Numbers Can Be Fun! Learn To Love And Manage Your Business Finances

The Word Carnival Strikes Again!

Today we welcome Nicole Fende, yet another member of the infamous Word Carnival (along with prior guests Téa Silvestre, Melanie Kissell and (formerly) Clare Price).

The Word Carnival is a group of small business owners and bloggers who get together to share business insights, advice and write on shared topics, and Nicole Fende is the group’s official Air Guitarist Profit Diva Finance Rockstar… aka The Numbers Whisperer®.

And today Nicole is here to talk to us about how to make budgeting and financials and all those numbers things that go along with business more fun.

Numbers Can Be Fun

Admittedly I’m not buying it. Numbers mean budgets and spreadsheets and un-fun things. But Nicole insists that she LOVES numbers and when you love something you can make it beautiful to anyone.

So I agree to stick around and give her a chance.

Excel Plays Music

Apparently you can embed music into Excel. This is the first little tip Nicole shares to show that the numbers stuff doesn’t have to be all boring and hard. You can even embed graphics. So when your budget balances you can play your favorite song or – in my case – pop up a photo of an Oreo.

Who knew!

Still, Nicole has some convincing to do.

It’s About Mindset

Nicole says that people typically approach numbers by telling themselves, “Ugh, I can’t do this.” (Guilty.)

But with a little effort you can change your mindset so that you think differently about numbers. First, be your own internal editor. You can’t keep telling yourself “I can’t” or “I don’t want to”.

Not only that but you have to replace those negative thoughts with something positive.

Think Of A Number With A Positive Emotion Attached To It

Ralph picks the number 37,500 (after he dutifully opens his Excel spreadsheet) because that’s how many subscribers we need for our new product (no spoilers yet!) in order to retire in two years.

I go off the reservation and pick 8 because it’s the number my dad spun on the carnival wheel to win me the giant blue elephant I’ve had since I was a kid.

Things get weird for a minute as we ponder pink and blue elephants and by the end we’re all laughing, which makes me wonder… are numbers starting to be… fun?

Emotion Changes Behavior Faster Than Logic

Nicole wants you to start your love affair with numbers by picking your own favorite. Make it a good one, fall in love with it and start to change your attitude. Why not leave us a comment below and let us know what YOUR favorite number is and why?

Nicole Likes To Drive Fast

This is something we didn’t know, but considering her leather-clad air guitarist nature, we’re not surprised.

So she sets up a scenario: imagine we’re driving on the Autobahn really, really fast. And Nicole, who’s at the wheel, takes her hands off and closes her eyes.

What do we do?

In our imaginary scenario, I yell and Ralph squeals like a girl.

And Nicole says that ignoring your business finances is just like driving with no hands and no eyes. You probably won’t crash right away but keep it up long enough and you’re going off a cliff to crash and burn.

Numbers are less fun right about now, but Nicole perks us up by assuring us that this will not happen if we begin to take a different approach to our finances.

How Should You Price Your Products Or Services?

Small businesses, especially service providers, struggle to price their services and we know a lot of people who work a lot but don’t make a lot because they tend to under price themselves. So we ask Nicole how she advises businesses to price their services.

First, she says, there is always a minimum number you can’t go below or you won’t make the income you want to make. This is the absolute bare minimum you need to charge to make your business profitable. You can charge more, but you can’t charge less.

And that number represents money in the bank – not money that you make. There’s a difference!

Revenue Vs. Money In The Bank

Nicole says you could have a billion dollars in revenue and still go bankrupt. Now numbers are starting to sound scary. But Nicole is quick to walk us off the ledge with a pretty simple formula that you can use to figure out how much to charge so you won’t end up in the red.

You need four numbers to make this work:

1. How much do you want to make in a year? Think of how much money you want in your bank account, after you’ve paid all your bills and expenses.
2. How many weeks in a year are you going to work? And don’t say 52! You need vacation time or believe it or not, you will actually be less productive and make less money. Figure a max of 50 weeks (more if you’re serious about your down time!)
3. How many hours will you work in a week? More than 40 and you’re in the same situation as you are without vacation.
4. What is your productivity ratio? You are not productive (in a billable way) 100% of the time. Sometimes you are doing your own marketing or business administration. Nicole says your productivity ratio is probably around 50% which means that if you take 40 hours a week x 50 weeks in a year and get 2000 hours… you can probably only bill out 1000 of those.

Now let’s say you want to make $100,000 in a year, and you’re going to work 40 hours a week for 50 weeks. That means you will work 2000 hours but practically speaking you can only bill about 1000 of those hours which means you need to charge $100 an hour to make your bare minimum. And voila! Numbers are kind of fun again.

Sidebar: Nicole Renames Fred

Apparently Nicole’s grandfather called everyone George so that’s what Nicole wants to call our audience. At this point we’re having so much fun that we agree.

Tracking Your Time Is Hard

We try to be super diligent about tracking time, whether it’s billable client time or our own business development time. And yet at the end of a day, hours can still go missing. Why??

It’s in the gaps – when we get up from one task to put something in a drawer and take a moment before we refocus on another task. Or answer the phone and don’t necessarily time it. Or check our email real quick before moving onto another task.

Time is slippery!

Nicole mentions an app Called RescueTime that you can leave running in the background while you work and it will pull stats on where you spend your time. So at the end of the day you can see if 76% of it went towards cat photos on Facebook. And you’ll have a better idea of what your actual productivity ratio really is.

You Need Breaks

Nicole isn’t big on timing breaks so she likes to play a favorite song and give herself the length of the song to chill.

Remember that song you embedded into Excel? Perfect opportunity to listen!

Profit Death By A Thousand Cuts

Death by a thousand cuts is a real thing. It’s an ancient method of torture but it can also kill your business. Are you spending a little bit here and a little bit there? That free trial you forgot about that’s now billing you… the few bucks you spent on that ebook… or maybe you bought a notebook to record your next great idea and didn’t record the notebook as an expense.

It sounds like a tiny thing, but remember – the first paper cut doesn’t hurt that much, either. Add them up though and you’ll be bleeding cash.

To add insult to injury, if you don’t record your expenses diligently, you can’t count them as expenses against your income when it comes time to file your taxes. So now you end up paying more taxes!

Nicole shares yet another app called Shoeboxed that will help you track your expenses. Among other things, you can take a photo of a receipt using your phone and the software will pull the information out for you and track it. Things are starting to sound really fun right about now.

Should We Really Be Billing Hourly?

Nicole doesn’t like to, and neither do we – the problem is hours are finite. So whatever your hourly rate is, you’re limited by how many hours you can work and there’s a definite cap on that.

Thinking hourly is a good place to start because it gives you a minimum for what you need to charge.

But think about what you’re going to deliver instead, and bill by project.

Just be sure you have a clear contract with clients so they know what they’re going to get and you don’t end up with scope creep. Ah, scope creep… the bane of everyone’s existence!

You Can Customize Yourself To The Poor House

Do you like to give your customers a lot of options? Nicole says that could be a bad idea. It’s hard to manage and maintain so many different products and services and doing so can reduce your productivity ratio.

For better profitability, limit your options to specific packages and customizations. Only customize when it’s really worth your while financially.

A Problem Of Scale

When you’re trying to grow your business, it may seem logical to think you want more and more customers. But scaling up is a lot more challenging than you think.

Ralph tells a story of a hypothetical deli owner. When he makes a few sandwiches at a time, he has a certain process.

But let’s say het got an order for 100 sandwiches.

Now he needs to buy products in larger quantities, which means he needs more storage space and more cash to buy them. And he needs more space to lay the bread out to make the sandwiches so he needs a new table. And he needs to train someone to help him make sandwiches.

Nicole calls this “growing into failure.” If you grow too quickly, you will sacrifice time (by delivering late), money or quality.

Nicole says you need a plan before you have the problem.

Your Marketing Action Item

From Nicole: Pick an interesting quirk or characteristic about yourself. In Nicole’s case it’s her laugh (you can’t miss it!) Think about how you can use it in your marketing. For example, Nicole has a laugh button on her website. First people have to get to know you and then they have to remember you. What can you be remembered by?

Links & Resources

• Visit Nicole’s website to find out more about how she can help you get a handle on your small business finances
• Listen to Nicole laugh. It’s contagious!
• Follow Nicole on Twitter @nicoleafende
• Find her on Facebook
• Buy her book on Amazon How to be a Finance Rock Star: The Small Business Owner’s Ticket to Multi-Platinum Profits
• Read Ralph’s article 3 Things That Will Prevent You From Cutting Your Marketing Budget In Times Of Crisis Or Beheading
• Find out where you spend most of your time each day with RescueTime
• Track your expenses with Shoeboxed

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