MBA1722 The #1 Mistake You Can Make (and How to Avoid It) + Free Ride Friday

Bringing your business dreams to life takes heart and about a thousand decisions a day. That's why Atlantic Union Bank's knowledgeable bankers are here for you with the right guidance and customized solutions to help you reach your business goals. So whether you're planning your next move, upgrading your space, or scaling to meet demand, we make sure your business is ready for what's ahead. Because we're big enough to support you, yet small enough to know you. Atlantic Union Bank Any way you bank.

Ready to Save on New Tech it's time for Dell Tech Day's annual sales event celebrating our customers with fantastic deals and benefits. Perks include Dell Rewards, free shipping, premium support, and more. PCs like the Dell 14 with Intel Core Ultra processors will help you do more faster and with a premium suite of monitors and accessories, you can upgrade your whole setup with amazing savings. Visit Dell.com deals.

Foreign. Welcome to the $100 MBA show your personal business coach every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100 MBA over@100mba.net and today's episode is Free Ride Friday. On Free Ride Fridays, we give away a lifetime membership to one of our programs. We're giving away easy course, our 30 day course on how to build your own online course. It retails for $500 over at EasyCourse Co or you can win it for free. Just leave us an Apple Podcast rating and review and you enter our weekly random draw. Listen in on Friday to see if you want it's that easy. It's our way to say thanks for showing us love on Apple Podcasts. In today's episode you will learn the number one mistake you can make as a business owner and how to avoid it. I know that sounds very grandiose, but it's literally the one mistake you just can't afford to make. And it's also the most common mistake. And the reason why it's so common is because it's an easy one to make. It's one of those that just creeps up on you if you're not vigilant against making this mistake. If you don't have a routine, a plan in place to make sure you don't do it, you will and it will affect your business and it can cause you to go out of business. Ouch. I want to save you the headaches, the hassles and the heartache and give you a plan of action. So let's get into it. Let's get down to business.

Valentine's planning starts now. Get ahead of the game with 1-800-Flowers xoxo sale and save 20% on gifts for the ones you love. For 50 years, 1-800-Flowers has made Valentine's special. But by delivering millions of high quality roses with unmatched reliability, right now, save 20% on premium bouquets, all backed by their seven day freshness guarantee. This Xoxo sale ends February 5th, so don't wait. Save 20% at 1-800-flowers.com sxm that's 1-800-flowers. Com sxm.

So what is the number one mistake as a business owner you can make and then we'll get into how to avoid it. Well, it's very simple. That mistake is spending more than than you make. Not being profitable is something that you just can't sustain for very long, especially if you're self funded. But even if you are not self funded, if you have investors, if you've taken personal debt or a business loan, eventually your bad habit is going to catch up. And you see this all the time in big businesses. And the businesses that still survive that make it are the ones that learn to be profitable. But let's just bring it down to our own small business. Why is this such a common mistake where you spend more than you make? Well, because it's easy to spend. It's easy to want to spend on your business, to improve it, to make more hires, to buy new tools or services, to buy more supplies or inventory. It's very easy to make the decision to spend on your business. It's very hard to cut. This is why it's better for you to always, always be profitable at all times. Once you go over that line, basically what it means is that now you're spending more than you're making. And eventually what's going to happen is that you're going to have to make that tough decision to cut your expenses. That's never easy to do. It's so hard. Whether that's letting team members go, whether that's cutting a supplier, whether that's downsizing something in your business, whether it's having less inventory on hand and maybe not helping your customers get their products fast enough. And a lot of people avoid this pain as much as possible and it causes them to go out of business. They just don't have enough money to pay all their bills consistently. It's a horrible feeling, that financial stress, I've been there, that feeling of not being able to make ends meet Your business is booming, your business is rocking. You're making money. You're just not making more than you're spending. This is why I always say you should always try to remain profitable. Stay profitable and give yourself a buffer. I would say a two to one ratio, meaning that you should be making twice as much as you're spending. So say, for example, you're making $30,000 in revenue. You should be only spending $15,000 to run your business. Why? Because that will give you a chance to build some runways and build some cushion. So every month you're building an extra month of cushion because sales will fluctuate, but your expenses won't. You might have a good month. You're making $30,000 a month, but the next month you're making $20,000. You need some buffer. You need something that' you to absorb those blows. Now, obviously expenses grow as well as your revenue. But what we want to say here is that we want to make sure they work in tandem. I never spend more until I make more. And when I spend, I spend half of what I make. So let me give you an example. You're a new business. And your first month in business you made $1,000. What are your rent expenses? If it's more than 500, you are asking for trouble. Things are going to start really catching up on you. If you don't have some Runway, some savings, even that's going to run out at some time. If your revenue doesn't increase rapidly, it's a race against time. It's a horrible situation to be in. Let's say month two, you make $4,000. Now, if you were profitable, then you were making less than $1,000 the first month. So at least now you are making $3,000 in profit. Your expenses, in my opinion, should not increase yet. Give yourself some buffer, give yourself some cash flow, some some reserves. If the next month I'm making, let's say $10,000 in revenue, I'm rocking now, and my sensors are still $1,000. Okay, now I can start thinking about where can I spend my money to make more revenue. And I'd be cautious to spend even that 2 to 1 ratio. I'm saying that's the absolute minimum. I'd probably, you know, slowly increase, maybe go another thousand, invest, reinvest another thousand. So now My expenses are 2,000 versus 10,000 in revenue. It's an $8,000 profit. Still good. I have some extra cash in the bank just in case I have a down month or down months. This happens all the Time. Often we get a lot of momentum at the start of a business, the launch of the business, and then things start to kind of teeter down and have some normalcy. So be careful of that. So as you can see, I'm never increasing my expenses until I know for sure I have plenty of revenue to cover those expenses and then some. And give me some revenue in the bank just in case things don't continue to go up in sales. If you're not good with money, if you're one of those people just like, you know what, I just never am good at budgeting and finances and all that kind of stuff. When you first get started, your first few months, at least have a spreadsheet of your expenses and your revenue. At least have a P and L A profit and loss sheet. Have something that you can follow. Second, your first hire should be a part time bookkeeper, Somebody who can do this for you and tell them, hey, make sure I never spend more than half of what I make. If I do, you have to alert me. We have to stop. This is a cardinal sin in our business. You have to put somebody in charge. If you don't want to own it, then give it to somebody, hire somebody. And this bookkeeper could be, you know, $500 a month, a minimal expense to make sure your business stays afloat. The biggest stress you could have in your business is financial stress. Competition you can overcome. Issues with your vendors, you can get new vendors, issues with your suppliers, you can get new suppliers, you can even get new customers if you don't like the customers you have. But if you don't have cash flow, if you don't have the finances in order, if you don't have your oxygen, which is money, money is oxygen to a business, then you die. It's that simple. That's it. And depending on your business, you have to tickle your own business model. Some businesses are just a really, a lot more expensive to run than others. Some of them have fixed costs that you just have to spend on every single month. No matter what, how good your business is doing, regardless. For example, if you own a pizzeria, their expenses are non negotiable. Your rent, your utilities, your staff. Regardless. If you sell 1,000 pizzas or 100 pizzas that month, you need to pay these expenses. So being profitable is even more important because those expenses can never be cut. You need to make sure you're making and in my recommendation, in those types of businesses, the pizzeria is just an example, but software is another one. There's a lot of fixed expenses in software you just cannot cut. So in my experience, what I think is you should always double and triple down on getting in new customers because you have to have cash flow. You got to keep that money coming so you can be able to continue to pay your bills. So marketing and sales should be one of the things you focus on heavily to keep that oxygen coming in.

Shipping, billing, admin, payroll, marketing. You're managing all the things. So why waste time sending important documents the old fashioned way? Mail and ship when you want, how you want with stamps.com print postage on demand 247 and schedule pickups from your office or home. Save up to 90% with automated rate shopping. That's why over 1 million small businesses trust stamps.com go to stamps.com and use code podcast to try stamps.com risk free for 60 days.

To wrap up today's lesson, you need to make sure you never spend more than you make. I know I've said this a million times in different episodes. This is the number one mistake people make. And it's the number one reason why people fail. There are many reasons why business could fail. They can fail because of product market fit. They can fail because they have the wrong team. They can fail because they're not serving their customers the way the customers need to be served. But the most popular, the most common, is finances. They run out of money. They burn out. And emotional burnout, by the way, is another reason why people fail or their businesses fail. But financial reasons is the number one cause. So you can avoid this by being on top of it. Being vigilant from day one. Again, if you don't focus on this, if you don't have somebody working on this, if you're not somebody who is into this, if you're not into finances, you need a bookkeeper. You need somebody to take care of your numbers for you and be on top of it. That's your job. Make sure that you're afloat and you're profitable. If you don't have somebody vigilant on it, it will creep up on you before you know it. Easy, easy, easy to spend. Not so easy to cut. Thanks so much for listening to the 100 RMBA show. If you love what you hear, share this on social Media Share this Podcast Let your friends and family know what you love about the 100 RPA show. Today is Free Ride Friday. So the episode's not over. I gotta give away a free ride. This week's winner is Colin. Colin. Colin. Colin is a handle on itunes and Colin Collins says Bite Size Actionable Lessons I discovered this podcast as a first time female founder looking to learn and gather as many actionable steps and this podcast delivers. I get so many perspectives and opposed to the long form content I normally listen to. This fits into my schedule. They're accessible and easy to implement. Great resource overall. Well thank you Colin Colin for that great review. Your mission is to email me@omar mba.net so I can hook you up with the Free Ride to Easy course over at Easycourse go a $500 course for free. You got a free ride. If you want to earn a free ride, just leave us an Apple Podcast rating and review and you enter our weekly random draw we call Free Ride Friday. Before I go, I want to leave you with this. I highly recommend you find somebody who you make it their job to make sure you're profitable, to make sure the numbers work and you evaluate them on that. When you have their evaluation, that's how they're evaluated. So you can focus on other things. You can focus on creating a better product, better experience for your customers, your branding, your marketing, your sales, all that stuff or whatever you love to do in your business. It's one of the best investments you can make to make sure your business is going to be okay. Thanks so much for listening and I'll check you in Monday's episode. I'll see you then. Take care.

Of.

With Venmo Stash A taco in one hand and ordering a ride in the other means you're stacking cash back. Nice. Get up to 5% cash back with Venmo Stash on your favorite brands. When you pay with your Venmo debit card from takeout to ride shares, entertainment and more. Pick a bundle with your go tos and start earning cash back at those brands. Earn more cash when you do more with Stash. Venmo Stash terms and exclusions apply. Max $100 cash back per month. See terms at Venmo Me Stash Terms.