This week, I’m talking about profitability and how you can stay profitable in your business as you continue to grow. 

Join me in this episode to learn how you can eliminate excess expenses and figure out what you should be spending on in your business to maximize profits and cut expenses that aren’t helping your overall business growth. 

In this episode, Danielle also discusses: 

  • How you can actually put profitability into play in your business 1:22
  • The steps you need to take to measure your profits over the past year 3:14
  • Why you should stay focused on advertising and marketing expenses 5:18
  • How to filter your expenses to see which ones you can eliminate 9:04
  • Measuring your time with your clients 15:33
  • Grading your clients 17:34

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Full Episode Transcript:

Intro  0:00  

Welcome to entrepreneur money stories, the podcast for women entrepreneurs who want to dig into their money stories so they can break free from limiting beliefs around money once and for all. Hosted by Daniel Hayden, owner of kickstart accounting, Inc. This podcast is a series of real conversations about money mindset with valuable and action packed takeaways for the entrepreneur who’s building their abundant empire. Danielle is a reformed corporate CFO who’s on a mission to help real female entrepreneurs understand their numbers and gain the confidence to create sustainable profits. And now here’s your host, Danielle Hayden.

Danielle  0:40  

Welcome back to another episode of entrepreneur money stories. Today we’re going to be talking about profits. This is the number one question that we receive from our clients is how do I continue to run a profitable business as I am growing? Now, I’ve worked with hundreds of entrepreneurs throughout the years. And this is an anomaly that we see over and over and over again, as a business grows, we are bringing on more expenses, bringing on more clients. And we can slowly watch profits start to dwindle if we’re not paying attention. But how do we pay attention? Right? Our clients ask us all the time I hear all the buzzwords, knowing your numbers or creating a profitable business, don’t spend too much, cut your spending too much, why should we are working with you but how do you actually put these practices into play. So we have created an expense, we have created a client and expense grading system for our clients, and we wanted to share it with you, our listeners. So this is our gift to you for being a part of this beautiful community, you, you are so brave to be listening to this content to be willing to work on your numbers to be willing to work on the finances of your business. I know that this topic isn’t easy, and I am so proud of you for being brave and being willing to care. So this is our gift to you. To help you be able to implement this system into your business. I’m going to start with expenses because I don’t think that we spend enough time on our expenses. There’s a lot of buzz around revenue and clients and how to attract your ideal client. And that’s not our specialty. Our wheelhouse really is helping put the whole picture together and understand where we’re spending money because there is a lot to know there. There’s a lot to be explored in our expenses. So I want to start with our expenses and our expense grading system. Now, you can download this system by going to kickstart accounting In order to download the worksheet so you can follow along with me. Now, there are two tabs in this worksheet, there’s a clients tab and Expenses tab. So you’re gonna go to the Expenses tab. Now I’m going to ask you to go into your accounting software or talk to your money team, talk to your bookkeeper and ask them to pull this information out for you. I want you to look at all of the vendors that you have spent money with over the last 12 months. So where have you been spending money? If the reason is that we study history in grade school and through high school, now I’m listening to my kids complain, I get it. But the reason that we do that is so that we don’t repeat history so that we can learn from history and not repeat those same mistakes that we can learn from it. So I want you to go all the way back in time, I want you to go 12 months historically. So there might be some vendors in here that you’ve already terminated a relationship with. However, that reflection point of understanding why you terminated or why you’ve kept them is gonna be really impactful. So you’re gonna talk to your money team about creating a list of every vendor that you’ve spent money with, and the total amount that you’ve spent, it might even be helpful to see the amount as a monthly amount and then a total, but I need you to see the total, you cannot just look at the monthly expense. Because those are easy to dismiss it is really easy to say yeah, that’s only $100 a month. I’m gonna keep it. I want you to see $1,200 right because we’re looking at the last 12 months. So in this worksheet once your money team once your bookkeeper has sent you this list, you’re going to list out every single expense and preferably the six this this list will be sent to you by category so you’ll see all of your, your advertising expense vendors first then you’ll see all of your operation that dollars second, then you’ll see all of your facility costs all of your payroll costs with each individual. So, I would love when you send this request to your money team that you’re requesting this information straight from your p&l, so that it is combined into subcategories. So when you’re thinking about all the advertising and marketing expenses, you’re able to stay focused on advertising and marketing before moving on to operations. So we’re gonna think about each of the vendors that we are working with, this includes subscriptions, consultants, paid marketing, and advertising, website design, website maintenance, are, these are everything that we need that goes into the advertising and marketing of our business, listed out by vendor, and then the cost. And we’re going to give each one of those vendors a grade, now I’m taking it back, I’m taking it back to grade school, you’re gonna give them a grade of A, B, or C, keeping it simple,

don’t worry, we’re not gonna do D and F and A plus B minus, we’re keeping it really simple so that we can filter this at the end. And then, as you’re reflecting on this, it would be really helpful for you to make yourself a note, in the grading worksheet that you have downloaded, you’ll see a place that says explanation. And I want you to reflect on if you graded something as see why what happened during that relationship, what happened when you launched that software? What happened when you switched website providers that made you grade this as a seed, and then you’re gonna decide right here, right now, what action you’re going to take. And the actions will include keep, consider other options, options, or eliminate, right, we are eliminating for profitability. Now, if it’s too much for you to think about that right now, and you need to see the entire picture first, hold on, you can do the action steps at the end. So when we do this exercise with our clients, we don’t always take action, immediately, we go through every single vendor First, understand the cost over the last 12 months. And we give it a grade, though, we look at the reflection, that explanation of why you gave that vendor the grave. And I really want you to return like you are going to submit this to me. And you actually can submit it, if you want to submit it to the kickstart team, you can send your results back to support at Kickstarter county And we will serve as your accountability partner. Because it’s really important for you to do this exercise and do it truthfully, and don’t give each one an explanation. And when you are thinking about it, as if you were explaining it to somebody else, there’s a different level of accountability there. I remember back in my corporate days, if you are a long term listener, I worked as a CFO for a midsize business. And one thing that we had to do on a quarterly basis was prepare a financial deck, a PowerPoint presentation that we would present to our board of directors. And in this PowerPoint, it was my job to help them understand where our money was coming from and where we were spending money. But that was not going to be satisfactory for this group. I had to explain to them why costs were increasing. Why were costs decreasing? What were we doing to maintain profitability? If we were not profitable? Why were using a new vendor and costs are going up? Why? Why did we choose that? And this gave us a very deep level of accountability, because we weren’t required to not just justify the spending. But to really answer the question of why once you’ve listed all of your vendors, and you have given each one a grade and an explanation, then you can sort this by a few different ways. And this is an Excel document. So there is a filter tool on here where you can filter all the expenses by See All right, alright, so all the vendors who are graded a C, which ones can we eliminate, in order to be able to focus on profitability, or which ones that are graded a C two we need to contact our vendor and communicate our dissatisfaction so that we can make it an A I willing to bet that if you are working with a another individual that they want to be of service to you. Most of us go into business to do a great job, right? We’re not trying, nobody’s trying to do a disservice to you as a business owner, we want to help you right? Other business owners want to help each other. And so if you’re grading something as See, consider contacting them, too. You bring this up to an A justifying the cost, eliminate profitability, or consider other options? Are there other options out there? And another option might be contacting them? Can you reduce my fees? Can you increase my services? This is really actually what I’m looking for, are we able to modify our services and modify our scope of work in order to include these services? So having that conversation, then we can filter this by the beats and have the same exercise, we’re going to take action on every single one of them? Are we going to eliminate? Are we going to consider other options, which include contacting them? Or shopping for at least two to three other vendors? Or are we going to keep it and then we’ll move to the A’s and your A’s really should be that we are keeping them? All right. We want players on our team, talking about this with my team all the time, we want to work with other A players. And so we deserve as a business to work with player vendors, player clients and player team members within our team. And so when we grade somebody in a, that means it’s success. And maybe your action is that you send them a thank you. Thank you for being awesome. Thank you for delivering this beautiful service. Sometimes it is okay to celebrate each other and acknowledge that they’re doing a really great job, acknowledging that you want them to continue to do what they’re doing today, over and over and over again, we can’t read each other’s minds. So how can we deliver that communication to say, This is amazing, right, and I’m going through this exercise right now in my business. I’m looking at all my vendors. And I just wanted to say that I appreciate what you’re doing. And I’d love for you to continue doing that. Right. Okay. Expenses are tough, right? There’s a lot of them. This is a quick episode, this is a quick exercise, but it’s not right, it’s gonna take you a little bit of time to go through each one. And I don’t want you to rush through it. So really put this time in your calendar to work on your business now in your business. And do this reflection point for every single one of your expenses, every single one of your vendors. Now the clients. This one can be heavy, depending on what season you are in your business, you might be in a season where you’re taking any client who will pay you money. You’re taking everybody on. And that’s not that that’s the season that you’re in. You are learning about what works and what doesn’t work. How can you serve your clients best? Who do you want to work with? As we continue to grow our business, we might start to think about what clients we want to continue working with, who is the most profitable, who pays on time, and who do we actually enjoy working with. Right, we need to enjoy what we’re doing. Our team needs to enjoy working with them. This is an exercise of being really reflective about our clients and our revenue. Now this framework, I originally heard about this framework through the Pumpkin Plan. So if you want more information on this, I definitely would suggest I’ll tag it in the show notes the Pumpkin Plan by Mike McCalla wants to go in deeper about each of these. Now, this is a very similar exercise, you’re going to list out every single client, and I don’t want you to just put their monthly revenue or their project revenue, I want you to put the total amount of revenue from each client for the last 12 months. And then you’re going to grade I call the cringe factor. So do you enjoy working with them? Do you cringe every time you see that email? Are you excited to see them? Are you excited to see them pop into your inbox? Now no shame here. It’s okay. I know you know, we all have a little bit of this. You don’t want to admit it. But we all have a little bit of this where there’s clients who email you and you’re like, Oh, my goodness, Sally is so good to see you. It’s so good. Yeah, I’m so excited to be able to respond to this email and pour back into you. And there’s other times that a client emails, you know, like, oh, gosh, I’m gonna pour a glass of wine. If I open that one

pays on time, this is the next grade and these are going to be similar. This will be A, B, C, D and F. Do they pay on time? Now you might be in a business where you require for payment to be paid without doing the work. However, we work with a lot of clients who do allow terms which means that they have to count on their clients being on time so do they pay on time and then the time spent? Are you spending a significant amount of time On this client in comparison to the revenue, now talk to your money team because this exercise can go deeper. Time spent, I mean, we can really think about the profitability by client, tracking our time making sure that we’re breaking even, we can do a whole break even exercise to make sure that we’re breaking even by clients. However, without having to put all those numbers to work, because I know you listen, or I know how hard that is, I want to give you a softer way of evaluating this from your gut. Right reflecting on the last 12 months, how much time are you spending on them. So if your cringe factor is an A, and your pay, and this client they happen to pay on on time, so we’re going to grade them in a, but you are spending so much stinking time on them, it takes you so long to work with them, you love them, they pay on time, but it takes you forever to work with them, you’re gonna put time spent as an F is that time of day, and your cringe catcher is in a shoe like them, which means your total grade is going to be a B. And that’s okay, we’re we’re going to use this. So reflect after we’ve listened. We’ve done this exercise for every single one of our clients. Do we want to continue working with them? Does it make sense to continue working with that client, and you don’t have to take action on every single one of these vendors, you don’t have to take action on every single one of these clients. I’m not saying go fire all your clients tomorrow. But I want you to understand that if you work with more clients who you love working with, right? You get excited when you see their email, they pay you on time because they value your service. And it takes you a decent amount, right, like a fair amount of time to work on them. And these are solid clients, right? So by month, this time spent right with this client, they no longer get an app, let’s say I read them, you know, see I’m spending a good amount of time on them. But it’s not overkill, they still get a top grade as an A because they’re kick ass people and you enjoy working with them. And they pay you on time. That’s why it is quiet. They actually don’t pay on time if you love working with them. But they don’t pay you on time, you’re always having a class with them. And because you’re always having to collect invoices, the time is actually even more because yes, you have to service their contract. But you also have to chase them down for payments. Their total grade is a C, right. And so we can once we’ve listed out every single client, we can filter this for our clients. Right, send them a thank you thank you for being awesome. I love working with you. Then we’ll filter this Barbie client and we decide whether we want to send them a thank you don’t see clients. Alright, now we need to evaluate, do we want to continue working with them? Maybe our B, C D clients. That’s when we contacted our money team. And we say hey, let’s do a breakeven analysis to really understand if it’s worth moving forward with this client. Am I truly profitable? All this is a learning experience. All of these are tools in order to help guide you to profitability. But these are just tools so I don’t want you to feel pressure to make hard fast decisions today. I want you to understand that this is a tool to help guide you to see where you need more information and where you need to focus your energy. What opportunities for change might be here in your business. Again, I am more than happy the team here at kickstart accounting Inc is more than happy to be an accountability partner for you. So if you fill out this expense grading worksheet, you can send it to support at kickstart accounting and we will be your accountability partner asking questions. If you are a current client listening, contact your account manager and your bookkeeper. We can do this exercise together with you. If you come through this worksheet and you have more questions, contact your money team. Your Money Team is there to support you and to help you if you’ve enjoyed today’s episode. I asked for you to rate and review or take a screenshot sharing your Instagram Stories. We’re here to be a resource for you. And we appreciate all of your support. We look forward to seeing you back here again next week.

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