Episode 025: Profit Report Intro - Part I Profit Report

cash flow solo show Jan 02, 2020

On this episode, I dig into my own income & expenses to share with you how I am personally working on my cash flow to grow a healthier business.

If you’d like to get started digging into the cash flow in your business, check out this freebie.

If you really want to dig into write-offs, I’d also love for you to join the Tax Challenge happening next month to help you get all your docs ready for tax season. It’s totally free! And you’ll get my free small biz tax deduction guide.

Episode Transcript

Braden: (00:00)
Hello and welcome to episode 25 of the unfuck your biz podcast. As always, I am your host, Brayden and I am a little bit scared but also excited to be joining you during this podcast episode. So in this podcast what I'm going to be doing is kind of laying the groundwork for what I hope will be a really productive and for you interesting and exciting series of podcasts where I dig into my own profit for report and I have a few reasons why I'm doing this, which I will save, uh, once we dig more into the intro. But before we do that, I want to give you some more information about the tax challenge that's coming up. Uh, you can sign-up at bradendrake.com/taxchallenge or go to unfuck, your biz.com and you can get all the information there. So what this challenge is going to be is it's going to be a one week challenge and every day you're going to get about a 15 to one hour, 15 minutes to one hour long task that you need to do in order to wrap up your 2019 books.

Braden: (01:07)
So the goal is at the end of the week, all of your materials, all of your books, records will be all gathered at nice and organized so that at that point you will be much more prepared to file your own tax return if that's the route you decide to go. Or you will have a very, very happy tax preparer once you hand them over all this clean information. So on prior podcast I announced that this was going to be happening, uh, January 13th, I believe. I ended up pushing it back. So now the start date is actually going to be January 27th so you'll be able to sign up, um, now through the 24th. And I moved it because I realized that not everyone gets super jazzed about taxes like I do. Right? Starting on January 1st. And that we all might need some more time to kind of gather ourselves and all of the new year excitement.

Braden: (02:01)
So pushed it back a couple of weeks. I hope that you join me. It is totally a 100% free. I don't think I've even mentioned that on the prior episodes, but this is not a paid program. It is a kind of a one week intensive so you're going to get trainings each day and then you will have a live Q and A's with me in the Facebook group every day as well, so totally free. I'll go sign up. Would love to see you there. Okay, another note before we dig into this episode, you might want to circle back to episode five as a primer on cashflow management. If you have not already listened to episode five that's where I break down my system for managing your cashflow in your business and that will be helpful for what we're doing today. So now let's go again to the actual episode content.

Braden: (02:47)
So you guys, this is, I have to be perfectly honest, it's a little bit scary for me. I've thought about doing this type of podcast episode for a while now and I just want to lay it out there as to why I hesitated and waited to do this until now. So first of all, raise the number one money has kind of a taboo topic and some people don't want to talk about it. You know, what are they, what are the ways to tell us? Don't talk about money, politics and religion at the dinner table. Well I find those are my favorite topics because you know, other things are just kind of surface level, but that's been ingrained in us. So I'm always hesitant to be the person that talks about, you know, well, take that back. I have not been the person that's hesitant to talk about it, but I am sometimes because not other people like to as much as I do.

Braden: (03:38)
That didn't really make any sense. Guys. Hope you're still with me anyway. Reason number one, covered. Reason number two, if I'm being perfectly honest, I'm a little bit embarrassed, uh, about what you all might think about my numbers. So I'm assuming that some people assume that I make a certain amount of money simply because I have a law degree and I am an attorney, but, uh, I have grown up my business in a way that feels very good for me. So my revenue streams, the way I operate looks vastly different from a typical, typical law firm. I also have two businesses. The one source of incomes comes from all of my education type stuff. So I feel like a lot of people in the small business space might look at my background and maybe they assume that I make a lot more than I do.

Braden: (04:28)
I don't, I don't know a number three, as I start to talk about my goals and do these reports as I'm making more in business, I don't want you all to think that I'm just materialistic or bragging about my income or anything like that. Um, I don't want it to be super self-indulgent. I want this to be helpful and educational. And the reality is like in what I would really love to do is bring on other business owners to talk about top line revenue expenses, profit and their business month to month, year to year. But I know that's a big ask. A lot of people don't want to share that information, so I'm sharing my own so that you can follow along and get a sense of, you know what, I wouldn't even say I'm an average business, but what at least one business out there in the world is bringing in.

Braden: (05:16)
So with those kind of fears out of the way, let's talk about why I am doing these episodes. If you're an avid podcast listener like I am, you've probably heard some of the bigger name podcasters talking about having six figure launches, ten thousand twenty thousand dollars months and growing seven figure businesses. But that is a not super relatable to a lot of us, especially when we're new in business and B, it's not really all that informative because like, cool, you made a shit ton of money. Well how did you get there? For all. We know these people are spending $500,000 on ads. They're spending $450,000 on contractors and employees, and if they're grossing $1 million, they're actually only taken home 50K themselves. So revenue is very deceiving and that's why I want to talk about actual real life numbers. Now the biggest reason I want to share all these nitty gritty details with you is because in 2020 my goal is to get really focused on cashflow, both in my own business, but also by encouraging you to focus on cashflow and your business as well.

Braden: (06:33)
So the goal is to have some open discussions about what it looks like to grow a healthy business, healthy and all caps here. That's the key. So to get started, I figured the easiest way to do this, to really dig into cashflow is to talk about real life numbers and not make this super abstract. So we're going to talk about the numbers. We are going to talk about their impact on real life and business, specifically mine and how that impacts everything else. So we're talking about stress, quality of life, longevity in business, how we pay our taxes, how we save money, all this kind of stuff. And this is how it's going to go down. All right, so in this episode I'm going to share with you a breakdown of my past year's income. So 2019 this is being released in December of 2019 so you'll get most of the information for this year and I will also talk about my expenses by category.

Braden: (07:31)
So how much I spent in business this year as well. Then I would like to share, uh, some steps that I've taken terrain in my expenses and make some corrections. And from there we will chat about some of my big goals in 2020 and a lot of that's going to be in part two. As I started drafting the notes for this episode, I realized it was probably going to be too long. So we're doing part one this week, part two next Thursday. After that, uh, I'm going to do quick check and check in episodes once a month. So around the end of each month or the beginning of the next month, I'll talk about my profit report from the prior month. So you will know, you're going to know what my goals are, you're going to know how I'm progressing towards my goals. This is like full transparency guys and you can kind of come along the journey and I have listened to some other podcasts where they do a similar kind of format and I absolutely love listening to them.

Braden: (08:27)
I think it's fascinating. So I hope that you all like it as well. Okay. Are we ready to dive in? I hope you are as ready as I am. So here we go. I did give you guys the full background of where I am. I wanted to let you know kind of when I started and how I progressed. So I dabbled with starting my business in the beginning of 2017 so it's been almost three. It's been, yeah, not, not really three years. Um, but I was in school through may of 2017 and then I went on my honeymoon with my husband and I think through January and may, I had made like $500 because I was still in school. It wasn't really networking or anything. So I consider July of 2017 to be my start date in business. So at the close of December I will consider myself to have been in business for two and a half years in the last six months of 2017 and this has been, we're getting into income breakdown because I work with a lot of new business owners and I think when we talk about their numbers, because we're discussing taxes, they're either embarrassed by how much they made or they're just not really sure what's normal.

Braden: (09:36)
So I'm going to share all my numbers with you and it may or may not be helpful, informative or interesting. But in the last six months of 2017 I made around $10,000 but I had one litigation client and about 70% of the income came from that client, which was, you know, both nice but also a little scary because I knew that was going to wrap up, uh, in a couple of months. And looking at the fact that I'd only brought in about $3,000 in six months from other sources was a little scary for the future of my business. So in 2018, which was my first full year in business, that was last year, my gross revenue was around $35,000 which was honestly about half of what I was hoping for. So my expectations were pretty unrealistic if we're being honest. I had been wanting to do like 70 K but here is why those expectations were probably unrealistic.

Braden: (10:33)
I did not really do litigation other than that one case. So if you're not familiar with litigation, basically is court, it's doing adversarial stuff and when you're starting out, that's where a lot of the money is because litigation attorneys charged by the hour. So, for example, I had several friends who went straight into family law. They're handling divorces and um, it's a Relic, well, I don't want to say it's an easy area to get started in, but it's a little bit easier. You can go out there and find clients who are getting divorced and you're going to build them, you know, anywhere from two to $350 an hour starting out. So you'll need to work on projects for them every week. So it's consistent income from the business perspective and that's just kinda how it works. And I just did not want to do that. I wanted to work in transactional law and so I needed to go find business owners who needed some legal help.

Braden: (11:26)
And it took me probably six months to even figure out what kind of law I wanted to do. And then another six months for me to figure out who exactly it was. I wanted to help. So while a lot of my counterparts were making on average, anywhere from three to 10 $10,000 per client, I was doing contracts and consultations and making on average two to $300 per client. So that's kinda how I started my business. A little bit different than most lawyers. So towards the end of last year in 2018 I discovered the world of online course creation and memberships and I decided to dive into that this year. So if you've been following me for awhile, you know that I've launched two courses. I have a membership now and my full plan for 2020th to go all in on this. And you're going to, you guys are going to get all my numbers so you'll know how much I'm making from kind of each side of my business.

Braden: (12:21)
So let's talk about 2019 this year. And while it's not quite over here is where I am so far with just a few weeks left, I'm projecting gross revenue of around $70,000 so that's twice as much as last year. Good growth. About two thirds of the money that I'll make this year has come from working one-on-one with some pretty kick ass entrepreneurs like you. Uh, actually as of this morning after I've written this notes, I've gotten a couple more one on one clients, so that might increase. But the other one third have come from courses and my membership. So two thirds from one on one, one third from courses and membership. And those are technically two different businesses. My plan for 2020 is to actually flip these numbers. So in 2020, the hope is that it'll be more like three fourths of income from memberships and courses and one fourth from one-on-one services. So that's kind of the breakdown of what I made this year and my plan for next year.

Braden: (13:25)
Now, um, for most of their episodes episode, I want to talk to you all about expenses. Super fun topic, right? In 2019, my total deductible business expenses will be around $32,000. That's a lot of money. All right? That's not a good thing. So if you listen to episode five, uh, you know that I shared that my typical target for a service based businesses is to keep expenses under 30% of gross revenue. There are exceptions if you have a lot of contractors or you spend a lot of money on ads and might be higher, but for me, if you're not doing that, you want to be under 30% and for this year I'm going to be at almost 50% which is a big yikes. When I saw this trend in August, looking at my books, I slashed some expenses and my now goal is to get my expenses under 30% by like end of Q one 2020 that's the goal.

Braden: (14:28)
So the first step I took in order to do this was to cancel some small subscriptions, like $50 a month through Adobe. A couple other things that cut out 200 total dollars a month once I added a few things up. So that's $2,400 a year. That's a lot of money in the long run. Then I canceled my work lease, so I am now recording. In a home office that saved me $900 a month. Crazy. Right? Keep in mind, this is what I want to share with you is that when I started my business, when I started my law firm, I thought having a dedicated office space was something that you just had to do as a lawyer. So I think, you know, I'm going to graduate. Um, grandma got me, my fiancee named black for my desk. I went and got my business cards. I need to have an office where a fancy suit, all that kind of stuff.

Braden: (15:15)
And my mind, I had to have a physical location to meet with clients. It's the only option I've ever really seen in law school. Right? But it turns out most of my clients prefer to meet on zoom anyway. I'm sure most of you probably don't want to, you know, like get dressed and go to an attorney's office. You'd rather just have a zoom call and your pajamas with like your favorite coffee cup. So what I'm gonna do now is challenge you to really ask yourself, consider you can make yourself a mental note to do this later, but consider if there are any expenses you have in your business that you've brought on because you believed that they were norms and the industry and that you also had to take on those expenses. So think about that. Let it sit for a minute and then remind yourself that there is no rule book for running your own business.

Braden: (16:05)
No one gets to the side of what we have to do, what we have to have. We make our own rules and we did the side where we're going to spend our money. Okay? So now before I tell you what other crazy shit I've spent money on this year, I would like to pause and address what might be an elephant in the room for some people. So if you've done the math, you realize that in 2019 after my gross revenue and expenses, I lived on about $30,000 $33,000 and a place like Southern California, that's not a whole lot of money. Okay? But, um, I have a very wonderful husband. He's a prosecutor for the district attorney's office here in San Diego. He's been an attorney for about 15 years and he has supported me mentally, emotionally, and financially through law school, grad school, the bar exam, and now my first couple of years in business.

Braden: (16:56)
And I, the reason why I want to mention this, you guys is for really for two specific reasons. A, as I'm doing all these profit reports, I want you to know that I am well aware of the privileges, the iPad, and my own life. And I have no expectation when I'm teaching other business owners on cashflow that they have these same benefits. So not everyone has a fallback plan. Not everyone has a safety net. You might need to grow more conservatively, you might need to have a part time job for a longer period of time. I totally get that. B, I would like for you to note that I myself have had this security blanket, which has allowed me to make bigger investments and my business that are, that I otherwise would have or would otherwise Ethan advise. So we all, we really all should hit this point in our business where safety net or a note, safety net or blanket, the analogies are getting lost to you guys.

Braden: (17:50)
You understand what I'm saying? We need to hit pause and think about the financial health of our business. So for example, like it's easy for me to kick the bucket and say I'll be more profitable next year and then I'll start saving for retirement. I'll be more profitable next year and then all, you know, get life insurance, I'll be more profitable next year and then I'll save for a mortgage. Finally. It's fine to do that if your basic needs are met. So thank Maslow's hierarchy of needs at once. You're, you know, paying for your own shelter, you're paying for your own groceries, all that's taken care of. It's kinda easy to continue putting pause on all the other stuff that doesn't seem crucial to you right now. But we all really need to come to this point where we're like, okay, but no, I really need to get my expenses in check so I can start doing all of that and run a healthy business.

Braden: (18:41)
So that's what I'm encouraging myself to do in 2020 and encouraging you all to do as well. So with that said, here's a more detailed breakdown of my 2019 expenses. I spend about $3,000 between marketing and my website. So I paid for Squarespace. I also pay for Kajabi. Um, it's mostly that kind of stuff. I think all my podcasting fees, I consider marketing expenses, that sort of thing. Spend about $5,000 on rent, which I'll no longer have moving forward. That's great. Around $4,000 on insurance because malpractice insurance as an attorney is a bitch. It's a lot of, a lot of money. Luckily most of you won't have to worry about that. Us about $6,000 on education. So that was a really big expense for me this year. I invested in my business a lot and then $3,000 in contract labor for people. I've hired to help me do some stuff.

Braden: (19:34)
Okay. So those are the big buckets of expenses. So we already talked about insurance was a lot of money. Rent, I've scratched education really was my splurge categories. So this year I signed up for a $1,500 course on how to create courses. I signed up for two different memberships and I also joined a high level mastermind. So the mastermind was the biggest expense to me. It's been worth every penny because it's really helping me set up the stepping stones to take huge leaps in my business in 2020. So moving forward, um, from here on out, my expenses are going to look largely similar, minus the $1,000 savings per month in rent and some miscellaneous stuff. So to really get to my goal of going under 30% expenses on my gross revenue, I'm going to need to increase revenues. So I decreased expenses a little bit. I'm going to need to increase income to make up for that. And that's the game plan. So that's more or less most of what I wanted to cover here. Uh, on net the next episode. Sorry, I think I lost my notes there for a second. Um,

Speaker 2: (20:51)

Braden: (20:54)
okay. So let's talk about next episode and that next episode I am going to go through my detailed spreadsheet of my goal income projections for 2020. Very exciting juicy stuff. For those of you who like to nerd out on this like I do and I'm also going to share my revenue goal and with a breakdown of how I'm going to get there. So if you don't know, I technically have two businesses. My law firm is Braden Drake law and then my education company is Braden drake.com. And my goal really is like I mentioned earlier, to get three fourths of income from the education side. So an episode number two or part two of the series, I will share with you my breakdown of how I will be doing that. So that's more or less all for this episode. I do want to remind you again about the tax challenge signup. Uh, you can sign up now through the 24th of January, and we're going to start the challenge the week of the 27. Again, totally free. Go check out the signup page for all the details, Braden drake.com/tax challenge. And as always, if you liked this episode, make sure to leave a review, subscribe and I will be back with you next week. Have a good one.

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