675: (Solo) The Money Mistake That's Quietly Killing Your Business

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1:18So today I want to talk about something that I've been thinking about a lot and it trips up a lot of founders and it's one of those things that feels like almost too obvious to talk about but I keep seeing this time and time again and it's this blurring of personal and business money. Now I'm not saying that businesses spend money carelessly but I've been thinking about this concept that we treat our business like monopoly and when you really think about it we are so happy to like spend it here, spend it there. Yeah, I'll get this freelancer. Yeah, I'll pay for this agency. Yep, I'll invest some money here.

1:55But if it was your personal money, I think you treat things so differently. And so I think it's a real fundamental problem for founders, especially if they haven't separated the two. So I wanna dive in.

2:06Nathan Chan:Hear the stories, learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

2:20So I want to talk about what this actually looks like in practice. Like, you know, you're generating revenue for your business. Things are moving. You know, the business account, you know, it's going up. And then the personal account, you know, they're essentially the same thing. Money flows in. You don't have a real structure. You do a transfer every now and then when you need money. You got a small salary, whatnot. And what happens is cash gets pulled out whenever it's needed without any formal process. Without any formal budget. it, mind you. And the result of this is you can't read a P &L when your personal life is running through the same accounts.

2:56And then you have this mindset of like, oh, well, it's the business's money. It's not my money. But if you're the sole founder, it's kind of this tricky dichotomy that you have because you're like, oh, well, it's the business's money and I work for the business, right? And then before you know it, you can't make good decisions about hiring and inventory or marketing spend and you don't actually know what the business has because just because you have a certain amount of money in your bank account definitely does not mean like if you've got$100 ,000,$50 ,000, whatever,$200 ,000, half a million, a million dollars in your bank account.

3:31That doesn't mean with an e-commerce brand that you are necessarily killing it because you might have a big purchase order that you need to fulfill on. Who knows, right? You don't know what's around the corner, right? So the other thing that's really dangerous with treating your business accounts and business like it's monopoly money is revenue starts to feel like personal income and a good month, you know, you feel good. Like you let that emotional baggage, like how good does it feel, right? When you just got like a big payment or you got a ton of money in your account, like, oh, I can relax now.

4:05How good is this? Right. And, you know, I've got a, you know, a big thing I've got to pay for a person and just take it out of the business. And it starts to feel like a piggy bank. And I never forget this for me and my journey when we did a big launch, did exceptionally well, had a lot of money in the bank account. And I just chilled, right? It really messed around with my mindset. And I think I just like the fact that we're talking about this conversation around like too many founders are treating their business finances like it's monopoly money. I think just even being aware of that, it's just so incredibly important because I think as founders, when it's the business's money, it's like it doesn't truly feel like yours sometimes and you waste it.

4:51And I don't want you to do that. Like I've done that. I've wasted so much money over the years. Like I didn't want to know. Right. So how do you actually fix this? Well, first and foremost, you have to have a dedicated business account. Like and if you can have multiple business accounts. Like I love the profit first model, right? Where you have an account for your tax. You have an account for your monthly OPEX where you have an account for actual profit and drawings, right? So what you do is you break everything up by percentages. So let's just say for tax, you know, you have to put aside every time, every time dollars come in, you put aside 20 % towards tax and you put it in that account and you know, you put in 30, 40 % to your OPEX.

5:36And then you know you put in 20 or 10 % to your profit. And it's just so incredibly powerful to have so many different accounts because then the money has purpose. And it's really, really powerful. So that's the first thing you want to do. So you know every single dollar that comes in, it has purpose. It's not monopoly money that you can just play with and throw around. Second, make sure you pay yourself a regular salary that you set, right? And it's okay if it's only$40 ,000. It's okay if it's$60 ,000. or whatever it is, right? You decide what you need to live on and set that as a fixed monthly transfer that you pay however frequently you want.

6:14And this does two things. It forces you to run the business properly and it forces you to be honest about what you actually need to live on versus what you're pulling out. The third, before any significant business spend, ask yourself one question. Can I measure this? If I do this, how much will I potentially make versus what is the risk? Not does it feel good, not does it look impressive don't get excited you know what founder we did a serious software audit recently and you know a dollar saved is a dollar earned and the number of tools we were quietly running in the background like insane like we we are saving like tens of thousands of dollars a month guys right and it's pretty significant when you add it all up and that kind of discipline just going line by line you're doing a bottom-up build of your p &l is so incredibly important and then the fourth thing I want to just really push you on is have a solid P &L with your accountant, even if it costs a little bit extra, have somebody external where you can check in every quarter, holding you accountable to your goals.

7:14So incredibly important. You have your profit goals, you have your revenue goals, you've mapped out what your expenses are, you've mapped out what you can budget for, how you're targeting this thing, and make sure you separate the two. And that's the big takeaway for today. Your business finances is not monopoly money and don't treat it that way. The business is its own entity. It has its own finances. It has its own needs. It has its own health and you cannot properly understand any of it if your personal life is tangled up with it. So separate the two, pay yourself properly, treat every dollar in the business, make sure it has a purpose, set up multiple accounts, use that profit first method, everything that I've shared.

7:54Because when you get this right, everything gets clearer and the clarity is what good decisions are made from. So guys, if this episode hit home, share it with another founder who needs to hear it. And as always, guys, I'd love to hear feedback. Shoot me a DM. I'd love to hear from you. And if you're enjoying this podcast, we've got a lot of new listeners of late. It's awesome. I'd love to hear from you. Share a review on Spotify, Apple Podcasts. The team are working overtime to create the craziest coolest content for you guys to help you win in your brand all right thank you for listening and i'll speak to you soon