With all of the economic uncertainty going on right now, I have focused the last several episodes on money and finances in business. I continue to get questions surrounding this topic so I’m diving deeper into it in this episode.

A lot of you have been asking what I personally have been doing with my money in my business, so in this quick tip episode of Art of Online Business, I’m sharing a behind-the-scenes look at my business and how I view my business expenses.

My view has evolved over the last several years. At first, I spent freely. If I wanted something, I got it. After a while though, I really started to be conscious of my money, and I realized that my profit margins were much lower than I expected. That’s when I started to change my mindset around my business.

We’re here to make an impact, and we can’t make an impact if our business isn’t making any money. I am now much more strategic and intentional about my business expenses and look at it all from an ROI perspective and not just a financial one.

In this episode, you’ll learn:

• How I used to manage my money in the early years of my business
• When I realized that my profit margins were low
• The way my bookkeeper helped me change my mindset
• The 2 different categories that I put my expenses into
• Why I prefer to see them as investments instead of expenses
• How I evaluate ROIs on the business expenses
• The way I look at profit margins for my offers

Links & Resources:

• The Art of Online Business website
• DM me on Instagram
• Visit my YouTube channel
• The Art of Online Business clips on YouTube
• Full episodes of The Art of Online Business Podcast on YouTube
• The Art of Online Business Podcast website

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Transcript:

Hey my friend, welcome to the Art of Online Business Podcast. My name is Rick Mulwray and I’m an online business coach. I’m an ad’s expert, and most importantly, I’m a dad. And this show is where we help established online course creators and coaches create more profit, more impact with less hustle. All right, let’s get into it. What’s up, my friend? Welcome to episode 631 here on. The show, Rick. I’m already here. And on today’s quick tip, I want to get into a lot of you been asking for more sort of. Behind the scenes, like what I’m working on in my business. What do I think about things that I’ve been doing or have. Done and sharing all that with you? And I don’t have a good reason for why I haven’t done more of that. But regardless, that’s starting today. And so if you’ve been listening to the past several episodes here in the podcast, you know, I’ve been talking about a lot of money talk here in the show, right, where, you know, I’m recording. This on August 24th. So pretty much the last week of. August in 2022. And there’s a lot of economic uncertainty and and all this other stuff. And so we’ve been focusing a lot on revenue and expenses and. How to play in your business and what to do if there is a recession. Or economic downturn or what have you. And so. In the last episode here in the podcast, I had my bookkeeper, she’s my de facto CFO, Emily Sandberg, from Cashflow Coaches on the podcast to talk all about. Strengthening the financial health of your online business. Emily has been a game changer, to say the least, for me. And my business and. Really how I look at. Money from that I’m making, but also from the expenses standpoint. And I’ve been working with her for a few years. And so today I thought I’d share with you sort of how I’ve evolved, if you will, over the past several years about how I view business. Expenses in my business. I’m in year eight and one. Half. Of of my online business. 

I started in January 2014. We started making money. Very early on now. Again, I left the corporate world in the fall of 2012. Just to add. Some context. Here. I left the corporate world. The end of. Or the fall of. 2012, and I didn’t start making any money until. February. Of. 2014. I floundered for a solid year and a half. And so it’s not like this overnight thing that all of a sudden I’m making money. From webinars or from courses or. What have you. No, it wasn’t the case at all. But anyway. I was making good money in the first. Year. We doubled. Revenue in the. Second year excuse me, we quadrupled. Revenue. The from year one to year two. In year three we doubled and then year four we. Hit seven. Figures. And so, you know, and that was 2017 and not sharing this would be. Like Ra Ra Rick. It’s more so like the money. The business was generating revenue and. I used to. Spend. Really freely. So it’s like if I wanted something for. The business I’m. Talking about, if I wanted something. Like I just went and got it and there was no consciousness or intentionality around my spending around whether there was any kind. Of ROI for the. Expense that I was incurring. I just went and I just went and spent it and. For so long and it obviously it makes sense now, but for so long, the first few years of the business, like I always felt like. That’s making great. Like, where am I? I think I know. I know so many of you can relate to this. I was making great. Money from a revenue standpoint. But I felt like there was so. Little in the bank. To show for it. And, you know, this is the first couple of years, I’ll be honest, I didn’t really track. And I mean, this sounds funny to say, but recognize the. Importance of really closely monitoring my profit margin. And then once I did start watching it, it was low for for me it was low like it was 25 to 30%.

And I’m like, where is this all this money going? And so it was really. Frustrating and. It wasn’t until. Frankly, in year four, year five, that I started thinking I’m really serious about this. And. Really change start to. Change my mindset around the expenses and what I’m spending in the business. And again, a. Few years ago when I started. Working with Emily as my bookkeeper. My de facto CFO, it really changed the. The mindset around looking at what I’m spending in the business. Differently. So if you heard the last episode Emily shared, if you’re in the 40 to. 60% profit margin range. You’re doing quite well. And so my goal was always to get that 25%, 30% up to at least a minimum of 50%. And so here’s how I look at expenses. Number one, I kind of. Stopped just. Spending willy nilly in the business. On Oh, that sounds good. Let’s go, let’s go get that tool or let’s buy that or what have you. Without being intentional about it. And I know that that sounds funny, but like. That’s the way that I was. Doing things. And so now I kind of break. My, the money that I’m spending in the business. Down into sort of two different types of categories. I look at like. My, my. Growth. Expenses. And I’ll tell you what I mean by that in a second. But then I also look at sort of like, what are the. Standard monthly expenses just to run the business, meaning like, okay, I use ConvertKit. So like there’s a cost there and just like sort of the cost of. Doing business so. You know, tools, your finance fees that you have to pay from stripe or what have you, the higher your fees that means you’re making more money. But I also look at it like growth. Expenses. And I could argue that I look at these that. Rather than expenses, I’m looking at investing, right? So I’m investing in team, I’m investing in contractors, I’m investing in my marketing this podcast. I’m investing in my fulfillment. 

For my accelerator coaching program, that sort of thing. Because I know. That the investing that I’m putting into. Those different areas of the business, I’m hopeful that they result in growth for the. Business. If I am paying for my email CRM. Like that expense, of course it’s necessary. To run an online business. But is that directly related to increased revenue? You could argue either way, like. Yes, absolutely. You could say, Rick, you’ve got like you could you could pair or you could put that email. Serum expense into your growth expenses. I just look at that as more so like this is the cost of doing business. This is a. Normal fee. Each and. Every month. And so that’s kind of how I look at the two different types of. Expenses. Whether it’s a growth expense or whether it’s sort of like a cost of doing. Business. Expense. Now with. Everything that I’m spending in the business. So. Emily’s team, Emily and her team give me a pencil every single month. And there’s also a balance sheet and. A cash flow report. But the pal I’m. Looking at line by line and I meet with Emily every single week and go through. That pal with her. And what I’m looking for is, is there an ROI on each one. Of these line items in my pal and and I’m not talking just a revenue. Roi when I’m looking at ROI, I’m. Looking at it in kind of. Like three different ways, three different types of ROI. The obvious one is, am I getting a. Financial ROI, right? So if I’m paying a marketing person on my team, for example. Well, I can directly attribute financial ROI to what. I’m paying them. And I like to see a minimum, a minimum. Of two X or Y on. What I’m paying somebody. Who where you can directly attribute. A financial. Roi to that role. So if it’s a sales rule, for example, that’s super easy to track other roles. It’s not so easy to do that. And I recently did an. 

Episode here on the podcast about coming up with success metrics. For example, and measuring the. Roi, if you will, of like an assistant, that sort of thing, where it’s harder to directly attribute. Financial revenue from. From, from a role like that. But anyway, I’m looking for some form of ROI on every line. Item in my pal. So those types of ROI is. I’m looking. At are. Financial like am I getting a. Financial. Return time, am I getting time back? So that’s an. Easy one. To to be able to track, for example, with like a VA or an executive assistant or what have you. You can offload things off of your plate and let’s just say they’re. Doing. Whatever, 10 hours a week for you. Well, you are buying 10 hours a week back for yourself. So there’s an ROI rate there. So I would say, okay, cool, I’m getting an ROI there of time. The third category is what I call like. Stress and energy. So am am I getting an ROI on. My experiencing less stress because of whatever this this role in my team, this tool, whatever it might be or the energy side? Is this increasing my. Energy because either I don’t have to do it. Or it makes it. Easier to do that sort of thing. If it doesn’t have if I’m not checking at least one of those boxes for each. Line item on my pal I’m looking at, all right. Let’s get rid of this or I’m looking at. Okay, if we get rid of this, does it drastically affect. Anything else in the business? And so. That’s how I’ve started to look at the the. Expenses that I’m putting out, if you will, in in the business. I also look at both short term. And long term and both and again, both in terms. Of. The expense. Itself versus the ROI. So let’s just say, for example, that I sign up for whatever a year of. Click Right, formerly tennis pro Click View, which is the platform that I use for. Landing pages and course in funnels and. 

All that stuff. So let’s just say I pay up front for the year. Well, that’s I’m. Taking that expense. Upfront. But the longer term for the next year, number one, I’ve already paid for it. And number two, I know. That that investment in that. Year long fee paying upfront for it is going to pay off so. Many times. Over. Right. And so I’m always looking short term and long term. Another thing that comes up is. When we are thinking about making a hire and this. Comes up a lot in our accelerator program where somebody is thinking, oh, I want to hire a what’s a good one here? What’s coming up a lot is I want to hire a. Marketing assistant. To do a. Social media strategy and implementation. Look at my email marketing and all that different type of stuff. And so maybe. Just as a number, that. Role is for super easy math. Let’s just say it’s 60 grand a year, right? And so 5000 a month. And if if they’re an employee and they’re on payroll, it’s going to cost you more because you. Have payroll taxes and so forth. But anyway, let’s just call it for easy for simplicity here. Five grand a month. Well, someone could look at you could look at that and say, well, I don’t have $60,000 to be to. Be spending on this. So what I would do, number. One, I’m. Not looking at it. Over a 12 month period. I’m looking I mean, I am, but I’m not at first. I’m looking first at okay, let’s look at this. In the next 90 days. That’s about 15,000. And if I’m looking at it from that perspective, what kind of ROI can I. Begin to see within those 90 days from this. Role? Right. And so if someone’s responsible for social media and this is a big piece of the business for you and the way that you mark it and giving you a content ideas so that you can make podcast episodes or videos for your YouTube channel or what have you.

And they are doing your email marketing. Well, you’re going to know fairly quickly once they get up to speed what kind of ROI this role is going to give you. And so that’s how I look at that. And so and I start to make. Some estimates, right? And so I say, okay, if I’m spending, then. I, then I look at even further if I’m spending 60 grand a year on this role and they and their primary goal is to, you know, to bring people in, attract. An audience into the. Business so that. We can sell X, Y and Z. Then I’m looking at what what’s the potential revenue there? And so, again, just as a simple. Example, like what if their work is going to create $300,000. In revenue in that first. Year? Well, now it becomes much easier to justify, if you will, that 60 grand because you’re looking at, well, I’m five exiting that ROI in year one. So that’s how I start to look at it. And of course, you’re never know for sure, but that’s sort of the. Mindset. Shift that has happened over the years where it’s like, All right, if I. Spend this much money on something. On a role, whatever it might be to go to a. Conference, that’s always a good one too. I know somebody. Who. Recently went to a conference and spent money there just to attend the conference, and they came away. With hundreds of thousands of dollars worth of business. I would say that’s a really good investment of both. Money and time to. Go to that conference. I want you thinking in through the lens of ROI, what is the why of you. Hiring this person, you adding this. Tool, you doing. This, you’re doing that. And again, it’s. Not just financial ROI, it’s. Also time. It’s also stress and energy. The last thing that and. I never did this early on in my business for the first several years of the. Business. And I think I find that a lot of people don’t do this. And I would really encourage you to do this is to whatever your offers are in. 

Your business. You want to be looking at the profit margin of the offer. So I look at profit margin, for example, for for accelerator, right? What is it. Costing. Me to run accelerator and what is it costing me to fulfill. On that program. Versus the revenue that it’s generating? So just as a simple number, you know, number one, do you want to you want to figure out what is the profit margin that you’re comfortable with? Let’s just say it’s 50%. Well, let’s just say I’m. Generating 50,000 a month on a program and it’s costing me as a simple. Number, 25,000 to fulfill on it. And, you know, because you have maybe you. Have coaches or whatever it might be. So there’s your 50,000 or excuse me, there’s your 50% profit margin. Most people don’t look at the profit margin of your offers. And then I’ve done other episodes here where I talk about. How to increase profit margin, and so. I would really encourage you to do that. That’s something that I do. Again, this all comes down. To looking. At the expenses that. You are. Spending in the business. Strategically, and that is what’s going to really improve the health of your business from a financial perspective and allow you to become a better CEO of your business. In the. Process. Because that’s where we’re looking. We’re here. To make a big impact and we can’t make an impact. If our business. Isn’t making any money and we’re not able to keep the business right. And so. That’s how I look at my. Business expenses and. Really how it’s evolved over the past several years to become much. More intentional and strategic about it and really looking at it through an ROI perspective and not just financial. All right, my friends hope. That was helpful for you. Thank you, as always. For tuning in today. You’re amazing. You’re awesome. Thank you. Till next time, my friend. Be well and I’ll talk to you soon.