Breaking Down the Numbers: Your Guide to Business Profitability

In this episode of Girls Make Bank, Jac dives deep into the critical financial foundations every new entrepreneur needs to master. Moving beyond arbitrary revenue goals, she explores the concept of your "enough number" - the baseline income required to fuel your life and business sustainably.

Through real client examples, Jac unpacks how overlooking key financial metrics like taxes, margins, and profit can lead to working harder while taking home less than expected. She breaks down essential business metrics and provides actionable frameworks for financial success.

Topics Discussed in the Episode:

* Calculating your true "enough number" beyond basic expenses

* Setting aside the right amount for taxes 

* Understanding and optimizing profit margins

* Key components of profit and loss statements

* Avoiding common financial pitfalls for new consultants

Whether you're transitioning from corporate or starting your entrepreneurial journey, this episode provides the financial roadmap needed to build a truly profitable business from day one.

Get the Profit Planner: https://www.honeybeesgroup.co/profit

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Transcript

you're trying to reach that 100, 000 mark, 250, 000, 500, 000, the elusive seven figures, getting to 1, 000, 000 a year in revenue, I want that for you. I think you can do it.  

Do you really understand the numbers behind your number?

 Welcome to Girls Make Bank! The podcast show for women who want to learn the art of selling for business and for life.  I'm Jac White, seasoned sales professional, entrepreneur, and owner of Honeybees Group.  Come back each week to hear inspiring stories from some of our favorite business owners. Learn how to take the ick out of selling and make bank. 

We're all in this together, so let's get started.

Hello, and welcome back to another episode of Girls Make Bank. This is the second part of a two part series. Today we are talking specifically to women who are new to their entrepreneurial journey. Okay, so if you all have recently left your W2 company and you are starting a new agency or thinking about consulting or becoming a fractional last week, and today are really important, uh, episodes for you to listen to.

Last week we discussed why it's important to start selling and building your pipeline and getting market feedback as a coach or a consultant or an agency owner before you spend time and energy creating a beautiful website, building a logo, even creating a name and trying to figure out the perfect packages and pricing and structure.

If you haven't listened to last week's episode, go back and take a listen. because there's a real clear reason why I think you should start selling in your business before you even start building in your business.  Today, we're going to cover the importance of understanding the financial fundamentals in your business.

Now, what does that mean? Well, for any business, We set financial targets, so if you are trying to get to your first six figures, you're trying to reach that 100, 000 mark, 250, 000, 500, 000, the elusive seven figures, getting to 1, 000, 000 a year in revenue, I want that for you. I think you can do it.  We often are just pulling these numbers out of the thin air.

We don't really have a rhyme or reason necessarily to how we're picking our financial targets. Do you really understand the numbers behind your number? Okay? So imagine this.  You're working 50 hours a week in your consulting business. You're taking on client after client and at the end of the month you check your bank account and it's lower than what you expected.

So you're making money But somehow it's not adding up. Okay, this is a really common thing that happens when you're starting your consulting business. Because here's the hard truth. If you don't know your business's financial fundamentals, you are going to have a real hard time making profit in your business.

 So that's what we are talking about today. The numbers, the ones that determine whether you are actually making money that you keep or not. So we are going to walk through how to set your enough number, how to factor in taxes, How to understand margins and how to set realistic profit goals. So, by the end of this episode, you'll have a clearer picture on what success looks like for your business and how to set yourself up in the beginning to achieve financial success this year. 

So, let's start with the most important number in your business, and that's your enough number. Okay, I don't know if you've heard that term enough number yet, but it's really important because while we're setting these financial goals for our business, a hundred thousand, two fifty, five hundred thousand, seven fifty, a million, whatever it is,  You need to get really clear on the amount of money that you need to bring home in order to fuel your current life, how much you need to pay your bills and to give you financial freedom so that you can continue to work hard in your business.

 I was coaching a woman last year who is charging 3, 000 per client. And she thought she was doing really well until we ran the numbers. So she was measuring her success based on how busy she was and the fact that she always had a full schedule. client roster. But when we ran her numbers and we took out taxes, business expenses, some unexpected costs in her business that she wasn't accounting for, we realized that she was barely taking home enough money to cover her life.

So meanwhile, she was on this hamster wheel of work.  But she wasn't charging enough, okay? And so she was working a lot and barely scraping by. And that's because she didn't start with the end in mind, okay? She didn't know her enough number. So I want to break it down for you. How much do you need to make every week, every month, and every year in order to live your life?

I have a profit planner on honeybeesgroup. co, which walks you through all of the personal expenses in your life that help you get to this enough number. And there are lots of expenses that we're very aware of, like our rent or mortgage, our transportation costs, any tuition. Our fixed costs, we're usually pretty good at understanding. 

I think most people don't have a handle on their lifestyle y costs. Certainly when we sit down and do our family budget, I am always astonished by how much we spend going out to eat, but it's really important to list all of your expenses, all of the debt that you might be having to repay, all of the investing that you need to do.

Especially as a business owner, there are a lot of amazing investment opportunities that we have but we also need to be investing for our future because there is no 401k or pension when you're a business owner. So go through and really figure out how much money it takes to fuel your life. This is not the elimination diet here, okay?

I am not one that says you can't have fun, go on vacation, get Starbucks or manicure if that's what you want to do.  This is about getting really honest with yourself and saying, okay, this is how much it takes for me to run my life, okay? And find that number. And then we get to the next step.  And so as a new small business owner, I want to give you a reality check. Okay.  The money that hits your bank account from your client work or from any products that you sell or services that you do.

is not yours. Well, or not all of it, at least most of it is, but a lot of it you need to set aside for taxes. Okay. Nobody likes talking about taxes. I get it. But if you don't plan for them, you are really setting yourself up for a brutal awakening and potentially a disaster.  I am talking from experience.

This is not talking about or asking for a friend. I have done this multiple times in my business and it typically happens at the very beginning, usually that first year of business when you start making money and you have never had to set money away for taxes before, it can be a rude awakening.  And then  two to five years later, you're going to hit this inflection point in your business where your revenue jumps.

Okay. Everything is sort of humming along and it's really going well. And then you jump up to that next big income bracket and you are caught off guard again. And so I want to help you avoid that. So a simple rule that I use is to set aside 30 percent of the revenue that comes into my business for taxes.

 I recommend opening a separate tax savings account. So you're not mixing your tax money with your spendable cash, but you maybe are more disciplined than I am. And I give you credit for that, but make sure that when you are planning for your business, number one, you know how much money needs to go into your pocket at the end of the month or the year, and then you're adding 30 percent on top of that number to account for taxes. 

Okay. So now that you know how much you need to make. And how much you owe in taxes, let's talk a bit about profit. And so that's the money that's left over after expenses.

So every business has margins on their business, okay? So margins are the percent of revenue that turns into actual profit.  Typically, as a consultant or a coach or an agency owner, your margins are pretty high. Different businesses have different margins. standards of margins, but we tend to have pretty high margins because we don't have a lot of overhead.

If you are running a product based business or you are outsourcing a lot of work, your margins will be a little lower because you'll have materials, inventory, shipping, freelancers,  but generally speaking, all of those things become expenses in your business and will affect your profit margins.  I'll give you an example of how this works in real life.

One of my clients who is a marketing consultant thought that she was making 100, 000 a year until we started calculating her margins.  two things were going on with this particular client that, um, are definitely related to her margins, but may not be something that's happening in your business.

Number one, she was over promising, on her skill set. And so she was, selling packages to clients and needed to outsource a lot of the work in order to fulfill on those deals that she was signing.  So she had a lot of money that she was sending out of her business right away, hiring subcontractors and other freelancers to fulfill on her deals.

So she thought she was making and wanted to make 100, 000 in revenue. When we did accounting for all of her expenses, we found out that she was really taking home closer to 60, actually 50, 000 when you account for taxes and everything else. So by knowing. This by knowing that she needed to get in 100 K and she was only taking in putting in her pocket about 50 K  We did two things number one.

We adjusted her pricing To help kind of make her more money and then number two We changed her packages actually so that she didn't need to rely on contractors and other freelancers to do the work. And while she thought that was going to turn a lot of her clients away, she actually ended up being able to make a lot of new business and, had repeat clients because she was in control of the experience.

So that's maybe an episode, for another time.  So I want you to really start to think about what your margins are. So here's a simple formula. Take your total revenue, subtract all of your expenses and then divide that by your revenue. And so that percentage is what your margins are. So if it's lower than what you expected, it's time to make some changes.

So you can either raise your prices or cut unnecessary expenses. And if it's higher than what you thought, good for you. I think anywhere between 60 to 70 percent for a consulting business is pretty good.  Now,  let's talk about one of the most important financial reports that will be in your business, and that's your profit and loss statement.

you may have heard the term P and L, that stands for profit and loss. And so this is essentially your business's report card. It shows you what's coming in, what's going out, and what is left over. So let's talk about the three important numbers that live on that profit and loss statement. Number one is your revenue.

This is the total amount of money your business earns. Now people confuse revenue with profit, which I think is pretty dangerous. That's how we get into this crazy situation where we don't have money for taxes at the end of the year,   your expenses. This is what you need to run your business. Any. Software systems that you have any, accounting fees.

Maybe you need to hire a CPA in your business. Contractors, marketing, any clubs, any client entertaining that you need to do. Those are all expenses within your business  and your profit or your loss. If you, you know, are spending more than you're making is what's left over after expenses are deducted from revenue.

Please do not confuse revenue and profit, okay? Revenue is the total money that comes into your business. Profit is what you get to stick into your pocket at the end of the day. Profit goes in the pocket.  If you are not tracking this monthly, you're really flying blind. And I  highly, highly encourage you to track your revenue.

Revenue and expenses monthly because here's the thing profitable businesses do not happen by accident Okay, you need to be very intentional about where your money goes  You will be shocked at all of the little costs that can come up and expenses that can come up in your business Okay, so now that we  have covered all of that, , and we have a pretty clear understanding of the numbers in our business, the next step is putting it together all in one place in a clear and actionable profit plan, okay?

And we have created that. inside Honeybee's group. So we have a Honeybee's profit planner. This is not just a spreadsheet, okay? It is a complete system. You get a plug and play template that walks you through setting your enough number that factors in taxes, it understands your margin, and you will create a real profit plan that works for your business.

Plus, just so that we don't leave any doubt, I've created step by step video tutorials  so you know exactly how to use it. Now, you might be thinking, why am I going through all of the time and energy of teaching you about your financial fundamentals and talking about your budget when this is all about sales?

It's because I want you to build a profitable business for yourself. I want you to make money.  Sales is a huge part of that, but you can sell and sell and sell, but if you don't understand how much money it costs to fuel your life, what expenses you have, what your profit margins are in your business.  You will never get to the revenue number and the number that you want to put right, that profit that you want to put in your pocket that you want.

So if you want more support, please go to honeybeesgroup. co slash profit planner and download the videos and the workbook template and build your own profit planner. , If you haven't listened to the first part, go back and listen to it now. And I am so excited. The one thing I would like you to do in your business this week is go and take a look at your numbers and see where you stand. 

I will see you next week. Let's make bank. 

  Thank you for listening to this episode of Girls Make Bang. If you like what you've heard, please remember to subscribe, like, and follow us on Spotify, Apple Podcasts, or wherever you listen. Please review and share our show to help spread the word and help your girls make bang. And I'd love to hear from you.

Connect with me on LinkedIn or Instagram, or visit honeybeesgroup. co. Until next time, friends.