Skip to main content

Powerful Business Planning

Lesson 10 of 20

Managing Your Finances w/ Q & A

Barbara Findlay Schenck

Powerful Business Planning

Barbara Findlay Schenck

Starting under


Get access to this class +2000 more taught by the world's top experts

  • 24/7 access via desktop, mobile, or TV
  • New classes added every month
  • Download lessons for offline viewing
  • Exclusive content for subscribers

Lesson Info

10. Managing Your Finances w/ Q & A

Lesson Info

Managing Your Finances w/ Q & A

And so once you make it, you have to manage it. You have to know your accounting method and there's two accounting methods, cash and a cruel cash is just like your checkbook. When the money comes in, you entered as it came in. When it goes out, you enter it as an out go a cruel means as soon as you invoice that you counted as an accounts receivable. And as soon as you get a bill that you're supposed to pay, you candidates in account payable, and then you entered again when you actually get the money or pay the money and it's considered gold standard accounting and you will need it. If you have a lot of inventory costs or if you carry things on credit, most of you will just do cash accounting. You can choose your tax year, most corporations and some llc is give you a choice. Not everybody chooses january one or april one is their tax year. Ask your accountant. There may be reasons to choose a different tax year you can count you can choose your accounting process software recordkeeping ...

approach. I highly recommend that you keep a software program that you keep your first draft finances in, and then you work with your accountant and that's. Why the quick, quick books work shop, I think that's coming up quick books watch creative life schedule that's a good one to go to and are you going to use a bookkeeper accountant? I think you should account a line with a professional at least for annual projections and taxes. This is the accounting method again, so that will be on a slide if you want to refer to it accounting process you want to establish a chart of accounts and that's just what categories and in the gig, too business checklist there is a chart of accounts you can follow for a small business you can customize it, but it gives you a real good sense of what categories air really wise to start with at least and most accounting systems like quickbooks, they come with the daughter of accounts chart of accounts select whether to maintain your records manually or with software. I recommend software select a bookkeeper because you're going to need three fundamental forms. One is your income statement and if you don't already keep one here is all it is it shows your net income equals revenues minus costs. It calculates that for you it tells your business bottom line how your business perform financially over the statement period it's also called the earnings report it's also called the profit and loss statement basically it shows how much you brought in how much you brought in all of your costs and therefore your net income your balance sheet is a snapshot of your business worth and you should compare it every single year is our business worth more this year than last? It tells assets minus liabilities equals equity equals what your business is worth to you so if all of your assets including your inventory, your equipment, your cash on hand even your accounts do all that your assets then there's all your liabilities everything you owe including your accounts payable it ends up with your equity. It gives a snapshot of your business worth it adds up to all you own all you owe and your business worth and then there's the cash flow statement what you've collected and spent and whether more cash is coming in and going out and these they're samples of each of these in business plans kept for dummies that you can literally use excel sheets and just plug in your own numbers for a new business it provides your cash need projections for an established business it provides a means to track changes in cash position and when you have partners this is real important people want to know where did the money go? The cash flow really shows that keys credibly and you need a budget and that is simply to project and present your financial projections it's called a pro forma are projected income statement it goes back to the income statement but rather than what you made and spent it's what you think you'll make and what you think you'll spend with riel breakdowns that allows you to create an estimation of your income and estimated balance, she what will you be worth at the end of the year? If all this happens? And do you have the cash for that you need? And then you have to use that financial information because this is what I told you earlier, the trend you're seeing will continue unless you do something different. So I want you to ask me questions about pricing. Does everybody feel confident with their pricing and what questions are receiving but questions about pricing because that's, really the basis of once, you know, your business model pricing is whether your business model really delivers for you. I have a question if somebody comes up quite often when you set your pricing, um, is it better to have the stand alone all the card hourly rate versus a prepackaged right where let's see by ten hours for a thousand dollars, right, and our customers more receptive to buying one type of great package over another? You know, I think it depends on your arena, for instance, in the legal world, everybody's used to attorneys charging by the hour, and people kind of want to know what they'll charge. In a lot of other businesses, hourly rate really doesn't matter because they don't know how slower fast you work or what's involved in the project, so I think it's worth it, we never got hung up on telling clients what are hourly rates were for one thing that we we didn't have to tell them every time we changed our out hourly rates, rather we bid the projects. We gave them some indications of what the range of prices typically were for the most frequently purchased options, and then we gave them a bid, and luckily because by that time we were in a consulting relationship they paid even for the bid because sometimes developing a bit is very expensive. But in other businesses, you have to offer free estimates, but I think you need to know your hourly rate fee so that you can build your estimates um in a way that in the end of the year and by the end of the year developed profitability, but I think the client doesn't need to see you sweat that much in a lot of cases, I think you can mortgage them what it's going to cost them, and I'll give you an analogy we were gonna have some trees, we owned a three acre lot, and we needed some trees thinned out because the fire prevention and this man we book he brought through there were a million reasons why we thought he was a good choice but we kept saying what's it going to cost well that he never so fine I said if you can't give me any indication I mean I don't know if it's ten thousand dollars or one thousand dollars and he finally said I think we can do this whole part of the yard for twelve hundred dollars there were thousands of trees but for whatever them out was and then we can go from there might be less that's all I needed was something to budget around so I think you have to be prepared to give them a solution because that's what you're really therefore is a solution and if you give them your hourly rate you're still asking them to take the total risk of how many hours it's going to take so and then once you give them the rates I don't think there's anything wrong with giving multiple levels of the rate is that is that your question questions come in while we were warren was speaking on surrounded by fabrics actually I said I've developed a priceless for services based on comes throughout the u s and considered my state's economy and went to three quarters down to the low end I have still heard complaints about high prices but they're actually low comparatively any suggestions I always say before you raise lower prices raise value chances are they are complaining over prices because they don't think what they're getting is worth it. You have to figure out how do you deliver the value that causes them to think that price is worthwhile and part of that is in establishing reputation as the premier deliver of that offer if if you're already at three quarters of the national average people are always going to complain over prices, you have to be prepared to defend your prices in a really positive manner and even to say it sounds like what you're having is some budget issues can we talk about how we could give you a different option? I mean sell them less there's always a way to figure out how to sell them less versus charge them less for what you're delivering. I would say first of all, work to increase value second of all work to give them some options that you know we call it the contractors budget give them two fireplaces instead of one I mean one fireplace instead of to figure out how to customize it to something that will fit their budget. But some people will never be satisfied with your pricing, which are the customers you have to eventually say ok, where we getting most of our complaints, what do they have in common? What are we doing wrong? Because it might be that in fact you're bringing them into their business into your business on kind of a premise of this tremendously affordable solution that then they don't think it's tremendously affordable watch what brought them in and what caused the price not to sink with what they thought they were going to get out of it, but I would increase value by increasing brand and, uh and the differentiation of the product, and then I would offer them options, but I wouldn't lower prices, lord easy w saying she's just moved to a new area and she's found out there's, another consultant, to charges absolutely rock bottom prices. She also says her work is horrible, she has a but this is a competitive, but she has a huge chunk of the market. So, barbara, how do you approach sticker shock for people who really want a better service but really aren't prepared to pilot pay five times as much as they're currently paying, even if they're not happy with what they're getting? I don't think there's a service provider out there that doesn't face somebody who's providing rock bottom prices, so what you have to do is figure out as we did, let me tell you, starting an ad agency, the first ad agency in a small town where everybody was selling rock bottom prices wasn't all that easy, so what we said is, how are we gonna build credibility? We know we'll get a bank, we said if you have a bank they know that you're like, so we did we went out of town and we found a bank that at a concentration of of branches in are the area where agency was and we got that bank is a client will assume as we got that bank is a client, other corporate clients started coming to us and that made some of those others who were working with the very, very rock bottom providers want to be on sort of that bigger ship and the market raised up to us, but we also had a determination that we would give it six months. We had the funding for six months to wait until we could get the kind of clients. So what attract more of the kind of clients we needed if all you're doing is struggling with low cost competitors for kind of bottom feeding clients that's where you're going to exist and it's going to be a race to the bottom because somebody can always charge less than you do? Somebody can always offer a lower price, so you have to you have to have a strategy, what would it take to get the clients who are willing to pay? And then how can we use that as a magnet to pull up on ly a few? You don't want all those bottom peter clients because they're not going to pay your budgets, it's a tough one, and it takes strategy, and tomorrow we'll talk about some growth strategies. Lawrie asked if you would advise what you think about displaying prices on a website and how what the best way to do that I would price I I would present if customers really need prices to make a decision, I would present pricing examples now, it's one thing, if you have a menu like if your yoga classes or this much for individual this much for for for group and package, then by all means, if you have a menu in the same way that restaurant menus, they're very valuable, you prison, but if you're offering a service business that is offering customizable offerings based on really unique situations, you stay. We treat every client as the unique situation and bid it accordingly, but here are examples for those of you who need an example, we frequently get frequently asked questions. What does it typically cost to have this and that? And you give some ranges? I wouldn't divulge the pricing too soon. I wouldn't give them something to say no, to avoid it, maybe not putting the pricing on the website, which forces the customer to contact them and communicate with them first, I would suggest that, unless it's something that they need the price to buy it because you have a menu of prices and particularly that's something that they could actually by now now sign now the to enroll and here's our prices. Why would you make them ask a second question? But sometimes, um, it really takes some collaboration to arrive at the pricing, and then you give some indication of what it costs and some opportunity to deal with them, sometimes in a first time, no, no fee setting where the where you can discuss their own options really comes down to whether you offer a product or a customizable service traffic. Cedric of switzerland has echoed what he was saying earlier, barbara, saying that trying a product different prices is not always possible or sensible because you obviously run the risk of confusing your customers. But they asking, how do you determine the pivot point? Well, with your sales start to go down if you set your price higher, you know what is that point of price sensitivity? And how do you determine that? It's called price elasticity and you figure out what is the demand for your offering and what is theater veil ability for what you offer, and if demand is high and there aren't a lot of options, you can charge more? If demand is high and there are a lot of options or if demand is low and there are a lot of options you have to charge less it really comes down to figuring out how accessible how easy is it for them tow access comparable services to ours and if it's easy and if they aren't terribly aligned your business you have less opportunity to change the prices but the less that you lock into a price that you have to tell them when you change it, the more flexibility you have in your pricing. Greg is actually followed up with a comment thanks you very much for your answers thinking if you know your hourly rate your day rate et cetera you just shouldn't live or die by them it's very important to know them but not necessarily really sticks a rigidly to them because his great d says there will always be somebody cheaper so don't be that I think you're going there will always be someone cheaper. The issue is how do you increase the value? Don't you deliver and part of that a big part of that and a big important element of business planning is how do you develop up the reputation that people prefer because they will buy that reputation they'll even pay a little more for people pay more to shop at nordstrom because they believe they can take it back if they don't like it they don't take it it's. Not like they all take a back. Some people have never returned anything but that promises so appealing that they pay more. I could go on to a sun glasses website and there's all these sunglasses that air comparably priced. But you actually pay a little more for the brand that you know because it looks a heck of a lot like the one next to it. But there's a confidence in the brand. The more you can developed the reputation as the preferred provider, the more you increase your value and are able to charge more accordingly. Fantastic. Well, let's hear from our students before we go to the end of the day. Let's, start on the on the end there with warren warren what's being your big takeaway from today your are hard moment you know there's so much information so it's hard to know that if I just want peace but I would say for me the systematic way in which you develop pricing was very helpful. Definitely that's been good as well think we best left from that as well. Tara what's your fault. I I really like the formulas for determining how much you need to charge that's really concrete and repeatable and, um, you can apply it it's a pliable applicable, applicable. I think you're right, laura what's your phone. What was the phrase used? Don't crap. Basically they don't crash the party you've already got going on with the business that you have figure out a way to don't cannibalize don't cannibalize your current business, and that is really resonating with me as well as paying yourself because you have to make more money. If you are accounting for your time and energy in the even if it's a side business that's developing it still time and energy and the rial expenses of that just really being realistic with that. I just think that I agree I'm glad it's january of two thousand fourteen because I'm officially paying myself a salary as of january. But I love the idea of the low hanging fruit products and with so many ideas to really mapped out what I can start on, you know, and get out the door immediately. Yeah, I think sometimes we said such lofty goals because we're also positive entrepreneurs. I mean, small business owners are where it's at that's, where the dreams are, but at some point you have to materialize the dreams and because lauren just asked her question I had written just mentioned the thing about multiple businesses I wrote and we have a couple of minutes I'll go through them real quickly before you start a second business you already have one business before you start a second business I just want you to think about these few things are you asking your best business to support one or more strugglers is this new business going to be a drain on the success you already have? Are the two businesses synergistic if the answer's no then you're going to really confuse customers as to what you stand for and if you just think about what I was saying about brand and the value of brand you're going to end up eroding your brand because now they don't know who you are have you earned back or paid back the investment in your first business yet before you invest in the second business can you own one that someone else runs? Can you make one of your business is one that someone else runs because one of the biggest reasons for failure is the owner loses focus the owner loses interest in the business the risks are customers come to small businesses because of its owner because of the owner founder and the second business causes you to step away from the business that they've been coming to and a second business requires double the human and cash resource is if the company you have can't scale up in size, it is bound by your hours in the day or whatever sometimes starting a second business is really worthwhile if it faces cyclical issues like the business you have is really on ly serves a back to school market start a second business I mean then you could you could think about it for the rest of the year or if it faces jeopardy from suppliers or changing trends or other reasons that cause you to think the business your end is really going to face some rocky roads and you want a rowboat to another option but move into a related field, diversify around threats and double up on strategies for both. Be sure you have strategies to keep this movement going or to close this one down or to sell it while you ramp this one up but don't just start a second business it's it's too hard one business is hard enough concept of value based pricing and that kind of it was my aha moment sort of blew my mind you think about any like absolutely you wantto you know absolutely should be based on value definitely and greg d had an interesting comment in the chat room he said pricing is so interesting it's like an art it is art and once you know your prices you also know what to pay your next employees employees all want to get paid what they're worth. And, of course, you want to pay them what they're worth. But there's a point where you have to realise, given our price structure and weaken bill you out for this much, and we used to know a lot of businesses know that the multiple they need to hire someone you need to make two and a half or three times their salary in order to cover all the benefits, all the training, period, all the non bailable time, this and that. And then you can work backwards with your hourly pricing to know what you can even afford to pay a new employee, that fundamental pricing issues. What is the hour worth in your business? Ends up helping you to set your service prices, your product, prices, your employee salaries.

Class Description

Tens of thousands of new small businesses are started every year -- does yours have a concrete plan in place to ensure it succeeds? Join marketing strategist and small business advocate Barbara Findlay Schenck for an introduction to fast-track business planning.

Throughout this course, you’ll learn how to write and implement a business plan by clarifying your goals: how much time you have to devote to your business, how many people need to buy your product, and how much money you’ll be able to make. You’ll also learn how to set up your business legally and legitimately -- without dipping into your personal finances. Barbara will also cover the marketing and finance skills every small business owner needs to know.

By the end of this course, you’ll have a smart, strategic plan for starting, managing, and growing your business.


a Creativelive Student

Really looking forward to this course with great anticipation to learn how to put a comprehensive business plan together for a full-time & part-time wedding & portrait photography business, what are the important steps involve to create a business plan and what all should be included in such plan, when or if you should amend your business plan, should you have two business plans (a simple plan & a very detail plan).

Christina Majoinen

This course was great. I'm at the very beginning stages of creating my business, and this course really helped me to think through everything I need to plan for.


Great class!!