Reflect and Set Goals in Q4
The time to plan and get clear on exactly what you want and need from your business in 2022 is now, in Q4! But how do you plan and why would you want to set goals for next year when this year isn’t even finished yet?
It’s simple. You can’t aspire to what you haven’t planned for. The sooner you have an actionable plan in place and revenue, profit, and marketing goals written down, the more momentum you will have behind you for January 1st of the new year.
In this week’s episode, Stephanie Rainey is back and she is drilling into my advanced planning methodology. We are covering:
- What financial data to gather in preparation for planning 2022
- How to set yourself up for “thinking time”
- What financial goals to set for 2022
- What to do if you don’t know your numbers
- How to structure your planning day(s)
- Where you can go to plan with other like-minded entrepreneurs
Have you noticed that my podcast guests earning six and seven figures in their business have mentioned that keeping track of their metrics is a key factor in having the information they needed to scale?! When you take the time to gather data from your current year, analyze it, ask yourself where you want to grow to and then reverse engineer how to reach those goals (revenue, profit and marketing goals), you become the leader your company needs to take them into the new year with A PLAN.
It’s time to get planning for 2022, so hit play and let’s get started!
What’s in This Episode
- Why plan for next year in Q4
- My Advanced Planning Method
- What financial metrics to gather for your planning session
- How to make space for “thinking time”
- The secret to having your 2022 already underway on January 1
- Why planning for the new year in January will leave you behind in Q1
- How the best big corporations plan their growth & you can do the same
- The most common mistake I see business owners make in planning
What To Do Next
- Join The Strategy Lab, Lisa’s insider entrepreneurial community that is learning, tackling, and coming together to support and challenge each other on all things business. Click here to get on the waitlist.
- Join Thought Readers and connect with other like-minded entrepreneurs in this popular book club for business owners.
- Subscribe to receive this podcast and regular weekly strategies to grow and shape your business. You’ll also be the first to know about upcoming courses, programs and exclusive LIVE training.
- Join the conversation on Instagram, Facebook or LinkedIn and share your insights from the show.
Next week for episode 34, In the Hot Seat with Stephanie Allen, we take a close-up look at what is and what isn’t working when it comes to her lead generation and second sale strategy. Then we tackle how to fix it!
CLICK HERE TO OPEN THE FULL TRANSCRIPT
Lisa Larter (00:01):
Welcome to, She Talks Business. If you’re an entrepreneur, business owner or aspiring mogul, chances are you want to learn more about marketing and mastering and monetizing your business. She Talks Business is where you’ll learn all of that and more. My name is Lisa Larter and I’m an entrepreneur, high school dropout, wiener dog enthusiast and your host. Let’s get started.
Lisa Larter (00:24):
Hello and welcome to She Talks Business. I cannot believe we are recording episode number 33. Did you listen to the last two episodes? Did you listen to episode number 32 with Mike Michalowicz and episode number 31 on pricing for profit during inflation. I can’t believe that 31 and 32 episodes in I feel such a sense of pride at the quality of content that we are recording on this episode. I really hope that it is serving you well. Today’s episode is a really important one too.
Lisa Larter (01:06):
I’m here with Stephanie Rainey and we’re gonna talk about everything you need to be thinking about when it comes to planning next year’s numbers. Super, super, super important. You don’t want to wait until January to start planning for next year. You want to start planning now so let’s get started. Hello Stephanie. Welcome. Thanks for being here.
Stephanie Rainey (01:29):
Thanks for having me. I love this continued discussion on numbers.
Lisa Larter (01:33):
Me too. So what we originally were going to do with this episode is, I was going to tell you what you should do. And of course, nobody likes to be told what they should do. But we all like to learn from best practices of other people. So Stephanie is going to ask me a few questions about the things that I do to plan and why I plan that way for my business, because I am a consummate planner when it comes to the numbers in my business. And in my old corporate world I had a knack for forecasting and planning. In fact, I used to make my VP look really good, because I was always within half a percentage of accuracy on my sales forecasts, on my FTE forecasts, which is your staffing levels.
Lisa Larter (02:25):
And it was really important in that corporate world, because we were basing my projections on inventory. And if you order too much inventory, then it erodes your profitability, because your money, your cash flow is tied up in inventory. And if you don’t order enough, then you can’t reach your sales goals. So, I have a knack for being able to forecast. But before we get into all of that, Stephanie and I were having an interesting conversation about episode 31 and inflation and the impact. Stephanie helps me with the show notes after I record these. So Stephanie, I’m curious, as a business owner, what did you think of that show?
Stephanie Rainey (03:06):
Oh, it kind of blew my mind. I actually had to listen to it twice, not just for the show notes, but for my own… To make sure I grasped it. And then I sat down with a pen and paper and did the calculations, because I couldn’t believe what you had mentioned about how inflation really will be and is currently impacting our profits in our small businesses.
Lisa Larter (03:28):
I know. It was really interesting. So one of the things that Stephanie said to me when she came to the call, she was like, “Wow, if inflation goes up by 5%, you’ve lost 5% of your profit.” And I was like, “Oh, no, you lost more than that.” She’s like, “What do you mean?” So then we started calculating the math and on the example that I used, and I showed her how if you have a 5% increase in costs on a business that does $100,000 a year in sales and has a net profit of $15,000, that 5% increase in costs could absorb up to 33% of your total profit dollars. Because a 5% increase in cost, if your operating costs are $85,000, is almost $5,000.
Lisa Larter (04:15):
So if you are a sole proprietor or you pay yourself based on profits that are left over, you could be earning 30% less next year if you don’t start paying really close attention. So, I love that episode.
Stephanie Rainey (04:30):
That totally blew my mind that it would add up so much. And it totally makes sense. Because if you don’t raise your prices by the same amount that inflation is impacting how much you’re paying in expenses, then it’s actually kind of exponential.
Lisa Larter (04:45):
It is. You should raise your prices more than inflation in order to offset the increase in cost. Because if you just raise your prices by inflation, you’re not getting better, you’re staying the same. So if you really want to get better, you need to increase your pricing by more than just the cost of inflation. And I think the other thing that people need to be thinking about is, the cost of inflation is just the cost of the stuff that we’re buying. But there’s a ripple effect to this, right?
Lisa Larter (05:16):
The ripple effect is if you have employees, the cost of living for them is going up. So they’re going to be knocking on your door saying, “Hey, I need a raise, because it’s really hard for me to live right now.” So you have to anticipate and plan for this, which is a really great segue into today’s episode, and why you need to start planning your numbers for next year now.
Stephanie Rainey (05:41):
Lisa Larter (05:42):
Stephanie, let’s take it away.
Stephanie Rainey (05:43):
Okay, great. Awesome. So many people I know really don’t plan coming into the new year in their business. And having met you, it became so normal for me to just plan a new year in the last quarter of the year before or the year before that. So why do you plan 2020 numbers and goals in the fourth quarter of 2021?
Lisa Larter (06:09):
Well, I think you should be planning all the time, not… Like, I think it should be a quarterly practice, which is why we do quarterly planning sprints in the Strategy Lab. When I worked in the corporate world, we would do our plans for the upcoming year, we would start them, we would start the preparation in Q3, we would finalize the plan in Q4, and then we would revisit and reforecast and update the plan every quarter of the year. But if I try to corral small business owners and get them to start planning in Q3 for the upcoming year, like they can’t think that far ahead, because there are so many moving parts and things that are changing in their business, that it’s just not practical for them to do that.
Lisa Larter (06:55):
So I think that when you start planning in Q4, what you’re doing is you are setting yourself up to take a really good hard look at where you’re at in the existing year, so that you can finish that year strong. And you’re forcing yourself to get clear on what you really want to have happen in the upcoming year. If you are waiting until the week before Christmas and New Year’s to plan the upcoming year or you’re waiting until January to start planning your upcoming year, you’re probably not taking your planning seriously, and you’re really starting out late. Because you want to hit the ground running. What you do in December influences January sales.
Lisa Larter (07:40):
So if you don’t start till January, then… If you don’t finish your plan till January, you start executing your plan until February, you’re not going to see the results even move until March. So the earlier you can plan, the better. So I’m going to use the Strategy Lab as an example. What I am doing in November is I am giving people pre-work for the December 6th planning session. And that pre-work will include gathering of information that they need in order to plan, gathering their financials, getting them to do projection thinking, getting them to think about what they’d like next year to look at, getting them to look at the 80/20 rule, what are the 20% of products and/or people that are generating 80% of your sales? What are the 20% that are the least profitable?
Lisa Larter (08:33):
Like, really looking at stuff like that, it takes time to gather all of that information, it takes time to spend some time thinking about what you want. And so, if you don’t start early enough, then my belief is you rush it. And when you rush it, you force it, and when you force it, it’s not intuitive and it’s not grounded in research, and it’s not as thoughtful or as impactful as it needs to be.
Stephanie Rainey (09:03):
I was going to say, I’ve really seen entrepreneurs that work with you, small business or business owners, take two kind of routes. One is they come into the planning sprint, and they have every single number that you’ve asked for them to get ready for this planning sprint, and then they come out of the planning sprint with so much intention and so much clarity about the direction they need to go. And then there’s other small business owners who didn’t do the prep work or did some of the prep work, but they don’t have precise numbers. Can you tell me kind of what’s the contrast there? What have you seen in your experience as someone who comes in with precise numbers, because numbers are great like that, you can have the exact number versus someone who’s kind of like, “Well, I think it’s about this”?
Lisa Larter (09:51):
Well, I think that it’s fly by the seat of your pants versus taking it really seriously. And I’m okay with you not having precise numbers if your estimates are 95% accurate. I can do my own forecasting with pretty good accuracy, because I look at my numbers all the time. So I think everybody’s different. But I think it’s if you don’t… People who don’t do the pre-work are typically not doing the pre-work in their business as a whole. So what I mean by that is how you do anything is how you do everything. So if you take your planning seriously, then you’re going to get better results. If you’re loosey-goosey about your planning, you’re going to get loosey-goosey results. And so it really depends on the type of leader and business owner you want to be in terms of how seriously you take this.
Lisa Larter (10:49):
It’s funny, I shared on Facebook this morning a text message that I got yesterday from someone that has worked with me as a coach and business advisor for the last three years. And that individual said, “I just finished up my third Lisa book.” And one of the things that I had advised them to do at the very beginning of our work together was to start a notebook where they wrote down all of the things that they were learning and their questions and their ahas. And then they sent me another text message and said, “We should write a book on how you helped me 10X my business.”
Lisa Larter (11:25):
When I think about that individual, I think, “Oh my gosh.” Like they actually almost have 20X their business, not 10X. And I think about how serious of a student they are. And there’s a high level of trust. If I say, “Measure this, this, and this in their business,” they measure those things all the time. They’re taking the work that we do so seriously that they’re getting ridiculously good results. Whereas other people who kind of half-ass it, they do some of the work, but they don’t do all of the work. They don’t always get the same results.
Lisa Larter (12:05):
So that’s why I think there’s some of us that just kind of loosey-goosey our approach to these things, and other people who take it really seriously. And I got to tell you the very first year that I did a million dollars in the business and I saw that my profit margin was like 100 grand, I wanted to throw up, because I was like, “Why am I running a million dollar business and working this hard and not…” I wasn’t paying myself that well at the time. For $100,000 in profit, that doesn’t make sense. I sold a retail business because that’s what was happening. And so I had to get really serious about really measuring and monitoring what was going on with the numbers in my business. And the more serious you get about it, the better your results get.
Stephanie Rainey (12:50):
Yeah. I was also going to say it’s such a change in the confidence in the way you approach everything too. Once you really are precise with the numbers and not sort of like going with your gut feel or what you think they might be, it really changes how you make decisions in your business, just like you’re saying. You see that $100,000 profit and you go, “Oh, man, we got to do something different here.”
Lisa Larter (13:13):
Right. But you know, the other side of that, Stephanie, is it will help you build confidence and competence in your business long-term. But in the short-term it’s going to be really uncomfortable, and you’re going to feel a little bit neurotic. [crosstalk 00:13:28]. You’re going to be looking at, “Oh my God, can I afford to buy that package of post-it notes? And, you know what? Maybe we’re not going to have a lunch at this event, we’re just going to make you buy your own lunch.” Like you know, so I think there’s… You go through the conscious competence stage, right?
Lisa Larter (13:48):
You become consciously incompetent, and then you become consciously competent. And it’s that consciously competent stage where you are questioning everything that can feel really uncomfortable, but you do eventually move to a place of confidence, because you have done that uncomfortable work.
Stephanie Rainey (14:07):
Got it. Yeah, that’s true. I forget that sometimes. That’s very, very true. [crosstalk 00:14:10].
Lisa Larter (14:11):
It’s scary, right? It’s scary to invest. It’s scary to invest in your business. And you know-
Stephanie Rainey (14:17):
Lisa Larter (14:18):
Here’s one of the other things that I want to talk about why it’s important to plan. And I talked about this a little bit in the Strategy Lab. But there’s this concept called the Rule of 3 and 10. And I read about this on a Tim Ferriss podcast when he interviewed, I think it was the guy who founded Evernote. And what this guy said is that every time you triple the size of your business, everything breaks. And so, what I’ve experienced in my business is that is true.
Lisa Larter (14:48):
When you go from one person to three, your processes need to change. When you go from three to 10, they need to change again. When you go from 10 to 30, they need to change again. But the same is true in sales. So when I tripled the size of my business, my first year I did about $160,000 I think in sales. And then when I reached the 500,000 mark, which was essentially tripling the size of my business, everything broke. And I literally spent two years at that $500,000 mark trying to really figure out how do I run a business this size? And then we had ridiculous growth, 50% per year for three years, and we exceeded the $1.5 million dollar mark, and everything broke again.
Lisa Larter (15:36):
And so because I know that everything is broken, and when I say broken guys like it’s not all broken, obviously we’re still doing that volume of sales. But what I mean is that if you’re not doing planning, you can’t be looking at the numbers and predicting and anticipating where you need to hire, where you need to invest, how your cash flow changes, how your monthly spending patterns change.
Lisa Larter (16:04):
And so, people will often end up, just like I ended up at that 500,000 mark for two years, they end up plateauing, because they’re not intimate enough with their numbers to know what they need to do to disrupt the state they’re in for additional growth.
Stephanie Rainey (16:20):
Yep. I remember the year that we had planned out me getting to the profit margin or profit amounts that I was looking for, and there was a plan to do it in one year and I was so excited about that. And that year, I actually only made like $830.
Lisa Larter (16:40):
Stephanie Rainey (16:41):
Because… Yeah, in profit.
Lisa Larter (16:42):
You grew in sales, but not in profit. Yeah.
Stephanie Rainey (16:44):
Exactly. Exactly. And so, but I was not at all discouraged, which sounds counterintuitive, because you would think that I would have been, but I knew that I had put everything in place to have that growth for the next year, which I did hit the next year.
Lisa Larter (17:01):
Stephanie Rainey (17:02):
So, yeah, I can understand exactly-
Lisa Larter (17:04):
Yeah. I’m going through that this year. Yeah, I’m going through that this year in my business too. I’ve invested a lot because we are at that 1.7 mark, and I need better systems, better structure. And so, even though I want to protect my profit margin, when people on my team come to me and say, “We need this and we need this and we need this,” I have to be willing to invest now for the future growth of the business.
Lisa Larter (17:31):
Now, I’m going to speak out of two sides of my mouth, because you also shouldn’t throw money at problems. And when you start to grow your business, that is a habit that I see people get into, they just arbitrarily throw money at problems without really understanding the structural or systemic reasons why they’re having problems. You need to fix the root cause, and not just be throwing money at something.
Lisa Larter (17:55):
Otherwise, as Keith Cunningham says, you don’t want to grow a tumor in your business. And when you just default to throwing money at stuff, you are essentially wasting your profits, and you’re not being a good business leader.
Stephanie Rainey (18:08):
Right. So let’s pull the curtain back a little bit on your planning and get a little granular. So where exactly do you do this planning? Like, do you sit somewhere by the ocean and decide what you want in your business?
Lisa Larter (18:20):
Oh, yes. I sit by the ocean, and I have somebody deliver margaritas to me on the hour. And I have somebody there to paint my toenails, and I have somebody to fan me. No, it’s not that glamorous. There’s a few things that I do in terms of the planning. I like to sit quietly and really think about what I need, and sometimes I do that on a morning walk. I will ask myself a question, and I will just think about the answer to that question as I’m walking. Other times I’ll sit outside with a notebook, and I’ll just kind of journal the ideas that come to me. But my own planning happens in front of my computer, typically in my office without distractions. And I find it very helpful to map things out on paper before I actually put my plan in place. I find it helpful to use posted notes and flip charts and whiteboards and things like that to really get clarity on what it is that I want.
Lisa Larter (19:23):
And I also find that a lot of times the reason that I give people pre-work leading up to the planning for the Strategy Lab is because it’s really hard to do it all in one sitting. So, you need to take a different approach to doing it. And if you are… Like, my husband and I don’t have kids. So, my environment is conducive for quiet planning. I can tell my husband, “I’m in my office working, don’t bug me,” and he won’t bug me. But if you are at home and you have kids, you might have more distractions than what I have in my life.
Lisa Larter (20:01):
And so in a case like that, I know people that will book themselves into a hotel for one or two nights, and they’ll just spend time in the hotel planning. I remember doing that with Pierrette years ago. We booked ourselves into a hotel room and did strategy. And we had like flip charts all over the wall, but we did such deep powerful work. And so, I think you have to know how you do your best work.
Lisa Larter (20:29):
And then just to double back on what I just said, I was doing the planning with her for her business. Sometimes you need somebody to help you. So, sometimes entrepreneurs are a little bit distracted by the fires, distracted by serving customers, distracted by things in their personal life, let’s not even mention distraction of text messages and social media. So sometimes you actually need somebody to sit with you to do the work. And you shouldn’t feel bad about doing that. If that’s how you get your best work done, then find somebody who can help you to do that planning, but don’t go into next year without a plan. Especially with all of the uncertainty happening in the world right now and inflation, like it is a disservice to you, your livelihood, and your business, and even your customers to not do this planning. Because businesses that go under, no longer employ people and they no longer serve others. Don’t be a business leader that doesn’t take this planning seriously, because it’s really important.
Stephanie Rainey (21:33):
That’s what I love about the Strategy Lab. And I even build in a structure around it as well. So your homework that you give like to get everything organized, I take that as early as it goes out and I sit down with it and get precise about the numbers. And then for the dreaming part, which is like, “Where am I really going with this business?” and trying to get to the core of really what I’m doing this year but also looking forward, I do that in an environment, like you said, like totally away from the kids. I’ll usually go to like the Nordic and sit in the hot tub and kind of do this work in between, because it gives me the freedom to really think openly and think only about what it is that’s on your homework pages.
Stephanie Rainey (22:15):
And then afterwards, we do the Strategy Lab, and that’s so packed with information. And it takes me in such a great direction that I like need time to debrief. So, I often will sit in a cafe or plan like even a half day after that or sometimes a day to go through and pull out everything that’s important, and put it on a one pager for myself, just so that I have it where I can see it in my office.
Lisa Larter (22:40):
Yeah, and that’s super powerful, because a lot of times we have the best plans, and then we get busy and we forget about them. And then six months later, we’re cleaning our desk and we come across this piece of paper that had everything written down, and we’re like, “Ah, I forgot I wanted to do that.”
Lisa Larter (22:55):
I’m going to tell you, one of the things that I think trips people up the most when it comes to planning for next year’s numbers, is they don’t have access to the financial information and the stats that they need to really get clear on where they want to go. So, when I am thinking about planning, like I am always looking at my P&L or my income statement. I’m looking at how much money I’m spending, what are our total sales? What are our profit margins? I am doing projections in terms of how much does it cost to grow? How many resources do I need to make this happen? Like, you can’t do really thoughtful planning without having a clear understanding of what your numbers look like right now.
Lisa Larter (23:36):
It’s all fine and dandy to set a high level goal and say, “Oh, I want to do a hundred thousand dollars in my business, or a million dollars, or $10 million.” That’s fine and dandy. But if you don’t understand the ingredients that go into the recipe for making that happen, you will expend a lot of additional energy on things that may not actually serve you and/or your business.
Lisa Larter (24:11):
And so, I think the hardest part for most people is actually accessing their financial statements and/or their sales tracking. They don’t have good ongoing numbers tracking. Like, I can pull my P&L up right now to the end of September, and I can tell you every month of this year what my P&L was, and I can tell you year-to-date what my P&L says, and I can tell you year-to-date the difference between this year and last year, I can tell you the difference between my balance sheet this year and last year. And I can pull up my sales results, I had to just do this for somebody the other day, and tell them what percentage of my business comes from the United States versus Canada, what percentage of business is fulfilled by me versus my team. Like, I have access to that stuff, and I have access by design. We track things on a weekly basis. We do our bookkeeping and accounting on a monthly basis.
Lisa Larter (25:06):
And so, I think if we go back to some of the loosey-goosey stuff that I talked about, it’s probably a result of not having those practices in place to access the information that you need. So if you’re listening to this and you’re like, “Ah, she’s right, I don’t have a year-to-date P&L, and I don’t have regular…” I get sales reports weekly, and I get high level sales reports and I get detailed sales reports. So like right down to how many people are in Thought Readers, and how many downloads did we have of the podcast last week? Like, I have a lot of measurements that I look at in the business. If you don’t have that, the number one priority you should set for yourself is to get that and maintain that on a regular basis moving into next year.
Stephanie Rainey (25:51):
I can’t believe how many guests have been on, that said that was the game-changer. Like Tanya Dalton was just on, and that was what she said, “That is what totally changed where I was going and helped me scale to such a degree.”
Lisa Larter (26:06):
Absolutely. You can’t do it if you don’t measure it, because you don’t know where you’re at, you’re operating blind. You would not get on the freeway and drive a car without knowing how fast you’re going, without knowing what your fuel gauge was at. So, getting into a car and not having any idea on how fast or slow you’re going is like having no idea what your sales are. And getting into a car and not knowing how much gas you have in the tank is like not knowing how much money you have in your business. It’s risky.
Stephanie Rainey (26:37):
I love that you said that. I mean, if it’s not what you… If you don’t have these things in place now, like make this the year that you do. That’s such a great idea. And work on-
Lisa Larter (26:46):
Exactly. Exactly. And set expectations with your bookkeeper and accountant. I’m very direct with my bookkeeper and accountant, “I am hiring a firm that I need to do this, and this needs to be done by this date every month. This is what I’m paying for. Can you do this for me?” A lot of us like we let them be loosey-goosey, we let them get the reports done whenever they’re ready. Don’t be like that. You have a right and a responsibility to your business to hold them accountable to get the results that you need to you when you need them.
Stephanie Rainey (27:20):
Lisa Larter (27:21):
The last thing that I’m going to say just was off the top of my mind, and this is not anything to do with the planning session in the Strategy Lab but something that you should be thinking about right now is, you should be asking your accountant right now to predict what your tax implication is for the remainder of this year.
Lisa Larter (27:38):
So, in the fourth quarter of every year I ask my accountant, “How much should I plan to pay for taxes this year, based on how the business is doing?” So if my trend continues the way it has for the first 10 months of the year, what do I owe in taxes? Then I compare that number to what I have paid, because I pay monthly installments so that I don’t have a big surprise at the end of the year, and I pay those installments based on what I owed the previous year.
Lisa Larter (28:07):
Then what I do is I make a decision on whether I need to up my payments over the next couple of months, or in some cases I’ve overpaid, I can actually pull back on them. But what you never want as a business owner is to be three to four months into next year finding out how much money you owe for last year. That’s a really bad place to be. And it happened to me once, and I had a really big surprise, and I hated the surprise, and it’s never happened since. So if you haven’t done that as part of your planning, it’s a really important question to ask your accountant.
Stephanie Rainey (28:40):
Right. Make sense. All right. So what numbers do you consider when you go into doing your planning?
Lisa Larter (28:48):
Well, I’m always looking at sales.
Stephanie Rainey (28:50):
Lisa Larter (28:51):
Obviously, I want to know what top line revenue, but not just sales, I want to know what my sales mix is. So, when I look at my business, I have I’m going to say probably four distinct areas of the business. I’ve strategy, where I do strategy with people, I have ongoing business coaching and/or advisement, I have implementation services that are fulfilled by my team, and then I have online programs like the Strategy Lab and Thought Readers.
Lisa Larter (29:21):
And so, I’m always looking at my sales through those four pillars to see where’s the revenue coming from? What is it costing me to manage the revenue in those different pillars? What do I need to add? What do I need to take away in order to drive the results that I want for the upcoming year? If you go back, I forget what episode number it is, but we’ll put it in the show notes, where I talk about rock, pebble, sand. What I find entrepreneurs do is they play in the sand. They look at the lowest common denominator in their business and they try to grow by really lifting heavy. And I prefer a lighter load, a lighter lift.
Lisa Larter (30:06):
So I’m always looking at where are the big rocks, the big wins that I can get to move the business forward? And I can’t do that by just looking at top line revenue, I need to look at the sales details in order to know what I want to grow and what I want to slow on in order to hit the goals, and I mean next year.
Lisa Larter (30:30):
The second thing that I need to look at is what those decisions do to my profitability in the business, and are they sound. Because if I look at Thought Readers, just as an example, I am raising the price of Thought Readers from a thousand dollars a year to $1,200 a year. And the reason I’m raising the price to $1,200 a year is because the cost of books and the cost of shipping those books to people has gone way up this year. And so in order for me to continue to maintain the program, I need to increase the fee, otherwise, it’s not profitable enough to maintain. So, you’ve got to look at the profitability associated with the different services that you offer.
Lisa Larter (31:14):
In Thought Readers, there’s a cost of goods associated, books and shipping. In the work that people do with me privately, when someone coaches with me or they bring me on as an advisor, there’s no cost of goods, it’s my time. So I know that that is a really high margin service. So it’s important that you’re able to look at your different products and services that roll up to your sales, and you’re able to evaluate the profitability of those things so that you can determine what you need to do more of. I would not bet the farm on Thought Readers to scale my business to the next level, because the profit margin is low and the price point is low. Why would I go all in on a $1,200 program, when it’s really easy for me to sell 20,000 and 50,000 pieces of business? So, that’s what I mean by knowing what it is that’s going to help you get to where you want to go, and what are the higher profit margin items that you can focus on to grow your sales and grow your profit.
Lisa Larter (32:22):
The reason that it’s important to grow your profit is because as your business grows, you’ve got to be making decisions around where you invest in your business. Now, a lot of people talk about, “Oh, I reinvest my profit,” and really they just spend it. True investment of profit is, I am intentionally hiring another team member to do this so that we can do that. I am intentionally bringing in this technology so that we can be more efficient in how we do this. That’s what I’m talking about when I say invest in your business. I’m not talking about buying a new coffee maker for your office, or art for the wall, or just taking people out for lunch because you have money in the bank, true investment is tied to where you’re growing to, it’s not just arbitrarily spending your money.
Lisa Larter (33:14):
So if you don’t have good profitability in your planning, you can’t actually make those strategic investments. And you can’t make those strategic investments if you’re not managing your cash flow. And so, when you really put your big girl panties on, or your big boy trousers, and you look at your business, you start to move away from your profit and loss, and you start to… or your income statement, they’re the same. People call them different things. You start to look at your balance sheet. And your balance sheet is what shows you the real value of your business, and it shows you how much cash you have in the bank.
Lisa Larter (33:54):
So, as you’re building your business, you want that balance sheet to grow. You don’t want to look at your balance sheet and see that your business balance is like, I don’t know, $100,000 one year, and then the next year it’s 20. That’s a sign of a business that’s going down, not up, even if your sales went up. So it’s important that you understand the sales profit investment and cash flow mix in order to be able to make all of that happen. And at the same time, it’s important that you understand the impact of growth and the effect that it will have on your taxes, because there are different thresholds for businesses as they reach different levels of profitability. And it’s important that you’re looking at your marketing spend.
Lisa Larter (34:40):
I actually stopped some of my Facebook ads about a month ago. I pulled the plug on them. Because there’s been so many changes in terms of accessibility to audiences with Facebook ads, and with the new iPhone restrictions on who can track and who can’t, and all that kind of stuff. And the competition on Facebook has made it a lot more expensive to actually get leads. And so, before I choose to reinvest, I need to do some analysis on my marketing spend. And so I think that it’s really important that you’re looking at your marketing spend in correlation to the growth of your business, and you’re making smart decisions and not emotional decisions rooted in comparison, because an influencer on Instagram has more followers than you.
Stephanie Rainey (35:36):
Those are all great things I guess to gather up in those numbers so that you can really plan properly for the upcoming year. [crosstalk 00:35:43]-
Lisa Larter (35:43):
It’s a lot. It’s a lot of planning.
Stephanie Rainey (35:44):
Yeah. It is a lot of prep work.
Lisa Larter (35:45):
And that’s why doing guided planning with a mentor, or coach, or in an environment like the Strategy Lab is so important. Planning doesn’t come… Like I have done planning for a $100 million corporation. That’s a lot of planning. A thousand employees. Take a thousand employees and times what they got paid, that’s a lot of money. So, I have a skill around doing this planning. It wasn’t like I was just born this way. And most entrepreneurs have not done that work.
Stephanie Rainey (36:15):
Lisa Larter (36:16):
They’ve not worked in a big corporation that had all these moving parts, and had this experience. So, don’t listen to this podcast and think, “Oh, my God, I’m so dumb. I don’t do this.” You’re not dumb. They don’t teach you this when you decide to start your own business. God, I’m going to guess that half the business coaches out there don’t even talk to their clients about numbers.
Lisa Larter (36:36):
So, don’t think that you can’t do this, you can do this, you can do anything. You just need somebody to guide you and show you how to do this. And then if you stick with the practice, and you do it, quarter after quarter, year after year, you will become super proficient and confident at this. Stephanie, do you remember the year you told me it was the last year you were going to work with me?
Stephanie Rainey (37:00):
Lisa Larter (37:01):
So Stephanie comes to me, and she’s so cute, she’s like, “So Lisa, this is the last year we’re going to work together. And what I want to focus on this year is I want to focus on my financials. So every month I want to look at my P&L, and I want you to tell me what I should be seeing and I want you to teach me how to understand my numbers better. And then once I know how to do this, we’ll be good.” We weren’t good, we continued to work together. But that process, the process that we went through, was really show-and-tell.
Lisa Larter (37:30):
So, in the beginning, I would look at the financial statements with Stephanie and I would say, “Okay, here are the outliers. Go ask your accountant why this is like this. Oh, here’s an outlier. Go ask this vendor for a discount. Oh, here’s an outlier. Go talk to this employee about this.” And so, for the first couple of months, that’s what we did. And Stephanie went away, and she did all the work, and she’d come back, and she’d report in on what she discovered and what she found out, what she learned.
Lisa Larter (37:59):
And then I passed the baton to her. And I said, “Okay. Now you look at this thing and tell me what you see. And month by month we will do this work.” And in the beginning, she only saw a couple of things, and then she saw more things, and then she saw everything. And I think by like month seven or eight, we even stopped looking at the reports, because you had just gained so much knowledge and confidence. But it took months of reviewing the reports and unraveling the numbers to really understand them, for her to gain the confidence that she needed to be able to scale and sell her business.
Lisa Larter (38:41):
So, I share that story with you because it’s real and it’s honest. Most business owners have never been taught how to do this, they don’t know how to do this. But I got to tell you, when you learn how to do this, it is a game-changer in your business.
Stephanie Rainey (38:58):
I’m just smiling here and nodding my head. People can’t hear that, but that’s absolutely what I’m doing. Yeah, that is exactly what we did. And it took time, but it was so worth it.
Lisa Larter (39:11):
Yeah. And it was uncomfortable. I remember you having to go back and ask somebody for a discount. And you were like, “No, no.”
Stephanie Rainey (39:16):
Oh my gosh.
Lisa Larter (39:16):
Because I was like, “Why are they charging you so much more than they did last year?” [crosstalk 00:39:18] money.
Stephanie Rainey (38:19):
That was huge. It was huge. But then when you put into perspective the impact that it has over a year, but then multiple years to come, it would have degraded my profit, where I would not have probably been able to continue being in business.
Lisa Larter (39:35):
Absolutely. And it taught you how to negotiate and stand up for yourself. We are all so afraid of negotiations.
Stephanie Rainey (39:43):
Yeah, it’s true. And it’s just a conversation in the end.
Lisa Larter (39:47):
Stephanie Rainey (39:48):
So, do you have any high level sort of goals set already, I’m curious, for like the LLG and for yourself?
Lisa Larter (39:55):
Ah, I do. So, I have higher sales goals. I’m predicting that this year will actually be our best year ever in business, and I am predicting that next year will be even better, because I feel like our team is really coming together and our structures are getting really strong, and I’ve got people on the team that are actually able to do some of the things that I used to think that only I could do. So that is like a huge bonus for me. And I am committing to only working four days a week next year.
Stephanie Rainey (40:29):
Lisa Larter (40:30):
And I’m committing to only working to doing my work on the business on Mondays, to working with clients on Tuesdays and Wednesdays, to having Thursdays for strategy. And that’s it, that’s all. And taking Fridays off. And I have set the goal that I’m allowed five days where I work on… I’ve given myself a 10% buffer. So there’s 52 weeks in the year, I’ve said, “Okay, I’m going to allow myself five exceptions where I work on a Friday,” because sometimes it’s the only day that works for a client. And if I go over the five, for every day that I go over, I have committed to some colleagues of mine, I will donate $100 to a charity, probably a dachshund rescue charity, because I’m dachshund obsessed. And if I go over 10 days, the fee goes up to $500 for every day over, because I really want to force myself to run my business in a four day a week workspace.
Lisa Larter (41:33):
And once I get good at that, then I’m going to look at potentially three days, or three days every other week, but I want to create a self-managing company where everybody on the team understands their contribution and knows how to self-manage. And I want to create more freedom for myself so that I do what I’m really great at, but I’m not having to work a standard five day workweek.
Lisa Larter (42:03):
It’s really interesting, reading Tanya Dalton’s book, On Purpose, there’s a part in the book where she talks about women and why women earn less than men, and all this jazz. And then she talks about why that happens. And the why might surprise you. The why that she claims is that it’s because women are rule followers and we follow the rules. And because we follow the rules, we actually limit ourselves. And so I’ve been thinking about that a lot, where do I follow the rules? Well, I follow the rules, because I think I need to work Monday to Friday, I think I need to be in my office every day, I need to be there from like eight to five. That’s a rule, that’s a story I don’t need to do, I don’t need to follow.
Lisa Larter (42:44):
And so it’s really made me question what other rules have I imposed for myself that I need to tear apart? And so, that’s another thing that I’m thinking about in the business, how do I grow and work less? That’s my goal.
Stephanie Rainey (43:00):
I love that. It’s like it’s what you helped me do. I like went off for months and months to like Australia and different places to do things, and my business ran itself. You helped me do that. So I’m so excited that is one of your goals for this year. That’s awesome.
Lisa Larter (43:15):
Yeah, I can’t wait.
Stephanie Rainey (43:17):
All right. So when you’re done planning, and you have what you know you’re going to do, and you have your sales goals and you have your other goals, what do you end up doing between Christmas and New Year’s when everyone else is scurrying to figure out what they’re doing the next year?
Lisa Larter (43:34):
It’s a great question. So, I have some routines. I’m a creature of habit. I have some things that I like to do between Christmas and New Year’s. One thing I like to do between Christmas and New Year’s is I like to ensure that my plan is really set up to go when I move into the new year. And that’s why I start early. You know, it’s… When we’re recording this episode, it’s October. And I’ve already given my executive assistant the directions on what needs to happen in my calendar for next year, so that she can put that in place in advance so that it happens. You have to get ahead in order to execute.
Lisa Larter (44:12):
And the second thing that I do every year is I read The Alchemist. And I know it sounds funny, but The Alchemist just reminds me of the journey. It reminds me that the plan is not going to go as planned and that that’s okay, that I have to be willing to embrace the things that come up that I don’t expect. I need to be flexible, but I also can’t lose sight of the long-term goals, vision, meaning, and impact that I want to make in this world. And so, The Alchemist is almost like a reset for me to do that.
Lisa Larter (44:48):
And then the other thing that I do that I highly recommend people do is I sit down one evening with a really nice glass of wine, my computer, and a notebook. And I open up my calendar, and I go back to January of the previous year. And week by week I look at where I spent my time. And I write down the things that I accomplished over the course of that year that I am proud of. And it is a really powerful way to end the year, because when you’re starting the next year, we’re focused on where we’re going, we’re not looking at how far we’ve come. And so, that exercise for me is a really powerful way to remind myself of what I’m capable of, and what I’ve done. And it’s like it fuels me to be ready to take on the next year.
Stephanie Rainey (45:49):
Oh, what a great exercise. That is a total surprise to me. I had no idea that you did that.
Lisa Larter (45:55):
Yeah, I do. And I love it.
Stephanie Rainey (45:47):
Well, that’s all the questions I have for you. Thank you for giving me an inside look into your planning and why you do it in the last quarter.
Lisa Larter (46:04):
That’s awesome. It was fun. I love talking to you about numbers. It’s like my favorite topic. I get such joy out of seeing other people impact the numbers in their own business, and I love digging into the numbers. Like, to me the numbers don’t lie, they just… There’s so much learning when you look at the numbers, there’s so much guidance that you can use to propel your business and take your business to the next level.
Lisa Larter (46:31):
If you’re listening to this episode and you’re thinking, “Man, I wish I loved the numbers,” I can tell you with confidence that I have converted many a skeptic into loving their numbers through the work that I have done with them. And if you’re thinking, “Man, I need to be part of this Strategy Lab and do this planning on a regular basis, because I want to change my habits,” go to lisalarter.com/thelab, and get on the wait list. We are going to start inviting people to join us, and in preparation for that December 6th planning sprint. So, if you want help planning 2022, go there and you can learn more about that.
Lisa Larter (47:12):
And if you’re listening to this episode, a couple things I want to say. One, thank you for listening. I’d love to hear what some of your big goals are for the upcoming year. You can message me on Instagram and let me know. And I also just want to say a huge thank you to those of you who have left a review on iTunes in the Good Ole U.S. of A.
Lisa Larter (47:34):
So, I learned something really interesting, because a client of mine sent me a screenshot of a review that they did on my podcast. And I was like, “I’ve never seen this review. It’s not there.” Well guess what? There are reviews on Canadian iTunes or Apple Podcasts, and there are reviews on the American one. And I, because I’m Canadian and my iTunes account is Canadian, I was only seeing the Canadian reviews. Well, it turns out there’s a whole bunch of them on the American channel that I didn’t even know about.
Lisa Larter (48:05):
So, for those of you, I’m just going to name a couple, Ashlee, Jean, Anna, thank you very much for the reviews that you put out there. I really, really appreciate it. I feel like a kid in a candy store. Every time I read a new review for the podcast, it makes me recommit to doing this work. So, thank you. And thank you, Oresta. I really appreciate you sharing, I think it was episode 25, the myths about money on Instagram, and endorsing the podcast. That was really awesome. So, I love knowing that these recordings make a difference. So, thank you for listening. Thanks for being here, Stephanie.
Stephanie Rainey (48:44):
Lisa Larter (48:46):
Thank you for joining me for this episode of She Talks Business. If you enjoyed the show, you know the drill, leave us a review, tell someone about it and join the conversation on social media. Thanks for listening and until next time remember, done is always better than perfect.