MBA2246 Why You Need to Start Saving Cash In Your Business

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Hey. Welcome to the $100 MBA Show. Your daily business workout 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 Webinar Ninja, an independent software company I started with my co founder back in 2014. And in today's lesson you'll learn why you need to start saving cash in your business. I've touched on this topic a few times in previous episodes, but it's so important I need to dedicate a whole episode to it. We're in the middle of a recession. It's a pretty big one. Some experts say it's one of the largest recessions we're going to see in the last 15 years. What happens in a recession is that interest rates go up. That means the ability to borrow cash cheaply from a bank, from debt financing, even from an investor. Investors usually don't use their own cash. They use bank cash. The cost of cash is going up because of these interest rates, how much it costs to borrow, let's say $50,000 is a whole lot more than it was two years ago. So in today's lesson, I'm going to show you how you can create your own bank, your own reserves so that you're charged 0% interest when you need to withdraw and take some cash to inject in your business. You see, a recession allows for opportunities, opportunities that you can exploit if you have the cash on hand. I'll show you how in today's lesson. So let's get into it. Let's get down to business. Today's lesson is not just for those who are just making it or grinding it out and are barely paying their bills every single month for their business. It's also for people that have a Runway of six months a year in the bank. You see, when interest rates are low and borrowing cash is easy, many businesses kind of don't like to keep too much money in the bank or cash in the bank. They rather invest it in their business. And then if they need more money, they can always go ahead and get a loan or get some debt financing, grow the business, pay back the loan, and even maybe shave off some interest rates or interest payments. See, most businesses, they don't like to have a lot of cash on hand in their business. They want to just rent in the business. So if they do ever need money, they just go to a bank and get a loan or get some debt financing. Because usually interest rates are pretty reasonable. It's a pretty good deal because you could take that cash, reinvest, grow your business, take your earnings, your profits, and pay back the loan quickly. But this is not a smart decision during a recession because interest rates are quite high and the money you're spending on interest alone on the payments is expensive. So what you want to do is create your own bank, create your own reserves of cash that you can tap in when you need it. Now, you might be saying to yourself, omar, this sounds great, but I'm barely making it go by. I'm in the early stages of my business. I don't have a lot of cash on hand. How do I just accumulate dollars and put it on the side? Well, you got to start today. So whenever you get paid, whether it's through client work, whether it's a payment that you get through your payment processor at a regular time, maybe every two weeks, maybe every week, maybe every day, whenever you get paid, you need to put aside some cash for a rainy day for that time when you want to tap into that, create your own little bank. And it doesn't need to be a lot of money, but it needs to be consistent money. Now, there's a few things I recommend. Number one, you want to make this automatic. So basically, whatever account you use for your business, bank account, create a Savings account aside, next to it, and preferably this account does not have any way to kind of withdraw with an ATM or with a card. You got to do a transfer to be able to withdraw from it. So it's kind of left alone. And what you want to do is every time you get paid into your main account, there's a withdrawal that happens from that account to your savings. And you can start small. Like you could start with $100 or $200 or $1,000, depending on how your business is doing. So you'll know the dates of when you get paid. So the following day, right away, just make sure you have that payment set up. You could do this on your business banking, where it's automatically deducted and transferred to the savings account. Let's say you get paid once a week and you do this four times a month. And each time you, you deduct, let's say, $400. Yep. At the end of the first month, you got about $1,600. That's not a lot of money. I know that. But you can start increasing that amount for every week. As you feel more comfortable and get used to this, what you'll find out is you'll actually be fine. You'll start to learn how to manage your money minus that $400 a week. This is the profit first methodology that Mike Michalowicz talks about in his book Profit first, where you put aside money for yourself first before you pay your bills. Now, in practice, what this does is that each month or each time you get paid each week or whatever the cycle is, you're upping the ante a little bit more. So maybe you'll start with 400, then it's 500, then it's 1000, and again this is automatically being deducted. And then what happens is that within six to 12 months, you'll have like 25, $30,000 in reserve in your bank account. Money you would not have if you did not set this up. Now, when you want to make a purchase or you want to reinvest in your business, you don't need to take out a lo need to pay high interest rates. You have it in reserve. And this is brilliant. When you want to save money for the long term, take a look at all your expenses in your business. Things that you rely on, email marketing software, course memberships, website hosting. These are things you're not going to cancel. Things that run your business that you need for the long term. These are the types of expenses you need to go annual with. Because you're going to save money. Most annual plans for most services are going to save you at least 15 to 20%. And guess what? With your reserves, you can do that. And you're basically earning cash because you're saving money and because you could pay it up front because you got the cash on hand, you're paying no interest rates, no interest payments. And of course, you get that service for a year in advance with the savings. Often when you buy a year in advance of any of these services, they'll bundle it up with an offer with some bonuses. You can even just email them or chat with their support and say, hey, I'm looking to switch from monthly to annual. What other benefits can you offer me other than the annual discount? And many will respond and say, hey, we can give you this. This maybe give you a free upgrade or add a few features that are extra. This allows you to save even more money in your business given the fact that you're getting extra value. But the whole reason why I'm recommending this is because you need to save for a rainy day during a recession. We don't know how long this recession is going to last. It could be 12 months, it could be 18, it could be two. Some people even say three years before we recover by starting this side savings and creating our own bank. The longer it lasts, the safer we get it. Also future proofs our business and the expenses of the business. Because as recessions go on, prices start to increase because again, interest rates are going up. Prices might increase from all your other expenses. So it kind of helps you cover. And then some, of course, some of these price hikes that you're going to experience as the year goes on and the next year rolls on, prices won't stay the same. Services will get more expensive. And by doing this, you're kind of making sure that you're not affected. This also gives you peace of mind as the economy starts to slow down. Business can be stressful and there's nothing worse than financial stress. And I want to alleviate that stress from you by having a little bit of reserve in the tank.

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Now you might say to yourself, omar, I have no extra funds to throw into my savings. My answer to you is no problem. Make extra funds. Okay, what can you create? What can you sell? Where can you add more expansion revenue, more products, things that you could sell your existing customers, things you can sell to new customers? Maybe you can add a service to your product. Maybe you can add a product to your service. Maybe you can use some affiliate commission cash on the side. How can you earn money that you can use that money that as your money in the bank? It's important to ask these questions so you can start getting this going. When people tell me this, I say the easiest way to get around this is that if you have an existing audience, if an existing customer base, just sell them products and services they can use that you don't own as an affiliate. So many of our existing users at Webinar Ninja Course Ninja make some really good side income just by being our affiliate, by promoting our product, promoting our service and using their affiliate link and getting a 30% commission on every sale reoccurring. If that sounds like something you want to look into, go to webinarninja.com and go to the footer where it says affiliate program. Well, it doesn't matter if you've signed up for Webinar Ninjas affiliate program or some other affiliate program that is a better match for your audience. This is low hanging fruit. This is something that you can do easily by just sending an email to your email list and say, hey, here's a great product that I endorse that I maybe use and this is how it can help you. Click on my link and I'll get a small kickback. It's going to be the same price for you. You might want to run a webinar to show them the fun things about this product or create a video and put it on YouTube. There's so many ways you can do it. Earn a little bit extra cash so that you can have some reserves in the bank. That wraps up today's lesson. Thank you so much for listening to the $100 MBA show. If you love what you hear, hit subscribe so you don't miss an episode. Or hit Follow. If you hit the top right hand corner, there's these triple dots. In Apple Podcasts or Spotify, there's these triple dots. Click them. You can. You'll see the Follow button. Click Follow and that way you'll get our next episode automatically. You'll also get access to our back catalog of over 2200 episodes. Before I go, I want to leave you with this. In practice, when you have these reserves, when you save that cash and put it aside, it's like every time it happens, every time that gets deposited in the savings account, you get more and more comfortable. You start to feel less stress, less. You feel like you're doing the right thing for your business, for your life, really, for your stress levels. Because it kind of is an insurance policy. Because things change, things happen, things get challenging sometimes, and it's good to know that you planned for it and you have something that can ease the blow a little bit if things get hard. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

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