Badass Is The New Black (Season 4) Episode #18- Bookkeeping For Your Business with Katie FerroJun 15, 2022
This week I am interviewing Katie Ferro, a CPA who works with online entrepreneurs, teaching good systems for keeping track of your profits and losses to help bring clarity and growth to your business. If money stresses you out and you tend to avoid this topic, I encourage you to join us today! This is for you!
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Bookkeeping For Your Business with Katie Ferro
Katie and I first met at a retreat that I spoke about with Claire a few episodes ago. That's where Katie and I were introduced and it was love at first sight. Love at first laugh. I just remember one of the nights we were just laughing hysterically. I think I was like crying and I don't know, you have this energy about you, this lightness about you and you're just fun and you bring laughter to this space and I really admire and love that about you.
So we connected right away. Katie is a CPA and immediately I was like “oh bookkeeping, let’s talk about this for a bit”. But I remember we did a little off session. We were talking about Kajabi and you were just kind of showing me some things that you're doing with your programs that you have. And so we just connected on some different levels and I really wanted to bring you on the podcast to talk about bookkeeping. I think that's one of the things that most entrepreneurs that come into this space where they're taking their knowledge and their skills, turning it into an online business like you and I have. Well, you have that experience of bookkeeping. I certainly did not. I still don’t really have the experience except for just trial and error things or when it comes time to give the stuff to my tax person, they're like, yeah, can I have your P&L? And I was like, huh, what's a P&L. Thankfully we use QuickBooks. And so it was easy for them to just log in and literally do everything for us.
But I know some people aren't using QuickBooks or don't have that luxury of using that service. So I'm excited to talk about this, and you can share a little bit more of your background and like your expertise and your specialty of what we should be paying attention to as entrepreneurs with our business. And, and especially because one of the things that you have mentioned in what you believe is that bookkeeping really changes lives because clarity increases profits and profit is how change is made.
Clarity increases profits and profit is how change is made.
So I'm hoping we get some clarity on the bookkeeping aspect so we can know what numbers mean, and what to be looking for and what to be keeping track of so that we can get that clarity and increase profits in our business.
Why is bookkeeping important?
You hit the nail on the head. Cause when you said we're going to talk about bookkeeping, I'm like, oh no, no, don't turn them off. Like they're going to be turned right off when we say bookkeeping first, we don't lead with that. You're saying that I have the experience of bookkeeping and I kind of do, but the truth is like the way that I do bookkeeping now.
I'm really excited to have this conversation because we actually didn't get into bookkeeping too much at the retreat we got into systems. I think it's very connected with logic and systems and simplicity to help you get stuff done. Right. That's what I like, like Kajabi is getting stuff done. But on bookkeeping it's seeing what's working and what's not, and it comes down to profit. So I ended up getting into bookkeeping for online business owners are like new female businesses, you know? And it started actually with my sister and I forgot this, but it started with my sister starting to sell Rhodan and Fields. And I was like, oh, well, like you're basically a business now. If you just start this the way that I imagine most people would, it's going to be bringing in money and spending money and not keeping track of it and not knowing like where it's coming from.
And that can go two ways. It can either be that you're making more than you expect. And it's a mess come tax time. Plus you might have taxes. You weren't anticipating at a different rate or you're like in some other businesses or industries where the cost is greater, you end up losing a lot of money and just not knowing that, and this isn't a negative thing either because I believe in spending money to make money on your business. I believe in periods where the money goes down before the profit comes in. So losing money, I don't mean that's going to be the story forever, but you're not clear on how much you're putting in to decide if my efforts are working.
That's all that it really is to me, is a process of looking at what's happening and then asking yourself what's working. What's not, what needs adjusting or like sometimes it's okay. I'm spending money in faith in my business that I'm not actually taking actions to sell. Sometimes it's that simple. And so it'll give you that clarity of like, I'm doing these things, but I'm not doing this, like looking at my sales. And other times I have clients where once they see their numbers in this clear, simple picture that I paint, then they're like, oh, all of my money is coming from that one thing that sucks my soul. And look at this second tier thing that's bringing in maybe even 20% of what the first thing is.
And none of my efforts are going there. And I like that so much more. And I can't get to that because I'm busy on this thing. That's making all of my money that I hate and they'll shut down a big income earner to go all in on something that's kind of catching up without intention. So I ended up bookkeeping in the online space because I was in a coaching program and my coach, I was doing math. I'm like, I know what this costs. I know how many people are in here, but I'm really curious what this actually looks like on a P and L like, I know your sales, but I have no idea what your profit is. And I'm very, very curious. So she ended up saying that she was like, she talked about it in a live stream that she was going to get a bookkeeper. And then another person in the program was like, you should message her. And I did. And I got into it out of sheer curiosity. And then I was so curious about the systems and the way that people build online. And so, like I prefer zero as a bookkeeping software.
Most of my clients use Stripe and PayPal and Kajabi, and that's why they use Stripe and PayPal. And those platforms play a lot nicer with xero, which is, it's like QuickBooks, but kind of newer and built in the cloud and stuff like that. So QuickBooks isn't bad. Xero's just better. And I've really nailed down systems that make it easy to bring that information in and also ways to lead my clients through how to accept payment and how to spend your money.
So that it's simple to keep track of. So putting a bookkeeping picture together is easy and efficient and you get it on time so that you can regularly see what's working. What's not. And how do I adjust it so that during the year you're looking at that and increasing your profits. And then at the end of the year, you have the bonus of it being ready for tax time.
What is a P&L?
So that that's never a mystery or some enormous source of stress. And you're prepared for Yeah. A hundred percent. Like how many of you listening out there when it comes time to tax time, whether you're doing your taxes yourself or have to prepare to have someone do it for you, you dread it, like you are just like, oh my gosh, I do not want to deal with this. And it's likely because you haven't been keeping track along the way, because if you have been, it's actually quite simple, especially if you're passing it off to someone else to do, let's go back P & L by the way, is profit and loss. Okay. So your profit and loss statement, what, you're, what you're bringing in, what you're profiting and what you're losing your expenses. Right. So, super important to be keeping track of. And thankfully, when we were going to buy a lake house, they were like, I need, because I'm an entrepreneur they need. And even if not, you need all this information about your business and, you know, is it making money? Is it losing money? So thankfully using a program and I was like a PNL, what I could literally just go in and click PNL and I could print them off and I didn't have to calculate any numbers, which was very nice to do. But also your statement about you were kind of curious, like, yeah, but what's the profit? And I think about that all the time with people, you know, doing business out there and talking about how much they're making. And I've been one of those people that says, Hey, we have a million, you know, multi-million dollar business, but I also wonder, okay, but what's your profit margin, right?
Because the context could Be making a million dollars and you could be spending more to run that business. And like no one wants to lose money in their business. Or you could only be making 5%. And I was just thinking about this, talking to my in-laws earlier. And they ran restaurants growing up. And I was like, what? As a restaurant?
What was your profit margin? Like, what's a good profit margin for a restaurant in a business. And he's like, well, it depends what restaurant fast casual could be anywhere from like 10 to 20% profit. So like knowing you're going into that kind of business, if you have a million dollar you're bringing in a million dollars a year, you're likely only profiting 10 to 20%, that could still be a good return on your business. But with the online space, I'd love it to be way higher than that. And I remember when we first launched GROworkspace and we're making money, and I looked at our profit margin, you know, within that first year, this probably the last quarter, it was like an 80% profit margin. And I was like, dang, this is what digital products do when you don't have a lot of expenses, Not for everybody, for everybody. So now it will say, yeah, Our profit margin is lower than that, for sure. And I don't know the exact number for last year and that's something I should probably be able to spew off as a business owner, but we have much more, much higher expenses. We've hired an entire team that literally is creating, creating the content, doing the design. We have a project manager, we have a translator, we have, you know, all of these things. So our profit margin is a lot lower in that business. However, I get to focus on another business. I love while the money's still coming in and there is a profit there.
Right. So it's just, it is important to know your numbers and maybe have, do you recommend, like someone has a goal of what they want their profit margin to be, or like, tell me like the first step. So like someone that hasn't been paying attention to these numbers, they're getting into this online business, whether they have products or services, you know, obviously if you're in network marketing and you have products through our company, you know, you've, you've got kind of that fixed whatever the cost is, but then you have expenses that you have to pay for. So I guess it doesn't really matter if you're in affiliate marketing. If you're a coach, if you have a program like there's, there's expenses, there's costs for your business. So I'm gonna turn it over to you and like, Yeah, I got a lot to say, okay, I've got too. And so first I want to say, because as you brought me back down from the P and L, I was like, Ooh. And we're like geeking out right now. And we might sound excited, but if we had a room full of people and we had a chat box open, and we said that it was okay to talk about how you feel, people would be like holding their breath and grinding their teeth and fidgeting and getting nervous just at the thought of the things that we're talking about. Because money is such a deep rooted trigger for so many people.
What if money stresses us out?
And so for anyone listening, that's stressing out and is like, oh my gosh, I'm never going to make it a business because I'm not geeking out like Krissy and Katie. I want you to know, I have done so many episodes, so many training sessions and talked to so many people to the tunes of thousands. And if you're not stressed out by this topic, or if you're not getting freaked out, especially if you're not keeping track of things, like you're the anomaly. It is extremely normal for you to be stressed about money. And it's like, I was thinking when you were talking about having it done for you and being able to take out that P and L and like keeping a, a system I'm thinking about a closet.
Like if you're, I have this tendency to throw everything into my master closet, which is pretty small already, I keep trying to keep it organized and it keeps getting messy. Then eventually I pull it all out and I organize it again. But like, if you're avoiding your numbers, as this feels like, and every time I open that door to my closet, when it's in that state, I'm, I'm anxious. I'm like, something's going to fall out at me. I don't want to look at this. I don't want to deal with this. And that's how the number side of your business can be. When you get rid of the things that don't serve, you have bad processes, and you put in better processes, you fold your laundry and you put in some shelves and stuff like that. And then you regularly maintain it. It's actually pretty easy. And while we're throwing around some words like you defined P and L I'm going to break down profit and sales, profit margin, and give a little bit more context to those things and say that that's about as complex as this conversation gets.
And that's the good news. And that bookkeeping is subtraction basically. So profit, like we said, a P&L shows you your profit. It shows you your income. And then it shows you your expenses, your sales are your income. You can use that interchangeably revenue, basically all the same thing, costs, expenses. Some people say deductions, that's the money that you spent to make the money that you made.
And then its sales minus cost equals profit. Boom. You can do that. Math. Everyone can do that. Math and bookkeeping is really just putting all of those transactions into little buckets. So that it's a category of what type of sale is going to be on your income if you sell multiple things. So it would be like, for me, like bookkeeping, coaching this program and stuff like that, and a whole total for that. And then your expenses will be something like a net, a grouping of office supplies, any contractors that you may have, software meals, things like that, which can get a little hairy, like what, what are deductions that could be a whole separate conversation. So that's as simple as profit is.
What are profits?
And back to the importance of profit. Profits are what you keep at the end of the day. And it matters because if your business isn't profiting, I say this, I break this down into four things. If your business isn't profiting, which is ideal, step one, then you have costs in excess of your sales. You are paying to work. And like I said before, that's okay in a certain season, but it has to turn around. Or this is not a business. This is a hobby. And if you're doing it for the intention to impact lives and change your own life, you're going in the wrong direction. Especially if you're trying to get out of a job that might be funding it. So if your business is new profit and way, one of covering costs, then you have three other possibilities. One is you're covering it from your day job. And again, this is okay in a season. There's no shame here. But if that goes on for too long and your purpose is trying to get out of that job. So you have more freedom in your life, think about what's actually effectively happening.
You're working more, you have less money. You are going in the wrong direction. This has to turn around. It gives me goosebumps because ultimately what happens there is if you keep doing that, you say this isn't worth it and you shut down. But probably if you're listening to this, chances are, I would say, you didn't actually get into this business for money.
You got into this business outside of yourself to do something in the world. Even if that's like, this could be any product or anything, it doesn't have to be so revolutionary things, products and things like that. They changed the way you feel. They changed the way things work and they matter. And like finding a good one matters. And if you can't share that because you decided it's not worth it, somebody else isn't getting that message. And so the purpose that you set out to have both for the impact that it has on your family and the impact that it has on the people that you serve, it ends. So if you think that profit is selfish, which some people do, it turns them off. They're like, I'm not doing this for money.
Well, profit is the, how to your, why you have a clear reason why you're doing this and profit is how you can keep doing it because you can do this in a season, but you're probably not even doing it well, if you're stressed out on the number side, and if you're not profiting because it's freaking stressful and you might hide that stuff in a away in your closet and not tell anyone, and that would be normal, but you can't pretend that that doesn't affect the way that you show up and operate and how you're able to even serve or share your message because you're in a fight or flight, kind of a response. And you're stressed out all the time at the, at the bottom of it, or you're totally avoidant, which is really the same feeling.
So profit is really important because I genuinely do believe that it is the, how to your, why that your why is important and that your why can be created through profit. And that once you profit, you can then have that impact that you want in your life, in the lives of those you serve and the people you employ and their family and their clients, and so on and so forth. And it becomes a really seriously profound ripple effect that like, I get kind of dramatic about bookkeeping, but I really mean what I'm saying is this one of the biggest points where you're at risk in your business of shutting it down, because if you don't know what's happening, you can't make informed decisions and profit in sales, just to continue that and deepen.
That is like, if people's sales are bothering you, like context is everything and context is not copy paste. So what their sales are, their profit could be high. It could be negative. They could be losing money. They could be throwing a lot of money at telling you a dream just to sell you a dream. It could also be very, very true. I've seen a lot of cases of what people are saying. Be very, very true, but it really still doesn't matter without context. So you can dream and you can earn millions of dollars and millions of dollars in profit, but that doesn't have to be the goal just because it can be done because really at the end of the day, like what dollars do is all that matters. And what my dollar will do is going to be different from your dollar based on your family, your obligations, where you live and stuff like that. And so always keep in mind that like numbers are very, very subjective and only apply to it. What matters to you is only making bowls that actually support your life and feel good to you.
And I would even say like, don't judge these sales and profit kind of conversations, but just be aware of it. Like it's not always exactly what it seems. And sometimes those people don't even mean to do that. They just don't even know the profit or it's too much information. You know, you take what you will and profit margin. We didn't define it.
So profit margin is a percentage: it's taking your profit and dividing it by your sales. And it's saying, how much, how many cents per dollar of sale did I get to keep as profit? So at 80% profit margin means if you made $10,000, you spent $2,000 and you kept 8,000 and that's 80%. And I have a whole episode on my podcast, profits and Prosecco profits and Prosecco of what your, what profit margin, isn't what yours should be, because I'm constantly asked that question. And for an accountant, I will never stick a formula on anyone or anything. I will give you ways to think about it. And so, like, what you were alluding to is backing this up. There were times where your profit margin was higher, but maybe you were working more. Maybe not. Maybe your dollars of profit were just lower. Maybe not like the system it's, it's, it's flowy. And so profit margins, again, you can't just look at a margin in a microscope and decide if that's a good one or not. I have like Month by month, right? Like Maybe Three year oh yeah.
Industry by industry month by month, like looking at a bigger, more macro than micro. Right. And what does it mean again? Like, what does it mean? Because like, if it's 35%, what's it 35% of, is it 35% of a million dollars? I'd be pretty happy with that part profit margin or is it 35% of $10? I mean, it doesn't by itself, it doesn't tell you anything. So the thing that I like to look at is measuring it against yourself, but also really a gut check of how this feels? Looking at the profit margin, along with the actual dollars of profit is really powerful because what you might see is profit margin, go down and profit, go up and that's possible with a scaled ads that are working and converting.
So you're paying more money, but you're also bringing in more sales and you're not working more. It can also happen when you hire a team like you were saying, so your team is now doing a lot of the work. So you're even in that situation, your dollars of profit and your profit margin might go down, but your time is back and what's more valuable, right? So you can either start that other business, or you can go to the park or on vacation or whatever the heck you want or not, or get COVID and not worry about if your business will shut down. Right? So when your business is scaling, it makes sense for your profit margin to go down. And so then look at it in terms of the profit and by the exact same opposite of that same coin.
I don't care if you want to operate at 90% profit, as long as you're not working yourself to death, and you're making enough to do what you want to do in your life. So things that I consider they're like not really leverageable things where profit might be higher would be like a misuse, but if she's making enough money and she's got great clients and doing something that she loves and the time works for her, and she makes $5,000 at the end of the month, profit, like awesome. That works, that can work. There's just no one size fits all to these things. And that's why seeing the picture helps you then apply what you know about it. And I try to explain this to bookkeepers too, because I'm somewhere in the middle and I'm in a weird realm of like super woo and super financial where people will say, and this is really more of an accountant thing. Like I love to see the black and white numbers. They don't lie. Hell yeah, they do do it. You as a, as a bookkeeper or whatever, you have no idea what's happening in the future. You have no idea what the dollars invested today are building that can be expenses going into a launch.
Seasons in your business
You don't know about it. It can be, it can be upfront costs of a long-term hire, where there are going to be seasons where your money goes below or close to. You know, it's just less profitable, maybe a loss that wouldn't be the worst thing that happens. And some really big successful businesses. They run it losses in months. And what I like to do, because I'm curious, and I believe that my clients are brilliant and that they just don't want to do their books. I like to ask them, what's going on? And they're like, oh, it's so exciting. I have this connection and that connection. And today we launched this and I have this podcast with this great person that's going to air next week and dah, dah, dah. And there are just seasons where it's lower because they're planting the seeds for the future. And you don't see that on a P and L so a bookkeeper doesn't actually know that the client does. And so when you look at your numbers, you know, oh, all of this money went to ads and you know, oh yeah, I did my funnel setup.
And I hired a copywriter for a sales page. It's not going to launch for two months. And then when, when you do that gut check, you look and you're like, oh yeah, it was lower, but I know what happened and I know where we're going and right. And you're the only one that can actually put that context to it. So, it's nice to be able to either do the books for someone or give them the tool to do it so that it's simple. And they understand ways to make it simple and ways to look at it. And the things that you should be paying attention to and get it done quickly and get it done routinely so that they can then look at the picture and adjust accordingly.
That's all that it is. Yeah. A hundred percent agree with that. And one way that Claire and I have been able to combat some lower months where it's like, okay, we had enough money to pay all of our contractors and all of our things. And Claire, we are not really getting paid very much this month, right? Like taking our dividends and our business because we put a huge chunk out to get some more coaching, or we put a huge chunk into getting our website, like having some coding done on our website. And it was like, oh my gosh, all these huge expenses literally happened this month. What Claire and I have done is when we did have really good months, instead of paying all of that out in our dividends and then spending it, we started a savings account.
Now this is just something that we've done, you know, not financial advice, take the information in and, and do what you want with it. But we started a savings account. And when we were able to put chunks of money in there, we put chunks of money in there. And so in the months where we have huge expenses and Claire and I maybe can't take a dividend, we're like, okay, is this a time? Do we feel like we need to pull some from savings to be able to have a little bit of money? Or are we good? We know next month is since we've been in business for years, we know next month is traditionally a much higher month because all of our memberships, annual memberships go through because of a big promotion we did.
So we can, you know, maybe count on some renewing memberships there. And so just taking that into account and really, as you have, your business goes longer over time, maybe you can recognize some of those. When there are lower months, maybe certain times of the year in your business, it's lower. And maybe there's other times where it's a lot higher and being able to keep track of that and know to gauge, you know, what your, what your profit is going to be. Yes, totally. I'm smiling because I just remembered, I started with the four ways that a business could pay itself. And I think I got to number two, the other one was by the support of friends and family spouses and stuff like that, which like, it's emotional.
It's really good when that's there, but it's also hard emotionally. And you, you feel attached to guilt around how long this is going to take. And then the fourth one is by going into debt and I've seen all of those things happen. And again, like these stories can turn around. It's just that the only actual sustainable one is profit. So I did want to complete that as I remembered that.
And then I thought about expenses. I have a rule like a test for how to look at expenses, which is, cause you're, you're talking about coaching. And that's always an example that I use with this is when you're looking at your expenses, you should ask yourself. Cause when you, when you compile your numbers, you're going to see your expenses and categories.
And then you're going to be able to say which one was the highest. And then you're going to ask yourself, okay, now what do I do? You do want to cut back on expenses to the point where they're not actually benefiting you? So the question is, is this expense benefiting me today or will it be reasonable in the future? So if you're investing in a coaching program and you're going to show up and do the work and you're going to implement, and you're going to detach from the time that it takes and stuff like that, there's a very good reason to believe that that will pay itself back. So you don't want to contact, There should be a return on that investment, or you shouldn't be making that investment right now. Right? And I have a whole thing about how to think about investments too, which is a really good episode. Those are more recent, like in the late seventies of episodes. I think the one about profit margins is somewhere in the thirties, but like, it's, it's basically what is it going to cost? What's the worst case scenario? How can I pay for it if it doesn't turn into a dollar today and am I ready to do my part?
Because you are happy, you can't invest in something blindly and not do your part. And that can even be in hiring a team member. You can't just bring them in and expect them to train themselves, to have good systems and good processes or change them because you realize you didn't have the time to train somebody and, you know, diligently screen and make sure it's the right person and communicate and things like that.
No matter what the expense is, if you're looking for an ROI, you contribute to that and you have to be willing to do your part and you likely have to be willing to do it for a certain period of time without judgment. So that's what I say. Like, if you're going to start running ads, you don't see if it works that week, you commit to the cost of three months minimum you judge it, not zero. You adapt and you look at it, but you do not judge it for three months. You show up. And at the end of three months, you can say, all right, this was my worst case dollar amount. This was the amount I knew it would cost in three months.
If I didn't make a dollar, which is very unlikely to happen. If you do your part and no matter what it is, if you do your part for a solid period of time, that it would take to see some return, it's unlikely. It's going to be the worst case scenario and $0. So I like to say, know what that cost is, know what a reasonable timeframe is, show up fully, don't judge it. And at the end of it, look at it and decide, are we going to keep going with this? Or where's my backup plan for, how am I going to pay for this? Because I can't assume that it's always going to pay for itself. That's a, that's a, it's great to have that belief, but financially it's risky and I've seen it happen before. And so I like to take the risks, knowing they're calculated risks and then show up. And I don't know that I've ever had anything that didn't work or wasn't worth the cost of that test period, to knock it off my list.
I'm also thinking about just times where you put in the work. So we've talked about coaching, but like, here's another example. So I did a virtual summit in 2020, and I spent $20,000 putting this summit together, hiring copywriters, hiring someone to manage it, and hiring support staff. I ran it all through Kajabi, which was awesome. So I didn't have to pay for another fee to support it.
And so I spent 20,000 and I made around 20,000. I don't know that there was much of a loss, but there was not much of a profit there. And I was like, oh, and I could look at it and like, oh my gosh, that was a total fail. But it wasn't like, what was the intention, the purpose behind it.
One to like to run a virtual summit and get my message out there and meet a lot of new people. So that was one intention that I had. It wasn't necessarily just to make money. I grew my email list by 3000 people. So essentially the summit paid for itself. It wasn't a big profit maker, but it paid for itself. And then I was able to leverage that list in the future to sell other services, other courses, programs, coaching. And so sometimes we can't like, I feel like I can't always know exactly what came from, and maybe you have a strategy to help do this, but like, know exactly what Kim's just shaking her head now, what strategy on to figure out like, okay, what came from that summit? Sometimes when I pull up people's, let's say, I have, I'm not doing too much private coaching now, but let's say someone joins a digital duplication academy. And I pull them up in Kajabi and I see their tags and I see a standout virtual summit. I'm like, Aw, snap. Like nothing before. I'm like, that's where they came from. Like, how cool is that? So I'm not necessarily keeping track of, you know, oh, they came from there. And so I can attribute it to that, but I know what the intention was behind the investment of the summit experience, doing it, getting my message out there to more people, growing my email list and, and, you know, so I, I count that as a success. So that's just another Million percent.
Yeah. Yeah. And, and that's what I'm saying, like the profit and loss numbers don't lie. Yes they do. Because that wouldn't show you the whole picture. Right. And I just, I was in my group of bookkeepers talking to them this morning about a concept of how nothing ever goes, according to the plan ever. And that, that can be like, oh, it doesn't go according to the plan. But really the opposite side is like, nothing ever goes according to the plan. So I'm going to do the best that I can to come up with a plan and I'm going to execute and then I'm going to learn. And then I brought up the I'm looking at it. Cause I literally just screenshotted this about an hour ago, the seven steps of the scientific method. Right. And this is all that your business is, and this is all that financials are.
And I don't even granularly track things either, but I don't expect that anything that I purchase is going to instantly turn into an ROI or it's a failure. And I don't put myself in financial risk for investments. So sometimes people will like, you know, put stuff on a credit card when they, and they're not making any money and they have no way to make it back. Like that's not you. And then sometimes they pay for things and then they don't show up, but they think just swiping the card, we'll do it. Right. And so it's more of like, I've been that person two times, but not to the point where you would then say that it's like, someone else did that to you. You know that I take full responsibility. I'm like the only reason I didn't see a return on this is because I didn't show up and do the work and know You didn't value it. You put just like, not in the right conscious state.
You learned from that, I'm sure. So a hundred percent. Yeah. So these steps are, ask a question, perform your research, establish your hypothesis, test your hypothesis by conducting an experiment, make an observation, analyze the results and draw a conclusion. And then it says, present the findings. And I was like, this is basically it.
This is how to build a business, except it doesn't end. And step seven is, start the next cycle. So it's, it's asking yourself like, what do I want? Or how can I do this or whatever. And then, you know, you might test your market. If you have one or you figure out how you're going to execute it.
And then you say, I think it's going to go like this. And that's your plan, your hypothesis. That's all it is. And then you test it, you do the thing. You can't just sit there waiting forever. You do the thing, you spend the money, whatever it looks like. And then afterwards, you're like, what did I learn?
You observe. And, you analyze those results. You draw a conclusion and you move on to what you learned next. Like the UN I learned this. And sometimes, like I said, sometimes it's just worth the cross of striking it off the list for me. I like Pinterest, but Pinterest wasn't going to grow my business. And the way that I wanted in the time from that I wanted, I had a manager for a period of time. It wasn't her. I didn't really show up and give her this stuff either. It just wasn't the right strategy for me. After three months I spent money. I didn't see it turn into money, but I knew it wasn't the thing. And I knew what I couldn't execute. And I moved on to the thing that made more sense.
So it wasn't a loss. I just am not going to keep doing that for too long. So at some point I'm going to say, okay, I gave it its time frame. And this is, I don't foresee this benefiting me the way that I want. So I stopped that service. So that's a way to look at expenses, but like we don't judge them harshly in the moment we make them is sort of what I'm trying to get at.
But on the same side of that, we don't put ourselves in true financial jeopardy, like at risk of losing our house or whatever. It may be not feeding your family because we think that there's a magic ticket that we just need to pay for. Yeah. Yeah. What would you, do you have a gauge on like, if someone's keeping track, which now everyone's going to start keeping track a little bit better on losses and obviously we need that full picture. What, you know, what are we investing in? When are we going to see the return? But like when is too long, like when do you need to do that? Check off like, okay, we really need to figure out what's missing here.
Why we're, why we're not flipping this around and making profit instead of losses. Like, what is that? Is it, is it just super variable or is it like, okay, after three months we really need to like, look at, look at this at a deeper level. So I like the question and I, I like, I like the question I'm trying to format it.
And honestly, I really just think that that's an internal thing and that everybody knows, like you hit your point and it becomes clear that this isn't working and you're banging your head against the wall and you're frustrated. And all of a sudden the new thing presents itself. So whatever that might, whatever that might be. But it also depends on what amount of attention and energy and money you're giving it and where the money's coming from.
So an example for me is like I considered my business one business for a long time. I'm in the process of splitting it now, but I had a book, a bookkeeping business that was not scalable. Like I worked on a big client and then I had like three clients and I wasn't outsourcing and I didn't have good processes in place. I just like popping in once a month, kind of messy. I didn't even have my own checklist. I just like messing around, knocking it out and turning it around very quickly. But like, it could have been set up better. And that, that messy from that, I didn't want to grow with like five clients as I was a stay at home mom and pregnant and having baby after baby, my kids are six, four and two. So at this time my oldest was probably two. So I might have had him and a baby. I might've been pregnant. I don't know. But I was when they were sleeping, running an unscalable, bookkeeping business without a team. So I kept all of the profits and that was great. And then I was like, I don't want to go back to corporate. And I want to start selling courses to this type of a market. This course doesn't exist now. So I'm not selling it to you, but it was like tax basics. Interesting because I shifted, I don't do tax now I do bookkeeping, but I wanted to teach tax basics and concepts to help people not make very simple and avoidable mistakes by letting them know at the beginning of their business, some things that they could do, which is now mostly, you can find it on my podcast for free and on my email list where you can go for reminders. You'll link that in the show notes, you can just subscribe. It is so non spammy. I basically just give you the information you want. And every month I remind you that it's time to look at things.
So you don't have to think about doing that. And so I was really so passionate about this concept, that it became the thing that I was doing all the time. And while I was spending, I ended up spending $10,000 in excess of what I made, which for me was a tremendous amount of money at that time, especially because I'm so like at that time.
So accountant T and risk averse and not understanding investments and things like that. But I did it without being funny, funnily enough, not looking at it. I was behind on my own books, keeping else's. I knew though that my business was maintaining itself, my business had the money. So one day I looked at it, I think I might've been pregnant with Zoe my third and I had been pursuing this for probably a year spending money on coaching programs, softwares. And because I didn't have a lot of time, I ended up hiring just those clients I had to get me through. I didn't do it strategically. I did it because I didn't have enough time to work on the thing. I was passionate about where all of my money was going. So my time and my money was now going to this course and building connections there.
That really is the same point we're driving home. That turned into everything that came, but it wasn't working how I wanted it to in that season. So one day I stepped back and I was like, how much have I spent? And I separated it into online and bookkeeping. And I saw, I spent $10,000 in excess. And I was like, how, how did I not know? And it was because my bookkeeping business was now scaled unintentionally. I was working less and I was keeping like, I was just keeping enough to be able to throw the money into this. So from there, I went all in on bookkeeping because I could see bookkeeping was actually scalable and it was working. And then I went all in on the fact to the point where I grew my bookkeeping business by 13 clients in three months while pregnant with my third baby.
And I meant to stop, but I couldn't really stop the momentum. And so what happened next was I started coaching bookkeepers because I like it. It was like, how will, how did that work? And why does it work? And you know, those kinds of things. And so I could have said this isn't working, but I think instead when you have that look at like, whoa, and you have that wake-up call, you have a come to Jesus moment with yourself and clarity drops in and you know, what needs to change. So I don't think it's normally shutting down. I think it's normally a, alright, try this for the point of exhaustion. I think I'm being guided in this direction and I think it's a lot more energetic and intuitive.
Ah, love all that was so good. So good. I love that. We didn't just talk about bookkeeping, like even strategy on your business. You gave some really good, clear examples. I think some people might have to even go back and listen to this again, to get some of those thoughts for sure. But I do want to share before we go.
I want to share a little, I don't, I don't call it. Do you call it a course of no. Okay. Like a template of care. Yeah. So I have a small business starter kit. That is the solution for people who can't outsource yet. So the best thing that you can do is really have it off your plate and have someone do it for you.
And if you're, if you want that, chances are, I'm not taking new clients, but if you want somebody that's like me, that I have these amazing bookkeepers that I mentor, and I can always match you with somebody. Excellent. So you can just fill out my [email protected] slash quote, and then we'll talk and we'll figure out are you open to meeting with somebody else because that's going to be the best thing, but I understand it's not realistic for everybody, especially in those beginning stages. So instead, what you can do is keep track of it, knowing what you need to do. And it, and my number one tip, and I can break this down and I can refer we'll link up a podcast that is basically like a masterclass on how to set up your business and how to keep track of your numbers and put that simple system in place, which is really just like getting a separate bank account and connecting things through there so that if you get behind, you're looking at one place, okay. And then I'll talk about LLCs and escorts and things like that. I'll, I'll just reference some podcasts where I go deeper, love that. And we'll put that in the show notes. So you guys can look for the references to Katie's podcast.
Yeah. I'll link up probably like five to seven episodes. That could be just, they could be, of course, but they're not. So it's going to cover those, those concepts. And then the system is, it's a Google sheets template, but it's something that, that of a bookkeeper and an entrepreneur. And what is a spreadsheet nerd created so that it's simple and customizable.
And we'll give you all of these insights without you doing any math. So it's, you get a tab first, you get a chart of accounts where you can put on how you want to see your income and how you want to see your expenses. Super simple, just type it in. And then each month has a tab. So you put in your income on one side and from a dropdown box populating, from what you just put in, you're able to say what type of income that is, and then you have expenses. And you can say, what, what, from a dropdown box, what is that for office supplies, business development, which is coaching and stuff like that, softwares and subscriptions. And then right there on that sheet, it's going to automatically update and summarize these things for you.
It's going to give you a total by income category and highlight your highest income earner, which, like I said, you're going to know what that means to you, if that's good or maybe even bad. And then you'll see the expenses the same way with your highest expenses highlighted. And then right up at the top, you'll see total income, total expense, total profit, profit margin, like we're talking about. And I have a box that you can put in what you're going to set aside for taxes so that you can remember that every month you should be applying what you think your tax percentage is and sticking that in a separate savings account so that you don't spend it. And you've got the money for taxes set aside.
It's not, it's not a tailored, comprehensive tax thing, but it's going to remind you to do it. And you can talk to your CPA, which I do recommend that you have, or do a best guess on what that is so that you can set it aside. And then it does quarterly summaries totally done for you by just clicking and looking and annual ones too.
So like, if you're looking at, at buying a property and they ask for a keynote, you can print that, but you can maintain that. And it's going to give you all of the insights and people say, it takes like a half hour a month. Some people like to do it on Fridays. I've had over 300 people in there and they like, love it. They actually love it. Now, when we were talking about doing this it was like, okay, but do you have anything that we can offer everyone out there that is having a hard time keeping track? Because you guys I've been that person that it's tax time. And my husband, like, you need to get all of your business stuff together for our tax person.
And I was like, okay. And I literally went to my bank account and my checking and I printed off every single page. And then I sat there and looked at it line by line and was like, was this for my business? Okay. I'm sure I have the receipt from our highlight, highlight, okay, now plugging it into an Excel or I can do the simple, like, you know, add to get it to add up and like, okay, here's my number. Like you guys, that is horrific. So when you send me just the page that shows what this is, this small business starter kit, there's a little video on there that literally shows you what it is. I was like, oh my gosh, yes, everyone out there needs this. So yeah, if you're not using, you know, QuickBooks, or you said zero or something like that, this is going to be simplified and super, still super effective, more cost-effective. So you've got a coupon code for us. The coupon code is Krissy. It's going to take $70 off. So I think that brings it to what, 1 27, 27 And one time costs you guys one time. Okay. I update it like when it needs updating. So even what you see is a very good spreadsheet. And then people are like, can you add a column for this? Can you add that? And I'm like, yeah. And so I go in and I add it. And as I add it and adjust it, I just blast out. So stay on my email list. Like you, you don't not want to be there. People love my emails and it's not even a side that I really focus on anymore. So I bashed them a year ahead. You'll get an automated sequence, which is going to give you the information that you actually care about. Like questions that you have, that you don't want to consume all at once. That's going to drip out for like a period of time. But after that, you're just going to get updates on, Hey, remember to go in there and then you'll get product updates if you buy so that when I make enhancements, you just go in and you watch the demo video, you get your new copy.
I'm not gonna nickel and dime you. There. It's just a solution to the problem without having a bookkeeper. And it is the, it's the gateway into growing your business to the point where you see value and understand bookkeeping. And at some point, you'll say, I don't want to maintain this anymore. And that's when you go, when you get a bookkeeper to handle that for you.
Perfect. Awesome. Love it. You guys, everything's going to be in the show notes, how to connect with Katie. What is your IgE handle For now? It's at orderly accounting by Katie. I love it at the time of this recording. Yes. I love it. I would always find me @katiefarrow.com. That's not changing, but my handle might change to something.
Perfect. So we'll have website links in the show notes. We'll have that podcast look for the freebie that will have the link to take you to sign up for Katie's email list. So you can get those notifications. We'll have the link for the small biz starter kit with the promo code and my referral link there that you guys can use. Just continue to follow.
Katie listened to her podcast. Tell us the name again. Cause I love it. Profits and Prosecco. Oh my God. Amazing. When Claire, I remember when Claire said that she was like, wait, what? Tell me again. Well, the premise is like, we're going to talk about profits and we're going to celebrate because that's all that this is to like, we're not judging rap by beating ourselves up. No bookkeeper gives a crap about what's happening today. We're like gynecologists, we've seen it all. And the point is really just to give you the picture so that you can adjust so that you can stay in business and you can have what you want. And you can have that impact that you're looking for. That's what this is all about.
Oh my God. Love it, Katie. Thank you so much for being here for blessing us with all of your knowledge, your words of wisdom, your stories. I can't wait to have everyone connect with you more. I appreciate you so much for taking the time out of your day to be with us. So thank you again and I'll see you soon.
Check out these links from Katie:
- Top tips to increase your profits
- Why Profit Percentages are Important and What Yours Should Be
- How to Use Credit Cards to Make Money
- Tax Planning Strategies and Increasing Net Worth with Karen Bahn, CPA
- Why is an S Corp and How Can It Save You Money?
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