By Adam Rundle
The podcast currently has 12 episodes available.
“There are systems that deal with processes and repetitive tasks. But sales deals with human systems and human systems are far more complex.”
Mike Mark (8:01-8:12)
Business owners can end up in a position where their revenue depends on them showing up every day. Business revenue expert Mike Mark refers to this as the Sole Revenue Generator Dilemma. He helps business owners pull themselves out of the sales process so they can focus on scaling and optimizing their businesses.
The Salesperson vs. Employee Mindset
The average employee values security, safety, and stability in their work. But salespeople value freedom and fulfillment. The process of finding, hiring, training, and managing salespeople is going to be much different than hiring support staff or an advertising team.
“Salespeople are more like entrepreneurs than they are like employees, and the best salespeople actually don't need jobs.” - Mike Mark (5:44-5:52)
Hiring an effective salesperson is more complicated than simply checking off boxes on your list of qualifications. Sales deals with human systems that are more complex than other systems involved in your business operations. In order for business owners to overcome the Sole Revenue Generator Dilemma, they need to attract high-caliber talent, train that talent, and then set up the systems to manage them while building that culture into the organization for long-term success. But too many entrepreneurs wait until there are fires to put out before hiring a sales team that generates the revenue they need.
Hiring the Right Salespeople to Drive Revenue to Your Business
Talented salespeople aren’t actively looking for jobs. So you need to learn how to pull the best talent away from whatever they’re currently working on. Many business owners try to find people who are just like them or share similar traits or beliefs. Hiring in your own self-image can cause you to ignore the most qualified candidates. The best salespeople won’t always be someone you’re going to like. What matters is that they have what it takes to drive revenue to your business. You have a choice between hiring someone who is a natural-born seller and someone who has had to learn how to sell.
The Many Functions of Sales
The selling process consists of multiple functions - lead generation, conversion, and client management, to name a few. The person who fulfills one role may not be the right person to fulfill the others. Today’s businesses will have a Sales Development Representative (SDR) who generates leads and sets up appointments. The Account Executive (AE) is the closer. Their job is to convert the prospect into a paying client. Finally, the Client Success Manager (CSM) has the job of making sure that the client achieves success. They help the client continue to succeed through the use of upselling or cross-marketing offers that further meet their needs.
“You have to think beyond boundaries to be an effective salesperson. You have to take prospects from different places through the sales cycle to a place where they are ready to pay you money.” - Adam Rundle (7:15-7:27)
What are the components of your sales cycle? How predictable are the results you achieve? Driving revenue comes down to more than just having more salespeople on your team. You need the right people, and you need to have a clear understanding of your sales cycle. When you bring high-caliber talent into your team, you can remove yourself from the sales process and invest your time and energy into growing and scaling your business for the future.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“If you're an entrepreneur, your goal is to make money… so that you can continue to serve your clients, make an impact, and make money. That is the final measure.”
Adam Rundle (13:26-13:41)
Having the right information helps you make the best decisions for growing your agency. But many business owners focus on the wrong things, causing them to waste time, money, and other resources. What do you need to make better decisions? What variables matter most to your business? More importantly, what are you doing to manage those variables better than anyone else?
“Why do some businesses succeed and why do some businesses fail? Because they have people who understand the variables and make the best possible decisions as often as they can. They win more than they lose.” - Adam Rundle (6:40-7:01)
There are four major variables for agencies.
The goal is to understand these variables and know how they interact with each other. Always consider your finances. It’s vital to understand the importance of measuring your profit and loss because every single decision you make has a financial impact on your business. The goal in business is to make money so you can serve your clients and make a lasting impact. That’s the ultimate measure of success in any business.
The Value of Profit and Loss Statements
Profit and loss statements give your business a scorecard by which you can measure growth. In the same way that keeping score in a basketball allows each team to measure their performance, your profit and loss statements give you the clarity to know if what you’re doing is working to achieve your goals.
Profit and loss consist of the money you’re bringing into the business along with the expenses related to the variables that matter. Marketing, labor, and overhead costs can eat away at your profits. When you see the percentage of your revenue that’s going to these and other expenses, you can make the decisions needed to help increase your profit over time.
Breaking Down the Cost
Your business generates revenue by acquiring leads and converting those leads into paying clients. This is a result of your marketing efforts, which include paid and organic advertising, email marketing, and offline marketing. The cost of your marketing and the labor required to fulfill client orders should not exceed 55% of your revenue at any point in time.
“If you’re a business owner, you’re on a journey of figuring out how to make the best possible decisions you can make every single day in your business so you succeed.” - Adam Rundle (32:22-32:33)
Overhead costs such as rent, insurance, processing fees, and travel shouldn’t exceed more than 15% of revenue. When combined with marketing and labor costs (55% + 15% = 70%), you’re left with an expected pre-tax profit margin of 30%. Going deeper, business owners can look at the ratios of different variables. Smaller agencies may perform better with a different mix and ratios of their variables.
Profit and loss statements are often overlooked or ignored by business owners who aren’t comfortable with the financial aspects of running a business. But it’s an essential part of keeping score in the game of business so you can make the decisions that grow your agency. Like growth models, financials help you get from point A to point B while minimizing your costs and maximizing your profit.
Take some time to look at the big picture of your business to ensure that you achieve long-term growth in your industry.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“If you’re going to be in the market looking to increase your return, you better have all of the information.”
Adam Rundle (17:54-17:58)
A growth model is one of the most powerful tools for scaling your agency. A growth model plots the performance of your business over time. It lets you see how your business is doing as you plot variables on a graph so you see what’s actually happening. But more importantly, a growth model helps you clearly see where you want to go and how you’ll get there.
Many business owners see growth as something linear. But in reality, the growth of any business is anything but linear, and having a growth model helps you through the ups and downs so you have a true depiction of what your business actually looks like.
“The second you decide to start a business, a growth model becomes important… whether you like it or not.” - Adam Rundle (5:08-5:12)
Many business owners wonder when the right time to develop a growth model might be. The answer to that question is that there’s no such thing as the right time. A growth model should be put in place as soon as you start your business. Once you create a model for growth, you begin to create a roadmap for the decisions you’ll make each day as you move towards the outcome you want. Much like an athlete preparing for a game, business owners need to have as much information as possible before stepping out onto the playing field. Being in a position where pressures relating to cash flow are holding you back is a problem you don’t want to have.
How to Create a Growth Map
One of the simplest ways to build a growth map is to create a graph with an x-axis (horizontal) and a y-axis. Although you can use whatever variables matter most to your business, the most fundamental graph model looks at revenue (x-axis) and profitability (y-axis). Profitability is the real measure of success in any business. Yet, many agencies only plot revenue, which means they’re missing an important piece of the growth puzzle. It doesn’t matter how many points you score in the game if the other team scores more than you.
Your growth model also has to consider your goal. What is it you’re trying to achieve? Having a specified goal in place keeps you from making costly mistakes as you move forward. You need to recognize the ups and downs of growth. Like the stock market, the growth of your business will look jagged as revenue and profitability ebb and flow. When you recognize the changing growth patterns, you’re more likely to make the decisions that give you higher returns.
Investing your money in the stock market and leaving it alone may yield an 8.2% return. But when you understand how the market works and you navigate its ups and downs through basic trading principles (buy low, sell high), you can dramatically increase your returns over time. Not having the right information - in the same way as if you failed to create a growth model for your business - could cause you to actually decrease your returns by missing out on opportunities.
“If you can formulate the ideal growth model, you can create the roadmap you need to make decisions every day to achieve the outcome you want.” - Adam Rundle (2:10-2:19)
Growing and scaling an agency is never a straight line from point A to point B. Your ability to manage the ups and downs is what will ultimately determine your level of success in the marketplace. Not knowing what decisions you need to make and when can cause your profitability to flatline or worse. Growth models give you invaluable and critical information to make the key decisions that position your agency for lasting growth and success.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“At the end of the day, if you’re running a business, it’s about being efficient at making money...and making more money than you spend, or your business won’t survive.”
Adam Rundle (3:17-3:25)
Accounting is a cornerstone in any successful business. But entrepreneurs get caught up in implementing systems that don’t take into account their financial impacts. When you understand the three key leadership roles your business needs, you achieve the four outcomes that help you make high-level decisions.
3 Primary Leadership Roles in Business
Every business must fulfill three roles to make decisions that consistently move them forward. This is true for solopreneurs, small and large businesses, and everything in between.
“The middle point where the roles of the CEO, COO, and CFO intersect is where you have the highest level of clarity of what’s actually happening in your business.” - Adam Rundle (6:55-7:03)
The CEO is the person at the front of the business directing its vision and strategy. They determine the direction you’ll take moving forward.
The COO focuses on day-to-day operations such as managing all moving parts and making sure that whatever is needed to achieve the vision is being done.
The CFO is in charge of the money. They combine strategy and operations to create a financial picture of past, present, and future business growth.
Where You Should Make Your High-Level Decisions
There’s a middle point where the roles of the CEO, COO, and CFO intersect. This is where you need to make decisions around marketing campaigns, pricing, labor, and other high-level decisions that filter down to more nuanced areas of your organization.
The middle point is where you have the most clarity about what’s actually happening, and you can create a vision that meets operational requirements and makes financial sense.
“The CEO, COO, and CFO are the three primary leadership roles in any business. Whether you’re a solopreneur or have people in these roles, every business needs to fulfill these functions to move forward.”
- Adam Rundle (1:33-1:56)
Accounting is a Fundamental Part of All Business Decisions
As the CEO, it’s your job to identify the role your CFO plays and how it supports your business. Create the space in your organization where you can sit down with your COO and CFO to focus on the decisions that take your business where it needs to go.
If you’re a solopreneur, consider all three functions in every decision you make. There are four specific outcomes you want to achieve with this process:
The CFO’s role gives you a clear and accurate picture of what’s happening financially in your business. Are you in line with your financial projections? Do you have statements and balance sheets that let you see how you’re performing?
Is what you’re doing working? What lessons can you learn from your failures and successes? A detailed analysis of the financial aspects of your business identifies your advertising, labor, and other costs. The more detailed your analysis is, the better you’ll understand what it all means.
What do you want to accomplish moving forward? Should you cut labor costs or increase revenue? The CFO takes your business goals and creates financial models of future performance. This gives you a clear projection of what you can accomplish while establishing a new course to follow.
Do you need to modify your ad spending or put new budgets in place? These decisions help you reach the goals you’ve set for your business. Once you’ve gone through this process and achieved these four outcomes, commit to sitting down the following week to assess your performance. Did you make the necessary changes? What results did you accomplish?
Go through the same process each week to establish new goals and action steps to take. Moving your business forward requires the three leadership roles of the CEO, COO, and CFO. Although there are other areas of your business you’ll need to manage, these three fundamental elements are the key to long-term growth and success in your industry.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word.
“Having clarity around all aspects of your business gives you the invaluable insight you need to make the best possible decisions, and improve your outcomes.”
Adam Rundle (7:05 - 7:19)
Gaining clarity on the relationship you have with your business.
The relationship you have with your business is one that affects all aspects of your life. It has a significant impact on your personal finances, the amount of time you get to spend with your family, and on how you fulfill the purpose that made you start your business in the first place. It also affects your clients and the value that you are able to deliver to them.
In order to have clarity, you need a strong understanding of all the different moving parts in your business, and how each of those components affect the others. Having clarity also means understanding your business in the context of the current marketplace, and your personal life.
Gaining clarity in your relationship with business will take critical introspection.
For example, you should ask yourself if you are clear on the purpose that your business is serving, or on the decisions that you need to make every day to fulfill the outcomes that you’re trying to achieve. You should also consider if you have clarity around the results you're trying to get for your clients. Answering questions like these will help you uncover a lot about who you are as an entrepreneur, and will help you move your business forward.
“The financial numbers of your business will show you the health of your business in a way that no other metric ever will.”
- Adam Rundle (24:09 - 24:17)
There are many different aspects of your business that you should get clear on. But two of the most critical elements that have a significant effect on your relationship with your business are your mindset and your finances.
Mindset clarity.
Self-awareness - Every entrepreneur has a unique story, and they have intrinsic motivators that led them to start their businesses. It also guides them in how they show up and make business decisions every day. They might be emotionally driven, or they can be more analytical. If you’re clear on what your intrinsic motivators are as an entrepreneur, it will have a significant impact on how you operate your business, and how you interact with your clients.
Mindset around money - You need clarity around your mindset regarding money because it plays an essential role in your relationship with your business. You should carefully assess how you think about money. For example, are you more driven by instant gratification or long-term success? Evaluate how your mindset around money affects you as a leader.
Finance clarity.
Numbers don’t lie - The financial figures in your business, assuming they’re accurate, will give you the full story as nothing else can. Numbers like income, expenses, assets, liabilities, equity, profitability, give you invaluable clarity on the health of your business. Without them, you’ll never be able to make informed and logical decisions. You’ll make decisions based on emotion, or on small pieces of information that lack context. They might work occasionally, but they won't move your business forward consistently.
You don’t know what you don’t know - There are some aspects of your business you know more about, and some that you don’t. Until you gain some clarity on the things you don’t know much about, you’ll never know how your decisions affect them. You need to understand how the choices you make as a business owner influence things like cash flow, equity, and other financial numbers.
“As a business owner, we need to consistently and actively pursue knowledge and understanding around the areas where we lack clarity.”
- Adam Rundle (27:13 - 27:27)
You might be a great marketer, consultant, or coach, but you may be lacking financial clarity on your business because that’s not your area of expertise. However, it is critical to have your finances in order so you can be clear about the impact your decisions have on your business. You can start by implementing systems and structures that facilitate accurate reporting of the numbers. Then you can seek help from someone that can interpret those numbers for you, so you can get back to serving your clients, growing your business, and fulfilling the purpose that led you to start your business.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“Ask yourself, ‘Am I intrinsically motivated to build this business?’ If you can’t answer “yes,” then you should reconsider whether to continue that business.”
- Cameron Gallagher (25:31-25:43)
Adam Rundle
ABR Consulting
Being the leader in your business brings plenty of its own challenges. There are fears around money that trigger deeper fears you might not know are there. When this happens on a subconscious level, we don’t notice we’re bringing these things into our business each day. This leads to irrational decisions, lack of trust, and behaviors that don’t serve your business goals.
Cameron Gallagher is a leading mindset guru in the entrepreneurial world. He knows entrepreneurs can be their own worst enemies. When your mind runs you, it owns you. If it’s not working in your favor, it’s working against you. Lack of self-awareness is the biggest limitation leaders can have, resulting in an inability to self-manage their behaviors. Today’s leaders need a high level of self-awareness to grow their businesses, optimize their teams, and create intrinsic motivation that leads to lasting success.
“Your relationship with your business isn’t economic or transactional. It’s psychological and mindset driven.” - Adam Rundle (4:25-4:33)
In order to develop a leadership mindset, entrepreneurs need to look at the relationships they have with their businesses. It’s the first step to taking control of your business and being the leader you want to be. It’s what gets you to create change quickly and want to take consistent action.
Intrinsic Motivation Grows Your Business
Every relationship has an internal psychological component. The relationship you have to money involves beliefs, fears, and inner conflicts. Each one is fundamental to how you act in your business.
Intrinsic motivation influences how you build and grow your business. This motivation is critical to your team’s performance. You need to understand and align yourself with intrinsic drivers that fuel your behaviors.
Salespeople can alternate between high levels of performance and low points where they struggle to reach business goals. As a leader, it is crucial to elevate your team and help them move beyond existing beliefs and fears. All individuals have moments where they face challenges. They want to live a higher version of themselves but will need proper guidance, motivation, and resources to do so.
“The more we align others with intrinsic drivers, the more they’ll see results.” - Cameron Gallagher (21:34 21:39)
How you engage with others affects their inner world and experience of life. Leaders must look at themselves to see if they’re intrinsically motivated to build the business. You then have to create that motivation within your team. Individuals who are intrinsically driven are more resilient to business challenges.
Answer key questions about your thoughts and behaviors. How do you react in stressful situations? How do you manage fear, anger, and challenges that arise? Look at yourself from an outside perspective and make some critical, honest assessments. Identifying patterns gives you the power to rewire them so you can make permanent changes. Get clear on your feelings and how you can change your behaviors to become more proactive. Use meditation, journaling, and other mindfulness practices to enhance self-awareness and non-reactivity. This is critical to functioning as an effective leader.
When you’re the leader of your business, you are its greatest asset. Building the right mindset and structures allows you to perform exactly as you should and create a path to success for you and your entire organization.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“A recent study conducted by Google revealed that 68% of consumers between the ages of 18-48 make purchasing decisions based off of YouTube.” - Aleric Heck (28:30 - 28:50)
Adam Rundle
ABR Consulting
Aleric Heck is the Founder and President at AdOutreach. He works primarily with coaches, consultants, and course creators, and he helps them run successful YouTube ad campaigns to attract more leads and clients. He exemplifies the entrepreneur that has a healthy relationship with his business, one that we often talk about on the Expensive Advice podcast.
Why YouTube offers a massive growth opportunity for entrepreneurs.
Whether you’re thinking of buying a particular type of car, a smartphone, or downloading an app, it’s likely that you’ll watch some YouTube videos about it before making a purchasing decision. In a recent study, Google found that 68% of consumers between the ages of 18-48 make buying decisions based on what they see on YouTube. However, only 9% of business owners are currently advertising on YouTube, and that means there’s a massive opportunity for entrepreneurs that are looking to grow their businesses.
Other social media platforms like Facebook are becoming increasingly difficult to navigate for advertisers. In addition to many people getting banned, many have seen a reduction in their ROI, and they’re finding it difficult to scale their campaigns. Many of the business owners that have switched from Facebook to YouTube have seen a massive increase in ROI, and some have even doubled their results.
“One of the biggest misconceptions is that people think YouTube ads don’t work because they can be skipped, while in fact, that's one of their best features.” - Aleric Heck (32:25 - 32:34)
3 reasons why YouTube is an ideal platform to acquire new leads and customers.
Learners mindset. While Facebook ads are still useful, most people don’t hang out on Facebook to learn something, and they’re usually just scrolling through. On the other hand, people typically visit YouTube with the intention of finding a solution to a particular problem. They might be looking for new workout ideas, how to follow a diet, or how to learn a skill like social media marketing. When you put an ad in front of a video on a topic related to your product, you’re redirecting that traffic into your funnel. You can provide some free information upfront to build your credibility, and point the user to the next step in your sales process. YouTube is set up in a way that makes it more likely that your audience will take immediate action.
Unique pricing model. On YouTube, you only pay when someone watches your ad for 30 seconds or longer. As a result, you end only paying for ads when they are viewed by people with a genuine interest in what you have to offer, and by people that are more likely to purchase from you. When someone skips your ad, that’s a big win for you as well, because you’re not paying for a view that is unlikely to lead to a purchase. For the people that do engage, you can provide some value in the ad, and lead them to your own website or webinar. YouTube’s unique pricing model allows you to target users with real interest, and get started on the sales process right away.
Superior optimization ability. Facebook campaigns are often difficult to analyze because they might bring you mixed results, and you aren’t able to differentiate between the aspects that are working and the ones that aren’t. Often, you’ll have to discard the entire campaign and start over. YouTube leverages Google’s platform and offers much better analytics that enables advertisers to make informed decisions. You can get detailed information on the exact set of keywords that converts well when combined with a specific video, and scale your ad efforts accordingly.
“Don’t make the people come to you, go to the people. That’s exactly what you can do on Youtube. You can find that person who is ready to buy from you, and get in front of them.” - Adam Rundle (34:43)
While Facebook is still a great platform to run ads, YouTube can be a great alternative that allows you to connect with users that are genuinely interested in your services, and that are more likely to end up buying from you. Too many entrepreneurs devote all of their ad efforts in one place, but it’s always good to have a backup plan since you never want your business to be entirely dependant on any one platform.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you’re thinking of running YouTube ads to drive traffic to your high-ticket digital product, check out Aleric’s webinar. To schedule a strategy session with Aleric, apply here.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“The quantities, the actual dollar amount, is a much bigger business management question to ask. But the method...comes down to taxes.”
- Adam Rundle (11:28 - 11:43)
Adam Rundle
ABR Consulting
There is nothing fun about the fundamental nature of taxes. But getting a head start and planning now could save you thousands of dollars.
With the beginning of each new year comes the dreaded approach of tax season. For some, it is a time of hopeful expectation, and for others, doom and gloom. For Joe Hartman, an enrolled agent and fellow employee of ABR, tax season means another busy couple days in the office. As an Interviewing Tax Accountant and Advisor since 2008, Joe understands the one-time annual communication with the federal government can feel daunting.
Taxes are an essential component of success for business owners. Joe aims to stay proactive by guiding clients through the process of paying taxes, avoiding extra fees, and educating on the different strategies available for possible reduction. Unfortunately, no two clients are the same, and tax laws seem to string together into an intricate web that can be incredibly challenging to navigate. Every business owner should have a customized approach to tax planning based on numerous factors such as goals, family, and state of residence. There are so many decisions to make, primarily as a business owner. Which is why taxes are more often than not, pushed off to the side until the last minute.
Planning for taxes is often overlooked in day-to-day business operations. It is easy to focus on all the positive aspects of your business and decide to figure out taxes later. However, the best way for business owners to claim success and retain high profits is by answering the question of “how much money should I be paying myself?” The follow-up question is, “how do I go about this?” The answer to both of those questions lies in the very fun subject of taxes, and their relation to business structure.
“Taxes are a massive part of running a business. It is an inevitable process that we need to go through.” - Adam Rundle (3:15 - 3:24)
First, review the basic concept of PnL. Every business owner must able to calculate the total profit (P) or loss (L) over a given amount of time. These are the recordings necessary for determining total tax liability. The change in tax rates will be influential in determining how much profit is retained, amongst other variables. PnL is just one of the various factors that play a significant role in taxes. However, it is a starting point in understanding what is relevant for the business owner.
Second, understand the differences between each business structure when determining the best method for your tax planning. Most entrepreneurs are making less than four or five million a year and can be categorized into one of these three business structures.
There are two generic calculations for taxability. The first is income based on wage brackets, and the second is payroll centered on the earnings of the employee or business owner, including Social Security and Medicare.
Here is an explanation of one of the tax classification structures from above. An S Corporation owner/officer receives a W-2 where the wages are subject to payroll taxes including Social Security at 12.4% and Medicare at 2.9%. That’s a total of 15.3% of earnings going straight to payroll taxes right off the top. The S Corporation then pays those taxes on behalf of the business owner/employee. Keep in mind as a high-income earner there is also a Social Security cap of around $130,000.
Perhaps there is no silver bullet, but there is a silver lining.
The vast majority of entrepreneurs are small business owners who fall in the flow-through entity bracket. One of the most noteworthy changes in 2019 tax reform is the Qualifying Business Income Deduction, referred to as QBI in Section 199a. This spectacular opportunity for small business owners has tax professionals quite flustered. There is a requirement in the flow-through entity bracket to examine all profit and any other investment income in the annual tax return. QBI is a deduction with the ability to reduce the owner/officer’s taxability by 20% of the business income based on that annual calculation. Simply put, QBI can cut taxes in the bracket your business structure falls under.
The bottom line of QBI is that you are only paying taxes on 80% of your business income. With that low percentage, you could be saving a massive amount if you start planning effectively. However, there is an income threshold, after which the benefit begins to fade out. Shockingly, there are certain levels of income where you can face a 50% tax rate. But at the end of the year, if income rises beyond a certain level, you will be unable to claim that deduction. Essentially, that higher pay will tax at a much higher rate than the rest of your income.
“The big picture in tax planning is to make the most out of your money.” -Joe (22:42 - 22:50)
For those that won’t qualify for QBI, it may be helpful to immediately lower income by allotting some of your income to your retirement fund. One of the most commonly overlooked retirement options is the SEP IRA. Simplified Employee Pension allows every business owner to put away 25% of their profit. Rules differ based on each business structure, but this percentage can be contributed once as a last-minute tax advantage at the end of the year.
Regardless of your business structure, earnings, and income, Uncle Sam always gets his way. Take actionable steps by keeping clean records of your profits and losses. Stay aware of what taxes are due and when they are due to avoid penalties and interest by the state and federal government. When in doubt, consult a professional. Taxes may always feel a little daunting, but beginning to plan now can allow you to reap vast rewards in your tax season.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“As entrepreneurs, our primary goal should be to build a business that is sustainable long term, that we can continue to earn a healthy living from for years and years to come.” - Adam Rundle (9:51 - 10:01)
Adam Rundle
ABR Consulting
Why you need to earn a consistent income from your business.
One of the primary functions of your business is to provide you with a consistent and healthy income for all the hard work that you do. But figuring out how much money you should earn from your business can be complicated, especially when you factor in other components like taxes, payroll, and managing overhead. These are frustrating topics that can keep you from serving your clients, generating sales, and fulfilling the purpose you had when you started the business.
Before we discuss how to determine the right amount to pay yourself, let’s clarify why you need to earn an income as the business owner. If you don’t take into account the cost of the work that you’re doing, you’ll significantly distort your business’ profit and loss statements, and you’ll be unable to measure how efficiently your business is running. Earning a consistent income will not only allow you to have a healthy relationship with your business, but it will also enable positive decision making in other areas of the company.
“Attaching a compensation amount to the work you’re doing as the business owner is the only way to reliably and accurately measure the efficiency and profitability of your business.”
- Adam Rundle (12:52 - 13:06)
How much should you pay yourself as the business owner?
To figure out how much you should earn as an entrepreneur, you have to consider the two mechanisms of income from your business.
The concept of compensation. Compensation revolves around the price you attach to the time and effort you put into your business, and all the functions you maintain including dealing with clients, managing advertising, and leading your team. While there’s no exact science to evaluate the price of your work as the business owner, you can think about it in a couple of different ways.
Determine how much it would cost to have someone else come into your business and fulfill the role that you currently play. Think about all the main functions you’re carrying out daily, and how much would you pay somebody else to do that work. You can also determine how much you would expect to get paid if you were to re-enter the job market and do similar work at another company.
The share of profits. Profits are how you reward yourself for running a business that is efficient and sustainable, even after you’ve accounted for your own compensation. As you decide on how much and how frequently you can draw a profit, you need to consider your business’ cash on hand at any given time. Cash on hand is vital for many reasons, one being that it dictates your ability to make investments to grow your business.
As a general rule, you’ll want to make sure your business has enough cash on hand to operate for two to three months, without requiring additional revenue. This will give you enough room to make any plans and adjustments, should you run into any issues. You can withdraw any funds that remain in your business beyond the adequate level of cash on hand as profits.
“A healthy relationship between an entrepreneur and their business is based on having clarity about how they can consistently and reliably draw an income and profit.” - Adam Rundle (25:41 - 26:05)
The only way to determine how much you should actually earn from your business is to have a significant level of clarity of how your company is working financially. Having a solid grasp on cash-flow, profitability, and overall business efficiency will allow you to you put the necessary structures and processes in place to earn a consistent income without negatively affecting your business.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
“Your ability to support your family, lifestyle, and to achieve your goals, comes directly from how much you can earn from your business.” - Adam Rundle (5:36 - 5:46)
Adam Rundle
ABR Consulting
Why you need financial clarity as an entrepreneur.
For an entrepreneur, a business is more than just a way to earn an income. It involves your dreams and desires, the relationships with your clients and your team, and it’s the vehicle that you’ve chosen to make an impact in this world. However, to be sustainable in the long run, your business has to be profitable, and it has to provide you with a consistent income. For this reason, it’s vital to have clarity regarding your business' relationship with your personal finances.
There are some main components of a business’ finances that are especially important. You should know how much to pay yourself, how frequently you get paid, the structure of the company, and how it all affects your tax liabilities. Having a proper structure in place will allow you to plan your personal finances, and allow for the business to be free from constant financial worry, making room for a positive and rewarding experience.
“How you earn money from your business is the primary function of the relationship between you and your business” - Adam Rundle (9:08 - 9:15)
There are three types of relationships between entrepreneurs and their finances.
In general, there are three categories of relationships business owners have with their finances.
The healthy category. This is the category where most entrepreneurs would like to be, but only a handful actually find themselves here. Business owners in this category earn a consistent income from their companies. They might also draw a profit periodically, depending on the company’s performance.
In order to have the freedom to consistently draw an income, as well as a profit, an entrepreneur has to have a solid understanding of how the business operates financially. That level of clarity is usually present in other aspects of the company as well. The healthy business owner feels rewarded, confident, and in control.
“In order to consistently earn a reasonable amount of money, you need to have a high level of clarity about how your business is operating”
- Adam Rundle (11:42 - 11:59)
The on-the-fence category. The majority of entrepreneurs fall into this category. Entrepreneurs in this category generally experience a lot of caution and apprehension around the topic of money. They are never sure how much to pay themselves and generally withdraw small amounts sporadically. Business owners in this category usually don’t draw a profit.
Operating this way is an ineffective way to measure the efficiency of a business. The numbers are distorted, and the income doesn’t reflect the effort of the business owner, resulting in frustration. The lack of financial clarity might also affect various other decisions, like how much to spend on marketing or whether to grow the team.
The danger zone. The relatively small group of entrepreneurs that fall in this category use their businesses as their personal bank account. There is very little consistency in how much or when they withdraw money, and there is almost no way to measure the efficiency of the business. The business owner has an inconsistent relationship with the company. This relationship state results in nervousness in personal finances as well.
The good news for entrepreneurs in the danger zone category is that many times a little bit planning and analysis can solve the problem. An excellent place to begin is to stop making inconsistent withdrawals, implement some structures and policies regarding payments, and decide on fixed amounts to be paid out consistently.
The sustainability of your business is dependent on the relationship you have with your finances. Take some time this week to assess which category you fall into. Regardless of your current state, there is room for growth. There are many reasons that led you to start your business, but making a consistent income and a profit are the factors that will keep it running long into the future.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
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