Tips from a CPA: Accounting for Entrepreneurs and Small Business Owners

that was facts on facts vanessa i felt that from the inside literally though but people aren't ready people are not ready for a big audience you better know you better know the responsibility that comes with having a big audience and knowing how to operate your business because people just care about getting 10k followers and like do you realize how expensive it is to have 10k followers welcome to the turn your followers into clients podcast i'm vanessa lau and my mission is to help new coaches content creators and corporate escapees get visible and get paid i went from quitting my corporate job with no backup plan to suddenly building a multiple seven-figure business in less than two years thanks to the power of social media my life changed in an entire year and i believe yours can too so boss let's help you get visible and get paid and dive into today's episode hi brittany thank you so much for being on the turn your followers into clients podcast hi vanessa thank you for the opportunity to share some knowledge as well as my experience with your audience now brittany how about you actually tell us about your journey first and exactly what you do today yes so everyone my name is brittany chantel jackson i am a certified public accountant out of detroit michigan in the united states because i know bga is definitely international she just wanted to put my little point on the map i'm also a beauty and fashion photographer so what actually attracted me first to bga was the beauty and photography side i was trying to figure out how i can add more value to that side and then based off of experience within bga and one opportunity which was coaching monthly coaching which is no longer offered um i was able to share my love for accounting as well as my love for photography and vanessa helped me have an aha moment that they took less than like five minutes and then she was like is that it and i was like yep that's it i'm on the way to go to where i needed to go and that's kind of how this journey has started on trajectories so right now i have a photography as well as an accounting business with my father lionel jackson yeah and just to dial it back a bit so the listeners actually know the conversation is when britney joined she was a photographer and funny enough she actually didn't necessarily fit the ideal client profile that bga typically attracts we typically attract people who already know they want to be coaches or know they want to be consultants but you didn't really know you kind of joined because you loved my content so much and you just was like you know what i just i just feel like i could learn things that could apply to my photography business and at the time when you joined that time period we still did monthly coaching calls it was a different type of boss gram academy offer and in the coaching call brittany was stuck and she wanted to merge her passion of photography but she also had an incredible background with accounting and i think you're studying your master's like you were cpa and i was like well why don't you just like merge the two and you know offer accounting services for creatives because i asked her i coached her and i asked like what did you like about working with photographers what did you like about that and she's just like i just love the people i love the creativity i love all of that stuff and then what did you like about accounting it's like well i have an expertise in it i spent a lot of money learning this stuff and she ended up merging it and now she has a company with her father and it's it's called intrinsic accounting and she gives such great advice she's actually also a guest expert in our program now so you've really grown with us brittany from a student who was seeking my help to now helping other students inside as well so my whole team loves you but how exactly did you find boss gram academy and i and why did you sign up even though like you were a photographer yes that is a great question so it was i want to say it's your pop star videos if i'm using my terminology correctly um and it was the most ranked one right now just how to it was really vanity metrics just searching youtube trying to find social media tips and based off of that video i watched it and i was like okay this young lady knows what she's talking about let me hit subscribe and if anybody and vanessa can attest to this i am a loyal type of person so if i really am involved and i hit subscribe you're gonna see me comment every week share it because that's just my personality so that's what started the journey and then i signed up for the original master class and her disclaimer and i really appreciate vanessa's disclaimer was like hey this isn't for service providers this is meant for coaches and consultants so at first i was like and then she actually was like and it's not for photographers i was like okay cool it's not for me let me walk away but based off staying on the list serve watching her content seeing her grow i'm like let me give it a try again and it was that second go-round when i actually sat back and listened more to what could i potentially learn and create on my own from this content is when i signed up and i paid in full because one thing as a cpa and this is my personal preference i prefer to pay in full because if i can't pay in full then i know i'm not mentally committed to it and i'm probably going to push it off and push it off so that's how i kind of even though it wasn't 100 for me i've learned to make every situation my own and that's how i feel like myself as an entrepreneur and other entrepreneurs can grow is if i can feel if i can get something from this individual how can i customize it for my success i love that and i know that despite not necessarily fitting our ideal client profile you still use bj and i remember like your first few wins was you signing full figure photography clients and then you merged and turned your business into more of accounting services and obviously you still do photograph to photography on the side which is great and then you've also been able to book out clients and a lot of your clients are coaches too and consultants so i just love how it's a full circle moment and so obviously this episode is dedicated for us sharing your expertise before we do that because i know a lot of our listeners sometimes are interested in joining the boss graham academy or they just want to learn more about our student experiences versus just my own um how has fosgram academy actually impacted your business since joining yes so that is a good point so my first financial win and more importantly first mental win is that that first module when it went to limited beliefs and in posture syndrome and don't want to give too much away because you need to click and buy um it helped me when it came to not only my photography business but i am pursuing my phd in accounting and at that time i really was struggling with is this right for me am i in the right location and it was really just that module that i allowed to use the workbooks not just for my business but for my life and for my education so that was like that first trigger of yes this is a great program because it doesn't just help you get financial wins but it helps you as a person and our business name is intrinsic accounting intrinsic means internally and i do feel like bga is trying to help students internally so that they can succeed externally so that is one of the reasons what i feel has helped me and it has really took us to a new height so i'm able to use the mental as well as the marketing strategies the social media strategies but also the business foundational strategies of finding gaps within the existing business that i had but also closing gaps that potentially could have been created in our new business i love that and also just kudos to you brittany because like you said earlier with your loyalty you know you are one of those students who just have stuck by thick and thin i remember one time we had a little mini pr crisis in our student community and the first person that i actually called and thought of was brittany because we had to send a really uncomfortable email to our students explaining you know a situation about us enforcing our boundaries and i'll talk about that in a future episode for sure and i wanted to tap into another student and get a second opinion to make sure that as a student hey you know is it clear with what our boundaries are but also like would would it is it understandable and does it make sense and brittany was the person that i facetimed like that's the type of relationship i've got with brittany since her joining in bga and just giving so much to our community but also speaking up for us too sometimes we'll have students ask questions that are out of scope and brittany's just in there being like hey vanessa doesn't cover this so i think that you should you know ask this person instead and you've really helped us a lot um and you're not even formally like a part of our team so that i just want to really say thank you and that's why i have such a beautiful relationship with you now um and so let's actually talk jargon because yes brittany we all know you're successful you have a very profitable business now every month you're producing profits and i see all the updates that you have but let's talk about the word profit and other jargon that is in the space because i know when i first started and i have a business degree so i have a bachelor's in business and even then i still have to google like what is the difference between gross sales and net sales sales revenue versus cash collected profit net profit gross profit you know what am i supposed to be measuring to track my success in business is it like number of enrollments is its dollar amounts and what kind of dollar amounts and so let's start off with the first group of terminology and that is sales revenue and cash collected now for me uh when it comes to cash collected i track my success and every time i share my revenue numbers it's always cash collected but i know a lot of people also track it by sales revenue so can you explain the difference between sales revenue and cash collected yes so um before we start that conversation it's very important to know that there are two bases of accounting so you have the cash basis of accounting and accrual basis of accounting so most small businesses you are on the cash basis of accounting so that means when you collect cash that's when you should be recording your revenue if it's related to revenue collection and when you spend the cash if it's relating to an expense that's when you should record your expenses versus the accrual basis of accounting which most big corporations have to follow and certain small businesses once they reach a certain threshold then you're going to actually record your revenue when services are provided and you're going to record your expense when services are provided to you so those two bases really take us into the conversation of what is sales revenue versus cash collected so cash collected if you say you have a 10 000 launch but out of that 10 000 launch 5000 was paid in full 2000 was payment plans and the remaining 3 000 is future payment plans where your cash collected is actually 7 000. so on that day of the launch if your cash basis you have seven thousand dollars in sales now you have three thousand dollars of future payments and from the cash basis you can't even put like accounts receivable because that isn't a component of it but in your internal records and that's something i think we don't talk a lot about is external financial records and internal financial records you should have a accounting schedule to say i know i have three thousand dollars coming in the future and once i receive that then i can record my sales so from my nerdiness that just happened cash collected is the amount of cash that you actually receive on that day of sales and sales revenue if you are the cash basis of accounting is going to be your cash collected but if you are accrual then technically it would be that ten thousand dollar launch of which based off the example i gave seven thousand would be cash collected three thousand would be accounts receivable if i get too nerdy please let me know [Laughter] and like what is there a right or wrong so when i actually started my business i was doing one-on-one services and there was less payment failures like virtually no payment failures i never had anyone not pay me because i was operating at a higher level i think at the time it was like two thousand to five thousand dollars and if anyone was on a payment plan um you know they never really not pay me because we worked one-on-one there was a higher accountability on that and so for me every time i did a youtube video every time i talked on social media i was talking about sales revenue so i was talking about oh my gosh i made a 10k month because i signed five clients at 2 000 that's a 10k month for me so that was my rationale but the moment i actually started selling courses like for instance the boss gram academy and especially after i put it on evergreen i noticed that we had a lot of payment failures because you know boss graham academy is way more affordable than one on one and also we're at higher volume so we've got hundreds of students new students coming in every single month plus half of them from our records fifty percent choose a payment plan fifty percent she's painful and with those payment plans we've got i think it's like a four month payment plan i believe um and sometimes like payments fail and so i can't really rely on those numbers and so that's why for me uh when i communicate hey i had an x dollar amount launch or hey um my business made two hundred thousand dollars this month i'm talking cash in the bank like money that we actually collected so that could be including the payment plans that we took in plus the new sales is there a right or wrong um i would definitely say yes because it really depends again how you are running your business but it's still something that you should internally say hey over this launch we expect to collect ten thousand dollars in sales but when communicating the success of the launch if you are the cash basis of accounting you need to talk about your cash collected and then the other piece um which is when you're talking about your payment failures um you should kind of estimate what percentage of your sales that is on account so your accounts receivable is not going to be collected so this terminology is allowance for doubtful accounts so for every dollar of sales that you sell that isn't cash collected what percentage is it going to be collected so that is another important piece that you should think about even if you are under the cash basis of accounting from an internal perspective you should be estimating how much you're not going to receive so that you're budgeting correctly and not already spending potentially that ten thousand dollar launch and then something happens with that three thousand that you didn't initially collect so yes you should communicate based off of how you're running your accounting system which for most small businesses until you elect accrual basis should be your cash collected i love that answer because even for us with our team we've got a spreadsheet and since this video is also going to be on youtube i'll throw up a screenshot of our spreadsheet every month we account for 10 of those money that we make to be payment failures because that's about the average for us like 10 of it just fails and they aren't recoverable and so my question to you is when you talk about cash versus accrual like is it your accountant that decides that your bookkeeper that decides that you that decides that like you know what how do you know which one you should be in who dictates that and then also is there a difference on which one you should pick depending on whether you're a course creator or a service provider or e-commerce business like how do we how do you know because i know a lot of listeners like okay i get it cash versus accrual but how do i know which one's the right one because you just said that there is a right and wrong kind of thing yep so again this is a conversation that you would sit down with your cpa and if you have like a tax lawyer and to figure out what works best for you most businesses again automatically are electing to cash and then once you reach a certain threshold so that would be like a sales threshold or a certain industry you automatically will have to switch over to the accrual basis of accounting but what's very important is when you record your sales so if you are using the accrual basis of accounting but you have a very low cash collection well you still have to record that high sales revenue and you're going to have to pay taxes on that sales even if you didn't convert it into cash so it's very important to understand the not only the financial accounting side of it but also the tax side of electing between cash and accrual when it's still voluntary but you can't just keep switching back and forth like you have to make sure and i am us-based but you have to make sure that once you elected that you are going to kind of follow which one you select right i think it's also about consistency too and especially as you have a team like for us because we're on cash basis uh all the goals that we communicate to our team all those things it's all about cash and so i'm wondering too um because you've worked with coaches and course creators and all that like do you find that like there's one like is it cash that's more common or accrual that's more common it's definitely cash and again it's because people don't even know that one accrual is an option um and then also it's just how we function as individuals as individuals when we pay our taxes they're not asking like oh well you worked the last week how much of it did you earn that you didn't actually receive yet in cash i'm going to tax you on that is based off of how much income you actually bring home so we function already as individuals on cash and cash out so it's easier as you start to do that as well and then once you see the business grow then if it is correct to make that switch speak with your cpa that understands your state and understands your country etc to make sure that you're in line with what needs to happen um 100 i love that so much all right now what about gross sales and net sales so this one you already know is like one of my um um i gotta think of the best one i don't wanna call it a pet peeve but one of my sensitive areas um when it comes to conversations because gross sales is literally your price times if you're a product base how many products or your price times how many courses you sell ebooks um people you work with et cetera it's just the actual price you put in your system so if you say that your course is worth 9.97 and that's what you put in your system times however many people that's your gross sales but that can be easily manipulated because your net sales is whatever your price times the people minus how many returns or refunds that you have how many discounts that you offer and then if the credit card companies take out some fees as well as what is known as allowances which allowances really wouldn't be that common in coaching but an example i would say is let's say that you bought a dress from fashion nova you selected the cardi b dress but you got the meg the stallion dress and instead of them saying which they're like oh i'm not giving you a refund but i'll give you a store credit if you keep the dress that will be an example of an allowance so you got something wrong and you're incentivized to keep the product and then you'll get a future code or something in advance so again net sales is your gross sales minus returns and slash refunds minus discounts and minus allowances so if you're always giving discounts well your system is still going to say the course is worth 9.97 but if you sold it for

4.97 then your net sales is actually that 497 and then your discount is 500 so it's very important to be careful and this is like my again my personal viewpoint but i think you should be very careful when you're screenshotting your gross sales because again that does not represent your cash collected if you have discounts returns refunds and allowances absolutely i love that and okay is net sales the same as profit then or no no so so next sales is still we're still at the top of the income statement which also is known as your profit and loss statement so net net sales is at the top and then after net sales and this is a very simplified you will subtract out all of your expenses so once you subtract out all of your expenses then if your net sales is greater than your expenses you have net profit and again this is net profit technically before taxes because most small businesses are not constantly paying taxes every single month or every single day per se so that number even when you're tracking your uh financials is before you pay your taxes so that is our net income and then if your expenses are greater than your net sales then you do have a net loss when it comes to other forms of profit so that was the very simple revenue minus expenses equals net income or net loss you have your gross profit and then as i just stated you have profit before taxes and these are just more itemized versions of your income statement to help you really look at the financial success of the business from the top starting at gross sales all the way to the bottom looking at net income or net loss i love that and for our listeners who are tuning in on audio only you know we have a version of this on our youtube channel and i'll make sure our video editors also kind of like illustrate what britney's talking about because i'm a very visual person and so it's really it's actually really easy to understand this once you see it broken down visually so if you want to head over to my youtube channel find this episode with brittany chantel jackson from intrinsic accounting you'll also see kind of the breakdown of everything i love love love that and so you know we talked about all these metrics you know cash collected sales revenue gross sales net sales profit net profit gross profit all those things actually before that is there any such thing as profit then or is it just it's either net profit or gross profit or is there actual does prof the word profit actually mean anything so typically there's something in like in front of profit so um what i like to tell my students because again i am pursuing my phd so i have a um 10 year this is like my 10 year anniversary of actually congratulations i know like just of teaching like from being a teaching assistant to a few more years professor jackson speaking into an existence um it actually is always going to be net something so you do have your gross profit so gross profit is more commonly seen in merchandise so when i'm selling a product so i have my net sales minus my cost of goods sold if you are a coaching business you could have cost of sales if you wanted to kind of keep track of that but typically when you're first starting out most of the expenses you have are more operating expenses more so directly attached to your course per se or to your one-on-one coaching so you do have net sales minus cost of goods sold gives you your gross profit so that is the direct profit associated with the item that you are selling then after that you subtract out your operating expenses so operating expenses you could think about it as when i go to walmart i expect the likes to be on i expect employees to be there i expect certain things or you might have your advertising expense to make sure that the business is running like i'm not in business to have that but i needed to operate my business so after i subtract out my operating expenses then i have my operating income after that i take out kind of my non-operating expenses and add in some non-operating items such as interest revenue or interest expense depending on if you have a loan or you have a savings account and then that is when we get income before um taxes then you pay your taxes and after taxes then you have net income or net loss oh my gosh okay all right that was like a little bit down more the rabbit hole but even i'm like you'll have the graphic look the brackets will be there if my video editors can keep up but maybe brittany after this you can send me a graphic so we can we can help our video editors a little bit after that i love that though but actually you mentioned something you mentioned something that i want to catch on i want to latch on to though is i actually struggle with this um as a course business or as a coaching business let's say is there such thing as our cost of goods sold like because i i think it's pretty easy for me to figure that out for a physical product but for me selling a course i'm always like is that my operating expense or cost of goods sold like for instance um kajabi right like i i paid from the membership pro course platform every single month uh and without that i can't really run the boss gram academy so is that part of cost of goods sold so it really depends on how you set up your operations for your business so every business should have a sop and with your sop you should have one for your financial side as well so if you feel that oh and by the way everyone sop is standard operating procedure which is basically like the blueprint of how you do things in business kind of thing yep so you should have one for your financial side of your business as well so if you feel that kajabi is directly related to the product that i'm selling then yes you could put that under your cost of sales because i need this in order to sell my product without kajabi there would be no bga per se but if you have something like mailchimp and i use mailchimp not only for my course but i use it for multiple products that you may just say okay this is going to fall under marketing and advertising and that's going to be under operating so it is very is way easier for a actual physical product because i have the physical product i know that i either bought it for a certain price or i made it for a certain price and then i have some additional cost this was able to get that product ready and then i have cost of goods sold but when it comes to forms of sales is more so what you feel is needed to actually make this product come to life and putting that in writing so that you if someone actual question you're able to justify that is in the right category actually that was really helpful for me because that was one thing i never was like i don't know i have no idea or like even like my employees or people who work for me like well they're not really associate they are associated to the product but they're associated to everything else and so i'm really glad that you you talked about that and so what metrics sorry go ahead oh yeah let me put you up sorry wages i would definitely say like your wage expense would probably go under operating because they're helping operate the overall business versus if um knock on wood bga was not to exist you still could utilize them for other pieces of the vanessa lao business yeah it's very different from a physical product like britney said i feel like physical products is more straightforward so for instance like i need to buy the stickers i need to buy the labels i need to have a co-packing thingy there i need to buy the box for this like those are all of your include that all is a part of your cost of goods sold um whereas i find that with a course business or even with a coaching business like even if you're selling 101 services i find that to be even more gray so i've always struggled with that but it's really helpful that you mentioned that you can be under operating expenses as well and so let's dial it back for our listeners who are like oh my god um you know what what metrics of success should really a business be tracking so for a course in course business and like one-on-one coaching services specifically yes um so i'm always going to start with you should select what you want so that is something that's very important to me because i can say oh you should think about your profit margins and when you talk about profit margin there are multiple ones so you have that gross profit margin which is comparison comparing how much of your sales is left over after cost of goods sold or cost of sales but then you also have your net income all the way at the bottom profit margin of how much of your gross sales is left over after all of your expenses so from your profit and loss i think that's very important to say out of every dollar and this is taking the ratio into words out of every dollar i make in my business how much do i want to keep at the bottom line so if i want to keep 75 of every dollar that means i have a 75 profit margin for my net income interesting so i i want to talk about paying ourselves because i i want to share how i pay myself and then you can give me feedback or you know we can also share different ways to pay yourself because there's definitely a lot of different ways but before i do that holding that thought i want to go back to what you said about because the original question was um what metrics should we be measuring for a health of a business and you said that you know it's really up to you to kind of decide and stay consistent on right and i really like that because i know that a lot of people they talk a lot about profit and people think that profit is the most important and it is but i also want to argue sometimes and say well if your business is in growth mode and you need to invest a lot let's say this one year you're investing a lot you're hiring more people like even for me i'm hiring i hired four more people you know doing a lot more um upgrading my equipment even more you know it's going to show that i have maybe a less of a profitable no profitable month but then let's say the following month i have a huge revenue and let's say i'm still paying off some of the expenses that i paid last month maybe i joined a mastermind or a membership you know for me at that stage i'm less concerned about my profit because i know that everything that i'm spending money on my business is to grow revenue now obviously eventually i'm going to want profit right and i just wanted to share that with some people because i can see a lot of people maybe getting discouraged like oh i didn't make any profit this month and maybe it's like their first three months of business well i was like well hey it's your first three months you're probably going to be spending more than you're making because you're trying to grow the business you're not here to hoard money and not grow at all it takes money oftentimes no it doesn't take money to make money it takes spending money wisely in the right areas to make money and so i really love that you mentioned that and then just to um add to that it is very very very important as a small business to understand that you're going to be potentially at a net loss which is what vanessa was saying you're making those initial investments because you don't know what you don't know until you try to figure out something and realize you don't know it so because of that you are paying for a lot of things initially and the reward is going to come after the fact but you want to have a plan to say if i know that i'm going to have a 10 000 net loss when i'm starting out this business because of all the expenses i've already paid for this is the plan that i'm making to get out of that hole and then to continue to grow so yes your business has different stages so you should definitely set an annual goal and you should say i want to have x amount of net income vanessa knows and my uh clients and future coaching clients the beta clients i'm working with now we speak net income we don't speak net sales we don't speak gross sales because that can be easily obtained and then you spend it all with expenses so we like to say hey this is the annual net income we want for our business and then we chop it up and say each quarter this is what i need to achieve and in order to do that each month and then each week and understand that i can have a buffer so if my first quarter like for us our first quarter was way better than what we have projected so because of that i can soften out in the second quarter or third quarter and then if i need to ramp up or ramp down i have that flexibility because i set a big enough goal and i'm not trying to figure out the goal as i go along so when it comes to your metrics be okay with having a let loss but have an executive plan on how to get to the goal that you want because last year in june a lot of businesses especially black owned businesses saw a skyrocket in sales within the united states but if i'm trying to plan for my june sales this year i know that may not happen because that was unusual so i try to make sure that my goals are realistic and if something abnormal happens understand why so i can figure out is this going to happen again or not yes and just to dial it back you mentioned the word net income can i just clarify is that the same as net profit or no yeah so net profit and net income are the same thing okay cool great and then to remind everyone net income or no net profit is your sales minus your refunds all the little icky things that happen in between and then also minus your operating expenses but not minusing your tax right not minus your taxes yeah so it's all well net yep so all well net income is all of your revenue minus your taxes but i mean minus your expenses but when it comes to how we're calculating because most of us do not pay taxes on a monthly basis just understand that net income you're calculating is before paying taxes and basically everything before taxes yep everything before taxes i like that i hate taxes uh you we all know how much i paid last year i wanted to cry i know mental was like i don't know i wouldn't and i was like oh my god i'm so happy that you like share this on your story but then tied it right back into like now watch this youtube video so you understand what happened that was like so beautiful yeah i mean it's good i mean i made a lot of profit you get you get taxed that's just what happened hey boss are you enjoying what you're hearing so far well i'm interrupting my own episode to invite you to my free training over at www.followers2clients.com this training has helped thousands of my own students nail down their niche create content that brings them more leads to their door and implement an easy to deploy social media funnel that helps them close clients like a boss this training is perfect for anyone who's starting out in business and wants to know the road map to making 10k months regardless if you're a new coach content creator or corporate escapee by the end of this training you are guaranteed to walk away with strategies that you can implement instantly the best part is is that this training is absolutely free and breaks down my entire methodology to signing paid clients plus complementary trainings that i don't share anywhere else on my free channels register today at www.followerstoclients.com link is in the description box below i can't wait to see you there and now let's get back into the episode anyways let's talk about paying yourself so how okay this is how i pay myself uh earlier you said that you know it's unlikely that you might be paying dividends but actually in my business i pay myself dividends so it's like a shareholders uh shareholders something about shareholders equity or something like that or loans to shareholder it's a loan to shareholder so how i pay myself um i actually don't have myself on payroll i have all my other employees on payroll and so what i do in my business is i take what i need and that's how my accountant had uh ex had advised me to do because there was a period in my business where i wasn't sure and a lot of business owners get they get to the point where they're making enough money they're like okay well how do i formally pay myself because you know maybe you listen to an episode like this or you watch some videos and everyone's always telling you to to uh split business from personal because it can get really messy and all of that i never really split it i just kind of take it from my business and then at the end of the year we split it um and so what happens is i don't have myself on payroll and the reason is because um with payroll comes with more taxes so i just don't don't do that and also with me i have i don't actually don't need a lot of money to survive for myself i don't have a mortgage i don't have all that eventually i eventually i'm going to have a mortgage because i just bought a house which is amazing but at the time like i didn't really have a lot of um set expenses every single month and so i could get away with just pulling from my company and so what that's called is a dividend so my company actually loans me the money gives me a dividend and at the end of the year we kind of take that amount and we report it as my actual personal income and so we do some little like accounting voodoo at the end and it all just makes sense and so that's kind of how i pay myself um and so how do you suggest other people to pay themselves like is it typical that most people should be on payroll should they follow what i do or is there another way to do it um any thoughts on that what so um again it depends on how you have structured your business so if you are doing business as a sole proprietor um and you haven't elected s corp or c corp and these are terminologies that if you speak with a lawyer that's a tax lawyer as well as a cpa specialized in your state and country they'll help you understand it but typically for most small businesses you may have been like oh i got on the llc train now what and it would be the same concept as the dividends that you spoke of for your country with us it would be like your owner's draw or if you use like a software like quickbooks it will say like owner's pay and personal expense what i say to take that extra step is to make sure you have a agreement with yourself which sounds very weird but you and your business should have an agreement to say this is how much you're going to be paid um so that it doesn't just look like you're co-mingling or putting together your personal with your business so if you're like hey i'm going to get paid 10 out of every sale or i'm gonna get paid 1200 dollars a month just email yourself from your business to your personal and say hey this is what our agreement is this is when you are going to be paid typically um with the payroll in the us we do have like payroll taxes so once companies have elected to like the s corporation tax status that's when they put themselves on payroll to try to pay a lower percentage of taxes on when the company is paying themselves but overall it depends on how you structure your business if you've spoken with the cpa and the tax lawyer in your specific state and country so they can explain what percentage of tax you're going to pay if you just have it as an owner's draw which is transferring the money from the um business to you or if you put yourself on payroll with payroll taxes and responsibilities you have to pay based off of that but overall you should have something in place to say this is how much you're going to be paid so that if you were potentially audited um by a tax authorities they could see no this is what this actually is for and we have a policy in place to um attach to what i got paid yeah so i guess just in layman's terms like i would essentially i would essentially take like let's say for my business account i let's say i want to pay myself a six figure salary so every month i take out ten thousand dollars i eat transfer i eat transfer ten thousand dollars every single month to my personal and then from my personal then that's when i start you know buying my bags buying my dog stuff whatever so it's still kind of separated from the business accounts so that's kind of what we're talking about about not mixing personal with business you can still pay yourself and take money out of your business for personal but you're not using your business credit card or your business account to like buy sushi buy whatever i mean you could buy sushi and say to for business if you wanted to but that's a whole other story um but you know what i mean and so that's kind of what i'm doing and i'm glad that you mentioned that and so here's another thing because i think this is a good segue to the top question that i get that's not related to my niche and that's also why i invited brittany on this podcast and also why she's a guest expert in bga because i am so sick and tired of people dming me asking me when should i incorporate what should i should i do s corp sole proprietor vanessa you did corporation how do i do that and i'm like number one i'm not a cpa so i can't tell you and number two it's different for everyone so how about you explain that um and if i if i see fit i might add on to that too so take it away yep so um a major disclaimer vanessa is a multinational international like corporation like she is canadian i am american so their rules on what it means to be incorporated may be slightly different than us so when it comes to why she incorporated her business it could be totally different on why like again the accounting business with my father we're just a llc functioning as a partnership we have not generated enough revenue that the cost benefit of how much we're paying in taxes on our pass through our individual basis our um is less than or outweighs the effect that we were to do like an escort so it really really depends on again and i know i've said this before having a professional paid conversation with a cpa that specializes in your industry that understands your industry and kind of the growth of your industry as well as the life cycle and a tax attorney because the tax attorney is going to look at it from the legal standpoint and the cpa is gonna also is gonna look at it from the accounting and financial and we merge in a lot of areas and we sometimes disagree in a lot of areas so that's why you want to kind of speak to both make sure they're in your industry don't do it too early because once it's done it's kind of hard to go backwards but don't do it too late where you are leaving money on the table because you're overpaying in certain areas that you shouldn't be paying because you should have probably transitioned over yeah and here's the funny story with me because if everyone copied what i did they'd make a huge mistake i did not okay this is my story so when i started i made my first like one thousand dollars and i was like i'm ready to incorporate and so i didn't seek out a cpa and i just went to a lawyer to draft up the corporation docs and i told him i want to be a corporation and he's like okay i paid him he took my money and then he did it and then when i went to my cpa she was so upset like she was she was upset she was like you shouldn't not have incorporated like that is not what i would have recommended you you're not you're not even six figures yet um blah blah blah and i just got really lucky that my business ended up making half a million dollars that year so i actually saved a lot from making that mistake i saved so much instead of getting taxed 50 if i was a sole proprietor and by the way all of this is just how it works in canada i can't speak to the us but if i had done sole proprietor because i made over six figures i would have been taxed the whole half instead i was only taxed like 15 or something because i was right under 500. and so uh that's kind of my story and so that's why you should never ever ever copy and paste someone else's company structure because it really depends on where you're at in business uh what jurisdiction you're in um how much your your personal income has been in the past just there's so many different things and very similar to what britney said is it's it can be really expensive if you incorporate and you can actually not afford to be a corporation because there's going to be a lot of book keeping costs there's just more costs associated with you know having a different structure versus another structure but at the same time if you have the wrong structure you know it's just all these things and so that's why you should talk to an accountant now here's an objection that i see a lot or just a question that i see is like when should you start talking to an accountant when you first start making money in your business or once you start having the intention of starting a business you know when is the right time to actually kick off a discussion so i'm always going to be a little bit biased with this answer and i'm saying from day one from day one when you have that idea and you feel like the idea is going to take you somewhere especially if you know you have a struggle with a relationship with money or understanding how to keep track and make sure your business is financially stable set up a consultation and say this is what my ideas are what are the tax laws and regulations in this industry that i'm interested in what are the requirements and the filings that i need to do but then also from the financial side what do i need to do to keep track of my income what do i need to keep track of the assets and the debt and the potential equity that i have in my business um should i meet with a lawyer um how should i budget all of that so from that beginning phase i think um you should meet with them and even if you plan to diy your bookkeeping meet with them to say help me set up my system that i plan to use so i know that i am putting everything in the right boxes and if i can't even hire you for the full year do you offer a service where you come in and review my work to make sure i did it correctly once you really start making a certain amount i think you probably could if you're okay to transition to hiring a bookkeeper because you will have somebody dedicated to that side of your business helping you stay organized because the time that you're spending diy in your bookkeeping is time that you're taken away from a revenue generating activity and with that is something that you can think about is the bookkeeper cost me 500 and i can make more than 500 by allowing them to do the bookkeeping why not let them do the bookkeeping or make the money cover that expense and still have some profit left over but definitely the more you scale you should add a bookkeeper and then an additional term is a cfo so your chief financial officer so that will be the person that really is over the financial side of your business as well as meeting with your cpa to help you with those more higher level items that a regular bookkeeper is beyond the scope of them and the cfo is more internal and the cpa would be more external yeah and so like britney said because a lot of our listeners are in the beginning stages i don't even have a cfo yet just so everyone knows so they're not like i need a cfo i'm like i don't even have one yet but um i love the the fact that you mentioned just book a consultation and they'll tell you they'll literally tell you they don't want your money like if you actually don't have any money you know like they're just gonna tell you whether or not you're ready yet for their service or not and if you're not they'll point you to the right direction i think most times you know this is going to sound harsh but i find that a lot of people who ask me that question you know they just want me to give them an easy answer instead of just them going on google and finding cpa keywords cpa and then keyword your city and then booking a consultation and then asking and what's the worst that can happen most of the consultations are free and so a lot of the things that we're talking about today are just you have to talk to a cpa about it even for me about paying myself um you know that was based off of the recommendation of my cpa your cpa might recommend you something different based off of whatever your goals are or even us talking about accrual versus cash-based accounting talk to your cpa your cpa will let you know you know don't take this episode and say oh vanessa does it that way so i'm going to pay myself dividends or vanessa's incorporated so i'm going to do that or vanessa's in cash basis so i got to do that or brittany said that most course creators are cash based you know talk to someone because you you never know you can lose out a lot of money and you can also gain a lot of money by doing it the right way um so one more question because i know that we are so over time in just this amazing episode is i want to talk about oops i want to talk about pricing um because i know you're very passionate about that and and it also kind of links back to copying like do not copy the way that i price my programs do not copy the way that britney prices the programs because if everyone just blindly copied the pricing that i have for the boss gram academy and you don't have a big audience i have a feeling that a lot of people would be broke and would be very unhappy with the results and a lot of our students come in they're like vanessa you could definitely like triple your prices like your program is so valuable and i know bossgram academy is a program that should be at least double the price but i keep it low because i can afford to do that because i have so much volume that comes in versus if you are a smaller creator and let's say you only have five students every month and you're selling your program at 9.97 uh it's you're going to have issues with that and so let's talk about pricing and what you need to factor in when it comes to pricing and why it's important not to copy someone else's pricing yes so um and i and i'm going to say this vanessa when she says this is valued at this this is value at this this is value this but you get it for 9.97 she's

telling the truth this isn't just oh i picked the number out the air like it's really really valued that it could be a four figure and some modules some people might even pay five for what you are learning because of the transformation that you have even before implementing just by listening and learning um but the way we like to think about um pricing is starting backwards and it's starting real real backwards so it's one so far what do i want my net income to be and what do i need to do to get my net income to that number but then also because a lot of people are structuring their business to help them pay for their personal after they pay themselves also what do i need to do to have my price so i can afford to pay myself and the reason why i say that is because when you are not paying yourself on payroll technically paying yourself is not an expense it is going to be like vanessa said for her it's a dividend out of her owner's equity or it would be an owner's draw so this wouldn't affect your net income numbers so that's why we kind of do an add-on to say if i want net income to be a thousand and i want to pay myself 500 then overall i need to get 1500 for the month now by doing that i next step i would say how much are all of my expenses so if all of my expenses come up to a thousand dollars so if i say i need to get 15 and all of my expenses come up to a thousand then that need means i need to make dollars that month to having a thousand dollar profit that i want in 500 to pay myself out of that 2500 if i want to work with five people then that means that my price needs to be hundred dollars if i did my math right yeah five a thousand yeah five hundred dollars this will have you trying to do so on top of your head so that's how we try to help people think about pricing is what is your end goal and by going from your end goal back to the top is no longer just selecting a number that looks nice but knowing exactly where that number is going towards the bottom line of your profitability and i think it's so important too to factor in things like your audience size your expenses like you said your goals uh and all of that and you know you can always increase your prices too eventually if you're finding that hey my expenses are starting to grow and the price that i have now i don't have enough volume to cover it well that's a good indication you should probably increase your prices versus in my business um at 9.97 for the boss graham academy like it's such an uh it's a steal right it's literally a steal but i've got expenses that are in the six figures now and so every month i have to make at least two hundred thousand dollars to make fifty percent profit let's say uh because my expenses are now a hundred thousand but if you were didn't have the same size audience if you didn't have the same type of traffic or whatever you know it would be really hard for you to sell that type of program at 9.97 and try to replicate my business and so the premise of this entire episode is really more about don't copy other people because you it's so unique to everyone and i love what you said and you really called it out so well you know when you do pricing it's not just like oh well this probably this price sounds nice or this person's successful and her program is similar to mine and it's priced that way i think it's important to look at what your competitors are doing because that's what your consumers are comparing it with but you don't want to go broke by being a copycat and to add on to that a hidden thing that you do not see a lot of times is all the additional revenue streams that someone may have to help them get their net income so the example we just talked about was a one product but if you have a product um such as a course but then you also have affiliate marketing and then you have ad revenue and then you have um a small ebook that you might sell that is also going to determine how you should do your pricing structure your course should not be so close in price to your ebook because then people are going to be confused on what is the value of your course if this has 50 modules this has 10 pages why are they 147 and 197 i'm confused on what value are you really bringing to the table so also when you're thinking about your pricing structure you should think about what effect is this going to have on my perception in the market with my potential customers or clients and also how are each product going to get me to my bottom line so if i have a lot of volume and i know more people are buying my ebook and that doesn't have a lot of costs associated to it well that could have a lower price because it doesn't have a high cost but if my course has a very high cost maybe i want to balance it out and say my course is going to be 4.97 my ebook is going to be 47 but i know i have a lot of volume on that 47 so i still get the net income i want even though i might not be selling a lot of courses so it very it depends on all the revenue streams and product lines you have in your business and overall your ultimate goal on what you define as success when it comes to a profitability level or the way that you are structuring your business how you want to move forward oh i freaking love all of that i i love how you brought that up and also like each product there's a strategy there's some products that you sell that isn't meant to produce profit it's meant to get people through the door it could be your 50 ebook people are like what the heck vanessa's selling a 15 ebook how's she going to make any money off of that the goal isn't to make money the goal is to get maybe someone who isn't ready for bga yet to get introduced but still pay a little bit so they have more skin in the game and then upsell to bga and then once they buy bj maybe there's something else so you really want to think about the product suite and understand not every product needs to make you money but there needs to be a strategy behind it another thing that i want to add oh my gosh i'm obsessed with this episode by the way um another thing people i got times i just don't know your schedule so please oh no like another thing that i want to add too is don't okay so this is one thing especially if you're a people pleaser like me uh i had a student that was saying gave me feedback on the boss gram academy and he was like oh i would really love it if you added you know more more coaching component like you know one-on-one calls with you and um more more calls with you and all that and all that stuff i'm like okay well i can do that but do you want bj to be at 9.97 or not because if you want my if you want one-on-one calls with me in bga if you want me to hire other coaches so that you have a consistent call every single week or if you want abcdefg then i'm sorry bj cannot be at the price point that it's at now there's a reason why it's at that price point because it also reflects back on my expenses right and so if you want more attention if you want more of that well i need to hire more people and therefore the program is going to be much more expensive to reflect that and so before yours if your students request things from you or your clients request things from you before saying yes it's so important that you factor in what you're saying yes to and make sure that it makes sense in your pricing because you can't just add more benefits and features to your program without changing anything about your price because then you're gonna reduce your profits unless that's what you want and you're willing to let go of some of that profit but you know i want students to also understand that there's so much more than just that price point that they see on the sales page there's so much more to that when it comes to running a business it's your the wages that you pay your people whether it's contractors employees the refunds that you might get you have to factor that in payment failures the person who's managing the payment failures uh graphic designers paying your taxes paying a cpa there's so many things that's just like scratching the surface of the expenses software expenses another thing too is people want to grow fast they want to get a bigger audience you better know how to convert that audience because that audience is expensive you know if you want to if you want to build your email list and get 200 000 people on your email list that's great but how are you converting that to sales because now on activecampaign activecampaign's gonna charge you two grand a month for all those people that you're not converting so if you want a big audience you better be ready to pay for a big audience because that's one thing about having a bigger audience is bigger expenses kajabi more students you get more money like they charge you by student uh same with your email list same with everything the amount of traffic that you get on a site well guess what now you have to upgrade your hosting and so you better make sure you know how to convert and so with that being said any last words of wisdom for our listeners brittany that was facts on facts venus i felt that from the inside literally though but people aren't ready people are not ready for a big audience you better know you better know the responsibility that comes with having a big audience and knowing how to operate your business because people just care about getting 10k followers and like do you realize how expensive it is to have 10k followers right to have 10k followers that don't want anything from you but free yeah so um one of the last things i would definitely say is do not be afraid of the financial side of your business this is the heartbeat of your business because every component touches the money so although we love to think about our personal brand we love to think about the pretty graphics and the imagery you have to understand my personal brand my graphics the imagery still has to connect to am i converting this to sales if i'm trying to run a profitable business again at intrinsic accounting our motto is we want you to be financially happy from the internal aspect we want it to be a natural component of your life from the mental physical as well as the spiritual features of it and the more you do it the more you ask questions the more you embrace the uncomfortability the better you will go so the fast and that will help you actually grow because you're no longer holding yourself back of hiding away from your numbers but you're embracing this is what it is this is my spending habits this is my revenue generating habits and now i can make changes if i need to so i can get to my next level i love it and we're awesome okay it's okay not to make ten thousand dollars in your first month it's okay to not make a hundred thousand dollars in your first five years it takes time it is okay what you see from people especially when it comes to the financial side of their business is what they want to show you we are in a private company right unregulated industry so they are sharing what they want to share to you and although they may not realize that they can manipulate those numbers don't be discouraged understand that all of our journeys are different i look up to vanessa i'm so happy that she has such a successful business but i know

2021-06-12 08:47

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