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The 4 am Report

Oct 31, 2019

And….that’s a wrap on season 2 of our micro podcast, The 4 am Report. 🙌 

We’re calling this one “The ‘chicken or egg’ of financial decisions for small business”

And this last episode of the season is a perfect way to close out ‘National Small Business Month’ as we explore the single most stressful issue facing small business owners and entrepreneurs -- 💰money💰.  

This brings us to the ‘what came first?’ analogy:  

As a small biz owner you want to increase your sales.  

But you need money to invest in your marketing function to do this.  

But you won’t have the money to do that until you increase sales.😖 

We dive deep into this topic and confront debt, borrowing and money shame with Financial Literacy and Credit Counsellor, Pamela George. 

Here’s an excerpt from the transcript:

Pamela: Most of my clients are business owners, and they're struggling to pay themselves, to pay down debt, investing in their business. Or just their personal financial commitments that they have. And they come to me most of the times and they're lost, they don't know what to do. "I have an extra $1000. What do I do? Do I invest in it? Do I pay down debt? Do I pay myself?" That's the question. What I find after going over their numbers is that more often than not, my advice to them is, "You need to increase sales. You need to increase your sales." And here's the chicken and egg analogy. They're like, "I don't have money to invest in marketing to increase sales. And you are telling me I need to increase sales." So I as a financial counselor, I take that and I do understand the issue with that. I want to say generally speaking, as a financial aid officer and as a financial counselor, I do not subscribe to borrowing money. And I do not subscribe to debt.

However, if you have somebody working with you on a plan to pay back said debt, and to use the debt properly, I'm all for it. I could jump on that bandwagon. So what I tell my clients, not all of them, some of them, if they're able to take on a little bit of debt to invest in their business, not run their business. There's a big difference when you are taking out a line of credit as an example, to pay yourself and to live. As opposed to taking out a line of credit to invest in your business. So those guys who I say, "Listen, you need to increase sales." If they have access to a line of credit, I'll say, "Let's work with that. Let's see what you can afford to pay back. And that we will get backwards. Let's see what your budget allows to pay back every month. And let's see how much we can invest monthly into some kind of marketing strategy."

Susan: That's such a great point that you make in terms of differentiating between expenses and investment in your business. And it's funny how, yeah, you said if sales is the number one piece of advice, you're often giving people marketing as a tool to that sales for sure. And interestingly, marketing has never been cheaper or more accessible to small business entrepreneurs than it has become now, right? With the rise of digital channels, and the availability of even advertising for cheap with things like Facebook and LinkedIn, and stuff. However, it all comes down to sort of having a plan and understanding that there are some key elements. As we were talking to a financial coach a few episodes ago, and we talked about how ROI must be looked at with marketing just like with anything else. And if you're able to deliver that return on investment, which offsets your costs towards your line of credit or way beyond that even. That's kind of what you want to be thinking about.

So either as a small business owner, you need to in the case of marketing, for me it was two things. It's either you need to figure out, can you afford something to pay someone on the outside? And if you can't, can you afford to do it yourself? Right? To sort of quantify that value of your time, right? Of scheduling let's say, if you need 10 hours towards marketing a week, and if that time is going to be 10 hours of your time, then what is coming out of your schedule? Which is potentially not a great thing, right? So I'd love to chat with you a little bit about that. How do small business owners sort of quantify their own time, or just quantify an investment like that?

Pamela: Okay, so it all goes back to  - And everybody laughs when I say that- but it goes back to your budget. We need to have a budget for our business expenses. Most clients who come to me don't know what their monthly business expenses are. Of course, marketing is a part of that. So I will do a business budget with my clients. And I'll say, "Okay, let's talk about all the expenses you have now. Let's list that. And let's talk about what you need to increase sales, because you do need to increase sales if you want this to work for you." And we'll come up with a budget. Of course that budget at the very beginning is just a number we're pulling out of a hat right now, because we are looking at balancing the budget. But if this individual, she says she charges $200 an hour. And she says she spends six hours a week on social media, and that type of thing. Then we have to figure out what is that really costing her.

She might say it's costing her nothing, but it's costing her three hours or six hours depending - That's about $1200 right there, right? So we do that. And once we can fit it into the budget, it doesn't mean you can't have debt. But it has to be sensible debt. It has to be good debt. It has to be debt that you are on a plan to pay back within a specified period of time. And I have clients who I say, "Listen, you can afford X amount of dollars per month to have someone do this for you." Or I will say, "You can't afford someone right now, but let's work together. And in two or three months time, we can get you on board where you can hire someone." Now it may not be just marketing, it might be a business school. Which a client needs something. But whatever the expense is, it needs to be in the budget. And if it can't fit in the budget at the moment, we need to work towards it.


About Pamela

Pamela George is a Financial Literacy and Credit Counsellor who gives her clients the support and skills they need to break out of debt, learn to control their financial futures, and give themselves and their children the lives they deserve.

She’s an Accredited Financial Counsellor of Canada® (AFCC) with over ten years’ experience working as a Credit Counsellor and a Financial Aid Officer.  




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