Penny Kidd teaches small-business owners to separate business and personal accounts, use the Profit First method to pay themselves first, and practice zero-based budgeting where every dollar gets assigned a purpose. She emphasizes setting aside money for irregular costs like insurance and holidays to avoid year-end surprises.
Chapters
It's really common for me to come across small business owners who have commingled their business and their personal, right? Especially when you're just getting started, you think, oh, it's only little, I don't need that business account. Well, it's super important if you want to grow your business that they stay separate for all your tracking purposes and, and your lifestyle. So I'm going to talk to you guys today and kind of cross over business and personal. So take what you like and leave the rest, as they say in Asia. This is my favorite phrase: to tell your money where to go instead of wonder where it went. And this is having a plan. This is what a budget is. A budget's not some kind of arbitrary, you know, rule-setting, like a diet, like you people that are in the health industry. It's not about the diet, it's about the plan. And this is very much what a Our traditional accounting thing says take your revenue minus your expenses and that equals your profit. Mike Michalowicz turns it upside down and says your revenue minus your profit equals your expenses. You need to be profitable today. You need to have some money in your business and you need to quit just keep funneling money back in the business, which is what I did for 2 or 3 years, right? And I wasn't getting paid. It was like an expensive hobby. And so Felicia, God bless her, said to me several couple years ago, if you're not paying yourself something, Penny, you're doing a hobby. You are not in business. So I don't care if you pay yourself $100 a month, pay yourself something. Um, you know, foundational stuff is about the concept of 8 out of 10 businesses are going to go under if they— and it's because of lack of cash flow. You can make a ton of money but not have any and not keep any, right? Whether it's personal or in business. So what we want to do is create a habit of being profitable. It's not a one-time event, it's not at the end of the year, It's one of those things that you want to make sure that you are doing consistently, that your business is profitable. I say this all the time, that it's not about math, it's about behavior. Your behavior drives whether your personal finances or your business finances are healthy. It's 5th grade math when we're talking about budgeting. It's not rocket science, but the hard part is doing it over and over and over again. Right? Our first stop is to create what's called a zero-based budget. And when I talk about zero-based budgeting, I don't mean spend every dollar. I mean tell it where it's gonna go. Sometimes it's going for savings, sometimes it's going for vacation or eating out, but it has a plan instead of just wandering off. And at first I thought this was stupid because I'm like, I can do that on a spreadsheet. I don't need— I can— I know how to budget. I don't need these separate accounts. But then the second time I read the book, I realized, ah, it's about behavior, not math. If you literally move the money from one account to another and call it profit and call it taxes, you're not going to spend it because that's not yours anymore, right? It's got a purpose. Save for items that you spend irregularly. This is what that budgeting thing we were talking about earlier. These are just a few of them. Annual insurance. Sometimes you get a better deal by paying it once a year, but you got to set it aside for yourself. Birthdays, holidays, back to school. I don't know how many of you guys have kids. Back to school, holy cow, you know, write that check to the school and go buy their supplies. And, and yet if you have kids in school, it happens every September, right? Same with Christmas. Christmas is coming, ladies, like a freight train. And so if you don't have a Christmas budget, now would be a good time to start thinking about that because It's a whole lot easier to set a little aside every paycheck than it is to, oh my gosh, it's Christmas! Oh my gosh, it's— last I checked, every year it was December 25th, and yet it's a surprise to us for some reason, right? Take it out of your pocket money. Okay, that's how much you get, and you save it up. Now, my husband would save his up and go buy something big, and I had no money. I'm like, that's no fair, I'm eating it with my friends. And he said, well, that's your choice, you know, it's your money. You decide. So there's something about your attitude about being willing to bless others and avoid that attitude of scarcity. I think spending cash as often as possible helps you spend less. You feel it when you spend cash, paper cash. Well, if you're making progress, it's all about progress, not perfection. So give yourself a little time to get it under your— and I really think I still get up every day and say, today I'm gonna try to be good with my money. You know, I don't have it all down. I make mistakes. I fall down and you get back up.
