Detailed Notes
In this episode of the Building Better Developers podcast, hosts Rob Broadhead and Michael Meloche dive deep into a topic that many entrepreneurs and business owners tend to avoid—business finance management. While it might not be the most exciting aspect of running a business, understanding how to manage your income, expenses, and overall financial health is crucial for sustainability and growth.
Read more: https://develpreneur.com/business-finance-management-building-better-businesses-for-success/
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*Additional Resources*
*Accounting Tips for Side Hustles: How to Manage Invoicing and Billing Like a Pro (https://develpreneur.com/accounting-tips-for-side-hustles-how-to-manage-invoicing-and-billing-like-a-pro/) * Accounting For The Entrepreneur (https://develpreneur.com/accounting-for-entrepreneur/) * Customer Success: Delivering Value on a Budget (https://develpreneur.com/customer-success-delivering-value-on-a-budget/) * Bootstrapping Success (https://develpreneur.com/bootstrapping-success-navigating-startup-costs-and-self-employment/)
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Transcript Text
[Music] we're going to click record and we are back and we talked about and I we're going to do is we're going to dive right into talk about like this is one of those I don't think anybody likes which is basically the accounting side we'll talk a little bit on accounting stuff for your business because it is important you need to know what comes in and what goes out in many many ways so we're going to do our little three two one well hello and welcome back we are continuing our season of building better businesses the podcast is actually better developers the developing our podcast where we have a lot of different ways that we develop you we help you become better as a developer as an entrepreneur as a business owner as a side Hustler as a main Hustler as a day jobber whatever it happens to be we help you out with that I am Rob BR I can't even speak I'm so excited for this season I am Rob Broadhead I one of the founders of develop or building better developers also a found of RB Consulting where we help you with technology we walk you walk with you through what your business is what is your secret sauce what is it that makes you special and then we craft a unique recipe for you to leverage technology whether it's stuff you already have whether it's stuff that needs to be build whether it built whether it's something that's out there somewhere that you need to purchase whether it's a team that you need to build we help you with that through integration Innovation simplification automation you name the shun and we probably help you with that so that you can really leverage your technology investment and it's like it's like buying a house you're this is a big investment there are very few businesses that their technology investment is some small percentage you know negligible percentage of their budget a lot of times it is right up there probably other than people it's going to be I'm going to guess you it's going to be your second biggest expenditure so let's be smart and how we do it as far as good thing and bad thing I'm like I guess I'm in like a season of my good thing and my bad things are sort of the same thing so the good thing is that we got past a got to a milestone recently of being ready to go to a real estate agent and get ready to put our house on the market and it took a lot to get there because we're effectively down actually we're effectively zero sizing and so there's a lot of crap that we've had to like move around get rid of and stuff like that and then you know cleaning up the mess afterwards so it was great to get there but now there's like a few things left that we have like I no longer have a kitchen table because we're like nope that's going to go because it's going to get moved into you know they're going to Stage the house so that can be a little bit challenging the big one is if you hear me screaming and wailing and nashing of teeth it's because my office that I have spent the last few years like really honing it down to what it is is now going to also be part of the like big sucking sound of getting all that stuff out of the house and moving it so it's going to simplify greatly and I will probably you know have a physical burden and an emotional burden of doing all of this so there's good things and bad things in that but back to the good side is Michael's on the other side and he's going to introduce himself hey everyone my name is Mike m I'm one of the co-founders of developer Nur building better developers I'm also the founder of Envision QA where we are a small software shop that is customized to helping small to midsize businesses basically build software or find software solutions to meet the business needs and let the software work for the business not the business worked for the software we help you simplify your processes and basically hopefully streamline your your business so that you're more productive making more money making the customers happy and having a better user experience all around good and bad so good this week I have made some Headway on some projects I've been working on we had some good feedback from some customers and kind of writing that High a little bit it's like you know you kind of get that pat on the back for job well done for getting things across the line getting things solved uh bad kind of the bad with that now we're getting into some new uh some other areas and trying to figure out the next step in some of these pieces and unfortunately I kind of hit some roadblocks mental blocks of my own where it's like oh that really doesn't make sense and it's like you know it should it was something simple but yet it's a blocker it's like ah uh sometimes you run into those and and you just sometimes you can't work through it sometimes you just have to literally step away for a little bit and eventually it'll get through your head at some point hopefully uh and hopefully it's not with a hammer uh or my wife's frying pan and she comes at me sometimes kidding uh but anyway that's my good and bad so the good and bad we have for this episode is probably there's some good and some bad we're going to talk about accounting essentially we're going to talk about keeping track of stuff now this as interesting to me because most of us as developers we like numbers we like math and so maybe accounting is not that bad but it seems like when I talk to people the accounting which is basically adding and subtracting people are like no it's like it's a pain in the butt I don't want to do it or I think part of actually the problem is that we think we can we know it that we can do it because it's just math and then we sort of just dive into a very simple we oversimplify it and the next thing we know we realize we've oversimplified it now I think for where I want to go with this one is a little bit more on the the startup side but actually it's something that's even good if you've been running your business for a while and it really it does come down to it's like it's really it's a budget and it's if you're you know if you're building a business then it is budgeting and it's looking at like what is it going to cost to build the product and what do I you know what is it going toost cost to sell the product to deliver the product and then therefore like where does the pricing need to be and now some of that is you're going to do you know you would hope hopefully do some market research and see what the typical pricing is because what you want to do is be in a situation where the market price the typical expectation of value and what they're going to pay is more than what it costs you to produce it because if it's not then you're in trouble you know that's one of those things like well you you know it's the business can only last so long if you're operating in the the red all the time if you every time you s sell a product you lose a dollar then sooner or later you're going to run out of money you've got to find a way to flip that up and we'll talk in other times about ways to like you know reduce costs and things like that but first it really is it's like figuring out where the heck am I what is what is a you know hopefully a monthly budget look like how much money is going out where is it going out and then what's coming back in now for an existing business I think this is very important for us to do periodically and this is honestly every year when you do taxes that should be part of it if you should be going through if it's even if your business is one that it files taxes if it's a corporation of some sort or even an LLC then you're going to be doing things like you're going to have your summary at the end of the year is you're going to get to the end of year and you're going to build out everything and you're going to know what your balance sheet effectively is like where did my money go and it may be in a large buckets or buckets that don't really resonate with you normally but they are things that you know you get to the end year you're like okay well all this money went out all this money came in and here's the bottom line and that bottom line is where you're probably going to have your concerns is is my bottom line positive or is my bottom line a negative now starting out it is not uncommon for it to be negative because you're probably investing in your business you may be loaning money to your business you're you know you're going out and you're you're winning projects and doing stuff but you're you're doing extra work and you're putting extra into these things so that you can really make sure that you knock these things out of the park now that's something that we'll also talk about further down the road is that it has to be sustainable you can't just like you can't have a loss leader forever and have nothing else that eventually makes up for those losses what I want to focus on like I said here is just the the budget side of it so what we're going to talk about is what are your expenses and what is your income what is what is going out and what is coming in and we'll get a little deeper into this but first I'm going to throw over to Michael and we'll then we'll come back around we'll talk a little bit more about this so it's interesting that you start out with budgeting because budgeting one of the things we constantly leave out of budgeting is our time because we don't we're the business owners right so for us we're always thinking about things we're always trying to get the next customer we're trying to do the next thing and a lot of times we lose the idea that hey we're our own employee we're working for the company so our time has value and we forget to include that within our budget so well at the end of the year you may show that hey I made $100,000 this year but if you worked 100 hour weeks and you started tracking that in you were better off getting a job at the gas station than working on your business so you need to be careful with budgeting that you also include your time the time factor into the budget because if you leave that out you're not going to get a real accurate value for what it is that you're making within your company so that that's one thing that just kind of stuck to me I want to follow up on that one real quick because I think that's like a that's a key challenge that we run into as uh solopreneurs in that is that we will put crazy amounts of time into our business the first time we try to scale out and hire somebody they're not necessarily going to do that they most likely are not going to like throw a lot of free hours into our company now some of us are you know came back to the days go back to days where you were salaried and salary meant you worked all hours you worked all the time but that is not necessarily the case and it's not something that it's really fair for you to put on somebody else so I think that's something is really important to think about is that you may be willing to pour that blood Sweat and Tears in but for somebody else they need to get paid for that and so it's not scalable so uh you had another Point yeah so I was just going to kind of carry that in because you want to think about that when you're budgeting your business not just money but your time how much time are you able to put into this and put a value on it or if anything at least keep track of the time so at the end of the year you can take your income and divide that by your hours to kind of get an hourly rate now the reason I started with that was because you also mentioned we're going to talk about like you know what is your expenses and what is your income but time is a big factor in all of that you need to make sure that you account for that when you budget your time for your expenses and for your income because if you are spending too much time your income's going to diminish and your expenses might actually go up exponentially because you're not paying attention to how much you're putting into your business uh so that was just one kind of thing that really stood out to me because you and I both we work lots of hours to keep our business going because we're passionate about what we do we like this which is why we do it but the problem is we do run into situations where we're spending time on things that don't necessarily make us money but they're things that we have to work on to work on the business not work in the business so that that is one thing you got to think about as we start building businesses I want to I want to follow up on that one too a little bit is that idea that uh sometimes when we're pouring hours in our actual expenses go up our living expenses cuz it could be things like now uh and it's I don't think we realize it usually until a little further down the road but it's things like hey I'm working all the time so maybe I eat out more or maybe I you know I take clothes to the dry cleaners instead of do my own laundry or I pay somebody to do yard work or you know whatever there's all these like little things that maybe we did ourselves but now we're paying somebody else to do it or paying service to do that and so our actually our expenses are going up because the time that we were using to address those has been reduced and now we've got a but the job still has to be done so carry on yeah exactly and I'm glad you touched on that because those are other things you need to account for within your budgeting so the last thing I'll touch on before I throw this back to you is when you typically do a budget when you think about budgeting you may think QuickBooks you may think Excel you may think some accounting software program but what a lot of those tools don't do for budgeting is you can put down okay I need this much money to run the business for the year great do you need all that money up front or do you need that money spread out throughout the year sometimes our accounting what we have to pay for for our business has to be paid at different points throughout the year so sometimes a budget might require money sooner than later so one of the things I would throw out that from from a budgeting perspective is figure out what you need but then plan out your quarter or if you know that you're going to have expenses in December go ahead and do a full calendar and put at least like at a high level what it is you need to pay out each month and have a running tally now you can just do that in a simple spreadsheet but kind of think forward don't just think month by month or week by week because you're going to run into situations where oh crap I have to pay a yearend taxes in a month or at the beginning of the year oh at the end of the year if I make x amount of money I have to pay out x amount of money to the government so there's some hidden expenses that you might not think about but you need to make sure you budget those in kind of at the beginning and have kind of keep them in your mind as you're going through so that you're not hitting that Mark or that Benchmark and be like crap I don't have it how am I going to get now you're stressing about things you should have that you don't NE NE need to be stressing about if you had a little bit of forward planning and I think that's important when you look at particularly uh as you start to grow a business that's one of the things that like if you get to the point that you're going to you know hire a contractor or an employee or something like that there's usually costs involved in that there's things like and just growing in general even adding a customers sometimes because now maybe you're um you know your your CRM has to C it's going to cost you more because you've got more customers there's more things you're tracting there's more projects maybe that you're working on or products that you are generating that there is whatever your tool is that it's going to grow in cost and there are going to be things like I said like employee like for me every time there's employee that comes out there's like a large amount of expenses that go on because there's you know like there's a computer and there's email and they're setting them up with all of the different services that we have and so there is you and everything almost incrementalization and that and I have to be able to take that on at the front end and then eventually you know it'll it'll come back in and so you do need to make sure that you are fluid enough essentially with cash so that you can do those kinds of things now there are other options and that's why there's you know people go through funding and business loans and stuff like that and we'll talk about that another time but you do need to think about such things because you don't want to be in a situation where you're like ready to go you've got a customer and everything there and you don't have the funds to be able to actually start the project so you need to think those and you want to do that beforehand because you don't want to go through all this get a customer to accept it and then come back and say hey I need to get paid up front maybe more than I was or you know maybe you didn't ask for any pay upfront so maybe you need to but you need to be able to cover you know those kinds of expenses that it made me think of one other thing be I'll interject that now so I don't forget about because it kind of flows with that the other thing is if you are just starting your business we tend to bootstrap a lot of our business with our own money or finding the cheapest or the least expensive way of doing something now the problem we run into is a year from now chances are a lot of those free services or those cheap Services expire and we suddenly have a balloon of expenses at the beginning of the next year because we didn't think to follow up on that or oh we did it a year ago and it's off our radar so when you do things like that make sure you include that in the budget that hey in 12 months I'm going to see an uptick of this or I need to make sure I schedule hey let's revisit this a month before this happens so that I don't get blindsided by like if you're AWS you have a free tier for a year you get to the end of the year and all of a sudden you're paying $50 $100 a month in server fees that you weren't paying prior so just kind of be a little forward thinking with the budgeting sorry I think that's that actually follows up well with we do a lot of our own uh bootstrapping and stuff like that and we need to it's I I refer to them as in my head really as like split expenses there are things where it's like because we are maybe working out of our home that we have an office we have a phone we have a computer and printer and some of these things if we go you know if we grow beyond that or we may get to a point where the company the company needs to own some of those things then the stuff the expenses that we were essentially sharing or we were essentially loaning the company our you know facilities and products and all that kind of stuff now suddenly we're going to flip it over the company is bearing that cost then that's only going to change your expenses structure you know it's things like if you go from it maybe that you use your own personal cell phone all the time but you get to a point that there needs to be a company cell phone or a company sell plan and now you're going to have a personal plus the company and now that expense you know it's going to be an additional expense so even while there are you know free services and trial periods and stuff like that there's sort of stuff that we do as well we essentially give our business a free period or a you know free tier or a trial period because we'll allow our business to sort of piggy back on top of some of the things that we do now back to the accounting itself a lot of times that's what gets companies and particularly startups into trouble is they just use their own bank account they use their own software and all that and they're just like well that's just business expenses but then when you get to the end of the year and you need to actually categorize them those haven't been split out or if somebody wants to you know it's like well did you you know buy that printer for the company did you buy that for yourself and you have to like you know figure all that stuff out you have to calculate things and all that that is cons really be a pain in the butt and sometimes it's even the data gets sort of Lost in just because it's being shared by too many people so one of the things early on is is set up your business accounting so it is your business you're not doing personal stuff out of that it's not in a person it has its own bank account it is not your you know your personal account that you're using for that find a way even if you don't want to go through setting up a bank account at the very least like set aside money that is very much like a a register that is like I put $1,000 into the business and this is where that money went or you know this is where it came and then this is how it went back out so you're tracking all of the ins and outs for the business so that you don't get further down the line and realize that oh crap I don't have that information so in the challenge side of this I think to start out is actually because it goes back to the sort of the first couple things we talked on is take a look at your budget if you've got one awesome just like take a look and make sure that it's up to speed that it's current because you know things change if not then build a budget and it it doesn't have to be really that complex I I I have for a long time had a spreadsheet that is like lined out for every month I've got my monthly budget and every year I create a new one and I plan out what is it going to look like this year what are my expenses and it's it covers some of the stuff Michael said because it's things like I know that I'm going to get you know hit with an extra expense in July or December or February or whatever it is and then every year those things you know will change a little bit so I'll make the updates but then I know that's like I need to have this amount of money coming in because this month I've got this amount to go through and it also allows me to do things like which is crucial I think as a when you're in a small business is it allows you to understand where like you can pay yourself where you can pay a bonus or where if you can afford to give your employees a raise and things like that is looking at all right you know I may have a pool of money but that money maybe is going to disappear next month because I have an extra pool of expenses that I'm going to have to match up against it so step into the budgetary side like put your little account hat on and just look at like what is the ins and outs and do your best to like walk through what makes a business run to make sure that you have those so it's things like you know do I do I include somewhere that my business is consuming electricity and it has phones and it has maybe Printing and it has web stuff it has server fees it has you know even things like coffee or something like that you know the simplest things like the making sure that you put those into your budget so that now you have a very clear and hopefully precise and exact budget of this is what the this is what I expect to you know go out and then as it comes in you know making sure that you match that budget and if not make your adjustments accordingly thoughts on that challenge yeah I like that now one thing I'll throw out though because you know granted we are a developer developer podcast for those of you that may not have like full laptop you may be watching us on your phone or on your tablet you know if you don't necessarily have software spreadsheet software you know you could use uh Google Docs has free has a free sheets application there's open Office you know you have Microsoft Office even then go old school one of the best things I like doing is taking poit notes and just writing an idea on a Post-It note putting it on the side wrri another one down putting it on the side sometimes that's a great way to brain dump your ideas or your expenses on paper put them out and then you can kind of categorize them and it makes it very easy to take it from that and putting it like into an organized sheet or at least in a on a piece of paper in a way that makes sense so you can track it yep that's a that is a great recommendation that's bonus material for those of you that are still listening to the podcast this laid into the episode that being said we get to wrap this one up so as always if you have any ideas suggestions recommendations or feedback on any of the challenges let us know at info@ develop or.com you can also reach out uh you can leave us feedback wherever you you know you're listening to this or watching this whether it's out on YouTube and the development or channel the building better developers developer podcast wherever you listen to podcast you can go to developer.com and you can we have contact us forms all of our all the blog articles have ability for you to leave feedback whether it's specific to that or in general you can also we have develop andur out on x we have a Facebook page the development or Facebook page out on conveniently enough Facebook and any other way that you want to get a hold of us we will probably find a way to get that communication through to us so we can take that feedback and build a better podcast so go out there and have yourself a great day a great week and we will talk to you next time bonus material so in addition to the kind of prey bonus I gave during the podcast uh one thing I found that helped me uh and this took time through multiple different businesses over the years that uh through different startups I worked on is you kind of touched on it during the podcast write down what it is that you need to buy for your business or what you need for your business but then also write down what it is that you're using of your own stuff are you using your laptop are you using your printer are you using your phone you need to distinguish what you is that you are using from your personal devices or personal material versus your business material so that you kind of get to the end of the year with taxes and you know how to split that up because taxes can be a real pain in the butt when it comes to uh what did you spend on your business and how because you don't want to spend something on personal applied for taxes and then get audited by the IRS and that's you I think that's where I'm going to go with this one too is there's there's two things is one is that you make sure that you as you're doing your budget as you're thinking through stuff is think through common business expenses and how are you addressing those because it's things like for example like marketing well if you get to end of the year what did you do that would attribute to marketing related expenses and it may be things like you have a website so maybe your website is not a software expense it is a marketing expense because that is your company website now the thing that I did which is sort of the follow-up to Michaels when I started out way way back and said I am going to have a business I actually sat down at one point and listed out what do I need as a business which was basically I sort of looked around my work area at work and said what kind of stuff would I need if I was going to do this on my own and this was back in the day where there was things like a fax machine a speaker phone uh I think a cell phone it may even been before cell phones were really that common but you know I had to have a phone that was a business line effectively I had to have an email address that was a business email address uh you know a business banking account there's all those things so that I was over time that was actually part of how I also bootstrap the businesses I would go say hey I'm going to need one of these and so I would save up and I would personally invest in the business and then I knew that like hey I bought this thing really it's for the business and I didn't necessarily you know I probably lost out on a lot of business expenses I could have applied to taxes along the way because it was a little bit here a little bit there but it did allow me when started a business to have a lot of that stuff already there that I could be like this is my you know this box is the stuff that is the businesses and it's not my personal stuff and so doing that sooner rather than later helps you because it is very difficult after the fact to figure out how to split those expenses out and where that went and what was all there versus doing it along the way and particularly when you're doing this you know because it's it's easy to go out like go shopping and you get a couple of things for your business but you also get a couple personal things and now you just have a receipt that if you just have the total you don't you know you don't remember what went where and so there's some of those kinds of things that it's going to help you trust me it will help you at the end of the year or when you're really starting to try to like nail down these budgets to keep track specifically of what went to what bucket personal or business that puts us to time to wrap this one up because we got to go we got businesses stuff to do working in our business on our business beside our business above our business below our business all of that all around our business we got crap to do so we're going to wrap this one up hopefully you guys have enjoyed this we are just getting started yet another season and we got plenty of things ahead of us so go out there and have yourselves a great one and we will talk to you next time [Music]
Transcript Segments
[Music]
we're going to click record and we are
back and we talked about and I we're
going to do is we're going to dive right
into talk about like this is one of
those I don't think anybody likes which
is basically the accounting side we'll
talk a little bit on accounting stuff
for your business because it is
important you need to know what comes in
and what goes out in many many ways so
we're going to do our little three two
one well hello and welcome back we are
continuing our season of building better
businesses the podcast is actually
better developers the developing our
podcast where we have a lot of different
ways that we develop you we help you
become better as a developer as an
entrepreneur as a business owner as a
side Hustler as a main Hustler as a day
jobber whatever it happens to be we help
you out with that I am Rob BR I can't
even speak I'm so excited for this
season I am Rob Broadhead I one of the
founders of develop or building better
developers also a found of RB Consulting
where we help you with technology we
walk you walk with you through what your
business is what is your secret sauce
what is it that makes you special and
then we craft a unique recipe for you to
leverage technology whether it's stuff
you already have whether it's stuff that
needs to be build whether it built
whether it's something that's out there
somewhere that you need to purchase
whether it's a team that you need to
build we help you with that through
integration Innovation simplification
automation you name the shun and we
probably help you with that so that you
can really leverage your technology
investment and it's like it's like
buying a house you're this is a big
investment there are very few businesses
that their technology investment is some
small percentage you know negligible
percentage of their budget a lot of
times it is right up there probably
other than people it's going to be I'm
going to guess you it's going to be your
second biggest expenditure so let's be
smart and how we do it as far as good
thing and bad thing I'm like I guess I'm
in like a season of my good thing and my
bad things are sort of the same thing so
the good thing is that we got past a got
to a milestone recently of being ready
to go to a real estate agent and get
ready to put our house on the market and
it took a lot to get there because we're
effectively down actually we're
effectively zero sizing and so there's a
lot of crap that we've had to like move
around get rid of and stuff like that
and then you know cleaning up the mess
afterwards so it was great to get there
but now there's like a few things left
that we have like I no longer have a
kitchen table because we're like nope
that's going to go because it's going to
get moved into you know they're going to
Stage the house so that can be a little
bit challenging the big one is if you
hear me screaming and wailing and
nashing of teeth it's because my office
that I have spent the last few years
like really honing it down to what it is
is now going to also be part of the like
big sucking sound of getting all that
stuff out of the house and moving it so
it's going to simplify greatly and I
will probably you know have a physical
burden and an emotional burden of doing
all of this so there's good things and
bad things in that but back to the good
side is Michael's on the other side and
he's going to introduce himself hey
everyone my name is Mike m I'm one of
the co-founders of developer Nur
building better developers I'm also the
founder of Envision QA where we are a
small software shop that is customized
to helping small to midsize
businesses basically build software or
find software solutions to meet the
business needs and let the software work
for the business not the business worked
for the software we help you simplify
your processes and basically hopefully
streamline your your business so that
you're more productive making more money
making the customers happy and having a
better user experience all around good
and bad so good this week I have made
some Headway on some projects I've been
working on we had some good feedback
from some customers and kind of writing
that High a little bit it's like you
know you kind of get that pat on the
back for job well done for getting
things across the line getting things
solved uh bad kind of the bad with that
now we're getting into some new uh some
other areas and trying to figure out the
next step in some of these pieces and
unfortunately I kind of hit some
roadblocks mental blocks of my own where
it's like oh that really doesn't make
sense and it's like you know it should
it was something simple but yet it's a
blocker it's like ah uh sometimes you
run into those and and you just
sometimes you can't work through it
sometimes you just have to literally
step away for a little bit and
eventually it'll get through your head
at some point hopefully uh and hopefully
it's not with a hammer uh or my wife's
frying pan and she comes at me sometimes
kidding uh but anyway that's my good and
bad so the good and bad we have for this
episode is probably there's some good
and some bad we're going to talk about
accounting essentially we're going to
talk about keeping track of stuff now
this as interesting to me because most
of us as developers we like numbers we
like math and so maybe accounting is not
that bad but it seems like when I talk
to people the accounting which is
basically adding and subtracting people
are like no it's like it's a pain in the
butt I don't want to do it or I think
part of actually the problem is that we
think we can we know it that we can do
it because it's just math and then we
sort of just dive into a very simple we
oversimplify it and the next thing we
know we realize we've oversimplified it
now I think for where I want to go with
this one
is a little bit more on the the startup
side but actually it's something that's
even good if you've been running your
business for a while and it really it
does come down to it's like it's really
it's a budget and it's if you're you
know if you're building a business then
it is budgeting and it's looking at like
what is it going to cost to build the
product and what do I you know what is
it going toost cost to sell the product
to deliver the product and then
therefore like where does the pricing
need to be and now some of that is
you're going to do you know you would
hope hopefully do some market research
and see what the typical pricing is
because what you want to do is be in a
situation where the market price the
typical expectation of value and what
they're going to pay is more than what
it costs you to produce it because if
it's not then you're in trouble you know
that's one of those things like well you
you know it's the business can only last
so long if you're
operating in the the red all the time if
you every time you s sell a product you
lose a dollar then sooner or later
you're going to run out of money you've
got to find a way to flip that up and
we'll talk in other times about ways to
like you know reduce costs and things
like that but first it really is it's
like figuring out where the heck am I
what is what is a you know hopefully a
monthly budget look like how much money
is going out where is it going out and
then what's coming back in now for an
existing business I think this is very
important for us to do periodically and
this is honestly every year when you do
taxes that should be part of it if you
should be going through if it's even if
your business is one that it files taxes
if it's a corporation of some sort or
even an LLC then you're going to be
doing things like you're going to have
your summary at the end of the year is
you're going to get to the end of year
and you're going to build out everything
and you're going to know what your
balance sheet effectively is like where
did my money go and it may be in a large
buckets or buckets that don't really
resonate with you normally but they are
things that you know you get to the end
year you're like okay well all this
money went out all this money came in
and here's the bottom line and that
bottom line is where you're probably
going to have your concerns is is my
bottom line positive or is my bottom
line a negative now starting out it is
not uncommon for it to be negative
because you're probably investing in
your business you may be loaning money
to your business you're you know you're
going out and you're you're winning
projects and doing stuff but you're
you're doing extra work and you're
putting extra into these things so that
you can really make sure that you knock
these things out of the park now that's
something that we'll also talk about
further down the road is that it has to
be sustainable you can't just like you
can't have a loss leader forever and
have nothing else that eventually makes
up for those losses what I want to focus
on like I said here is just the the
budget side of it so what we're going to
talk about is
what are your expenses and what is your
income what is what is going out and
what is coming in and we'll get a little
deeper into this but first I'm going to
throw over to Michael and we'll then
we'll come back around we'll talk a
little bit more about
this so it's interesting that you start
out with budgeting because
budgeting one of the things we
constantly leave out of budgeting is our
time because we don't we're the business
owners right so for us we're always
thinking about things we're always
trying to get the next customer we're
trying to do the next
thing and a lot of times we
lose the idea that hey we're our own
employee we're working for the company
so our time has value and we forget to
include that within our budget so well
at the end of the year you may show that
hey I made $100,000 this year but if you
worked 100 hour weeks and you started
tracking that in you were better off
getting a job at the gas station than
working on your business so you need to
be careful with budgeting that you also
include your time the time factor into
the budget because if you leave that out
you're not going to get a real accurate
value for what it is that you're making
within your company so that that's one
thing that just kind of stuck to me I
want to follow up on that one real quick
because I think that's like a that's a
key challenge that we run into as uh
solopreneurs in that is that we will put
crazy amounts of time into our business
the first time we try to scale out and
hire somebody they're not necessarily
going to do that they most likely are
not going to like throw a lot of free
hours into our company now some of us
are you know came back to the days go
back to days where you were salaried and
salary meant you worked all hours you
worked all the time but that is not
necessarily the case and it's not
something that it's really fair for you
to put on somebody else so I think
that's something is really important to
think about is that you may be willing
to pour that blood Sweat and Tears in
but for somebody else they need to get
paid for that and so it's not scalable
so uh you had another Point yeah so I
was just going to kind of carry that in
because you want to think about that
when you're budgeting your business not
just money but your time how much time
are you able to put into this and put a
value on it or if anything at least keep
track of the time so at the end of the
year you can take your income and divide
that by your hours to kind of get an
hourly rate now the reason I started
with that was because you also mentioned
we're going to talk about like you know
what is your expenses and what is your
income but time is a big factor in all
of that you need to make sure that you
account for that when you budget your
time for your expenses and for your
income because if you are spending too
much time your income's going to
diminish and your expenses might
actually go up exponentially because
you're not paying attention to how much
you're putting into your business uh so
that was just one kind of thing that
really stood out to me because you and I
both we work lots of hours to keep our
business going because we're passionate
about what we do we like this which is
why we do it but the problem is we do
run into situations where we're spending
time on things that don't
necessarily make us money but they're
things that we have to work on to work
on the business not work in the business
so that that is one thing you got to
think about as we start building
businesses I want to I want to follow up
on that one too a little bit is that
idea that uh sometimes when we're
pouring hours in our actual expenses go
up our living expenses cuz it could be
things like now uh and it's I don't
think we realize it usually until a
little further down the road but it's
things like hey I'm working all the time
so maybe I eat out more or maybe I you
know I take clothes to the dry cleaners
instead of do my own laundry or I pay
somebody to do yard work or you know
whatever there's all these like little
things that maybe we did ourselves but
now we're paying somebody else to do it
or paying service to do that and so our
actually our expenses are going up
because the time that we were using to
address those has been reduced and now
we've got a but the job still has to be
done so carry on yeah exactly and I'm
glad you touched on that because those
are other things you need to account for
within your budgeting so the last thing
I'll touch on before I throw this back
to you is when you typically do a budget
when you think about budgeting you may
think QuickBooks you may think Excel you
may think some accounting software
program but what a lot of those tools
don't do for budgeting is you can put
down okay I need this much money to run
the business for the year great do you
need all that money up front or do you
need that money spread out throughout
the year sometimes our accounting what
we have to pay for for our business has
to be paid at different points
throughout the year so sometimes a
budget might require money sooner than
later so one of the things I would throw
out that from from a budgeting
perspective is figure out what you need
but then plan out your quarter or if you
know that you're going to have expenses
in December go ahead and do a full
calendar and put at least like at a high
level what it is you need to pay out
each month and have a running tally now
you can just do that in a simple
spreadsheet but kind of think forward
don't just think month by month or week
by week because you're going to run into
situations where oh crap I have to pay a
yearend taxes in a month or at the
beginning of the year oh at the end of
the year if I make x amount of money I
have to pay out x amount of money to the
government so there's some hidden
expenses that you might not think about
but you need to make sure you budget
those
in kind of at the beginning and have
kind of keep them in your mind as you're
going through so that you're not hitting
that Mark or that Benchmark and be like
crap I don't have it how am I going to
get now you're stressing about things
you should have that you don't NE NE
need to be stressing about if you had a
little bit of forward planning and I
think that's important when you look at
particularly uh as you start to grow a
business that's one of the things that
like if you get to the point that you're
going to you know hire a contractor or
an employee or something like that
there's usually costs involved in that
there's things like and just growing in
general even adding a customers
sometimes because now maybe you're um
you know your your CRM has to C it's
going to cost you more because you've
got more customers there's more things
you're tracting there's more projects
maybe that you're working on or products
that you are generating that there is
whatever your tool is that it's going to
grow in cost and there are going to be
things like I said like employee like
for me every time there's employee that
comes out there's like a large amount of
expenses that go on because there's you
know like there's a computer and there's
email and they're setting them up with
all of the different services that we
have and so there is you and everything
almost
incrementalization and that and I have
to be able to take that on at the front
end and then eventually you know it'll
it'll come back in and so you do need to
make sure that you are fluid enough
essentially with cash so that you can do
those kinds of things now there are
other options and that's why there's you
know people go through funding and
business loans and stuff like that and
we'll talk about that another time but
you do need to think about such things
because you don't want to be in a
situation where you're like ready to go
you've got a customer and everything
there and you don't have the funds to be
able to actually start the project so
you need to think those and you want to
do that beforehand because you don't
want to go through all this get a
customer to accept it and then come back
and say hey I need to get paid up front
maybe more than I was or you know maybe
you didn't ask for any pay upfront so
maybe you need to but you need to be
able to cover you know those kinds of
expenses that it made me think of one
other thing be I'll interject that now
so I don't forget about because it kind
of flows with that the other thing is if
you are just starting your business we
tend to bootstrap a lot of our business
with our own money or finding the
cheapest or the least expensive way of
doing something now the problem we run
into is a year from now chances are a
lot of those free services or those
cheap Services expire and we suddenly
have a balloon of expenses at the
beginning of the next year because we
didn't think to follow up on that or oh
we did it a year ago and it's off our
radar so when you do things like that
make sure you include that in the budget
that hey in 12 months I'm going to see
an uptick of this or I need to make sure
I schedule hey let's revisit this a
month before this happens so that I
don't get blindsided by like if you're
AWS you have a free tier for a year you
get to the end of the year and all of a
sudden you're paying $50 $100 a month in
server fees that you weren't paying
prior so just kind of be a little
forward thinking with the budgeting
sorry I think that's that actually
follows up well with we do a lot of our
own uh bootstrapping and stuff like that
and we need to it's I I refer to them as
in my head really as like split expenses
there are things where it's like because
we are maybe working out of our home
that we have an office we have a phone
we have a computer and printer and some
of these things if we go you know if we
grow beyond that or we may get to a
point where the company the company
needs to own some of those things then
the stuff the expenses that we were
essentially sharing or we were
essentially loaning the company our you
know facilities and products and all
that kind of stuff now suddenly we're
going to flip it over the company is
bearing that cost then that's only going
to change your expenses structure you
know it's things like if you go from it
maybe that you use your own personal
cell phone all the time but you get to a
point that there needs to be a company
cell phone or a company sell plan and
now you're going to have a personal plus
the company and now that expense you
know it's going to be an additional
expense so even while there are you know
free services and trial periods and
stuff like that there's sort of stuff
that we do as well we essentially give
our business a free period or a you know
free tier or a trial period because
we'll allow our business to sort of
piggy back on top of some of the things
that we do now back to the accounting
itself a lot of times that's what gets
companies and particularly startups into
trouble is they just use their own bank
account they use their own software and
all that and they're just like well
that's just business expenses but then
when you get to the end of the year and
you need to actually categorize them
those haven't been split out or if
somebody wants to you know it's like
well did you you know buy that printer
for the company did you buy that for
yourself and you have to like you know
figure all that stuff out you have to
calculate things and all that that is
cons really be a pain in the butt and
sometimes it's even the data gets sort
of Lost in just because it's being
shared by too many people so one of the
things early on is is set up your
business accounting so it is your
business you're not doing personal stuff
out of that it's not in a person it has
its own bank account it is not your you
know your personal account that you're
using for that find a way even if you
don't want to go through setting up a
bank account at the very least like set
aside money that is very much like a a
register that is like I put $1,000 into
the business and this is where that
money went or you know this is where it
came and then this is how it went back
out so you're tracking all of the ins
and outs for the business so that you
don't get further down the line and
realize that oh crap I don't have that
information so in the challenge side of
this I think to start out is actually
because it goes back to the sort of the
first couple things we talked on is take
a look at your budget if you've got one
awesome just like take a look and make
sure that it's up to speed that it's
current because you know things change
if not then build a budget and it it
doesn't have to be really that complex I
I I have for a long time had a
spreadsheet that is like lined out for
every month I've got my monthly budget
and every year I create a new one and I
plan out what is it going to look like
this year what are my expenses and it's
it covers some of the stuff Michael said
because it's things like I know that I'm
going to get you know hit with an extra
expense in July or December or February
or whatever it is and then every year
those things you know will change a
little bit so I'll make the updates but
then I know that's like I need to have
this amount of money coming in because
this month I've got this amount to go
through and it also allows me to do
things like which is crucial I think as
a when you're in a small business is it
allows you to understand where like you
can pay yourself where you can pay a
bonus or where if you can afford to give
your employees a raise and things like
that is looking at all right you know I
may have a pool of money but that money
maybe is going to disappear next month
because I have an extra pool of expenses
that I'm going to have to match up
against it so step into the budgetary
side like put your little account hat on
and just look at like what is the ins
and outs and do your best to like walk
through what makes a business run to
make sure that you have those so it's
things like you know do I do I include
somewhere that my business is consuming
electricity and it has phones and it has
maybe Printing and it has web stuff it
has server fees it has you know even
things like coffee or something like
that you know the simplest things like
the making sure
that you put those into your budget so
that now you have a very clear and
hopefully precise and exact budget of
this is what the this is what I expect
to you know go out and then as it comes
in you know making sure that you match
that budget and if not make your
adjustments accordingly thoughts on that
challenge yeah I like that now one thing
I'll throw out though because you know
granted we are a developer developer
podcast for those of you that may not
have like full laptop you may be
watching us on your phone or on your
tablet you know if you don't necessarily
have software spreadsheet software you
know you could use uh Google Docs has
free has a free sheets application
there's open Office you know you have
Microsoft Office even then go old school
one of the best things I like doing is
taking poit notes and just writing an
idea on a Post-It note putting it on the
side wrri another one down putting it on
the side sometimes that's a great way to
brain dump your ideas or your expenses
on paper put them out and then you can
kind of categorize them and it makes it
very easy to take it from that and
putting it like into an organized sheet
or at least in a on a piece of paper in
a way that makes sense so you can track
it yep that's a that is a great
recommendation that's bonus material for
those of you that are still listening to
the podcast this laid into the
episode that being said we get to wrap
this one up so as always if you have any
ideas suggestions recommendations or
feedback on any of the challenges let us
know at info@ develop
or.com you can also reach out uh you can
leave us feedback wherever you you know
you're listening to this or watching
this whether it's out on YouTube and the
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wherever you listen to podcast you can
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find a way to get that communication
through to us so we can take that
feedback and build a better
podcast so go out there and have
yourself a great day a great week and we
will talk to you next
time bonus
material so in addition to the kind of
prey bonus I gave during the podcast uh
one thing I found that helped me uh and
this took time through multiple
different businesses over the years that
uh through different startups I worked
on is you kind of touched on it during
the podcast write down what it is that
you need to buy for your business or
what you need for your business but then
also write down what it is that you're
using of your own stuff are you using
your laptop are you using your printer
are you using your phone you need to
distinguish what you is that you are
using from your personal devices or
personal material versus your business
material so that you kind of get to the
end of the year with taxes and you know
how to split that up because taxes can
be a real pain in the butt when it comes
to uh what did you spend on your
business and how because you don't want
to spend something on personal applied
for taxes and then get audited by the
IRS and that's you I think that's where
I'm going to go with this one too is
there's there's two things is one is
that you make sure that you as you're
doing your budget as you're thinking
through stuff is think through common
business expenses and how are you
addressing those because it's things
like for example like marketing well if
you get to end of the year what did you
do that would attribute to marketing
related expenses and it may be things
like you have a website so maybe your
website is not a software expense it is
a marketing expense because that is your
company website now the thing that I did
which is sort of the follow-up to
Michaels when I started out way way back
and said I am going to have a business I
actually sat down at one point and
listed out what do I need as a business
which was basically I sort of looked
around my work area at work and said
what kind of stuff would I need if I was
going to do this on my own and this was
back in the day where there was things
like a fax machine a speaker phone uh I
think a cell phone it may even been
before cell phones were really that
common but you know I had to have a
phone that was a business line
effectively I had to have an email
address that was a business email
address uh you know a business banking
account there's all those things so that
I was over time that was actually part
of how I also bootstrap the businesses I
would go say hey I'm going to need one
of these and so I would save up and I
would personally invest in the business
and then I knew that like hey I bought
this thing really it's for the business
and I didn't necessarily you know I
probably lost out on a lot of business
expenses I could have applied to taxes
along the way because it was a little
bit here a little bit there but it did
allow me when started a business to have
a lot of that stuff already there that I
could be like this is my you know this
box is the stuff that is the businesses
and it's not my personal stuff and so
doing that sooner rather than later
helps you because it is very difficult
after the fact to figure out how to
split those expenses out and where that
went and what was all there versus doing
it along the way and particularly when
you're doing this you know because it's
it's easy to go out like go shopping and
you get a couple of things for your
business but you also get a couple
personal things and now you just have a
receipt that if you just have the total
you don't you know you don't remember
what went where and so there's some of
those kinds of things that it's going to
help you trust me it will help you at
the end of the year or when you're
really starting to try to like nail down
these budgets to keep track specifically
of what went to what bucket personal or
business that puts us to time to wrap
this one up because we got to go we got
businesses stuff to do working in our
business on our business beside our
business above our business below our
business all of that all around our
business we got crap to do so we're
going to wrap this one up hopefully you
guys have enjoyed this we are just
getting started yet another season and
we got plenty of things ahead of us so
go out there and have yourselves a great
one and we will talk to you next time
[Music]