Latest / Travel Agency in a Year / Day 147 - TAs, are you reviewing your budget?
Transcript
- Rachel K: It is day 147 of the Travel Agency New Year podcast. Thanks for coming by. I'm your host Rachel K. If you have any questions about who I am, go to elevatewithrachelk.com. I really don't have any other social media right now other than like this podcast. but you can send me an email. I do have a sub stack. I've been working so focused on this podcast, I'm not really doing anything on the sub stack right now. Okay, today's day 147. Let's talk about how you need to maybe consider reviewing your budget now and not later. Don't worry, I have a whole reason. If you didn't listen yesterday, I was talking about we're nearing the end of this quarter. and you're like, bitch, no, we're not. got a whole other month. It's coming for you. It's coming for you. So I am a huge fan of the old profit first method. It is a book. Go read it. Profit first. I have it on my bookshelf. I can't see who the author is or even where it is. I just know it's on my bookshelf. It changed my life with regards to financial management as a business owner. I never really focused on it before and I've been self-employed since about 2006 for the most part. Like I've worked some random little jobs when I needed the extra cash but and then I did take that butler job because I was like screw being self-employed I don't need that anymore. I'm gonna go be a butler and then I was like this is my nightmare. Immediately I was like I'm not cut out to work for other people. I'll stick it out for two years, because that's what I do. This is a horrible decision for me. Better stick it out until I'm completely discarded. Lessons learned, folks. But Profit First is amazing. I remember I was finally doing really well in the travel agency stuff after COVID. I was like coming back and I was like, ⁓ yeah. And I busted out Profit First because I was like, why were my taxes so high? And why do I not have any money? Questions are everywhere. And so I looked at it using the Profit First method and I was like, ⁓ I spend way too much money, that's the problem. And I was just like buying all these courses left and right and I was, ⁓ I need to upgrade this, I need to upgrade that and da da da da. And then I was like, I could barely pay myself minimum wage. It's pathetic. Okay. Profit first is great because you set up different accounts for each aspect of your business. He gives you a lot of advice on like, how much you should pay yourself, like a percentage-wise of the revenue based on your gross revenues, how much you should pay yourself and when those things change as you grow, ⁓ all that fun stuff. So, I love that method. The 10th and the 25th, you send money off to a separate profit account and money off to a separate tax account. At tax time and at profit distribution time, regardless of how your LLC is structured, you can... Pay your taxes and you can give yourself a little profit distribution or reinvest in your business. Okay. I don't know why I have that in the beginning because this is reviewing your budget now, not later. ⁓ because it saves you a lot of time and you pretty well stay on track with your budget, fairly well with the profit first method because you're like, no, I have to put 15 % aside for taxes or my profit margin is 8%. That needs to go immediately. Okay. So when you're reviewing your budget, gather your current P &L statements, slash income statements, slash profit and loss statements, slash, I don't remember what other names there are. I call them P &Ls. and then your, if you did this, you should do an annual like review, right? Hopefully you've done this. If you haven't, A, you should go join the success circle, the success farkel, the success circle. Week one is how to do your annual business review and it is a nightmare for everyone. like, this is tough. And I'm like, yep, let's get the hardest shit out of the way. and then you forecast for the following year like how you'd like that to look based on the prior year's data. So you should have that somewhere unless you're brand new then you're just like I have no idea what's going on. You're just like gathering data at this point. But if you are not brand new, review your spending over this quarter in your P &L statement versus your targeted spending that you had outlined at the beginning of the year slash end of last year. for the new year. Are you over or are you under? You're gonna be one or the other. You're never gonna be like to the penny. You're not. Stuff's gonna happen. Prices go up, like you'll get an email and be like, Google Workspace went from 18 cents to $25 starting next month. And you're like, well now I'm addicted. I'm just gonna pay that difference. You know what I mean? So there's gonna be little things like that. So if you are over your spending, i.e. your profit is super small slash you are operating at a loss for this quarter, please stop. and think, what did I have to invest in? Sometimes it is very reasonable reasons why you had to invest. Like your laptop completely crashed out or your desktop and you had to get a new computer. You had no other choice. ⁓ Or maybe you were in a nasty situation with a host agency or like those agencies that quote unquote offer all this mentorship. but they charge like four grand a year and they're very employer-employee relationship coded, not IC relationship coded, and they've got horrible splits. Maybe you were in one of those situations and you had to spend extra money to get yourself out of that because you had to go get another host agency and set up all these new things. There are reasons you can be over on your spending that are legitimate reasons. There are reasons that you can be over on your spending that are more emotional based reasons. And I want you to look at if you are over, really understanding, taking accountability for that spending, not justifying it. Not saying, well I needed this technology. No you didn't. No you did not. If you can't bitch about your spending, yes you could have... ⁓ waited to invest when had more revenue and it might be a good decision, but also like take accountability. Don't just justify all your overspending. Now, if you were under your spending, consider if you were like, I'm fasting from spending this quarter and I'm just doing the bare minimums and you have all this extra money now and you have enough like in reserves to cover you if there's no revenue coming in for whatever time you're happy with. then you can consider any upgrades or investments that you've been denying yourself. And at that point, if it's really that valuable to you, it doesn't really matter what the price point is. If it's like a difference of $500 or $1,000, and if you wait kind of thing, like hurry up and get it now versus I'm gonna wait and see. ⁓ If it's something that's truly that valuable for your business and for you, makes your life easier, That $500 difference is going to be negligible because the return on that investment will be potentially tens, if not hundreds of thousands of dollars. So who cares about a $500 difference? Honestly. So the whole idea of like pre-sale stuff that people do kind of thing, like get it now before it's too late and we go up to a million dollars. That is a psychological manipulation. and they wanted to see. if people value it at that price point and they're never going to go back to that price point, but then they can see how well it'll do if they double it. But they're also trying to get as many testimonials as possible from those who could make the investment at a lower cost, right? It's all sneaky stuff. So. Let's say there is software that was being launched and it's like, you can get in for 20 bucks a month. And you were like, I don't need it right now. And I know it will help my business. And I don't have the time to mess with it right now. So I'm going to have to lose out on that saving 20 bucks a month. Because even if it's like, let's say it's 20 bucks a month subscription, and they're like, ⁓ and 90 days everyone's gonna go up to 50 bucks a month. That's three months and So you invest that 20 bucks a month and you spend $60 over those three months not even looking at the software because you don't have the time Maybe you're working on other things But you're like all save 30 bucks a month if I buy now, but you just spent $60 Doing nothing does that make sense? Whereas you could have just waited those 90 days, gotten through your work, and then just started paying the 50 bucks a month everyone else is paying. It's very much akin to the people who freak out about the Black Friday sales and annual, I'm not a fan of like paying for software on an annual basis, even if I'm very loyal to the software, because it's not a huge time, it's not a huge savings. Like you might get 20 % off whoop-de-de, but you're also trapped for the rest of that year. Whereas if you are monthly, even if you are dedicated, and this is a permanent decision, if you had to switch at the drop of a hat, you could, and you wouldn't have to worry about losing all that money. This has actually, I've seen this happen, where people are like, I'm gonna sign up for this annual thing. Normally it would cost us $120 a year, but if we pay the annual rate at a discount, it's 105. And I was like, how long did it take you to figure this out? And they were like, oh, I had to look around for like an hour. Okay, do you make 15 bucks an hour? And what do you mean? You're saving $15 and it took you an hour to figure that out? I said, what if you cancel it? Well, it turns out they wanted to cancel it six months later, but they had to eat the cost of six months. So let me do the calculator over here and I'm going show you just how foolish that decision was. Okay, so they saved a whopping $15 in their brain doing the annual plan, right? but they only wanted it for six months. So 105 divided by 12 is $8.75 a month. Times six, they wasted $52.50 to save $15. That's like, think about it, okay? So you don't always necessarily have to invest in things right away. So if you are under and you do wanna make that investment or that upgrade, and it's been three months, that means your business really, really needs it or you really, like that's actually a good thing. And it's not gonna matter what the cost is because you know the return's gonna be exponential. All right, that was a long rambling. You can fight me on the annual versus the monthly subscriptions. I do not care about saving $20 a year if I don't have the opportunity to cancel and just save, you know what I mean? Like if it's $40 a month, but annually I only pay $30 a month, that's a savings of $120 a year. Yeah, well, if I'm in it three months and I want to cancel, I'm gonna lose $90 because I gotta pay, or not $90, I'm gonna lose $270, whatever. because I gotta pay for the nine months I'm not using this product. Thanks. Like, it's a sneak. It's a sneaky, sneaky, sneaky, sneak. Okay, hope you found this to be a very helpful day. You're like, no, now I'm mad. Okay, tomorrow is what is a P &L statement just in case you're like, I don't understand that. Thanks for stopping by, have a good day.