think aboutwhere your brand sits within the market
and then you can adjust your prices.
And this is similar for productbased, , for service based as well.
Is that you, you go, okay,this is literally how much it's
costing me to deliver the service.
(12:51):
And then you add yourprofit onto, onto that.
And then you can look kind of withinthe market and go, does this feel right?
Do I feel like I'm gettingenough money for this?
Am I charging out my value enough?
And obviously with this, you also needto think about all the other costs
that come in that we forget about.
It's not literally just the cost ofproviding the service or product.
You need to think about VAT or sales tax.
(13:13):
If you're outside of, , UK, if you'rein America, you need to build that sales
tax of that VAT into your product prices.
Cause if not, 20 percentwill just be taken.
Of profit before you even know it andin a product based business, that's,
that's going to be a pretty big hit.
And also things like, , the cost of yourtime, I always find, especially in service
based businesses, people forget to put thecost of their own time in their pricing.
(13:38):
I mean, I'm sure you've come acrossthis a lot, Georgia, but I think that's
something that we often forget aboutthat our time has a cost, even though
it's not an actual monetary cost comingout of the business, there is a cost
and we need to include that, right?
Georgia (13:51):
Absolutely.
And it's definitely thing somethingthat people forget because I think
we really underestimate often howmuch time we put into something.
, plus you're also thinking about.
all the years that it took you to buildup that knowledge that you are now selling
within your service based business.
And if you want to scale that business,if you don't want it all to be you
(14:13):
forever and ever and ever, you'vegot to start thinking about, okay,
so what is the cost of replacingme within this client delivery?
Because now, instead ofundercharging for myself.
I'm actually going to have to paysomeone else to be delivering this.
So what would that be?
And just almost start to usethat to check your check.
You're paying yourself fairlyto begin with, because then it's
(14:36):
going to make that shift intopaying a team member much easier.
And remember, if you're thinking aboutselling this business further down
the line, you absolutely have to thinkabout replacing yourself in every
single step of your business becauseOtherwise, you are literally going to
have to sell yourself with the business,which we're obviously not going to do.
So really factoringthat in to your pricing.
(15:00):
I just wanted to just quick questionthere on the VAT, because that is
definitely something that people oftenworry about in a service based business.
Are there any particular traps that peoplefall into around thinking about adding
the VAT once they hit that threshold?
So I
Pip (15:18):
would always price including VAT from day one of the business because
up until you hit the VA threshold, youjust get to take an extra 20%, right?
So it's a bonus.
And I think when you're starting off,we often don't pay ourselves enough.
There's lots of other costsgoing on in the business, so
that extra 20% often could be.
The bit we pay ourself whilst everythingelse, all the other money in the business
(15:41):
is paying for all the, the other thingswe need to keep the business running.
So I actually think it's quite a smartway of get paying yourself as you're
just getting yourself off the ground.
, the other big trap I see is that people.
Stay below the VAT thresholdbecause they don't want to pay VAT.
And actually that's damaging the growthof that business when they're like
(16:01):
actually keeping themselves below the VATthreshold and the VAT threshold has stayed
at 85 K a year for a really long time.
And so with inflation and everything,if you're staying below that
threshold, you're actually shrinkingyour company year on year rather
than growing in line with inflation.
So it's really important that you just.
Get over it.
(16:21):
You pay your VAT and yes, it's a littlebit more hassle and everything, but
it's a really cool sign when you hitthe VAT threshold because it means
you have a proper business, right?
So I think it's something that weneed to see is like this really
exciting milestone as opposed to,Oh no, we've got more tax to pay.
I think there's generally a feelingof, I don't want to pay tax.
I'm going to.
(16:41):
Spend all my money to make sure thatmy profits really low so I don't
pay tax and actually taxes are anamazing sign that you're doing well.
So I think we really need to change thenarrative around changing tax, about
paying tax and actually see it as a signthat our business is doing really well.
And we're, we've been reallysuccessful and see that as a
really good sign, as opposed tosomething we should be avoiding.
(17:03):
I love
Georgia (17:03):
that.
Let's celebrate hitting the VATthreshold and definitely I have
seen this with friends as well.
When, you know, they said it's amazing.
My business has got to this point whereI'm, I've now hit the VAT threshold.
Like I am on the up.
So yeah, keep thinking about that.
What else, , is, what else is happeningif we are not keeping in line with
Pip (17:22):
inflation?
So we definitely need to keep prices inline with inflation because inflation has
been, I mean, inflation has been prettycrazy over the last, what, 15 months.
, and you know, we've hit double digitinflation and we can see it in terms of.
interest rates, , rising.
So we want to really ensurethat we're increasing our
(17:44):
prices to reflect inflation.
Now, this might not be that we'reincreasing them directly in line with
inflation, but we need to be cognizantof what's happening in the industry
around us and within other companiesthat are selling similar products or
offering similar services, because if.
Inflation is, say, at 10 percent a year,then in a year's time, if we make the
(18:06):
same amount of money, we're actually10 percent behind where we were last
year, so our business has actuallyshrunk from where it was last year.
If you make 100k revenue each year,Then you're actually shrinking
rather than growing because thevalue of money has decreased.
And I think this is something that,, we forget about quite a lot because
it's quite a, a weird concept, thevalue of money and inflation and,
(18:28):
and everything to do with that.
So I think it's really importantthat we build in those regular
pricing checks, at least once a year,there's a, there's a chance for you
to sit and reflect on your pricing.
, you know, often this needs to be morefrequent, especially in service based
businesses when you bring in team andunderneath, but it's something we can't.
Forget about, you can't say,Oh, well, I used to sell this
service for this amount of money.
I used to sell this productfor this amount of money.
(18:49):
Yeah, that's great.
You used to, but thisyear you're not right.
Georgia (18:53):
Yeah, it's so true.
But yeah, keeping, keeping growth inline with inflation is really important.
, as well as keeping track of what youmight need in reserve, would you agree?
Like thinking about what might becoming up, worst case scenario, like
how much should we be planning aheadin terms of keeping some money aside?
Pip (19:16):
Great question.
, so I would always say that you needto start small and then aim for
what feels comfortable for you.
Now, most, most people, depending onyour risk tolerance, feel comfortable in
about having about three months runway.
So essentially, if you take all thecosts your business has over three months
and you put that money and you just.
(19:38):
Chuck it in a savings account somewhere.
And at the moment, we've got some, youknow, actual interest on our savings.
So, you know, you can actually,, make some money out of doing this.
, but this will really dependon your risk tolerance.
Some people want, you know, toeventually get to a six month place.
Other people, you know, have muchlower or higher risk tolerance.
And so they only want one month,but I would always say three months
(19:58):
is about good because if somethinghappened today, say you got ill or say
something, you lost a big supplier,a big client, and everything's sort
of ground to a halt really quickly.
It's really nice to know that you've gotthree months to figure everything out.
I think most entrepreneurs.
Could get everything back up andrunning and going within three
months, a month is a little bit short.
(20:19):
Obviously, if you're a bigger companyand you've got greater team costs
and everything like that, you mightfeel more comfortable doing four
months or five months or six months.
But I think the big thing is to not tryand aim for three months to begin with.
It's okay.
I'm going to put aside a week's worthof costs and I'm going to put aside
two weeks worth of costs and just feellike it's a little, you've got a little
pot that you're aiming for and you'rejust slowly adding into that pot.
(20:41):
And as you said earlier aboutautomating where your money goes,
This is a really good way to do this.
So your money comes in, your salesmoney comes in and you automate it out.
So some of it goes intoyour tax savings pot.
Some of it goes into your runway.
Some of it goes into your pay.
, and this is actually a methodology calledprofit first, which I know a lot of
people follow, which I think is a reallygood way of ensuring that you're paying
(21:01):
yourself and you're making a profit.
But I think automating that and just noteven touching the money, just letting it
go out to where it needs to go and thensaying, okay, this is what I've got left.
This is what I can invest in, in this.
It's not in the business.
Yeah,
Georgia (21:15):
that's so good.
I love that.
Yeah, it is the automationand putting that money aside.
And, and equally this kind of mirrors withwhat we were saying with team as well.
Once the one thing I see, , peopledo a lot is not investing in
that support early enough and notrealizing the value of their own time.
Plus.
thinking that it's better that theydo tasks that just fall within their
(21:40):
zone of competence, or even excellence,but not their zone of genius.
So they're paying themselves high levelto do quite non, like quite not meaningful
tasks for them, things that are notlike 100 percent in their skill set.
So thinking about where isyour time most valuably spent.
Thinking about investingin that support early on.
(22:02):
And actually I love this idea of factoringin VAT early, because actually what
you could be doing is using that money,putting that, saving it into a small fund
to get you started with that first hire.
So that you know you've got a monthor two backup money there ready to
pay them if they haven't quite startedgenerating their ROI in the role as well.
(22:25):
So thinking about, I know I'm goingto want team from, from the get go.
So where am I putting that money aside?
So I feel really comfortable bringingthem in as soon as I can to take over some
of these tasks that are really absorbing
Pip (22:37):
a lot of my time.
Yeah, I completely agree.
I think with team, it's always,you always want to be hiring just
before you feel quite comfortablyfinancially too, don't you?
Because that team member is goingto bring in, if you, if you do it
right, it's going to bring in revenueor it's going to free up your time
so you can bring in more revenue.
And I think it's really.
Understanding that data you have inyour business and going, okay, right.
(22:58):
I have this much money.
This is where our, our sales are comingin here is where we're projected to go.
So I know that if we hire this teammember, it's going to cost me this.
And this is our aim.
We're going to create this.
Much more revenue because I'm goingto be out doing more sales stuff,
or they're coming in to help mewith sales and marketing or whatever
that person's role might be.
And I think that really comesdown to, you can't make decisions
(23:22):
without having the data.
And I know a lot of us, , , especiallyrunning a business, we're really
trying to lead from a place ofcompassion and really kind of.
We look inside and use our gutto help guide where we're going
and really build businesses thatare aligned with what we want.
But we always need to be using that dataas well to understand where we're going.
(23:43):
I always think that you shouldkind of trust your gut and then
back it up with data, right?
I think sometimes we can get sodata driven that we stop seeing
the bigger picture and we're just.
So honed in on something, butit's really about going out.
This is what I want todo with the business.
This is my vision.
Okay.
Let's look at the numbers and seewhether this is sensible or actually
are the numbers telling me thatthis might be a better path to go.
(24:06):
And it's not just thenumbers within your business.
No, it's not just what's sellingwell and what's not selling.
Well, it's also looking at thenumbers of the market that you're in.
You know, , we discovered by lookingat this recently, a whole new.
Potential area of growth, which we hadn'trealized had grown so big because we
started looking at some industry data.
And we said, actually, we've gotproducts that we could tweak and
(24:27):
sell to this market very easily.
And immediately you founda whole new revenue stream.
And I think it's about really puttingyour idea and vision in the context
of that data so you can make theright decisions for you and for
your business and for the longterm.
Amazing.
Georgia (24:42):
Okay.
Before we wrap up with, , the keytakeaways that people need to think
about, is there any last top tipsthat you want to add into that?
Pip (24:51):
biggest finance trap, this little bonus one, , is that you should
be paying yourself from day one.
And I'm not saying, you know,you need to pay yourself a six
figure salary from day one.
I, I really understand that, you know,it's hard to get a business off the
ground and money can be stressful.
And sometimes you might sit there,especially if you're early on and think,
Oh my goodness, where the money is.
Or if you're in that scaling andyou've got these huge bills coming
(25:13):
in and you're, you know, you'rereally struggling with cash.
You think, okay.
I'll pay myself in three months time.
I'll pay myself in six months time oncewe've just got a little bit further.
But you really need to start gettinginto the habit of paying yourself as
early on as possible for a multitudeof reasons that we've talked about.
And I'm sure we'll continueto talk about on the podcast.
But.
Even starting out small and justgetting into the habit, even if it's
(25:35):
just putting 50 pounds aside, youknow, each week or something, just
a little bit, just to get into thathabit of putting the money aside.
And depending on how your businessis set up, , , there'll be different
ways to do this the most efficiently.
Obviously, if you have, if you're a soletrader, any profit you make is yours
anyway, and you're getting taxed on it.
But if you run a limited company, thenyou want to be thinking about , employing
(25:56):
yourself , taking out the personalallowance each, , year , and then
taking out dividends on top of that.
And obviously this is notspecific tax advice for you.
It will really depend on your personalsituation, but there are really smart
ways in which you can pay yourself anddo it in a way that also sets you up.
So you are, you know, getting yournational insurance contributions and all
the other things you need to think about.
(26:17):
So, you know, you have access to,you know, state pension later in
life and all these other things.
, but.
Start paying yourself fromday one, even if it's pennies,
it's worth getting that habit.
And then slowly over time, you can startseeing that pot grow and start really
reaping the rewards of your business.
Amazing.
Georgia (26:34):
Okay.
So before we give everybody the fearabout all the things that they need to
think about with these finance traps,as we said, there are some simple things
you can get started with straight away.
So number one is making sure thatyou're tracking your numbers.
Don't ignore it.
Don't push it down the road.
Take a look at those numbers everyday, every week, every month.
(26:54):
There is a separate episode thatwe've done all about what to track.
So definitely don't ignore
Pip (27:00):
your numbers.
And then number two, you want to be savingfor your tax as that revenue is coming in.
Just put some of the money aside soyou don't get hit by that surprise
tax bill at the end of the year.
Amazing.
Number three,
Georgia (27:11):
not building enough profit margin into your products or your services.
So remember, this is especially importantwhen you're starting to charge VAT.
So think about that from the get go, butreally keep on top of that profit margin.
Pip (27:26):
And then number four, you want to make sure you're regularly reviewing your
prices and make sure that you're rising,, raising them in line with inflation.
If you want to grow your business, youneed to be growing faster than inflation.
If not, you're just standing still.
So really be cognizant ofthose, that, those numbers.
Great.
Number five,
Georgia (27:44):
making sure that you're saving that three month runway.
Start small.
As we said, it can be a week,then two weeks, then a month.
And then eventually you've gotthree months in an account that's
actually giving you some interestnowadays, which is good news.
Pip (27:55):
Transcribed And then number six, you want to make sure you're
investing in support early enough.
You need to slowly step out of thebusiness, out of all the doing roles.
And so don't get scared to spend thatmoney on getting help in your business.
That's ROI back and it'llhelp you grow your business.
So don't take too longto get help coming in.
And finally,
Georgia (28:15):
just making decisions based on your gut without actually seeing
how the data is backing that up.
So, , if in doubt, look at the databecause that is going to help you
make the right decision going forward.
Pip (28:28):
Fantastic.
I hope that helped you understandwhere you can be spending a little bit
more time and energy in your finances.
And remember finances donot need to be scary at all.
So if you want any more informationor access any of the resources that we
mentioned, then just head to the shownotes and you'll find all the links there.
Welcome back to another episode of the podcast.
(00:02):
And this week we aretalking about finance traps.
So a few weeks ago, we went intoa bit of depth about the different
areas of your finances and yournumbers that you should be tracking.
And this week we're going to talkabout some of the finance traps that
you might be falling into that arestopping you from scaling your business.
So Pip, I'm going to come to you.
(00:24):
Why is it so important for us tothink about these finance traps?
Pip (00:28):
Well, I think as a business owner, really, when it comes
down to it, the entire point of abusiness is to make profit, right?
The entire reason for having a businessis technically, if you're using the,
the official meaning of businessis to understand your finances.
You need to understandyour finances for that.
And I know a lot of us build businessesfor many other reasons, not just to make
(00:50):
money, but it's really important that weunderstand the money that we're making in
our businesses so they can be efficient.
They can be effective.
They can support us in the lifethat we're trying to build.
And then also we need to understandwhat's going on in our businesses,
just from a statutory perspective.
So we need to understandhow much money we're making.
So we pay the right amount of tax.
So our accountants can do ourtax returns for us and our
(01:14):
financial accounts every year.
So it's just really important thatwe don't get ourselves to a place
where we ignore everything because.
Our business isn't our hobby, right?
So we need to know the numbers.
And I think when it comes towomen, sometimes we have been
taught in society that, you know,you don't talk about numbers.
And I know this is a massive thing,, from an English perspective, you
(01:35):
know, you don't talk about salary.
You don't talk about numbersand it's a bit of a taboo thing.
And actually with a small business,you need to understand your numbers.
And so we've spent all this.
time in our life, like avoiding numbersand the financial conversations and
finding them a bit awkward often.
And so it's really also learning tofeel confident stepping into this
(01:55):
area where often we've not beengiven a lot of confidence from people
around us in stepping into this area.
So we can really manage the situationourselves and be in charge ourselves
and not be reliant on anyone.
I always think if you're running thebusiness, you should know everything and
you should never be reliant on anyoneelse to tell you exactly how your business
is doing, you need to know yourselfso you can be making those decisions.
(02:17):
Yeah,
Georgia (02:17):
I think that's really true.
It's so important to be on top ofthose numbers to understand the
numbers, but also, as you say, justget really comfortable talking about
money, talking about the cost ofthings, talking about the value of
things, understanding what other peopleare paying in similar situations.
I think one of the really bigbenefits of, , joining even like
(02:38):
these mastermind, coaching mastermindsI found is how open everybody is.
At talking about money.
So it's really easy to get a goodhandle on actually what are the
things that I need to be considering,you know, further down the line.
So I don't get tripped up or whatare actually people paying for?
Like what equals a good service?
What's a fair wage?
Like, you know, wheredo we stand with this?
(03:01):
And I think when you're startingto think about scaling, you're
going to have to bring on a team.
That's one of the key things.
So the sooner you can think about.
What will the cost be?
And what do I, what am I hoping toachieve by investing in that team?
, you can get much more comfortable withthe numbers of how you're going to
pay people and why it's really worthbringing someone in to pay someone.
(03:24):
And I think the other thing is it is so.
Stressful when we don't know what'sgoing on with our money, like
money can be really stressful if wedon't understand it, or if we think
about it as something that's scary.
So if we're actually just reallyopen about it and really considering,
okay, this is what's coming in.
This is what's going out.
(03:46):
This is the plan I canmake to deal with it.
We can be much more prepared for what'scoming rather than it feeling like.
A really stressful kick in the stomach.
So there are heaps of mistakes I'msure that we could all be making as
we're starting to scale our businessesand think about our finances.
(04:07):
What would you say are some of thebiggest mistakes that people are making?
Pip (04:11):
question.
I mean, I think the biggest one isjust ignoring your numbers or not
tracking them, just hiding from them.
So I think it's really easy.
As you say, if you get stressed aboutmoney or a bit stressed about what's
going on in the business, and thisis, it's such a normal feeling to
have is that you then hide from it.
Right.
And you're like, okay, I'lldeal with that next month.
(04:32):
I'll deal with it.
When my accountant sends me his littlenote at the end of the year going, Oh, you
know, can you send me everything through?
And.
So I think it's really important that youmake sure you start getting comfortable
with your numbers as early on as possible.
And even if that makes youuncomfortable, you don't really
know what they're telling you.
Go get help, ask somebody and justget used to checking in regularly.
(04:53):
And I know we talked a lot about whatto check in, in a previous episode.
So we can always link thatin the show notes for you.
But if, if you don't know what's going onand you don't have that data, you don't
know, Which products are selling well,or which clients are paying on time.
You can't then make decisionsproperly in your business.
Yes, you can think something's going on.
You're like, Oh, I think thisproduct selling really well.
Or, you know, I really think thatthis client has brought me in a lot
(05:16):
of revenue, but you don't actuallyknow without looking at the numbers.
And so it's really hard to make.
really good decisions unlessyou have those numbers.
And I think also you need to know thenumbers so you can be saving for tax
and all those other aspects as well.
But I think the biggest thing is justgetting into the habit of starting to
track your numbers and not ignoring themwhen everything feels a little bit scary.
(05:38):
Yeah, that's
Georgia (05:39):
so true.
And actually, it's not justthe finance numbers, is it?
It's not just knowing likewhat's coming in and out.
It's, , looking at what arethe most valuable assets that
you have within your business?
What are the most valuablerevenue streams you have?
And therefore, which team members areContributing to those revenue streams,
and they'll each have KPIs, , around whatthey're trying to do, how they're trying
(06:03):
to contribute to that revenue stream.
And I think for every teammember, there's usually one number
that's really important for them.
So that could be the number orthe percentage of people they are.
are converting into lifetime clients,or it could be the number of five
star reviews they're getting a week,or it could be the number of clients
(06:26):
they're delivering to, or the numberof sales that they're bringing
in each month, or the number ofconversations they have each week.
Whatever that team member is, there'ssomething that you can measure and
that they sort of need to be measuringto know that what you're paying them
each month is a return on investment.
So it all comes back to that ROIthat we've talked about before.
Pip (06:47):
Yeah.
And when it comes to you mentionedassets, we also want to think
about what's happening withour business in the long term.
I think we can often be so stuckin the midst of things that we
forget what the big plan is.
Is it the We are going to need toget some money to come in to invest
in something big in our business.
Are we going to need to go raise finance?
Are we looking to sell ourbusiness in the future?
(07:07):
Are we actually just looking for it tomake a lot of profit that which we then
pull out, which is then our pension?
You know, we've got to think about thelongevity of our business and how this is
setting us up for the future and not just.
Well, the, you know, the moment hereand now, and knowing those numbers and
understanding, and it's often not evenunderstanding what questions to ask.
It's just even understanding who you needto speak to, to try and find the questions
(07:32):
you need to ask about setting yourselfup and whether that's setting yourself
up in the most tax efficient structure orthe right business structure, or you're
pulling out your profits in the right way.
, which again comes back to, you know,if you're in a mastermind or some kind
of group, I find this is where I oftenfind lots of new ideas around this.
And it's really kind of sparks thoseconversations, but if you don't know your
(07:52):
numbers, then you can't get yourself to aplace where you, you do know what's going
to happen for yourself in the business.
And I think it's really sad when womenwork really hard to create amazing
businesses and because they don't havethat long term plan, they then can't make
the money that they want to on sale, orit kind of fizzles out and they don't
actually get that long term financialreward that they really deserve from the
(08:13):
incredible business that they've built.
Yeah, that's
Georgia (08:15):
so true.
It's really about thinking about thelong term future of it, isn't it?
So that financial planning, , monthly,quarterly, annually, but as you say,
where you want that business to go.
And I've had conversations with anumber of clients actually recently that
are starting to think about that fiveyear plan and saying, you know, well,
actually I know in five years, I don'twant to still be working this business.
(08:35):
I want to be selling it.
So I'm kind of reverse engineering.
Where I need to get to with everything tobe able to sell that and that's thinking
about how that, how you're going toinvest in team, how you extricate yourself
from doing everything in that business.
Like what, what are the figures,like, what do you need to
think about as you get to that?
So that's so important.
(08:56):
Now, I know you mentioned taxes.
I would say, is that kind of number twoin terms of things that you need to think
about when it comes to finance traps?
Pip (09:06):
Yes.
Yes.
Absolutely.
Hit the nail on the head.
So I know you've heard thisbefore, but the money coming into
your business is not your money.
Okay.
You can't just say, Oh, brilliant.
We've got loads of sales.
This is my money.
Off I go.
I'm going to buy myself a newbag or go on a new holiday.
The money coming into your businessis your business's money, right?
And so we need to understand.
(09:27):
From there, what our costs are, andthen whittle it down to what our profit
is and what our taxable profit is.
So we can understand how much we needto be putting aside and saving for our
taxes, because there is nothing worsethan having a really great year, and
you feel really good about yourself,and you're like, yes, the business is
really finally taking off this year.
And then, bam, the tax bill comes through.
And you have...
(09:48):
No idea how big it is and it's justgoing to hit you when you suddenly have
to scramble around to find that cash.
And, you know, I see the face you'remaking that like everybody has either
been there or knows of someone who'sbeen in this situation before, right?
And it's just the worstsituation to be in.
And yet we don't need to putourselves in this situation.
(10:08):
We can be saving.
our money aside every monthwhen we know what's going on.
And then it's really nice becauseyou know, when that tax bill comes
in, it's just the best feeling to go.
Yep.
Here's the money paid off.
And you know exactly whereyou stand within the business.
So saving for taxes isdefinitely a huge one.
You need to get into the habit of doing.
(10:28):
That's such a big thing
Georgia (10:29):
to think about the money coming in as not your money, because
it's a really easy track to fall into.
too, isn't it?
And the more you can automateit and sort of directly, direct
debit money out of your account,straight into your tax account.
So you don't even look at it, you know,you, you haven't got time to be sad about
(10:49):
the handbag that you didn't get to buy.
You can, it just, it justhappens automatically.
, okay.
So yeah, taxes is definitelya thing, but I, I also think
thinking about that as well.
Is not building enough of thatprofit margin into things.
Would you agree?
Like, how do you goabout that particularly?
I mean, with a service based business,I feel like it's slightly easier.
(11:11):
You know, you've got morecash that you can manage.
You can do things slightly differently,but I know that product based
businesses are your specialty as well.
How do you manage that in a product based
Pip (11:23):
business?
So you're right, service basis isa lot easier to build in a profit
margin because generally youstart out and it's just your time.
So it's more about valuing your timeand then the small costs you incur.
Where with products, you have the costof the product, you often have a cost
of developing the product potentiallyto begin with, and all the other things
that come with it, like, you know,packaging materials and shipping and
(11:45):
import taxes and all those kind of things.
, now there are loads ofdifferent ways that you can.
calculate, profit.
, and I actually have afree workbook on this.
So if you want to know how toprice your products, , send me
a DM and I can send it to you.
Maybe we can do a fun episode on this.
Cause there's loads of differentthings you can look at whether you're
service based or product based.
, but the thing that I wouldalways say is that you want to
(12:06):
have some pattern of how you.
Manage your profit every,for every product or service
that you are developing.
So with product based business,you'll generally have a margin that
you want to hit, a target margin.
So you'll know that you have tosell the product for say, three
times the cost or five times thecost of what it costs you to make.
And then you look at the marketand you go, okay, is this cost?
(12:30):
Where I think it should be,do I have a premium product?
Can I charge more for it?
Am I trying to competeon, you know, cost price?
You know, you really need to think aboutwhere your brand sits within the market
and then you can adjust your prices.
And this is similar for productbased, , for service based as well.
Is that you, you go, okay,this is literally how much it's
costing me to deliver the service.
(12:51):
And then you add yourprofit onto, onto that.
And then you can look kind of withinthe market and go, does this feel right?
Do I feel like I'm gettingenough money for this?
Am I charging out my value enough?
And obviously with this, you also needto think about all the other costs
that come in that we forget about.
It's not literally just the cost ofproviding the service or product.
You need to think about VAT or sales tax.
(13:13):
If you're outside of, , UK, if you'rein America, you need to build that sales
tax of that VAT into your product prices.
Cause if not, 20 percentwill just be taken.
Of profit before you even know it andin a product based business, that's,
that's going to be a pretty big hit.
And also things like, , the cost of yourtime, I always find, especially in service
based businesses, people forget to put thecost of their own time in their pricing.
(13:38):
I mean, I'm sure you've come acrossthis a lot, Georgia, but I think that's
something that we often forget aboutthat our time has a cost, even though
it's not an actual monetary cost comingout of the business, there is a cost
and we need to include that, right?
Georgia (13:51):
Absolutely.
And it's definitely thing somethingthat people forget because I think
we really underestimate often howmuch time we put into something.
, plus you're also thinking about.
all the years that it took you to buildup that knowledge that you are now selling
within your service based business.
And if you want to scale that business,if you don't want it all to be you
(14:13):
forever and ever and ever, you'vegot to start thinking about, okay,
so what is the cost of replacingme within this client delivery?
Because now, instead ofundercharging for myself.
I'm actually going to have to paysomeone else to be delivering this.
So what would that be?
And just almost start to usethat to check your check.
You're paying yourself fairlyto begin with, because then it's
(14:36):
going to make that shift intopaying a team member much easier.
And remember, if you're thinking aboutselling this business further down
the line, you absolutely have to thinkabout replacing yourself in every
single step of your business becauseOtherwise, you are literally going to
have to sell yourself with the business,which we're obviously not going to do.
So really factoringthat in to your pricing.
(15:00):
I just wanted to just quick questionthere on the VAT, because that is
definitely something that people oftenworry about in a service based business.
Are there any particular traps that peoplefall into around thinking about adding
the VAT once they hit that threshold?
So I
Pip (15:18):
would always price including VAT from day one of the business because
up until you hit the VA threshold, youjust get to take an extra 20%, right?
So it's a bonus.
And I think when you're starting off,we often don't pay ourselves enough.
There's lots of other costsgoing on in the business, so
that extra 20% often could be.
The bit we pay ourself whilst everythingelse, all the other money in the business
(15:41):
is paying for all the, the other thingswe need to keep the business running.
So I actually think it's quite a smartway of get paying yourself as you're
just getting yourself off the ground.
, the other big trap I see is that people.
Stay below the VAT thresholdbecause they don't want to pay VAT.
And actually that's damaging the growthof that business when they're like
(16:01):
actually keeping themselves below the VATthreshold and the VAT threshold has stayed
at 85 K a year for a really long time.
And so with inflation and everything,if you're staying below that
threshold, you're actually shrinkingyour company year on year rather
than growing in line with inflation.
So it's really important that you just.
Get over it.
(16:21):
You pay your VAT and yes, it's a littlebit more hassle and everything, but
it's a really cool sign when you hitthe VAT threshold because it means
you have a proper business, right?
So I think it's something that weneed to see is like this really
exciting milestone as opposed to,Oh no, we've got more tax to pay.
I think there's generally a feelingof, I don't want to pay tax.
I'm going to.
(16:41):
Spend all my money to make sure thatmy profits really low so I don't
pay tax and actually taxes are anamazing sign that you're doing well.
So I think we really need to change thenarrative around changing tax, about
paying tax and actually see it as a signthat our business is doing really well.
And we're, we've been reallysuccessful and see that as a
really good sign, as opposed tosomething we should be avoiding.
(17:03):
I love
Georgia (17:03):
that.
Let's celebrate hitting the VATthreshold and definitely I have
seen this with friends as well.
When, you know, they said it's amazing.
My business has got to this point whereI'm, I've now hit the VAT threshold.
Like I am on the up.
So yeah, keep thinking about that.
What else, , is, what else is happeningif we are not keeping in line with
Pip (17:22):
inflation?
So we definitely need to keep prices inline with inflation because inflation has
been, I mean, inflation has been prettycrazy over the last, what, 15 months.
, and you know, we've hit double digitinflation and we can see it in terms of.
interest rates, , rising.
So we want to really ensurethat we're increasing our
(17:44):
prices to reflect inflation.
Now, this might not be that we'reincreasing them directly in line with
inflation, but we need to be cognizantof what's happening in the industry
around us and within other companiesthat are selling similar products or
offering similar services, because if.
Inflation is, say, at 10 percent a year,then in a year's time, if we make the
(18:06):
same amount of money, we're actually10 percent behind where we were last
year, so our business has actuallyshrunk from where it was last year.
If you make 100k revenue each year,Then you're actually shrinking
rather than growing because thevalue of money has decreased.
And I think this is something that,, we forget about quite a lot because
it's quite a, a weird concept, thevalue of money and inflation and,
(18:28):
and everything to do with that.
So I think it's really importantthat we build in those regular
pricing checks, at least once a year,there's a, there's a chance for you
to sit and reflect on your pricing.
, you know, often this needs to be morefrequent, especially in service based
businesses when you bring in team andunderneath, but it's something we can't.
Forget about, you can't say,Oh, well, I used to sell this
service for this amount of money.
I used to sell this productfor this amount of money.
(18:49):
Yeah, that's great.
You used to, but thisyear you're not right.
Georgia (18:53):
Yeah, it's so true.
But yeah, keeping, keeping growth inline with inflation is really important.
, as well as keeping track of what youmight need in reserve, would you agree?
Like thinking about what might becoming up, worst case scenario, like
how much should we be planning aheadin terms of keeping some money aside?
Pip (19:16):
Great question.
, so I would always say that you needto start small and then aim for
what feels comfortable for you.
Now, most, most people, depending onyour risk tolerance, feel comfortable in
about having about three months runway.
So essentially, if you take all thecosts your business has over three months
and you put that money and you just.
(19:38):
Chuck it in a savings account somewhere.
And at the moment, we've got some, youknow, actual interest on our savings.
So, you know, you can actually,, make some money out of doing this.
, but this will really dependon your risk tolerance.
Some people want, you know, toeventually get to a six month place.
Other people, you know, have muchlower or higher risk tolerance.
And so they only want one month,but I would always say three months
(19:58):
is about good because if somethinghappened today, say you got ill or say
something, you lost a big supplier,a big client, and everything's sort
of ground to a halt really quickly.
It's really nice to know that you've gotthree months to figure everything out.
I think most entrepreneurs.
Could get everything back up andrunning and going within three
months, a month is a little bit short.
(20:19):
Obviously, if you're a bigger companyand you've got greater team costs
and everything like that, you mightfeel more comfortable doing four
months or five months or six months.
But I think the big thing is to not tryand aim for three months to begin with.
It's okay.
I'm going to put aside a week's worthof costs and I'm going to put aside
two weeks worth of costs and just feellike it's a little, you've got a little
pot that you're aiming for and you'rejust slowly adding into that pot.
(20:41):
And as you said earlier aboutautomating where your money goes,
This is a really good way to do this.
So your money comes in, your salesmoney comes in and you automate it out.
So some of it goes intoyour tax savings pot.
Some of it goes into your runway.
Some of it goes into your pay.
, and this is actually a methodology calledprofit first, which I know a lot of
people follow, which I think is a reallygood way of ensuring that you're paying
(21:01):
yourself and you're making a profit.
But I think automating that and just noteven touching the money, just letting it
go out to where it needs to go and thensaying, okay, this is what I've got left.
This is what I can invest in, in this.
It's not in the business.
Yeah,
Georgia (21:15):
that's so good.
I love that.
Yeah, it is the automationand putting that money aside.
And, and equally this kind of mirrors withwhat we were saying with team as well.
Once the one thing I see, , peopledo a lot is not investing in
that support early enough and notrealizing the value of their own time.
Plus.
thinking that it's better that theydo tasks that just fall within their
(21:40):
zone of competence, or even excellence,but not their zone of genius.
So they're paying themselves high levelto do quite non, like quite not meaningful
tasks for them, things that are notlike 100 percent in their skill set.
So thinking about where isyour time most valuably spent.
Thinking about investingin that support early on.
(22:02):
And actually I love this idea of factoringin VAT early, because actually what
you could be doing is using that money,putting that, saving it into a small fund
to get you started with that first hire.
So that you know you've got a monthor two backup money there ready to
pay them if they haven't quite startedgenerating their ROI in the role as well.
(22:25):
So thinking about, I know I'm goingto want team from, from the get go.
So where am I putting that money aside?
So I feel really comfortable bringingthem in as soon as I can to take over some
of these tasks that are really absorbing
Pip (22:37):
a lot of my time.
Yeah, I completely agree.
I think with team, it's always,you always want to be hiring just
before you feel quite comfortablyfinancially too, don't you?
Because that team member is goingto bring in, if you, if you do it
right, it's going to bring in revenueor it's going to free up your time
so you can bring in more revenue.
And I think it's really.
Understanding that data you have inyour business and going, okay, right.
(22:58):
I have this much money.
This is where our, our sales are comingin here is where we're projected to go.
So I know that if we hire this teammember, it's going to cost me this.
And this is our aim.
We're going to create this.
Much more revenue because I'm goingto be out doing more sales stuff,
or they're coming in to help mewith sales and marketing or whatever
that person's role might be.
And I think that really comesdown to, you can't make decisions
(23:22):
without having the data.
And I know a lot of us, , , especiallyrunning a business, we're really
trying to lead from a place ofcompassion and really kind of.
We look inside and use our gutto help guide where we're going
and really build businesses thatare aligned with what we want.
But we always need to be using that dataas well to understand where we're going.
(23:43):
I always think that you shouldkind of trust your gut and then
back it up with data, right?
I think sometimes we can get sodata driven that we stop seeing
the bigger picture and we're just.
So honed in on something, butit's really about going out.
This is what I want todo with the business.
This is my vision.
Okay.
Let's look at the numbers and seewhether this is sensible or actually
are the numbers telling me thatthis might be a better path to go.
(24:06):
And it's not just thenumbers within your business.
No, it's not just what's sellingwell and what's not selling.
Well, it's also looking at thenumbers of the market that you're in.
You know, , we discovered by lookingat this recently, a whole new.
Potential area of growth, which we hadn'trealized had grown so big because we
started looking at some industry data.
And we said, actually, we've gotproducts that we could tweak and
(24:27):
sell to this market very easily.
And immediately you founda whole new revenue stream.
And I think it's about really puttingyour idea and vision in the context
of that data so you can make theright decisions for you and for
your business and for the longterm.
Amazing.
Georgia (24:42):
Okay.
Before we wrap up with, , the keytakeaways that people need to think
about, is there any last top tipsthat you want to add into that?
Pip (24:51):
biggest finance trap, this little bonus one, , is that you should
be paying yourself from day one.
And I'm not saying, you know,you need to pay yourself a six
figure salary from day one.
I, I really understand that, you know,it's hard to get a business off the
ground and money can be stressful.
And sometimes you might sit there,especially if you're early on and think,
Oh my goodness, where the money is.
Or if you're in that scaling andyou've got these huge bills coming
(25:13):
in and you're, you know, you'rereally struggling with cash.
You think, okay.
I'll pay myself in three months time.
I'll pay myself in six months time oncewe've just got a little bit further.
But you really need to start gettinginto the habit of paying yourself as
early on as possible for a multitudeof reasons that we've talked about.
And I'm sure we'll continueto talk about on the podcast.
But.
Even starting out small and justgetting into the habit, even if it's
(25:35):
just putting 50 pounds aside, youknow, each week or something, just
a little bit, just to get into thathabit of putting the money aside.
And depending on how your businessis set up, , , there'll be different
ways to do this the most efficiently.
Obviously, if you have, if you're a soletrader, any profit you make is yours
anyway, and you're getting taxed on it.
But if you run a limited company, thenyou want to be thinking about , employing
(25:56):
yourself , taking out the personalallowance each, , year , and then
taking out dividends on top of that.
And obviously this is notspecific tax advice for you.
It will really depend on your personalsituation, but there are really smart
ways in which you can pay yourself anddo it in a way that also sets you up.
So you are, you know, getting yournational insurance contributions and all
the other things you need to think about.
(26:17):
So, you know, you have access to,you know, state pension later in
life and all these other things.
, but.
Start paying yourself fromday one, even if it's pennies,
it's worth getting that habit.
And then slowly over time, you can startseeing that pot grow and start really
reaping the rewards of your business.
Amazing.
Georgia (26:34):
Okay.
So before we give everybody the fearabout all the things that they need to
think about with these finance traps,as we said, there are some simple things
you can get started with straight away.
So number one is making sure thatyou're tracking your numbers.
Don't ignore it.
Don't push it down the road.
Take a look at those numbers everyday, every week, every month.
(26:54):
There is a separate episode thatwe've done all about what to track.
So definitely don't ignore
Pip (27:00):
your numbers.
And then number two, you want to be savingfor your tax as that revenue is coming in.
Just put some of the money aside soyou don't get hit by that surprise
tax bill at the end of the year.
Amazing.
Number three,
Georgia (27:11):
not building enough profit margin into your products or your services.
So remember, this is especially importantwhen you're starting to charge VAT.
So think about that from the get go, butreally keep on top of that profit margin.
Pip (27:26):
And then number four, you want to make sure you're regularly reviewing your
prices and make sure that you're rising,, raising them in line with inflation.
If you want to grow your business, youneed to be growing faster than inflation.
If not, you're just standing still.
So really be cognizant ofthose, that, those numbers.
Great.
Number five,
Georgia (27:44):
making sure that you're saving that three month runway.
Start small.
As we said, it can be a week,then two weeks, then a month.
And then eventually you've gotthree months in an account that's
actually giving you some interestnowadays, which is good news.
Pip (27:55):
Transcribed And then number six, you want to make sure you're
investing in support early enough.
You need to slowly step out of thebusiness, out of all the doing roles.
And so don't get scared to spend thatmoney on getting help in your business.
That's ROI back and it'llhelp you grow your business.
So don't take too longto get help coming in.
And finally,
Georgia (28:15):
just making decisions based on your gut without actually seeing
how the data is backing that up.
So, , if in doubt, look at the databecause that is going to help you
make the right decision going forward.
Pip (28:28):
Fantastic.
I hope that helped you understandwhere you can be spending a little bit
more time and energy in your finances.
And remember finances donot need to be scary at all.
So if you want any more informationor access any of the resources that we
mentioned, then just head to the shownotes and you'll find all the links there.
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