Episode #008 Doing Business In The Right Order
Improve your business as a bookkeeper with important numbers for Australia Small Business Statistics
Amy uncovers some alarming statistics about Australian small businesses that will motivate you, and help you understand the bigger picture. If you’ve ever wondered WHY the role of bookkeepers is still so important, then you need to listen to this. These numbers for Australia small business statistics are shocking, and could be fixed easily with planning and preparation.
The take-away from this podcast: “Before hiring, pricing and niching, make sure you lay a solid foundation in your business. With every business decision, always consider the broader context of our country, as well as our place in history.”
Host: Amy Hooke
Guest speaker: None
Topic: Doing Business in The Right Order
Small business statistics of note…
Hey, welcome back. Happy Friday, today I'm going to talk to you about doing business in the right order. I want to ask you this question… How much time and money have you wasted doing things in the wrong order? Also how much brain power and frustration have you invested in things like pricing, hiring, marketing, implementing software programs, and so many more things?
Just have a think about that for a moment, about how much time, or how often do you find yourself with a sense that you're spinning your wheels or wondering, “Should I actually really be doing this thing? Or, “How is this going to fit in? Or perhaps you just find yourself thinking, “I don't really have much spare time, and I seem to be doing a lot of activity, but I don't really feel that I'm getting the benefit from it.”
If you felt like that, then you're definitely going to relate to this. I'm not sure if you're aware of this, but the ICB, the Institute of Certified Bookkeepers, did a survey in 2015, and there were some very interesting statistics in that survey, which actually sparked a lot of the work that I do with Savvy.
This survey showed, it divided up the people who were running a business, and not running a business, so it segmented the people who had, that were in employment, so they didn't need a business plan. But out of the remaining amount of people in the survey … and I believe the survey was taken of about 800 bookkeepers, so it was a pretty good sample size. 20 percent of those bookkeepers who said they were running a business, had a written five year business plan, and the remaining 80 percent, were split between, so some of those … I can't remember the exact numbers off the top of my head, but I will post it in the notes. Of that percentage, a larger percentage actually had no business plan at all, and then there were a group in the middle who had a partially completed business plan.
I read this information around the same time that I'd started working with a particular client who'd approached me, and I remember this client before he was a client, he came into the business planning session with me. He said to me in our initial meeting … we were talking about his niche and why he does what he does and that kind of thing, and I said, “Why do you want to do what you do? Why do you want to help small business owners?”
He said to me, “Well you would have heard this statistic before that, I think three, one in three businesses will fail within the first three years” … no, sorry, my mistake, it's three in five, so 60 percent of small businesses will fail in the first five years. He said, “You would have heard that stuff before?” I said, “Yeah, of course I've heard that many times”, before I didn't know what the exact number was … and still, obviously still don't.
But I'd heard that stat so many times although I'd heard it a little bit differently in like, I think it was like I'd heard that one in three small businesses fail or something like that. It's a bit of doom and gloom in terms of small business failure rates, and he said to me, he said, “I don't know where I heard this statistic” … and I've since looked it up, and it's actually a verified statistic of ASIC, of the Australian Securities and Investment Commission. It's actually what he was referring to was the statistic of companies going to liquidation, so that's what he was talking about there.
He said to me, “The statistic you haven't heard is that 50 percent of small businesses that fail are profitable businesses.” When he said that, I still to this very moment remember how that impacted me. Three in five businesses will fail within the first three years and of those three that fail, 50 percent of those businesses are profitable businesses.
What I got out of that when he said that, I just … the words that came out of my mouth were just “Oh my goodness, this is a solvable problem.” This business failure statistics, three of five is huge, 60 percent, that is huge, and it's also, it puts a lot of fear in people. Because when you're working as a small business owner, you think, “Oh, my gosh, I'm I going to be in the 60 percent that fail or I'm I going to be in the 40 percent that don't fail?”
But when I realised that half of these are profitable businesses, I thought, “How on earth” … it had never occurred to me, I'd never even thought about it. “How does a profitable business go broke? How does a profitable business go into liquidation?” I started listing out what I thought the answer was, and the conclusion that I came to, I came up with three main points that I felt were the cause of this problem.
1. Control spending and identify profitable income streams
Number one was that business owners don't understand how to control their spending or taught how to identify their most profitable income streams. Obviously learning how to control their spending is one thing, over viewing their expenditure at the end of the month, quarter, financial year. Having a look at where they're overspending, making plan for the next period.
Obviously we're all familiar with that, or us bookkeepers, we should be familiar with that. I really think in this day and age, there's no excuse for a bookkeeper to not know how to look at a P&L, and to be able to say, “Hmm okay, this person's spending has gone very high in these areas.”
For me I would say that should be a basic foundational part of double checking your own work. If you're working for yourself, or whether you're checking your staff's work, or even teaching your staff how to check their own work, every bookkeeper should run the P&L and the balance sheet at the end of each period to make sure that they're … even to double check their work and make sure the allocations are correctly.
But not just to check their own work, but to actually keep an eye on the expenditure of the business, and to be able to alert the client. Because potentially these clients, these business owners, are spending and they're not actually looking to see how much the totals are on the P&L side, on the expenditure side of the P&L that is.
The other side of that is about identifying the most profitable income streams. Now this might be a new concept to you, I'm sure you've heard the word forecasting bandied around like it's going out of fashion, and you might actually be thinking what actually is forecasting. Part of what forecasting is, I mean forecasting is, it's to forecast, to look forward into the future and to predict what is going to happen based on what happened in the past, and based on what's currently going on. Based on things outside the company, industry trends, that kind of thing. That's it in a nutshell.
But, and important elements of this is about identifying the client's most profitable income streams. Now you might be listening to this and thinking, “Wow, is this bookkeeping? Is this anything to do with what I do?” This may be a completely new concept to you, but this is something that's very important, and I think this is part of the reason why businesses fail. You can probably identify this in your own business, think about it.
Think about the different business activities and the various services that you offer. Now you might just think, “Oh, I do bookkeeping.” But if you really think about it, and you actually just sit down and have a look at your different income streams, what you find is that you just don't do bookkeeping, but you do compliance work. So you do BAS lodgement, you do payroll, you do data entry, you do accounts payable, accounts receivable, systemization of business processes and bookkeeping processes. You do training and you also do software setup, software advice, bordering on cloud integration if you're someone who spends time helping to set up the integrations between software.
You give GST advice, you do reporting, you do business planning, consulting, you do all sorts of things. If you take a really close look at what you do in your business, you would see that you actually have multiple income streams. The only thing is, you've never looked at them as different income streams, you just see them all as one, as bookkeeping. What you'll be able to see is that in a small business, when you're working for a business, you will actually be able to identify their income streams. Every income stream has an associated cost, associated expenses, overhead… so you have staff costs, that kind of thing.
Let me give you an example, so you might have an income stream which is BAS preparation and lodgement, so for me I don't charge a BAS lodgement fee for time, it is time exclusive. Or it's not, it's a fee that's not associated with the quantity of time. The work that goes into actually getting the books ready for the BAS is included in the bookkeeping.
The BAS lodgement fee is as a client once politely put it, “To click a button”, and the reason that I do that is because I've identified that there is a cost associated with the BAS preparation lodgement, and that is that I'm putting my name on the person's BAS statement. I'm a registered BAS agent, and I am required to adhere to a code of conduct, which includes doing 40 hours of study every two years, which can cost a lot of money if you go into conferences, and taking various courses and things like that.
There's a cost associated with that, there's a cost of getting your BAS license, staying registered, there's obviously a registration fee. For me a BAS lodgement fee is an income stream that has associated costs with it, but it's not necessarily the same cost as with bookkeeping. With the bookkeeping stream, there's the bookkeeping fees, there's the software that we're paying for, so we cover the cost of the client's Receipt Bank files, and we have the staff cost.
The staff who do the bookkeeping are the junior staff, so their costs are lower, and then when it comes to checking the accounts at the end to verify them for the BAS… which I guess is, I guess that is a cost that's part of the BAS lodgement fee. You've got the BAS agent or the senior bookkeeper who overviews everything.
As you can understand now as I've explained it to you, you have associated cost with revenue stream, so you can actually break down your revenue streams and you can have a look at the profitability of those. A lot of clients have never thought of this, what happens is when you start a business, a lot of the time, we're looking for opportunities all the time, especially when cash flow is tight. We go, “Hmm, oh wow, there's an opportunity, I'll start doing this as a new income stream.” But what starts to happen is we add all these income streams to our business, and we've never stopped to think about which ones are profitable, and which ones are not.
There might be actually income streams in a business … potentially not a bookkeeping business, because bookkeeping's quite profitable, and we've got pretty low overheads and costs and things like that. You've got these business owners who are potentially, they're offering something for an income stream in their business that's potentially losing them money.
Then you want to be able to have a look at that income stream, and you want to be able to say, “Okay, well this income stream's losing the money, however this income stream generates a lot of leads for the business, and those leads turn into paying customers.” Then in that sense you can look at it like potentially it's a marketing expense.
Let me give you an example, I had a client who's a naturopath, and they would have, they would buy a lot of stock on sale to try and increase their profit. But what it turned out was that there was a lot of stock that they couldn't sale, and it ended up sitting there on the shelf. To be able to break that down and say, “Okay, well how profitable is this?” And then what would the business look like if you didn't have it anymore, and is it possible to do that?
Is it possible to be a naturopath and not have these stock available of supplements? Well the answer is no, really. I guess there's an opportunity to do that, you could consult with people and then send them to get their own, so at that point the business owner can then weigh up, “Is it worth our time to keep all these stock in hand? Is it worth our time to supply the supplements to our clients? Or should we just offer them the consulting services, make the recommendations for the supplements, and not try and earn an income stream from that, and by doing that freeing up the time in our business?”
That's just one example of a non-bookkeeping business where a business owner doesn't understand how to control their spending or identify their most profitable income streams. For this very reason, businesses are potentially tying themselves up in huge amounts of stock or they're providing services that don't provide a good return on their investment, and potentially don't even bring leads into the business.
You want to be able to help the clients to break this down. I believe that that's one of the reasons that 50 percent of profitable businesses fail.
2. Have a strategic and actionable plan
Number two is I believe that it's because they don't have a strategic and actionable plan to help them to focus on the big picture. Just like the ICB survey showed of 800 bookkeepers, 20 percent of those bookkeepers have a business plan, and the other 80 percent don't.
If you have a started business plan that's not finished, well that tells me that you don't have an actionable business plan. I'm not talking about a very complicated business plan, I'm talking about start with a very simple business plan … which I'm going to talk about in a little while. If bookkeepers who are dealing with numbers and businesses every single day, don't have business plans, I am also going to say … I don't know the exact numbers, but business owners potentially at about the same rate also, do not have business plans.
A lot of time people will say, “Business plan is an unnecessary thing that's only needed if you need finance or if you're looking for investors.” A lot of people see business planning as a bit of a waste of time. But we all know that if you're able to focus on the bigger picture, and when I say bigger picture, you've got to have a sense of where you want to get to in the future.
I'm talking like … So with my clients, I say, “Let's look at five years.” Now that said, we don't sit and plan out the next five years, because there's the concept of being agile is super important these days. I was talking to our… we've got a Facebook ads person on our team, and when we're talking about during our marketing plan, we're talking about whether we plan out the next 12 months. He made a very good point, “No way we don't plan out 12 months, we plan a quarter at a time, because you just don't know how things are going to go.” We love the fact that we as a business at Savvy, it's all about being agile and being able to change quickly.
Your business plan it has to be not only strategic and actionable, and when I say actionable, it doesn't need to just be this huge document. It's got to be something you refer to on a regular basis or that's I guess simple enough to know at all times when you're not looking at it anymore. Having that business plan in place, doing a business plan, the process of getting a business plan is actually a massively important process that so many business owners skip over.
They skip over it because it's hard or saying it's pointless, it's actually a lot of work. Obviously I teach business planning, but I can't see my own self, and my own flaws and weaknesses and shortcomings and that kind of thing. I also have, I have a business coach who helps me with my business plan, and he asks me a lot of questions to get me thinking about the bigger picture. Because your business plan is not just about you and your business, but it's also about where you fit in to your industry, where you fit in to the workforce or small business in general.
It's also about where you fit in as a citizen of Australia, it's also about where you sit, not only in the world but also in history. Where do you sit at a place in time, so my business coach will get me researching the history of accounting. He'll ask me questions, I'm like, “Okay, I'm here to work on my business plan, what should I sell? How I'm I going to make money?” He says, “Do you know why we have accounting?” I'm like, “No, I don't know.”
He sent me on this, he sent me down a couple of rabbit holes looking for why do we have accounting? Why do we need accounting? Why do we track our income and expenses? Why do we need to do that? Then I came back to him and gave him what I thought the answers were, and then he goes, “Okay, that's great.”
Obviously we need to track our income and expenses so we can lodge tax returns, pay our taxes, we also do it for planning, that kind of thing. Then he said, “Okay, so where did money coming from? Why do we have money?” I'm like, “Oh, my goodness”, so I went back and I did all these research again. Then I'm starting to look into the reason that we have money, and that it's part of once upon a time we started to trade with one another, and as a result we needed to … we had money as a medium of being able to record or transfer value.
He got me thinking into all of these things, and now … I'm in the middle of reading a book called “The Reckoning”, so “The Reckoning” by Jacob Soll, “The financial accountability and the rise and fall and nations” is what the subtitle is for that book.
If you haven't read this book, and you are a bookkeeper, or even if you're not a bookkeeper or if you're an accountant or whatever you are, do yourself a favour and get a copy of this book. I don't think it's available on Kindle, I had to order a real book, a nice hardcover book from … I think I did Book Depository, and I couldn't wait for this book to arrive.
But it talks about accounting through history and where accountability, financial accountability or lack of financial accountability can affect so many things in a nation. To see that things play out through history, it gives me context about why I'm here, and what I'm actually here to do.
For me … you might be listening to this now and thinking, “This is blowing my mind a little bit”, but this is … to have a business plan, you need context for who you are, and what you're here for, and what your bigger purpose is. If your business plan is just about how much you're going to pay yourself as a salary and you don't have any understanding of where you fit into history, then you're going to struggle.
But the thing is business owners don't bother to do this, maybe because, maybe it doesn't sound that interesting. But I'm hoping from what I've just described now, that you will take an interest in the place that you are playing in our nation, in our world.
Before I ever heard any of this and before my business coach sent me on a wild goose chase into the history of accounting, I basically really had no idea, I just thought … well actually I had a sense, I had a sense, I knew that when I was working with clients. But I didn't know how to explain that, I didn't know how to convey the information.
I knew that doing accounting well had something to do with financial integrity, and I knew that if my clients allowed me to help them to do their books accurately, even if it cost them. To be able, I knew that I was a foundation, I always had a sense of that, that a good set of accounts is an excellent foundation for building a business on. But I kind of didn't know why or I didn't know how to articulate that.
I also had a sense that bookkeepers play a big part in the financial integrity of our nation, and to prove that all you need to do is to look at countries that neglect bookkeeping, and to see corruption and that kind of thing. You only need to look at … I'm reading about the Medici at the moment, these were some of the original bankers in Italy.
The Medici were a very powerful family in Italy in Tuscany around the, I guess around the 1200s and onward. Their head accountant was meticulous about accounting, in fact when I was reading “The Reckoning”, the book that I just mentioned before, what fascinated me was how often they referred to real time accounts.
Back in the 1200s, accountants kept real time accounts. Now you might laugh, I always laugh and make a joke about that. Before reading this book, I used to joke about it, I used to say, “We've been talking about having real time accounts since GST came in or since I don't know, since MYOB, do you know what I mean.
We have, real time accounts is, to me it's always, it seemed like a pipe dream. It's something that we always want and we always … I remember years ago my boss always promising our clients real time accounts, but the reality is you can never get real time accounts, because you had to wait for the clients to provide things. But by the time they did it, they're already three months behind, and there was nothing you could do about it.
Whereas today with Xero and bank feeds and all these sort of technology, we're getting to closer to real time accounts, but the bank feeds are still 24 hours behind. Whereas back in the 1200s, accountants kept real time accounts. Think about that, think about the fact that we cannot get real time accounts, we're always late. What are we, we're always a month behind to get accounts up to date even to a week, is no small feat. It requires a lot of discipline, a lot of focus and a lot of dedication, and potentially would cost a business far more than they would be willing or able to provide.
I guess, I mean, I don't know I've got one eye on the Blockchain technology which you may or may not have heard of yet. But to me that represents a glimmer of how we may be able to use technology for these real time accounts. For example when you invoice a client on a Blockchain, as soon as you create the invoice, the invoice appears in their system and your system at the same time. Then when you make the payment, the payment's applied against your invoice and their invoice at the same time as well.
I've heard it referred to a single entry bookkeeping as opposed to double entry bookkeeping, but in my opinion it's actually triple entry bookkeeping or I don't know, maybe quadruple entry bookkeeping, anyway it doesn't matter. But we look at the future and we say there might be one day a technology that allows as to have real time accounts, whereas back in the 1200s, they had real-time accounts, and how did they do that?
Well accountants were dedicated to real-time accounts, so the moment a transaction occurred, the transaction was recorded in a book. Now they did have a second set of books as well, they had one set for the taxman and the public, and then they had their own set of books. Obviously you had back then, you've had accountants who work twice as hard on the double entry, quadruple entry bookkeeping, back in the day, but I guess that really stood out to me.
I hope that you're hearing this and seeing where you fit in in history, and the importance that it is for you to have a strategic and actionable business plan that helps you focus on the big picture for your business. But to also help you to be able to help your clients, because you're clients also don't have business plans, many of them don't. Looking at how we can reflect on history and we can forecast or look at the future, what is potentially going to happen based on what's already been happening in the past, and where the technology is heading.
To think about 50 percent of profitable businesses going broke, that's huge, and you're here to play a part in that. I believe that we owe it to … I don't want to speak for you, but I believe that we owe it to Australian small business owners to reduce this statistic.
We don't want three in five small businesses to fail in the first three years, I would love to see that number shift. If we could see that numbers shift to even two in five to fail, or one in five to fail, that would be amazing.
Then out of those ones that fail, 50 percent of them are profitable, how do we reduce that number? How do we change this? My conclusion on number three reasons why profitable businesses are failing, is that I believe that there is a deceptive success bubble, and it's in many circles and it's very strong online. You see it, it's on LinkedIn, it's Facebook, wherever you see people having conversations about business. Obviously we have communities online where you can go and talk about things that are potentially not going wrong, but we're still in the deceptive success bubble.
We live in a world where we want to share with others when businesses are going well, we love to announce and share about our sales. How many sales we've made … business coaches do this all the time, and I really hate this to be honest. But business coaches will tell you how much income they earn, but they never talk about their expenses, they never talk about their profit. They only talk about things when things are going well, and if you go on the flip side of that, we don't really want to hear about when people are struggling, we love success stories.
We're in a culture where we love to hear positive stories, and we don't like to hear negative stories, and so we live in a bubble where it's very difficult for business owners to come and say, “I'm struggling.” Especially business owners that are potentially, if they're in leadership positions or if they're influential people or people that others look up to, it then becomes very hard. Because to them it becomes more risky to admit that things aren't going that well.
3. Having someone to talk to about financial issues
I think that's massively number three, where can business owners go to talk about the issues they're having in their finances? They have nowhere to go. A lot of business owners won't even tell their spouses, and I know I just said they have nowhere to go, but they do have somewhere to go.
They can go to their accountant, no I'm just kidding. No one goes to their accountant when they're struggling, they go to their bookkeeper, because the accountants are involved in their accounts maybe once a quarter, but probably at the end of financial year for tax planning and that kind of thing. But the bookkeeper, firstly is probably, potentially one of the only people in the company who have the private phone number of the business owner, and the business owner tells them everything.
Bookkeepers get told things that the business owner won't even tell their wife or their husband. Bookkeepers are at a privileged position … and I don't mean to, I'm not saying this to look down on accountants, but bookkeepers are in a far more privileged position than the accountants.
Accountants are known as the trusted adviser, but it's actually the bookkeeper, because the accountants often … and I don't want to make a blanket statement here, because there are great accountants out there who really have that relationship with their client. But because of the frequency that bookkeeping is done, bookkeepers are in the accounts of a client on a weekly or even a daily basis. We're in a privileged position with the business owner to change these statistics, so that's it.
Number three when business owners need to reach out to somebody and they have nobody to turn to about their financial situation, they have a bookkeeper they can turn to. But the problem is as bookkeepers many of us don't take the time to work on number one and number two which is about understanding how to control the spending and identify the profitable revenue streams. And number two, about the strategic and actionable business plan that helps the business to focus on the bigger picture. Not just for the business but for our nation as a whole and where that business fits into history.
Bookkeepers are the people who can do something about this, and the thing that I'm finding is that bookkeepers have the desire to do this, because we see the business owners struggle, we see them in pain. I know for me back when I first started my business, I saw the struggle my clients were having and I didn't know what to do about it.
I'd spend like 12 months fixing up years and years of accounts of rescue jobs to try and get these accurate accounts, and I didn't realise that there were small steps that I could take regardless of a rescue job being finished.
I always believe that you have to get all of the previous history accounts up to date, and accurate before you can start helping them move forward. Yes there is some truth in that, but there are also things you can do to start to help the business owner to look forward as of now.
Do things in the right order
Now I just want to jump back to what I originally was talking about. I started off the podcast talking about wasting time and money and brain power doing things in the wrong order. When I actually talk to you about how bookkeepers are planning their businesses, because we already know only 20 percent of bookkeepers have a business plan, so how are all other bookkeepers managing in business?
Well I've kind of noted it down into four items, and this is what I think that it is.
1. Doing what others are doing
I think one of the ways that we plan in our bookkeeping businesses is that we look at what others are doing and then we copy them or we try to copy them. That's number one.
I think that, I think this is huge, and I think that this leads to, I think it actually, it looks like a solution, but it's one of those short term solutions. It's kind of like the equivalent of I guess similar to … let's say you feel stressed, so you've got two … let's say you have two choices, when you feel stressed. You could, I don't know tuck in to a block of chocolate or a bottle of wine or you could put on your sneakers and some running gear and you go for a run.
Now the first option is easy, and the second option is hard. But the first option … so both of those things will give you stress relieve, but one of the options has long-term negative consequences, and the other one has long-term positive consequences or beneficial … has long-term consequence, I mean benefits.
One of them has long-term benefits, so I think one of the things that I've found … and I've been guilty of this myself, is that because I don't take the time to figure out what I'm supposed to be doing in my own business, I look at what everyone else is doing and I'm like, “Look at this person, what's this person doing? What's that software, what's this software? Why is this person doing this? What are they doing? I might try that, I think I might need one to those.”
It's actually endless and I think what it's doing is that, I think by doing this that we're not actually solving … so what happens is that we do it as a reaction to some kind of pain that we're having. But what we’re doing is we're just kind of eating chocolate slash drinking wine over the top of our problem, we're not actually dealing with what's going on underneath.
That's the first one, looking at what others are doing and copying them or trying to copy them.
2. Having reactionary responses to pressure
Then number two is reacting to pressures building up inside of us, and then doing what you think you should do to relieve the stress. That's totally related to my analogy about the chocolate or the running.
One of the things that is, it's easy not to do, because there's pressure coming at us from all different directions. I'm talking about a competition, there's all sorts of competition, and people offering cheaper prices. Then all the pressures of what I just mentioned in the last one which is that we should be using all those different software programs.
Then there's the extra pressures on bookkeepers about being held accountable for, if the business owners are doing the wrong thing with their payrolls. There's just so many things, I wouldn't even be able to list them all but that's just a few.
What we do is we react to the pressure that's building up inside of us, and we go, “Oh, I'll just do this, oh I'll just do that, oh I'll just”, and many of a time it actually results in … very, very frequently, it's hiring. Normally what we'll do is we'll hire too quickly, we'll go, “Oh my gosh, I feel the pressure, I just need to hire someone”, and we get the wrong person, and then we go and complain that there's no good staff out there. Or we take on a client that we know is a not a good fit, but we're just reacting to pressure, financial pressure or whatever it might be.
Maybe pressure from the actual person themselves, I just don't know, it could be a pressure from an employee who's wanting more work. We're responding and reacting to these pressures, and then what we're doing is we're hiring and we're taking on new staff without actually thinking about the consequences. Not actually realizing if this is part of the bigger picture, is this even going to lead to what I actually want?
3. Trying random things to hopefully find a solution
That leads me into number three which is that we try random things without thinking it through, we just do random stuff, it's like, “Oh, yeah.” This really comes back to copying people, so, “Oh, yeah I saw this on Facebook”, or, “Maybe I should try and do this”, and we just sort of try things without actually thinking how does this fit into the bigger picture for my business.
4. Asking advice from people who have no real clue
Then another one, this is a classic, and this is huge because of the social media I guess, it's like we ask other people who also have no clue. I've said this before in my Business Planning Basics webinar which is a free webinar that you can watch about business planning. In that webinar, I just talk about the fact that when we go to Facebook … matter of fact, I think Facebook's so bad for this, we have these lovely online communities where we can get together and get support at any time. But the problem with those groups is that it can make us lazy.
What we can do is we can say, “Oh” … so without telling people any context of what size business we have or who our target market is or anything like that or what our specific goals are, we go into a Facebook group and we go, “What's the best software to use for this?” Then everyone comes in and puts in like 100 different opinions, and you kind of end up more confused and you think to yourself, “Oh, sort of wish I didn't post that.” Then at the end you go, “Oh, thanks everybody, thank you so much for all your help, I'll have to have a think about it.”
It's like you've got all these extra information, maybe you feel more confused than you did before. Because what you've done is basically you've gone to ask a whole group of other people who have no idea. It's not wrong to ask for help, and I do say this in the Business Planning webinar, but it's about learning better questions to ask people. Rather than coming in and saying, “Hey, what's the best software program to do” … I don't know, record staff time sheets for example, and then everyone come in and put their opinions.
But what might be better is to say, “Hey, everyone, I've got a small bookkeeping business, we've got two remote staff, and one on site staff member, and we're hoping to grow. This year we'd like to double our team, and we've tried this software, but I'm just wondering, is there anyone else been in this situation and what software did you use for tracking your staff time?”
Can you see the difference between, so then what you're doing is because by asking that question, you're not just asking random people who have no clue, like the blind leading the blind. But what you're doing is by asking the question that way, your only speaking to people who know what you're talking about, and you're not going to get … so you might not get 100 responses, because I think sort of sometimes we can, we like the fact that we can post in Facebook group and get 100 responses. But it's like who cares if you get 100 responses, isn't it better to get one response that's actually correct, one that's actually going to help you?
Anyway, what I want to point out here is a massive reality check that those four things that I've listed, that's not a business plan, that's just a recipe for stress. That's something that I want to actually help you with so that you don't have to land yourself in that world of pain.
Hiring, Pricing and Marketing are the biggest areas this is happening
Probably the top three things that bookkeepers are trying to do in this fashion would be, so it would be hiring, pricing and marketing. I guess I'll start with pricing, so obviously I've just started the bookkeeping project which is me starting my business off the bookkeeping again. Kind of from scratch in a way, it's not really because I've done it before, but restarting my bookkeeping business and letting everyone watching what I'm doing and sharing my processes with them.
What I've noticed is since I've opened up the site channel for all of these people to join … so we've got about 260 bookkeepers in the program, and everybody's like … so we have a channel that's dedicated to pricing and everybody kind of flocks into the channel. They're all trying to find out, “Oh, what software are you using? What are you doing? How did you break this down? How did you price this?”
I actually said in that group, “Okay, everybody, it's time to come down because we're going to get to pricing, don't worry. Pricing is actually step two in my entire process of how to set up your business, so don't worry we will get to pricing. But I want you to remember this, that the most important thing is to do business in the right order.” I felt, “Okay, well how I'm I going to explain this?” I kind of did a bit of a brain download to my graphic designer, and I asked him to come up with some kind of visual diagram that I could use, and I'll actually share that diagram with you, I've got two versions.
6 steps to doing business in the right order
I've got one that breaks it down, so I've got six steps, six steps to help you to know which order to do your business in. But what we did is we initially did it as there's basically nine different things that you can focus on, and they go in a specific order, so I'll share that in the comments.
You'll see the direction that the arrows go, and there's some that kind of double up, so obviously you want to start with your business plan, then pricing. You do the business plan first, so I've just talked about the business plan, getting that bigger context, the bigger picture, understanding where you're actually going before you try and do pricing, before you try and do branding, marketing or anything like that.
Now obviously when, once you start hearing about this, you're probably already at a different stage. We've got, so step one's business planning, step two's pricing, step three branding and marketing, so branding's like crafting your message and marketing is getting the message out there into the right platforms.
Then you've got step four, sales and onboarding, I put those two together because they kind of go hand in hand. Step five is services, so your range of services that you offer to your clients and everything's that's involved in that. I've put step six as team building, because until you're offering services, you're not going to be building a team right, so you're not going to be hiring before you've got clients.
Whereas if you've already got a team, but you've never looked at your branding or you've never done your pricing, you can backtrack. Or if you've never done a business plan, all you do is you look at the diagram, and go, “Okay.” That's the six step diagram.
But he nine step one, starts with the business plan, and then you can go to branding or pricing. If you go to pricing first, then you go to branding, and then from there you go to marketing then to sales, onboarding to services. Then you build your team, and then you also get referrals which leads to more sales, so it kind of goes round a circle. You have to look at the diagram to know what I'm talking about.
But basically if I condense those nine items into six steps, that's what they are. Step one business planning, step two pricing, step three branding and marketing … and before I kind of rumble on too much, I'll quickly cover branding and marketing. The reason you do that in a particular order is because, let's say you want to get a website done or you want to get some graphics done for your business. When you go to speak to your designer or marketing person, let's say you want to get Facebook ads or something like that, they're going to say, “Okay, well who's your target client?” And you're not going to know, and I can tell you now about 98 percent of the bookkeepers that I work with when we're doing their website, no clue whatsoever who their target client is. They go, “I just want to work with anyone, I really don't want to limit myself.”
But so if … Well that's fine, it's fine to diversify, but if you're going to be doing a marketing campaign, you have to target somebody, that's just reality you can't just be general. You can still have diversity in your client base and that's something that you have to figure out.
I think, I guess I'll share with you as well, there are different ways that you can niche and figure out your target client. I talk about that a lot in Business Planning and Action which is, that's a business planning webinar where I go through and help you work out your niche, so I'll put the link to that in the comments as well.
You can go through, it's so important, that's step three, you've got to figure out your branding and marketing. You work out who you're marketing to and what the messages is, and then where are those people, and how do you get that messages to those people. That's finally … let's say you've got more than one target client, well then you need to craft different messages for those people because they have different pain points.
I'll share a couple of resources with you so you can find out about how you can niche and still have variety because we all love variety. It doesn't mean you have to limit yourself, but you can still have that variety.
That's, so step three branding and marketing, branding first then marketing, of course that's the order that it goes in. But then from there, you've got your sales and onboarding, so probably when bookkeepers talk about sales and marketing, it's like as if it's the same thing, but it's completely different.
Your sales, so your marketing, so your branding is crafting the message, and the marketing is I guess broadcasting the message, putting the message out there. Sales occurs from the point where somebody hears the messages and when they hear the messages, they go, “Oh, I'm interested”, and they contact you.
Soon as that person contacts you, they leave the marketing phase and they come into sales, into your sales process. The sales process is about you starting to build a relationship with them, introducing them to your services, and finding out if you should work together. Then once they say yes, they pop into the onboarding stage which is a quick process to help the client to understand how your business works, and what you expect from them, and what they can expect from you.
Then from there, they come into your services, so your services phase of the business is really or stage of the business I guess you could say or step whatever you want to call it, that's when you're offering the service. That's an ongoing thing, obviously monthly, weekly, quarterly, whatever your clients are.
Then from there you get referrals, so obviously you pop back around, if you get a referral at that person, then pops into the sales stage and then back through the onboarding and into services.
Then, so the other issue or thing that bookkeepers do in the wrong order is hiring. This is what I was talking about before, the pressure. What we do is we look at pressure that we have and react to it. We feel the pressure, we've got too much work on, we've got so much going on stressing about whatever, and what's the default reaction for someone who's full? Well the reaction is hire someone.
The thing is we talk about hiring someone as if it's just like, “Oh, yeah, I'll just hire someone”, not realizing A, how long it takes to hire somebody, and B, how long it takes to onboard and train a new employee in your system. Even if they're a senior bookkeeper level, they still have to learn your systems, and as a result, you're more stressed than ever.
Hiring is something that comes, I guess in my steps and stages, it comes at step six. Hiring is something that you, all the way back in step one, when you're looking at your business plan, you want to think about this, you want to think about, “Okay, in the future, what's the most amount of staff that I would ever possibly want to have?” Some people don't really want that many staff, some people … sometimes when I work with a bookkeeper, they'll say “Oh, I'd only like one part-time person”, whereas others go, “Oh, I'd love to have 10 staff”, 10 full timers, 10 part timers, whatever.
It's different for everybody, and so doing things in the right order is super important, it's as important as a builder laying a foundation before they build the house. But we do it all the time, we start building our houses without doing the foundation first.
Obviously just remembering okay as soon as you feel that stressfulness rising up in you or that temptation to down a whole bottle of wine or a whole block of chocolate or both at the same time. Rather than default going to that, ask yourself this simple question … I want you to actually drum this into your mind to go, “Okay, I feel stressed about the business, what step I'm I up to at the moment?”
Just re remind yourself okay. Because the thing is, it's not like you go, oh step one, two, three, four, five six, done, but you're going to go, “Oh, I've been doing my business for a while, and I'm up to, I'm trying to do some more marketing”, or, “I'm trying to do hiring.” Be at a specific step that you're focusing on, but it's probably likely that you're trying to do a lot of different steps at the same time, and you're not realizing that you will revisit those steps over and over again. It's just knowing which one I'm I focusing on now.
In my business, I even use this understanding or this mindset or framework that I'm introducing to you, I use this to how to break up my week. If you want to focus on more than one of those steps at the same time, you can set aside specific times during the week to focus on that step for example. That's really the thought that I want to leave you with.
I want you to think about when you feel compelled to look at what other people doing and try to copy them or when you see the next shiny thing, and want to copy that. I do know some bookkeepers who love shoes, but as bookkeepers, we might think, “Oh, I'm not really into fashion that much, I don't really care about all sorts of things”, but we think that we're not superficial taste in shiny things. But the reality is we chase software applications and then we go on Facebook and we're like, “Hey everybody, I just signed up for Receipt Bank”, or whatever … sorry this is not a pod for Receipt Bank by the way, just that was the first one that popped into my mind, like whatever. You know what I mean.
People love to go and say, “Hey, I'm using the latest technology”, and I think that's our … for bookkeepers, that's our shoes and handbags. You won't see us posting on Facebook about our new Jimmy Choo handbags, but we'll definitely be out there saying like, “Hey, guess what I used to track my time?” Or “Hey everyone, I've got a iX500 ScanSnap printer, how cool am I?” That kind of thing.
That's what we do, and it's not that bad, it's not wrong, it's just something that we do. But just notice when you see that shiny thing and you're like, “Do I need that shiny thing? Do I need it?” Keeping Up with the Joneses quite kind of thing.
If you feel that pressure building inside of you, and you're thinking, “What can I do to relieve my stress? Is it going to help if I hire someone? Or, is it going to help me if I just get more clients? Or, is it going to help me if I go to package pricing?” That kind of thing.
If you find yourself in that place where you're like, “Oh, my God I don't know what to do.” I just want you to remember this, just remember step one. It's like … I don't know, do you feel like you're at an AA meeting, “Step one is, admitted that we were powerless over alcohol”, whatever it is … I don't know why I said that in an American accent, but anyway.
Basically that's what I want you to remember, if you can't remember the six steps, just remember step one, which is the plan, the business plan, what is the plan? Where are we going? What are we doing? Why are we here? And just take that time to revisit that. Then I'll give you the diagram, print a copy of it, stick it on your wall, and just remind yourself where, “Which step am I on?”
When you're feeling like you're just sort of randomly doing things … you know that feeling, it's the feeling that your head is spinning or that you're doing a lot of things, but you're kind of like stuck on that thing. “I need to do this but I can't do that until I've done this, I can't do that until I've done this”, and you feel a little bit locked in, that's the sign that I want you to look for.
When you find yourself, if you find yourself tempted to go on Facebook and ask a whole bunch of people who have no idea what they're doing, how to help you in your business. I want you to actually be aware of that as well, and just remember take a deep breath and think, “There Are six steps, and I just need to remember which one I'm up to”, and go to that step and just start from there.
Anyway, I hope today has been most helpful, and I look forward to seeing you all again next Friday, well I won't be seeing you, but you'll be hearing my voice, so I'll see you then.