Entrepreneurial Bookkeeping
Part 2 | Decision Making
So many times, when we ask our students what they want to do with their business, the only response we get is “I don’t know.” That’s why we knew this course needed a module about how to make confident decisions, because decisions are what determine the trajectory and the success of all businesses. You must have a vision and a reason for being in business. With a clear vision and a good understanding of why you’re in business to start with, the solutions to most difficult choices become obvious. Brooke and Mark go into more detail about this and share some of their own experiences in the video below:
Serving Your Vision
At The Life Coach School, our vision is simple: become an example of what’s possible with the lessons we teach by growing into a $100 Million per year company. We also believe in the philosophy that, when in doubt, it’s best to err on the side of simplicity. We try to make decisions that help our business move quickly and efficiently towards our mission, instead of over complicating things. The fewer offerings you have, the better; you shouldn’t add a new product just because you a have great idea. Notice that in the lead profit report, we limit you to three main sources of revenue. We do this because we think the fewer things you have going on, the easier it is to market and deliver on those things.
Another factor in achieving success is knowing whether you are in a growth mode or a profit mode. This will help you decide how much to invest in marketing and how much to pull out as distributions. We tend to go for the side of profit over expenses most of the time. Our priorities look like this:
- Growth
- Profit
- Expenses
Your priorities don’t need to be the same as ours, but you should define your own clearly in this way.
The last tool to help you make decisions is to have certain rules that you never break. These rules make things very clear when our judgment is being overtaken by a risky opportunity or an offer that seems irresistible. If it breaks one of the rules, we don’t do it. Our rules are the following:
- If the expense is more than $10k, I run it by my financial team first.
- We never dip into tax reserves to pay expenses.
- Taxes are always paid on time even if we have to sell something; as mentioned, one year, Brooke had to sell her boat because an accountant error meant we had our taxes wrong.
- Always have an emergency fund.
- We always invest more in ourselves and what we know than in other business opportunities and investments.
- We don’t defer taxes to pay them later, we take care of our obligations now. (This is why we don’t invest in 401(k)s or SEP IRAs anymore.)
- The best tax shelter of all is more revenue. We spend more time making sales than trying to save on taxes.
- We pay all our bills immediately on receipt. We never do anything to a vendor that we wouldn’t want a customer doing to us.
- When there’s any doubt, we prefer to overpay our staff than risk underpaying them.
- We review our financials every week without fail.
- Whenever we can, we try to increase revenue before we reduce expenses.
When you have a structure of rules like this in place, making decisions is swifter and easier. Indecision in business wears you out and causes stress, when all that mental energy could be used to create solutions for your customers instead. Marketing, sales, and delivering content are the most important things you can do for your profits, so spend your time and energy trying to make those numbers sing to you. All our decisions are directed and clean because of our vision, guidelines, financial reports, and forward finance goals. If you follow our advice, yours can be the same way.