Let’s talk about every entrepreneur’s favorite topic- finances! I know what you may be thinking, that is not a fun topic. It may not be fun but it is an important one! The hard truth is that you can’t run a successful business if you don’t know your numbers.
Don’t panic yet, once you know your numbers and you really understand them, finances can actually be fun!
If you find this topic intimidating and don’t even know where to start, you don’t want to miss this episode of the Empowered Business podcast. I sat down with Parker Stevenson to talk about bookkeeping and finances for entrepreneurs.
Parker is a managing partner and the Chief Business Officer at Evolved Finance; a bookkeeping firm that specializes in helping online entrepreneurs to build more profitable and financially stable online businesses.
For over 6 years, Parker has been advising some of the top coaches, course creators, influencers, and thought leaders on how to make more sound business decisions using their financial data. Before joining Evolved Finance, Parker spent five years at adidas America where he became the US product manager for golf footwear.
As business owners, we have to manage our income well if we want to continue to see success. There’s no way around it! Parker knows all there is to know about finances for entrepreneurs.
Parker has a lot of valuable information to share on the topic of finances for entrepreneurs. If you are interested in learning more, make sure to check out his free finance workshop for entrepreneurs.
If you are ready to start your profitable digital product business, make sure to check out my free training. You’ll learn the three secrets to creating digital products that sell like crazy!
Head over to http://monicafroese.com/listen to listen to this episode and previous episodes on your favorite podcast platform!
Monica Froese 00:04
You’re listening to the Empowered business podcast. I’m your host, Monica Froese, a mom of two and your secret weapon to creating a six figure digital product business. I’m on a mission to help 1000 Women make $100,000 a year. That’s right $100 million towards financial independence for women. As an online business expert, I am teaching you everything I know, right here week after week. So you can join us on the journey to $100 million dollars. Sound good? Then let’s jump in. Today we’re going to be talking about everyone’s favorite topic. I say that a little tongue in cheek because I know that you might laugh when I tell you that the topic is finances. But here’s the thing. You can’t run a successful business if you don’t know your numbers. And when you do know your numbers, and you can use your numbers to grow your business. It’s actually really fun. I know I sound like a nerd. However, it is also the truth. Today I am bringing on the show Parker Stevenson. He is the managing partner and the Chief Business Officer at evolved finance, a bookkeeping firm that specializes in helping online entrepreneurs to build more profitable and financially stable online businesses, which I think we can agree we’d all like to have for over six years, Parker has been advising some of the top coaches course creators influencers and thought leaders on how to make more sound business decisions using their financial data. Before joining evolve finance Parker spent five years at Adidas America where he became the US Product Manager for golf footwear. So let’s welcome Parker onto the podcast. So we can talk all about this fun concept of business finances. But just remember that you are not in business if you’re not making money. And if you’re going to make money, you need to understand how that money flows to your business. So this really is a fun conversation. So hang in there. And let’s welcome Parker onto the podcast. Parker, welcome to the Empowered Business Podcast. I’m so excited to have you.
Parker Stevenson 02:25
Monica, thank you for having me. I’m excited to be here.
Monica Froese 02:28
Yeah, so we’re gonna be talking about numbers today. But we’re gonna do it in a way that people are gonna enjoy. I think I personally think people are not doing so too. So I always like to get started with your entrepreneurial journey, where you got started, why you became an entrepreneur and what you’re doing today?
Parker Stevenson 02:44
For sure, we were talking a little bit about this, before we hit record, I have a very weird journey. Like, if you think about okay, I guess people won’t see the audio or see the video of this but nerdy looking dude with glasses probably got an accounting degree and has been in finance his whole life. And it couldn’t be further than further from the truth. For me, I actually kind of grew up a creative, I was a musician, I started playing guitar when I was like 10 years old, and ended up going to school for business, just because the practical side of me was like, Yeah, going to get into music degree feels scary as hell. And I’m teaching myself how to play music, I was already in a band. So I don’t really need to do that. So I’ll get a business degree as a backup. But for most of college, I was in a band. And that was my main focus. I was living in LA and going to school in LA, after I graduated, the band kept going, I have family in the music industry as well. So it felt like something that was doable. And we were actually a really good band. But I can say that without feeling like I’m bragging too much. But we were really good. But ultimately, it’s really hard to make it as a musician. And especially, I kind of came up in the music industry, when like Napster had kind of destroyed everything. And nobody knew what the heck was going on. So so it ultimately didn’t work out from a music standpoint, which is fine. It was exhausting. I was working a full time job, and also playing music and also trying to have a relationship with my now wife. So I kind of traded the band for actually getting married and having like a life. So it all worked out fine. But I was definitely someone who never thought I’d be in this position. Because I was a musician. I looked at myself as a creative but when the band broke up, I decided that my second love was golf because whenever I wasn’t playing music and working, or with my now wife, I was at the driving range across the street or playing golf with some of my buddies. So I moved back down to San Diego where I was from I got a job at TaylorMade Adidas golf at the time, Adidas owned TaylorMade which is one of the biggest golf manufacturers in the world. And that was kind of like a its business which I liked the business part of being in a band too. But I kind of felt like it’s at least it’s golf, I’m gonna like it and I had a really great five years with them learned a ton had great mentors and some great bosses and had overall great experience but kinda like I think a lot of entrepreneurs felt I was like, Yeah, I don’t like all these people telling me what to do and having other people in control of my future and whether or not is gonna get promotions and also just feeling like, I have to put a lot in to get not very much out I was looking at like the directors and VP level people, and they’re working 80 hours a week, 6080 hours a week, I’m like, Yeah, that’s not gonna go well for my marriage if I do that. So I just kind of saw a dead end in that regard. My, our best friends, my wife and our best friends, Cory and Anna, they had this little bookkeeping business. And I thought it was just really interesting what they were doing and like the clients they were serving. And so Cory and I talked more and more about what they were doing. He was kind of explained to me who their customers were, which were online businesses, and I’m like, what’s an online business? And over time, we kind of realize I’m like, I think I can help you grow this business just based on my kind of entrepreneurial chops from being in a band, and then all my corporate experience. And I think I think I can help you grow this. He’s like, I think you can, too. I’m like, but I know nothing about bookkeeping. He’s like, don’t worry about that. I’ll teach you all of that stuff will teach you the bookkeeping. And I’m like, okay, and looking back at it, it seems insane. But I quit my cushy corporate job took a huge pay cut, and partnered up with Cory yet of all finance. And I will honestly say that I’ve you know, after getting to chase my dream of playing music, and to chase my dream of working in the golf industry, I’ve never been more fulfilled, doing anything then building of all finance with Corey, and we have a great team. We have amazingly interesting clients. They’re all online business owners, and maybe some that a lot of people listening would maybe even know of. And here I am bookkeeping nerd after thinking I was going to be a rock star and I couldn’t be any happier with with where I’m at.
Monica Froese 06:42
That’s a fascinating journey. So first question is what kind of music
Parker Stevenson 06:46
so we were like alternative rock I grew up in the 90s. So I was I graduated high school in 2000. So my middle school and high school years, were growing up in 90s alternative, so we got compared a little bit to like Incubus, or even some, weirdly enough sublime or Green Day, I don’t think we really sounded that much like them. But we were very much rooted and just like 90s Hard Rock, but like melodic and stuff like that. So
Monica Froese 07:11
ah, fascinating. Yes, I graduated in 2003. From high schools, we can date ourselves here. So I grew up in the same same time frame, so I know who you’re referencing.
Parker Stevenson 07:21
I was hoping so because rock rock music in general just isn’t really a thing anymore. Like, you know, alternative rock and stuff like that. So I always feel very old talking about like, my musical influences. I’m like, oh, yeah, tool and Rage Against the Machine and Pearl Jam. And you know, all that. And I just assume anyone under the age of 30 is just like, yeah, none of that’s cool anymore.
Monica Froese 07:43
I’ll do my boyfriend when I was in high school was very into all that. So maybe I was definitely like the unsink verse. backstreet,
my wife is there to bond with you over that. I’m an unsynced girl.
Monica Froese 07:56
And I went to an all girls high school. So if I hadn’t had a boyfriend in high school, I don’t know how much I’d be that exposed to what you’re talking about. But he informed me so I’m in the know enough. Okay, so what year was it that you partnered with Cory on evolved finance?
Parker Stevenson 08:13
So is are August 1 2014, was when I officially started.
Monica Froese 08:19
Okay. Wow. So that that’s actually a long time ago, if you think about it, like, I think it’s it’s seven years. Yeah, that’s seven years. I actually some of my friends use you for bookkeeper. So I am fairly familiar with what you do. How big is your team at this point?
Parker Stevenson 08:38
So we just brought on so if you include Corey and myself because we are employees in the business. I believe there are 16 of us, which is crazy, because when I came into the business, it was essentially Cory and his wife who’s always kind of been part time she serves like one of our like key accounts like a client that they’ve worked with, for their friends with and have a close relationship with. And then our bookkeeping manager, Susan, who is the bookkeeper. So it was essentially Cory, Susan and myself in the beginning. And to think we’re here with now 16 full time employees is pretty good. I mean, it’s been seven years. So I guess some people are probably like, Well, yeah, it’s been seven years, you should be there. But it’s always just it’s always just such a trip to think about starting out this little family business and turning into something that’s now a lot bigger than just Korean myself.
Monica Froese 09:25
Yeah, you’re supporting 16 other families. I mean, that’s, that’s significant. If you ask me, I think it’s I have two full time employees. And that’s significant to me. I feel like worse. I mean, I have to in the business and I have a full time nanny who we pay. I always say legally, we do payroll. As a household employee not written off to our business. We follow the rules. It irritates me though, I have strong opinions on the fact that we can’t write off household employees because it’s after tax money that we pay, personally like comes out of our personal bank account. And I feel like that hurts women because 100% Yeah, and my CPA who I adore, I went on a rant about this with him. And he kind of wasn’t you wasn’t tracking my rant a little bit. I was like, I’ll stop because, but I do feel like it hurts women. And anyways, that is like a little bit of a side thing. But I do think it’s, it’s really cool growing these businesses that we get to support other families, which is like, it is wild. It’s, it’s wild that you started something seven years ago, and now you have all these other families you’re supporting. So I’m gonna guess go on a limb here that you’re not the one doing the bookkeeping anymore.
Parker Stevenson 10:32
I always joke around that I’m probably the worst bookkeeper we’ve ever hired. But I learned like I spent a year doing bookkeeping, learning it because to do it, right. Is this a real? It’s really a skill set. Right? I know, there’s a lot of entrepreneurs who tried to do their bookkeeping. And I’ll even say like, I think QuickBooks and Xero some of these bookkeeping software companies try to convince entrepreneurs, oh, yeah, you can use our software and do the bookkeeping yourselves. After doing this for seven years, and looking at hundreds of sets of books, entrepreneurs do not know how to do their own bookkeeping.
Monica Froese 11:02
You know what the thing is, it’s a waste of time. So I’ve mentioned to the courser recording, I have my MBA in finance. I worked with numbers and corporate, I’m really good. I do my own projections. I’m like, looking at my spreadsheet over my other screen like, good that stuff you should be doing. Yeah. Because you have to understand Yeah, I agree with I agree with that. And my bookkeeping, I remember in 2016, that’s when I quit my corporate job. And I think I made like 75 grand in revenue that year, I was attempting to do it myself on a spreadsheet. And it was a gigantic waste of my time. It was absolutely so time consuming. And I’m pretty sure it was January 1, that I gave it to the CPA, his wife was doing bookkeeping. Now I use a boutique service that also deals with online businesses because Okay, so let’s talk about this. Evolved finance specializes in online business, I think he was specifically course creators. My correct
Parker Stevenson 11:53
a lot. We have a lot of course creators and coaches and influencers a lot of online educators, for sure. Okay.
Monica Froese 11:59
So it’s a very different world, I would argue that one of the biggest differences is probably done, because the overheads different in a business like that. So you’re dealing with different profit margins. And it’s just what made you decide to reach down into that market?
Parker Stevenson 12:16
Well, it’s actually it’s all credit to my business partner, Cory, because Corey essentially founded of all finances like a teenager, Korea and his wife were sort of like personal assistants to a lawyer in LA. And then they started working in her family planning law office in LA. And then she eventually sold that practice and started an online business where she’s training lawyers. She’s really ahead of her time. And she was training other lawyers to build family planning businesses and stuff like that estate planning stuff, not family planning, estate planning businesses. And so when she was trying to find a bookkeeper who knew how to do the online portion of this, like core slash coaching program for lawyers, the bookkeeper was just doing it wrong. Cory was already so integrated into her life and into our business that eventually and Cory just I think has, he almost should have like been an engineer or something. He is a very linear, linear, logical thinker, that he said, Hey, I think I can do this. I think I can figure this out. And we’ll figure out the books. And so together, they sort of figured out there processes. And then as that first initial client started to network with other online business owners, they go, who’s doing your bookkeeping, bookkeeping, cuz my bookkeeper just doesn’t get it. And she’s like, Okay, well, here’s Cory. And so Cory started to work less as like an assistant and marketing person for her. And they still kept doing her books. But then they started to take other online business owners as clients and started to just build it up. Because the issue with bookkeeping, and I think accounting as well, in general. And just for listeners, the difference between bookkeeping is the book and accounting is your bookkeepers, one organizing the financial data for you, they’re actually like categorizing all the transactions, making sure everything’s accounted for, versus your accountant or CPA is going to be the person filing your taxes. A lot of CPAs will do bookkeeping, but I think they do a really crappy job of it. We’ve seen a lot of accountant screw up books, that’s just not their specialty. So all of our clients work with us for bookkeeping, and then they have accountants who actually file the taxes for them. But that aside, a lot of bookkeepers will just do the books for any business that comes their way. And what you were describing earlier, Monica is that there’s very specific intricacies and details of an online business that’s going to be different than a restaurant, or it’s going to be different than like a manufacturing business or a retail business. Not all businesses are created equal when it comes from a finance and accounting standpoint. And so the online space just felt like there’s no bookkeepers that understand what the heck I’m doing. They don’t understand stripe and PayPal. They don’t understand my my checkout software, they don’t even understand what I’m selling. And so Cory just leaned into that he got networked into that sort of small world and just start to gain referrals. And to this day, our business still offers offer referrals. Because once online business owners start to make, you know, they start to generate six figures or more in revenue. If they ask for a bookkeeper, they’re going to hear about us in one way or another because we’ve been in this industry for so long. And we become, I think, the staple for online business, bookkeeping. But the reason our clients stick around with us for so long is because we do know how to reconcile Pay Pal properly, we’ve never really I’d say, 99% of the time, when a client comes to us from another bookkeeper Pay Pal is not being done, right stripe isn’t being managed, right? The way they’re categorizing all the transactions doesn’t make sense for their business model. So they don’t really understand what’s going on in their business, even though they do have bookkeeping. And the only reason we’re able to do that is because we only focus on online businesses. If we like other bookkeepers had to deal with restaurants had to deal with retail businesses and manufacturing businesses and doctor’s offices, we would essentially do a crappy job of doing the books for everybody, and sort of learning how to do the books really well for one business model. And I think that’s what’s made us successful at Evolve finance is that we’ve only focused on online online businesses. So we’re able to provide like an experience. That’s just what our clients are looking for, and are able to do the work properly, which unfortunately, can’t say that’s always the case with every bookkeeper, we’ve seen. Oh, I have a lot to
Monica Froese 16:15
say about this. So first of all, what I learned is that the CPA who files your taxes, they’re really good at compliance, which also makes them reactive. And this has been, because I’m at the point now, wherever, where I probably need a tech strategist, that probably means I do. And I’m like, But why can’t my CPA be my tech strategist. And it really became abundantly clear to me this year. And then looking back, it makes now everything kind of clicked. So in 2017, when I had my CPAs wife, who’s their bookkeeper started doing my books, nothing was categorized, right? It was, and here’s the thing, my numbers came in so late. So I was constantly behind the eight ball of understanding how things work, because I was a b2b business at that point. So I didn’t have all the bandwidth to be pulling my own own numbers and, and making like, where are my revenue? I was selling tons of digital products. So like, Where were my heavy hitters? Where Where was my profit really coming from? And I was getting my books back 4560 days later, it’s like, oh, so that month sucked, that would have been great to know, you know, maybe, like, sooner. And even like, it just was so reactive. And I couldn’t understand every time I would go through, I’m very meticulous. So I would be like, okay, these needs to be recategorize. And they’re like, oh, no, no, no, it doesn’t really matter. Because at the end of the day, they just care about the end line of compliance, you know, making sure that what they submit through, and what I’m paying taxes on is right, they could have cared less under job education, or, and I was like, but it matters to me, How am I supposed to make business decisions if I don’t know how much I’m spending in all these categories? 100%. And I wish I didn’t suffer with that as long as I did. I think I did it for two full years. Before I just was like that, I need a better bookkeeper.
Parker Stevenson 18:14
I think that and I think that’s the shame is most accountants and bookkeepers fall prey to the same story that entrepreneurs have for themselves, which is like, I don’t want to know the numbers, I can’t understand the numbers, it’s not gonna really help me. And I think I’m generalizing here. But a lot of the reason that people get into bookkeeping or accounting isn’t because they want to provide customer service, and they want to explain things or teach. And so they the story of like, you’re not going to understand this, let us just do our thing, and we’ll take care of it is not really what’s in the benefit of the business owner. And so that’s why I again, I left my job to partner up with Cory, because I felt like what he was doing here was actually providing a service that the end user actually wanted. And stead of I think bookkeeping and like, specifically, being a commodity, where it’s just like, it’s just something you have to do to file taxes. And what you’re talking about Monica is that’s the compliance area, which is we have to file our taxes. But as your business grows, and we can talk more about this, you have to understand how money is moving in and out of your business. This is the point of running a business, am I making more money than I’m spending, because if you’re really good at making more money than you’re spending, you are going to have a lot more money in the bank account. And you are going to make a lot more personally, which is, again, I don’t care how heart centered your business is. You can save the world, but you can’t save the world with your business if you aren’t making money and profiting from it. And this is like almost the entire game of business. But we just don’t speak to entrepreneurs about it. Like they can handle it and they 100% Can it’s just the level of support they get from their bookkeeper needs to be different than what the industry thinks of as bookie as a bookkeeping service.
Monica Froese 20:03
Let me Okay, so the importance of my CPA with compliance is that he’s local, and he understands all like New York State just passed, I don’t know, I have to pay. There’s like this new form, and it’s gonna save me a bunch of money. And he’s like explaining it. Here’s the deal. Like, I need that. Because you understand where I’m filing taxes. He’s up on the laws of where I’m filing taxes. And that’s great. But he doesn’t understand online business like he, he’s always like, Wait, how much money did you make last month? And what’s your profit margin? I mean, it’s like, absurd online business. Our profit margins are not I worked in distribution in tech, we operated on 1% margins. Yeah, I have launches where I’m bringing in 80%, I’ve 80% profit margins on some of my lungs. Yeah. And you know, and then I accept, like, and I’m very realistic. So I can go negative a month. But I planned for it, because I knew what was happening. But I you know, because I work on live launches, still. And I’m really good at forecasting. So I understand that.
Parker Stevenson 21:01
And that’s super common too just for everyone listening, it is common to have big months and have months where you might take a loss, it’s as long as the average for the year is looking good, then
Monica Froese 21:10
you don’t know your numbers, and you don’t understand. And one of the things I realized a lot of entrepreneurs have no idea about is this concept of run rate, understanding where you’re tracking for the year, what run rate was really big and corporate, for us to understand, you know, like, By June, you should understand based on your monthly averages where you’re tracking to end the year. And if you don’t understand that, then your lows can be very devastating to your business. Because that’s the thing when you when you operate in the container of like, oh, I had a really great month. And well then if I go and spend all my profit from that month, and then I’m going to go negative because you’re so this is why something like your service, a boutique service understands online business, I’m very passionate about this, because I love it. Here’s and I’m like selling I’m like, hire Parker. Because here’s the thing, my CPA understands the local compliance, but a firm like yours or a company like yours. Understand, because you work with other online businesses, you understand norms of like averages, you see all of these books, so you can you know, your profit stinks for your business model. Or you can probably identify really bad lines of like, revenue lines that are like this is a waste, this is not a profitable line item for you, you’re selling this your your your spending 80% of your effort is 20% of your profit, like those are probably things you can identify pretty easy, because you can see it across all of these books in the same industry. Am I right?
Parker Stevenson 22:37
That’s that’s a big part of our value proposition is understanding what your numbers should look like, what does a healthy online business actually look like? And that’s I think, what even people who get like our clients who go to business coaches who are working with them on their funnels, and their copywriting strategies, and all the things we need to do our brand and all these things, those are all important, like pieces, but most business coaches only know the numbers for their own businesses. Maybe, maybe if they’re working with us, they probably do. But it’s not a guarantee. I know there’s big people in this industry whose numbers are a hot mess. They don’t take it seriously enough. But that aside, that they don’t feel it’s their job to make your numbers work. They are just trying to teach you how to sell more, right, which is hugely important. We all need to be able to generate revenue consistently. But I talk about this in a free workshop we do. And it’s about the second game that comes in that I think sideswipes, business owners. The first game we’re trying to learn how to play is, can I make money? Like that’s the game, you’re going to play the entire time you’re an entrepreneur, not just can I make money? But can I make money consistently and continue to grow my revenue and find new customers? We’re always playing that game. But a lot of entrepreneurs get into this and think that’s the only thing they need to worry about. And then we have clients come to us and go, Ah, yeah, I just realized that there’s this whole other thing I wasn’t expecting as a business owner, which is, am I tracking? Or am I aware of the flow of money in and out of my business, that’s the second game, we then have to learn how to play where it’s not enough to just get work done in your business, we now have to get work done efficiently and as an as cost effectively as we can. Because when it’s just you and the business owner, you know you as the business owner, and you’re doing all of the things in your business, you don’t have a lot of expenses because you are doing all the things sure you have some software, maybe you have a VA, but you can make a lot of money just with you and maybe like one VA and some software and do pretty well for yourself. But if you’re trying to scale your business to a certain level, we are going to have to spend money on more team members. We are going to have to spend more money on pursuing different marketing channels and things like that. And it’s not enough to just throw money at it and go cool. I’m spending money on it. Let’s hope I make money. We have to be super strategic around where we invest in in our businesses and do we understand how we’re going to make more money than we’re investing back into it. And it sounds complicated when I speak generally. But when you have numbers in your own business, it becomes so apparently obvious if you’re spending way too much money on Facebook ads relative to the amount of revenue you’re generating, or you’re spending way too much on team members relative to the amount of revenue that you’re generating. But the whole game because of game number two becomes, am I monitoring and controlling the amount of expenses in my business relative to the amount of revenue I make, and once someone teaches you that, and you know what to look out for, it really is straightforward, because there’s only so many metrics like for our clients that they really need to pay attention to. online businesses are relatively straightforward, simple business models. But just like learning other things that are businesses that we spend money on coaching for, or courses or whatever, to learn these skills, someone has to kind of teach us how to look out for numbers, and somebody actually needs to organize those numbers properly for you. And that’s where like a bookkeeping service like us comes into play. And this is the other piece I want to kind of explain based on your experience, Monica, you working in the corporate world and finance, if you haven’t worked in a corporation, then I think a lot of people don’t realize like finance can be a huge department, you have accountants who are worried about compliance, but then you have like financial analysts who are like monitoring different departments of the business to make sure that those departments aren’t spending more money than they’re they’re bringing in. So there’s like the analysis part of your finance. And then there’s the compliance part of your finance, every major corporation kind of has those different sections. When you’re a small business. I think a lot of business owners confuse their accountants for being all of those things for them. But in reality, like you said, they’re just the compliance piece. But the analysis piece, that’s where your bookkeeping comes into play. And I think a lot of business owners think that bookkeeping is just compliance. It’s just for a county, but it really is the piece that’s going to allow you the insight into what’s actually happening to my business, and am I making more money than I’m spending?
Monica Froese 27:00
Yeah, I actually did I for a long time, thought it was just part of the compliance of getting my taxes filed, like Oh, of course, I need a p&l statement and balance sheet and IRS cares about these things. You know, and I just, that’s what I thought, when it really became about well, I moved off to a bookkeeper, I understood online business in 2019, I also hired my first employee, then, and that was the cash flow wake up call. Because I explained this to people all the time. Basically, when you start a business, it’s like, here’s what you make, here’s what you spent, oh, look at all this money, I just took home. And then it becomes, this is what you make. This is what you spend, and what you spend should also be your payroll. And when someone explained it to me is, the work I do in my business is what I get paid on payroll. And basically the benefit of having started this the profit that’s leftover is like your perk, except that profit that’s leftover. When you take it all, well, you’re gonna put yourself in a little bit of a pickle, if you leave no cash flow. And because employees get paid with cash in your bank, the day it has to come out, there’s no putting on a business credit card, like a contractor that you can pay 30 days later. So cash flow was like all of a sudden, it wasn’t a thing I cared about. And then it became a, oh, this is very important. This is you can’t run a business without cash flow.
Parker Stevenson 28:18
Well, let’s let’s put it this even easier terms, I think for people to understand. Think about your personal finances, right? If you’re in a situation where you spend every dollar that you make on a monthly basis, if a surprise expense comes up, you’re going into debt to deal with it. And unfortunately, a lot of Americans live that way. It’s living paycheck to paycheck, essentially, right? Where if your car breaks down, you have dental work that you need done unexpectedly, you’re like, I don’t have the cash for it. And usually you’re you’re taking on debt with a credit card to pay for that. Ideally, personally, we want to build up a savings in our personal savings account. So that way, we have a cushion, right? unexpected expenses, we’re good for want to go on vacation, we’re good for want to be able to put money down on a new car, or maybe you’re saving up for a house. You’re good for it. It’s really no different in your business in that sense. Yeah, it’s just a lot of business owners think, Oh, well, I’ll just make more money.
Monica Froese 29:18
I fell into that trap briefly. I’ll just do another launch and launch another product. Yeah, that’s not that’s not a good idea. It’s not sustainable.
Parker Stevenson 29:26
It was not a can work novel times. And so this is where I would say if you feel slightly intimidated by finance and what we’re talking about, put together your personal household budget, like use something like mint.com You need a budget we actually right now on our website, we’re going to be changing our opt in like our free offer down the road. So we’re only going to have this up for a little bit but we have a right now a workshop we have on our website called Know your numbers. Know your numbers now. And one of the free things we give away is a personal it’s like a spreadsheet for a personal budget that will help you put together your personal budget. And then we recommend going and using that budget in something like you need a budget comm or mint.com. So you can start to track this stuff. But there’s nothing, I think more personal and clear than your own personal financial situation because you know, everything that’s going on with it, you know the story behind every dollar that you’re spending. And if you can start to track that in some in some personal budgeting software, and really start to get a lock down on Ooh, okay, I want to save more money, there’s some opportunities here for us to be putting a couple 100 bucks a month away, or maybe a couple $1,000 a month away that getting that practice in place, I think helps entrepreneurs and they go, Oh, my business really isn’t that much different. I just number one need to make sure my business is separate from my personal finances. So I can actually track my business separately from my personal finances. But number two, I then just need to have some sort of tracking in my business. So I can start to really see the picture of what’s going on here. But really, your business isn’t that much different, we still just need to have some savings built up in it, which we recommend for our clients, three months of operating expenses is what we like our clients to have saved up. So that way, if you have a bad month, or you know, we have clients from either Facebook, all of a sudden the Facebook algorithm changes and they need some time to pivot. The whole idea here is how do we make this business less stressful, simpler to run and give us the runway we need because even our most successful clients need a runway because not every month goes perfectly to plan. Maybe a global pandemic happens. And we freak out for two months and wonder what the hell’s going to happen to my business, let alone the world that this is the reason why as your business grows, it’s not something maybe if your business is just getting started, you’re going to have this like big cushion. But that’s why as our businesses grow, we want to have that cushion. We need to pay attention to these numbers, because we need to protect the business so we can protect our personal income that the business supplies us as well.
Monica Froese 31:51
Totally agree with everything you’ve said. Do you feel like you give your clients like peace of mind when, like, for example, I grew up in the blogging world. And so we all know about the traffic slump that happens in the summer, except Coronavirus, made that completely different so the first year everyone in 2020, people didn’t leave the internet, there was nowhere to go. It was kind of nice for online businesses. And now in really good for online businesses, it really was. And then 2021 happens. And here people get vaccinated and travel starts opening up. And the summer slump. From what I’ve heard from all my friends became and we experienced it, too, was a little bit harsher than in previous years. So I’m imagining that you’re seeing you saw this amongst several clients. And so you can give your clients peace of mind that they’re not the only one because no one wants to know that they’re but wants to think that their business is the only one falling off a cliff for three months straight.
Parker Stevenson 32:49
Totally. And that’s why having got cash is so important. It’s so important to work towards that. And when you talk about peace of mind, I think nobody, regardless of whatever you’re doing in your life, feels comfortable going in blind without, without I can’t think of a better term to do that. I apologize to any blind people. But it’s obviously very stressful to not be able to see what’s in front of you, right. And I think that’s the same for our marketing metrics, our finances, whatever it is, if we don’t feel like we have feedback, if we don’t feel like we have some sort of report card to let us know how we’re doing. It’s very stressful to operate in a nebulous place where you don’t have clarity into what’s going on. And again, I think this is true for like, our clients that are running Facebook, maybe they have paid to traffic campaigns, right? If they have a campaign where they’re monitoring their cost per click, they’re monitoring how many people are going to the landing page. They’re monitoring how many people are signing up for the webinar, how many people are attending, and they’re tracking the things they need to track. They’re not just taking guesses in the dark around? Where do I plug holes in my funnel, they’re strategically monitoring and being intentional with where they’re putting their time and attention to fix the things because the numbers, the feedback, the data is telling them where things are working and where things aren’t working. And while sometimes the data might not look good, and it can feel crappy to look at stuff that doesn’t look good, that honesty is what allows us to make better decisions because we go okay, this isn’t working, let’s do something different. And let’s do it sooner than later. So we don’t sit in this place of things not working longer, and we lose more money and get more frustrated. So whether it’s your marketing, whether it’s your your finances, whether it’s your operations, when we have feedback telling us are we doing good, or are we not doing so hot? That’s how we get better as businesses. And so if we’re the type of business owner who puts our head in the sand with anything that feels scary or feels uncomfortable, or feels like it’s not something we’re good at, you’re gonna have a bad time as an entrepreneur because to me, the whole thing about being an entrepreneur is how good are you at learning new things and being uncomfortable having to do things You’ve never done before.
Monica Froese 35:01
Yeah. And knowledge is power, one of my ads for a long time. And you know, so I guess I’ve just always lived in this like data world. And so I always consider like, when you start running ads, I tell people, you’re just buying data. And they’re like, What do you mean, if that’s what you’re doing, you’re buying data. But once you buy the data, essentially, now you can make decisions with it. It’s the same thing with with your bookkeeping and your numbers. It’s like, once you have the data, now you can make informed decisions. But without the data, you know, you’re just flying blind. It’s you can’t run a business like that. I just, that’s like the PSA, you cannot run a successful business for the long term, if you don’t know your numbers. And so here’s my question, especially for people who are maybe having their CPA do their bookkeeping and its compliance base, or maybe they still have that spreadsheet, that they’re just doing cash in cash out, you know, transactional, very transactional? What are the numbers, the core numbers that a business owner, especially an online business owner needs to know?
Parker Stevenson 36:05
Well, I think in the early stages, like, the categories don’t really matter, just what’s your monthly not? And I think it’s a number that’s helpful the entire way, like, what are you spending total on your expenses, because if you know what you’re spending on average, each month, you know how much money you need to make, right? But especially in those early stages, if you’re like, Yeah, I’m spending about two grand a month on software and a VA, that’s helping me and a couple other things, then cool, you have to make at least $2,000 a month now, in order to break even at a minimum, right. But once your business gets past the initial phases, and it starts to become important that you understand, what am I spending money on within those total expense categories, there’s really only two areas that make or break our clients, businesses and all of our clients are generating $100,000 or more a year in revenue i That’s just when we feel like the intricacies of your expenses and knowing the details of your finances becomes way more important. I will say that in the early stages of your business, a lot of the times the metrics aren’t that important, other than just go make more money, like whatever you’re dealing with profitability wise, the solution is probably you just need to generate more revenue and get better at making more sales. But once you’re trying to generate enough sales to do $100,000 or more a year, the two expenses that make or break or clients businesses are paid traffic. So are we getting the ROI, the return on investment for Google ads, Facebook ads, Pinterest ads, whatever you’re into, are we getting enough money back from that and investment on a monthly or quarterly or yearly basis, and then labor because online businesses have really low? Again, you had mentioned overhead costs, Monica, which is just like the general expenses in a business, we don’t have building rental, that we you know, we have to rent an office space. You know, we don’t have to buy inventory, we don’t have to do some of these things bigger businesses have to do. So we have the advantage of having low expenses. But the one expense we will never be able to avoid as we scale is labor, because we need more than just you to run this business as your business gets bigger. So labor becomes more important as the business grows to make sure that we aren’t over hiring. In some cases, we’re telling our clients like go hire, you are so profitable, but you’re losing your mind, you need to go hire someone. Those are the two areas that if they’re managing the cost of acquiring new customers, usually through paid traffic, and they’re managing their labor costs really well. There’s not really a whole lot else that’s going to break their business. Sure, in the early stages, software can feel like a big expense, coaching, continuing education, whether you’re investing in courses or coaching for yourself, yes, in the initial stages of your business, that might be a huge expense. But once you get to six figures, and beyond labor, and your cost to acquire new customers,
Monica Froese 38:50
I’m feeling pretty confident now. Like, it’s really the two things we talked about it nauseum, both, both of those are like the biggest indicator, they’re the biggest expense lines for me. And they’re the biggest indicators. And basically, my labor line got traded out for my job education line. So like Job education, in the early days, when I was learning new skills needed the the tech skills and stuff was higher. And then that went dramatically down like the more competent I got knew what I was doing, and then labor costs went up. So now I kind of selfishly want to ask, on average, and and the with the businesses you work with how much of our revenue should be spent on paid advertising and labor costs, like what’s the averages?
Parker Stevenson 39:29
So let me just start with this caveat. There’s no should for as long as the profitability looks good, and the business owner isn’t losing their mind working 80 hours a week, you know, and they have good work life balance, then there’s no right or wrong overall metric. So for instance, we have some clients who are doing seven figures without spending a lot of money on ads. Does that mean oh, you need to hit this target and spend more money on ads? No, it just means that they have a business model where they don’t have to spend a lot of money on advertising because they have other channels. That being said, now that I’ve covered my but typically, we get concerned when one of our clients businesses, especially if they’re in the mid to six figure range and beyond. And they’re spending more than 30% of their revenue on advertising. So if they’re like, for instance, a million dollar a year business, we wouldn’t want to see them spend more than $300,000 on ads. And I’d see for smaller businesses experimenting with ads, I’d want to see that far less than 30% of revenue in the initial initial stages, in terms of labor, we usually like to see that at around 20% or less, I will say that as a business gets bigger, depending on their business model, like if their heavy coaching business, and there’s a little more of a service aspect to it, I’m okay with it getting up to 25 or 30%. But otherwise, we know that a healthy online business can operate a team around 20%, that’s employees and or contractors,
Monica Froese 40:57
does that include all the owners payroll?
Parker Stevenson 41:01
No, it would not include the owner, we don’t get the owner in that because profit payroll, it’s all just benefit to you. We’re more concerned about the people outside of the owner, what percentage of the revenue is going to those people now if your business operates at 40%, and your profitability is awesome, again, that’s fun. And as long as you feel like that’s scalable, great, but after looking at literally 1000s of p&l, over the last 10 years or 11 years that the business has been in existence, we found that if the labor is somewhere around 20%, and advertising is less than 30%, then there’s a good chance, you’re going to be at 30% profitability or better. And that’s where we want our clients to be, we have some clients who can get up to 60 or 70% profitability at the end of the year. Some of that’s a little luck, mixed with a really good marketing strategy. And some of our clients will always hover around 30 to 35%. What I want, and we have obviously clients in between those two ranges as well. But what I want everyone listening to understand is that in terms of business models, if you can run a business that does like 30%, profit or better, that is a phenomenal business model to be a part of, because like you mentioned, Monica, you’re operating like 1%, when I was at Adidas, if we were at five to 7% profitability for the global company, that was massive. And if you hit 10%, like holy crap, everybody’s getting bonuses, it’s a huge deal to even get into double digits, restaurants are kind of the same way. Sure, there might be a few restaurants that get into 30%. And beyond, most restaurants are operating at five 10%. So to be at 30% is at the minimum we like to see for our clients that just goes to show you how profitable an online business can be. If you’re intentional and strategic, as you scale your business, you have
Monica Froese 42:43
made me feel great. I do 15% and adds 20% on employees, and my profit margin doesn’t dip below 35%. So I feel like I’m fitting in the metrics quite well here.
Parker Stevenson 42:54
You know, that’s great. And again, we have clients who as they grow can get to 4045 50%, it is doable, but usually the way I look at it is the higher the profit margin, usually the more gray hair you’re adding here, yes. And the lower the profit margin, usually, usually the better work life balance you have there usually, but sometimes, depending on the issues in the business, they can maybe have a lower profit margin and be working their butts off, which usually points to bigger issues with the business model or the offering like pricing and stuff like that, in general, but a straightforward course or coaching business to be in that 30 40% range is right on that I
Monica Froese 43:35
couldn’t I have no doubt I could be at like 50% profit margin. But I do have a work life balance. I didn’t always have work life balance, you know, work life balance employees. And at the end of the day, and I also believe in. So I’m very passionate about growing. It’s not just so I I want to help women grow their businesses to contribute more to the economy for women to have more financial independence. That’s actually like, what the brand’s bout, but I also want to be able to pay the women around me fairly and give them their own work life balance. So like right now, one of my full time employees to have her kids have him out foot so she’s working half days. And you know, there’s no, like, I’m not mad about it like we work around it. That is so important to me to create those jobs for women. Because I didn’t have that in corporate. My mother career. It was yeah, it was very much. I quit when my youngest or my oldest was three ish and basically until she remembered my sheet hold, just hold it against me. But she reminds me I have a three year old now. And she tells me all the time. You see her so much more than you saw me and she’s right. Because I basically you know the there was no balance the favor was all on the side of work and that’s what had to be done to pay the bills and I remind her I’m like you know you had a roof over your head and food your belly and clothes on your back. That’s what I had to do to make that happen. But it just, you know, I have a very big passion for. I mean, do I really need to make 50% profit margin, if it means that I’m not paying my employees fairly, and I’m making their life, what my life was in corporate, because that’s just not what my business is about. So that’s how I see it.
Parker Stevenson 45:18
No, I agree 100%, we do very much the same thing with our team we have, I think we definitely have a larger female employee base, just because we work with a lot of female entrepreneurs as well. But we charge our clients a little more than what a typical bookkeeping service would offer. Because number one, we do the work, right, like we’re charging to actually do the work properly. But we’re also we have US based employees, who we want to pay appropriately for the work they’re providing, and the value that they’re providing. We want high level high caliber people working on our clients books. And you don’t get that when you try to pay everybody the least amount of money you possibly can pay them. So I 100% agree with that, because I think everybody can win, it just becomes Are you pricing your offer appropriately? Are you setting the right expectations with your customers and clients about what they’re getting at that price? And are you paying enough attention to your numbers to make sure you can balance paying your team well and fairly, with also making sure that your business is staying profitable, because we’ve seen some business owners go in the wrong direction where they have such a loyalty to their team that they suffer for it even though their team is underperforming. But I think in today’s day and age, and I think just with what the workforce is expecting now, and this is maybe one of the benefits of COVID is that work in life can be integrated better, and you can feel more fulfilled by your work, but also have more balance with your work, and also make a better living by being more productive and more valuable during whatever time that you are spending in the business. As a small business owner, seven years ago, I’ve been on paternity leave my wife and I just had a kid. If you know, seven years ago, there’s no way I take a month off. Like there’s just our business wasn’t capable of doing that. But as that’s the this is the incentive, I think to grow your business is you get to create more stability in your business, the more people that are working in IT, assuming that it’s financially feasible for you to pay these people. But the more you have this team, the more you can support each other. And the more you can cover for each other when you need to. Versus if you’re always staying a solopreneur. When you’re working, you’re making money when you’re not working, you’re not making as much money. And that’s where scaling and growing your business has a lot of benefit. Because you like you said you get to help more people support a team. I think it’s more fun to work with a team than to work by yourself. But it does create that stability and a little more of a safety net for you and your team to make sure that if someone’s sick, someone has something going on, there’s always someone there to cover and the business can keep going and your customers are, don’t know that anything’s different.
Monica Froese 48:00
Yeah, I, I came to the realization during 2020 When we’re all not going anywhere that I hadn’t enjoyed any time off. Since before I had my second daughter, before I got pregnant with her. So it was like early 2017, my husband and I had gone on a European, we went to London in Paris. And it was like this phenomenal trip. And it was amazing. But it was before my I had it was before my business took off essentially. So I you know, there wasn’t a whole lot on the line about me being gone. It wasn’t like I was going to be out 1000s of dollars because I wasn’t actively working. And then I had my daughter and think that’s when things took off. It was appropriately timed. I’m out on maternity leave, and people are knocking on my door to buy my stuff. And I’m like, What is going on? I basically was, you know, I was working around the clock, I was completely burned out. And what what I learned last year was that I want to enjoy my family, you know, like what am I doing, I really got to the point where I’d rather close shop than not enjoy the whole purpose of why we’re doing this, which is to get more time with my kids to enjoy my kids quality time. And to help other people do the same. Like it was just such a disconnect. And for that I’m very grateful for last year because it kind of was like a wake up call. I felt like
Parker Stevenson 49:16
it shows you as possible. I think it’s shown the working world in general, that people don’t have to be tied to their desk for 10 hours a day to be productive. And in fact, it might be less productive mental to do that, that if the works getting done. I don’t need it done in eight hours. If you can get it done in five hours, then great. Why should you be punished for that? So that’s where, again, I think being able to make decisions like this, you got to think about things like this. We have to know our numbers when we know we can bring someone in we know what kind of work environment we can create for our team. We know we can pay people appropriately for the work that they’re doing. It all just comes down to do we have some sort of financial tracking that gives us the visibility into our business. is to make informed decisions and not just make decisions based on how things feel. And that’s the piece we’re always trying to push our clients away from is yes, trust your instincts, we need to have good instincts. But if you’re just making decisions based on how things feel in your business, you’re not really making decisions based in reality.
Monica Froese 50:18
Right? I learned that during live launches, emotions are high, and I want to like blow things up. And it’s like, this is not even it’s not dread. And then we look at the spreadsheet, and we’re like, oh, let’s make decisions based on where the numbers are during the launch. And not how Monica feels that nothing’s going the way Monica want it. You know, it’s like,
Parker Stevenson 50:35
I’ve fallen for that to myself. There’s times where I’m, like, just been stressed, haven’t worked out enough. And I feel like the business isn’t doing well. And then we look at our numbers, and they go, Oh, why am I freaking out? Like why… I’ve
Monica Froese 50:47
I’ve had that too. So okay, this is a great place, then for if, if you’re listening, and you need to be informed by your numbers, and you want to work with Parker and evolve finance, how does one do that?
Parker Stevenson 50:59
So I like I mentioned earlier, our ideal client is online businesses based in the US, unfortunately can only work with us based businesses Canada, and Australia and UK kind of have different financial systems. So if you’re US based business, you’re kind of getting to that six figure mark or beyond. And you’re selling digital products we don’t work with like he called like heavy econ businesses, because that’s a whole different business model is selling physical products. So if you’re kind of in this online education space, then evolved finance, EV o LVD, evolved finance comm schedule a call with us, we’d love to talk with you learn more about your business, see if we’re a good fit. And we really are all about finding good fits. If we don’t think we’re a good fit, we’re going to tell you, and we’re going to direct you in a direction, even if it’s not working with us that might be better for your situation. Otherwise, if you don’t feel like you’re quite ready to work with us, like I mentioned, if you go to evolve finance, we have a great workshop there that we have up, we’re actually going to be replacing that later this year with an awesome audio course, like a free audio course that I’m putting together, that I think is going to just fill in a lot of these financial gaps for people that I think makes entrepreneurship so intimidating and confusing sometimes. And then I also have a podcast as well, that usually I’m just talking for 1520 minutes at a time trying to teach these kind of concepts to our audience. And also we’re going to be moving into doing a lot of interviews with our clients, and learning more about their financial journeys and learning more about like, how did they get to where they are? And how do they use numbers in their businesses to make decisions? What’s the name of the podcast? It’s the bottom line by evolve finance.
Monica Froese 52:31
Awesome. We’ll link to that too. I didn’t know you had a podcast. It’s all at of all
Parker Stevenson 52:35
It’s all at of all finance comm just go to vol finance, and that will have all the things to look at for us.
Monica Froese 52:39
Awesome. Well, thanks so much for joining me today.
Parker Stevenson 52:43
Monica, thank you for having me. It’s always a pleasure to talk to another a finance connoisseur like yourself.
Monica Froese 52:49
Yeah, it was fun. Thank you. Thanks for tuning in to another episode of the Empowered business podcast. If you want to get started creating your own digital products and don’t know where to start, we have a brand new training that can help. It’s called the passion to profit. How to discover your unique million dollar digital product formula, head on over to empowered business.co forward slash profit to join the training for free. Plus, we’ve added on a private podcast feed to make consuming the content even easier. You can choose to consume it via video or a private podcast feed. I can’t wait to see you back here next week.