This Is Woman's Work with Nicole Kalil - 203 / Treating Your Business Like A Business To Protect It (And You) Financially

Episode Date: April 1, 2024

There are a lot of women out there that are in business. In fact, around 40% of all US based businesses are owned by women, and these businesses employ around 10 million workers. As it stands today, women are more likely to start a business than men are. Which makes you brave. Because running a business in any form and at any scale is hard. Each and every stage has its own challenges, and those challenges evolve, they don’t disappear. On this episode I share my lessons on how to treat your business like a business, so that you can protect that business AND yourself. So you can not just look like a real business, but actually be one, so you can go into your work with confidence and credibility, and so your business challenges don’t bleed into and become your personal challenges too. As the quote says: treat your business like a business and it’ll pay you like one. Treat your business like a hobby and it’ll cost you like one. Know your value. Find your people. Give greatly and protect fiercely.  Like what you heard? Please rate and review  Thanks to our This Is Woman’s Work Sponsor: Being a business owner can feel lonely, but there’s no valid reason to “go it alone”. You don’t have to! And if you’re feeling alone, join me for our BE hive retreats… you’ll come out buzzing, I promise. Learn more by visiting https://forms.gle/qaKN8caGfejWRPvg8  Use Square for billing, contracts, recurring invoices, and more! It’s my go-to resource for all my business needs and there are a ton of great tools you can leverage to set your business up like a business. Use this link and you can get free processing on your first $1,000 in sales!

I am Nicole Kalil, and you're listening to the This Is Woman's Work podcast, where together we're redefining what it means to be doing woman's work. And if you tune in regularly, you know that this isn't a one-size-fits-all answer. Woman's work is being and doing whatever feels true and right and authentic to you. You are the decider. For many, though certainly not all women, doing what feels right can lead you down the path of creation, of doing your own thing, of starting your own business or having a side hustle, creating your own product or service or your own craft or art or your own offering to the world. Women's work doesn't just show up in the business realm, but there are a lot of women out there that

are in business. In fact, about 40% of all US-based businesses are owned by women. And these businesses employ around 10 million workers. And as it stands today, women are more likely to start a business than men are, which makes you brave. I mean, regardless of gender, anybody who starts a business is brave because running a business in any form and at any scale is hard.

Each and every stage has its own challenges. So while the startup phase is pretty freaking scary, I work with enough business owners to know that the challenges do not end there. And I've been in business long enough myself to know that the challenges only evolve. They don't disappear. I've had the opportunity to work with different genders over my career, though the first 15 years were mostly with men and the last 10 years has mostly been with women. So I can tell you that there are many of the same struggles across the board,

but I have noticed a few differences, some nuances in how women approach their business. And many of those differences are good and very productive, but a few of them are not so much. One of those not so great nuances is not compartmentalizing. More specifically, many of the women that I talk to have a hard time running their business or even thinking of their business as a business. And they too often blend everything together. Yes, in their minds, but also with their time and their finances and their decision-making, hiring, managing, firing employees, making investments, and so much more. Said another way, rather than having their business be a separate entity, they mesh it together with their identity, their personal decisions and finances, their family time

and schedule, and so much more. I've heard it sound something like this. I want to hire a new employee, but I can't because the roof on our home needs to be fixed. Or I'd like to invest in this amazing website, but I don't because the roof on our home needs to be fixed. Or I'd like to invest in this amazing website, but I don't have the money because everything I make goes right into our personal bank account and gets spent. Or I didn't get my work priorities done today because I spent an hour of my workday

talking to my sister, my mom, my friend, or fill in the blank of someone in your personal life reaching out in the middle of your workday and you answering out of obligation or guilt instead of prioritization or desire. Or it could sound like I've partnered with a friend on a project and they're not pulling their weight. But rather than having a conversation or renegotiating, I'm going to do all the work and only make half the income because I'm afraid that pointing it out will damage our relationship. Or I'm having a hard time collecting payment from a client and I feel

really awkward or uncomfortable about it, but I didn't have them sign a contract because it's someone I know from the PTA or whatever. I could fill this entire episode with examples of ways that we are not thinking or acting like a business owner when we're doing business. And when it comes to making business decisions universally, this is regardless of gender, the most common thing I hear, the most common argument against making that best decision or even getting things set up in the right way for your business is, I don't have the money. And trust me, I get it. When you're new and growing, you may not have the business funds to set things up perfectly

or at the level that you desire, but done is better than perfect in most cases. And I have to point out that there are many free or low cost options available today. I know that when you're new or in the startup phase, you probably think that you'll eventually get to a place in your business where you stop saying, I don't have the money. And that might be true for a very small percentage of the population of business owners who I've never actually ever interacted with. But for the most part, we just say the same thing about bigger investments. No matter the phase of business you're in, there will always be 1 million things that you could spend $1 million on, but you have to decide what's most important

for your business. What does your business need? What are the best opportunities to invest in? And what is the expected return on investment, ROI, for anybody who's looking to improve their business or finance lingo? So today we're going to talk about treating your business and setting up your business like a business so that you can protect that business and yourself. And so that you can not just look like a real business, but actually be one. And so that you can go into your work with confidence and credibility. And so that your business challenges don't bleed into and become your personal challenges too. As is always the case when we talk about things like this. I am not immune from challenges. I've made business decisions for personal reasons. I've said yes to things that I should have said

no to and no to things that should have been a yes. I have said I don't have the money. In fact, I said that this week. So I am not immune. And most of what I've learned, I've learned from my own experience. So before I dive in, I must acknowledge that starting and running a business can be really overwhelming. The to-do list seems like it's never ending. It can be scary and it can be frustrating. And I am not suggesting that we don't or shouldn't invest ourselves fully into it or that it doesn't feel personal at times. I am suggesting though that we don't drag our personal shit into our business or carry our business discouragements to the dinner table as an example. I'm also suggesting that your personal accounts don't get instant gratification from your business wins and

your business P&L isn't impacted by your love of amazing shoes or epic vacations. Okay, so why am I talking about all of this? Well, it's the beginning of April, which is Financial Literacy Month. So I'm going to focus the conversation today on business finances. Also, because it's one of the small handful of things I did do well when I started my business and I continue to do mostly well to this day. And lastly, it's the thing that I hear most business owners, most women in business struggling with the most. So my background is in finance. I worked at a Fortune 100 financial planning company

for about 15 years. And while I am not a financial advisor, I did learn enough to be dangerous. Having said that, and as kind of a disclaimer, anything that I share today should be run past your financial advisor to make sure it's a good idea for you because there is no one-size-fits-all financial solution. And there are really great options out there for no-cost and low-cost planning if you're just getting started. So now that I got that disclaimer out of the way, let's talk business finance. Starting with that first phase, which for most businesses happens kind of in your own mind. It's this idea, your passion, your vision, or hope for what your potential business could be. For many people, it never gets past this stage, but for those that it does, it typically involves

somewhat of an initial discovery or testing phase. We're talking about some basic actions here, doing some market research, talking to people who have successfully done something similar, creating a loose business plan, thinking about your initial product or service, picking a business name, even if it's not your forever name, thinking about how you'll structure your business, like whether it's just going to be you or you're doing something with a partner or a group of people, or if you will need help right away, or what type of startup resources or capital you might need. This stage is mostly about what's happening in your mind and in your conversations.

Let's call it the pre-business phase. It's exhilarating and it's scary as shit. It's an idea for a business, but it's not a business yet. For many people, this is happening while you're simultaneously making money at your job or in another career. And it's a great time to strategically begin to save for that business or to make contacts for potential investors, which will hopefully at some point bring you to the next phase, the startup or new business phase. It's when your business actually becomes a business instead of just an idea. Here is where we have the opportunity to make this mental and practical shift.

And here is where many of us are missing the mark. In order to start a business, it's important that you create a business, an entity that is not you. You register that business, get your federal and state tax IDs, and you open your business account at the bank and you fund your business. There may be a few circumstances where you don't have to do all of this or where that isn't true, but generally speaking, this should all be happening before you go into marketing or set up your website or sell your product or take on clients. Why? Well, first for your own mindset. So you literally separate your business from your personal, social, emotional, familial, and all the other parts of your life.

So you can see it for what it is. But also, so you start your business on solid ground and you protect yourself. Now, you might be thinking, well, Nicole, I don't have the money to pay the registration fees or to get my EIN. Well, friend, I say this with all of the love and respect in the world, but if that's the case, then you're not ready to be in business. Take a step back and determine how much money you need and put a plan in place to get there and then start your business. Which brings me to the topic of funding your business. And when I say funding your business, that could be wildly different things and can be completely different dollar amounts,

depending on your business and your needs. This could mean having a small amount for startup costs. It could mean taking out a business loan or raising capital. This could mean having a small amount for startup costs. It could mean taking out a business loan or raising capital. It could mean credit cards or crowdfunding, grants, or using your own personal assets. Bottom line, what does your business need? And what do you need your business to do for you? Do you need to hire an employee or rent space right out of the gates? Do you need to buy inventory? What do you think your operating expenses will be? And how much do you need in salary from your business? For some people, that answer might be zero dollars. And for some, it could be a number with many, many zeros. So let me give you the example of how I got started.

I left a lucrative, secure position at a Fortune 100 company to start my business. So the first thing that I needed my business to do was to replace an income, or at least part of an income. Yes, we adjusted our living expenses. We canceled many subscriptions, many wine subscriptions for sure. We scaled back and we cut unnecessary expenses so that I only needed to make about 30% of what I had been making, but I still needed my business to generate revenue and to pay me, to pay our household an income. I also want to acknowledge quickly the privilege that I had in that Jay does do very well in

his business. So I didn't ever worry that we couldn't cover our basic needs, but I also didn't want to put all the pressure on him. And by the way, we had a period of time in our relationship where it was reversed, where I carried the kind of financial responsibility while he was building his business. So we've sort of covered each other a couple of times. Anyway, I knew that I needed to make some initial investments and I needed to pay my household or myself a certain, and I'm just going to put in air quotes, salary, a certain income so that our personal life didn't ride the financial and emotional roller coaster

of my new business life. So some of those initial investments above and beyond my income were things like registering my business or setting up an LLC. I wanted to get a new computer. I needed a functional workspace at home. I needed a little bit of money to outsource setting up some of the technology because technology is the bane of my existence. And I had some marketing materials that I thought that I needed, as well as having a business coach. Those were some of my big startup priorities. So I took that monthly income need that we had figured out. Again, this is what I needed to make, not a goal or a wish. And I took that monthly income need number and I timesed it by six. And then I added all of those anticipated costs, all those other initial investments that I just listed out that I

wanted to be able to make and do early on in my business. And that's how I came up with the amount that I needed to fund, the amount that I needed to have in my business account to fund my business. So depending on who you ask, I've heard having anywhere from three months to 18 months of what you need to run your business, including what you need to pay yourself, is what you want in that business account when you get started. I opted for six months. And also, just so you know, the timeframe from my pre-business phase, where it was just an idea and a hope, to actually starting my business was about eight months. So when I started my business, when I entered that startup phase, I was registered. I had my business checking and savings account and six months worth of anticipated income and

business expense needs in my business account. Now, I said we want to separate personal from business, but the way that I funded my business was initially from personal assets. I saved money from my personal side to start my business. And that was a decision that I made and a conversation that I had with Jay. And that might not be the way that you do it, but from the point I started my business, that is where everything became separate. Now, here's where I want to drive home the point about treating your business like a business and not getting it all tangled up with the personal stuff. If I had a job, it would pay me a salary and we'd live our life based on that salary.

If I got a bonus, it would not change our lifestyle. If I got a raise, we might make some lifestyle adjustments. So that's how I think about my income in my business. My business pays me a salary. My business back then paid me a starting salary. There were some months where I didn't make enough to cover that salary, so I needed to use some of those initial funds to make up the difference. But ultimately what this did is it helped me feel like my family and all of our emotions didn't need to ride the roller coaster of being a new business owner with me. So as an example, let's just use round numbers for me to make this point. Let's say I had $50,000 in my startup fund. I didn't, by the way, that would have been really nice. And let's just say that I was paying myself a salary, I put in air quotes, of $5,000 a month.

In that first month, maybe I made $500 in my brand new business, which got deposited directly into my business account. But my business account still paid my personal account $5,000 that month. It still paid my salary. So now let's say my business account has $45,500 in it. I took the $5,000 out to pay my salary, but I made $500. So that's what's left in my account after that first month. Let's say the next month I make $2,500. I'd still pay myself $5,000 and now I have $43,000 in that account. And let's say for many months, that account gets smaller and smaller, that business account, which is not unusual during the early stages. But let's just, for example, say in month 10, I make $15,000 from a big contract.

And of course, I'm super excited, but I still pay myself, my personal account, $5,000. And I take that other $10,000 that my business made and I use it to replenish those business account funds that I've been using along the way. Or maybe I use it to invest in something meaningful to grow my business. What I don't do is I don't increase my salary. Frankly, I wouldn't recommend increasing what you pay yourself any more frequently than annually and only if it makes sense, just like what would happen if you were an employee. If you have a great quarter in your business and your accounts are funded for whatever it is that you need and you want to give your personal account or yourself a bonus or a profit share, then great.

That's awesome. But you do not have your personal finances ride the highs or the lows of your business profits and losses. You should pay yourself first. Most likely you are your business. So don't prioritize everyone or everything else first because I promise you, you'll resent it. And burnout is probably right around the corner. You pay yourself and be damn proud that you can. And if somebody comes along and has judgment that you're paying yourself as a new business owner, or that you're paying yourself more than another employee, or that you're living too abundantly, or that you're making, and I put in air quotes, too much, as long as you're keeping the financial commitments

that you've made and you're compensating your team if you have one fairly, well, then I say fuck them. If they don't like it, then they should go take the risk and start their very own business because that's why business owners and entrepreneurs can make as much as they do when they succeed. It's not because they're smarter or better or more talented. I promise you that. Hell, it's not even because they work harder. It's most often because they took a risk that most people are unwilling to take. And if somebody wants to share in the upside of that risk, if they want to be partners in your overall success, well, then they damn well better share in the downside and be partners

in that risk. Now, let me be clear. I fundamentally and fully believe that employees deserve a fair compensation package, which includes salary, benefits, and likely perks. You should treat the people who work for you and with you with respect and they should be valued. If you have key employees, give them additional upside and perks,

opportunities for growth and additional compensation, or you will lose them to somebody else. But that doesn't change that you deserve to get paid first and foremost, because without your risk, nobody would be here to get paid anything at all. Which brings me to something else. If you're making money or spending money in your business, either track your business finances using a tool like QuickBooks, or you absolutely need to hire a bookkeeper if that's not in your wheelhouse. What you save in taxes or by having an appropriately tracked P&L or by being able to

make smart business decisions based on data will most likely cover whatever cost, whether that be the cost of your time or what you pay a bookkeeper, it will cover it. Plus having that data so you can make knowledgeable and effective business decisions based on real information that instead of just your feelings is invaluable in and of itself. When it comes to business finances, it's always great to have three people in your corner, your bookkeeper, even if that's you handling the books, your CPA, who's focused mostly on taxes, and your financial advisor, even if that's you handling the books, your CPA, who's focused mostly on taxes, and your financial advisor, who's hopefully helping you achieve and strategize for your future goals.

More often than not, these three people are focused on different things that intersect, but you need all three. I'm not suggesting that you turn over your finances to any of those people, but that you leverage them to help you understand, to help you make decisions and to monitor your business financial position. And a quick note to make sure you're setting aside money as you make money for taxes. For the love of God, pay attention to those tax payments. They can absolutely creep up on you. And I promise you, you do not want the stress of having to deal with the IRS.

So the last point I wanna make here is that you should be reviewing your business finances at least monthly, at a minimum, probably more frequently when you're new, but also don't do it every day or else it'll freak you the fuck out. And when you do have a bit of a handle on those business finances, begin to consider what are the best places for you to invest for your growth.

I've personally never had a hard time with the investing part. I've taken some pretty big risks along the way, but where I have made some big mistakes is in investing in things because I thought I was, and I put in air quotes, supposed to. I thought I should because I saw other people investing in them. I also sometimes fall into the trap of investing in things because I want to without taking a step back or having a clear plan for how I want those investments to grow my business versus just like fingers and toes crossed, hoping that they will. I think a topic for another day and one that I am hoping to cover in a future episode,

and another one of those things that I've noticed is nuanced for women in business, is our feelings, or maybe more appropriately, our fear around debt. Most businesses have leveraged and will leverage debt at one time or another, and part of that will likely include creating a new relationship with debt. I can tell you that I've had credit card debt as a business owner. I've borrowed money. I've took a business loan as a business owner. And I still continue to pay myself a salary during all of that because my business needed to leverage debt, but my family didn't. So the bottom line, and honestly, I probably could have just cut to the chase and said this, set up and keep your business finances separate from your personal ones.

Do not allow your business to put your personal assets at risk and don't allow your life to run your business. This is true whether or not you're single or married with kids or really anything else. Ultimately, when you make a business investment, or if you pay a business expense, you pay it from your business account, or you use your business credit card. If you're taking somebody out to lunch to ask them questions about growing your business, or if you're buying ink for your printer, or taking an Uber to a business event, or hiring somebody to help you build your website, that is a business expense and it gets paid by your business account. Buying a plane ticket for a vacation and you want the miles? Well then get a personal credit card

with good travel perks, but don't commingle your accounts. So that's a little bit about the structure of your business finances, but I have to talk about another part of business and money, and that is you getting paid for your work. First and foremost, you have to determine what your rates or your price will be. And I know that that's hard, but you decide what your product or service is worth, and then you test it out with the market. I've found that it can be helpful to look at what other companies charge as a starting point or as a range, but I never determine what I charge solely

on what other people are doing. And there are formulas and strategies to figure this out. And you're welcome to join my community to learn more about a few upcoming business retreats. I call them beehives. If you're looking for some support with all of this, because I find that most women undervalue and don't charge what they could be charging. In fact, a retreat can often be a great investment with a great ROI because you come out with pricing

strategies or ideas on how you can structure things differently that make you a ton more money. But bottom line, at the end of the day, you need to set your price, your fee, or your rate, and then determine before anybody ever asks you under what circumstances and to what point you'd be willing to negotiate. I know on any given day the four reasons that trigger my willingness to negotiate and to what amount I'll negotiate to for every single one of my offerings. And once you decide that, and you'll thank me for this later, think about and practice what it is that you will say when somebody asks if you'd be willing to do it for less or whether or not you'll give them a discount or if you'll do them some sort of big favor.

So you're ready to handle it in a way that you feel good about. Because trust me when I say this, those conversations are coming. And a quick side note here, whether or not you're a business owner, can we please all stop saying that we're looking for something that's, and I put in air quotes, reasonably priced or that doesn't cost an arm and a leg? Nobody knows what the fuck that actually means. And you are not the decider of what is reasonable in somebody else's business or for somebody's other customers and clients.

Neither am I. So say what it is that you're looking for and the range that you're willing to pay. As an example, I might say, does anybody know of a photographer that specializes in brand shoots that is willing to do it for around $500? And maybe even show a couple of examples of the types of photos I might want. Or if you reach out to somebody and they share their fee and it's above what you're looking to spend, ask if it's negotiable. Don't say, oh my God, I can't believe you charged that much. People charge what they charge because they've

determined that's the value and people are obviously willing to pay it or they wouldn't charge it. Stop expecting that people will lower their rates just because you can't afford them or that just because you can't afford them, that they because you can't afford them that they're unreasonable. Ask people if they're willing to negotiate. And if not, ask if they'd be willing to recommend somebody else that is in your fee range. Most people know other people who do what they do, but are maybe in an earlier stage of their business or they've structured things differently or they're able to offer a similar service for less and they're happy to make that connection. I refer at least 70% of the people who reach out to

me for individual coaching to other coaches, often because their budget isn't aligned with my rates or also because sometimes I think there's a better coach out there for what they're looking for and I want them to get the support that they need. And no matter what, whether you negotiate or not, whether you give a discount or do something as a favor, whatever it is that you do, put it in writing from a signed contract to a scope of work, terms and conditions, or a customer agreement, or even an email where they confirm what you both agreed to. I don't care what you call it or how you do it. I just care that you do it before you sell the product

or begin the service or offering. I personally use Square for my billing because they have contract templates, recurring and individual invoicing reports, and all the things for most of my business needs. I have a special link that I'll put in show notes if you want to check them out. There are tons of tools out there like Square that you can leverage for little to no cost. And at some point, yes, it might make sense to have an attorney to set things up for you or at the very least review them. But for now, there are tons of options out there and I don't care how well you know the person or how much you like them or they like you. I am telling you,

I create basic contracts and invoices with terms for my own husband. And yes, I do charge him when I do work for his business. It's the lowest I charge anyone, but I charge and I expect timely payment. You might think that that's insane, but I think it's business because I don't show up to a coaching relationship or a speaking event as his wife, and he'd be paying somebody else to do it if it wasn't me. So please make sure that your payment terms are laid out and that they're clear and that you have them for everyone. You will always run into people

who try to weasel out of paying or who pay their invoices months after they were supposed to. Setting things up correctly doesn't totally prevent that, or at least in my experience, doesn't eliminate all those uncomfortable conversations, but they do protect you and your business. I mean, good luck trying to chase down a payment on a handshake deal if they're not following through. And I think I speak for most business owners when I say that you'd be amazed at the people who don't follow through on their payments. So those are my hodgepodge of thoughts about business finances, but I'm going to ask financial advisors or savvy business owners who are listening in, what did I miss? What else should we be talking about when it comes to business finances or getting things

set up appropriately? We could do part two on this topic because I am sure that I've missed something important, but the bottom line is this. If you're going to start a business of any size, then start a business. Register that business. Get your tax ID and your domain, open your business bank accounts and credit card, figure out your initial funding, have a business plan and goals, even if it's a loose plan. Get some of your ducks in a row before you worry about the marketing, the promotion, and all the other stuff. Trust me, there will

always be plenty to worry about. But you learning to treat your business like what it is, a separate for-profit entity, is key. And if you've already started but haven't set things up correctly just yet, there is no time like the present. Being a business owner can feel lonely, I know, but there is no good reason in today's day and age to go it alone. You don't have to. And if you're feeling alone, join me and other exceptional women for our Beehive business retreats. You'll come out buzzing.

I promise. As the quote says, treat your business like a business and it'll pay you like one. Treat your business like a hobby and it'll cost you like one. Treat your business like a hobby and it'll cost you like one. Know your value. Find your people. Impact greatly and protect fiercely. All of that is woman's work.