How To Budget When My Income is Unpredictable

PodcastLeadership

Jan 10

Episode 812: Show Notes

In today's episode, I'm diving into the world of budgeting when your income likes to play hide and seek. Maybe your business revenue and pay are doing the unpredictable tango, and you're itching for more stability in the paycheck department. The economy's a bit wild right now, so what I'm sharing is my playbook for a more conservative approach in these uncertain times. Trust me, this is the game-changer for tweaking your business finances, setting up a cozy personal financial vibe, and securing the long-term health of your hustle. Think of it as the secret sauce to keeping your business doors wide open for the long haul!

Oh, and let's kick that idea out of your noggin that businesses grow all neat and tidy, either linear or exponential. Nope, it's more like a rollercoaster ride. Don't stress if things seem a bit wonky—that's just the nature of the business beast. I've been there, done that, and I'm here to help you ride those waves of inconsistency like a pro. Now, I'm not promising to smooth out every bump; bumps happen! But what we're aiming for is to sprinkle a bit of predictability into your personal financial future. So buckle up, and let's get ready to surf the unpredictability that's bound to show up!

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Cure Inconsistency With a Base Salary

How do we bring some order to the income chaos? Well, the secret sauce is introducing a base salary! Once this magic happens, you can start mapping things out with way more ease—knowing what you can swing for living, personal splurges, vacations, the whole shebang. Plus, it's like having a time machine to compare your current situation to where you've been. Talk about opening up a treasure trove of insights into your personal finances while handing you the stability you crave and a chance to stash some cash in your business piggy bank.

If you're rocking the Sole Proprietor title, here's a pro tip: get yourself a separate bank account! Even though every dollar is essentially yours, having dedicated banking helps you build those healthy habits, understand your business flow, and keep the growth vibes strong. Now, if you're in the S Corporation squad, it's time for a serious chat about setting a reasonable salary. Find someone in the know about IRS considerations—it's a crucial step, so jot it down!

For both business flavors, here's the drill: look at the low end, figure out the consistent profit for the past year (before your paycheck), and boom—that's your starting point for a reliable base salary. Regardless of the digits, let's craft something you can count on. As your empire grows, feel free to tweak that number. Set up a regular payday for yourself, and if you're scratching your head about what's a reasonable base pay, I've got your back! Feel free to shoot me a message on Instagram.

Create Your Business Lifeline

I never want you feeling backed into a financial corner, so let's talk game plan—time to set up a cash flow account and an emergency fund. Now, I get it; you might have heard a million things about this, but hear me out. I've been in the money management game for a while, and I've got the lowdown on what's going to anchor your stability.

Here's the drill: two accounts—checking and savings. Your cash account is your MVP; it should pack one month's worth of operating expenses. Think of it as the safety net so that when the income rollercoaster kicks in, your paycheck and your team's don't have to play hide and seek. Now, your cash reserves account is where the big guns come in. We're talking three months' worth of operating expenses, covering your base pay and any team costs. To nail down the magic number, take a peek at your biz's spending and your pay averages over the last 12 months.

I know, it might sound like a financial triathlon, but no need to panic—you don't have to hit these numbers on day one. It's a gradual climb, and the timeline is your own. Quick side note for my Sole Proprietors and S Corps: having a mountain of cash in your accounts can mean extra tax—let's avoid that. Start by looking at your profit after your base pay each month, stash away 50% in the business, and share the other half somehow.

As things evolve, consider ramping up your distributions. Maybe hit 85% of your profit, leaving the rest in the cash flow. No need for massive cash mountains in your business. Heck, you could reach a point where you're distributing 100% of the cash because, let's face it, as the boss, you can always pump cash back into the business. Keep it real and aim for a max of one month of cash flow and six months of cash reserves. When payday hits, make it rain for yourself and dish out profits on the same schedule. These savings are your golden ticket to smoothing out the bumps because, let's be honest, consistent distributions are the unicorn of the business world.

I know this sounds like a lot and I want you to know that I am here to help you. I believe The Co-op can assist you with the tools you need to manage your finances so go check it out!

Control the Lead Gap

You might be feeling that the real hurdle isn't just managing cash flow but rather the lack of control over leads at the moment. Let's bridge this gap and dive into the nitty-gritty. Social media shifts, privacy laws, and settings are throwing a wrench into the connection between small businesses and potential buyers, disrupting the good ol' reach. The trick here is to focus on what you can control—strategies to supercharge your conversions.

If you're rolling with the 'one-call' approach, I'm throwing out a friendly nudge to consider a two-step dance—kick it off with a discovery call and then hit them with the sales call. I've seen clients work wonders, building rapport and locking in long-term clients with higher conversion rates by splitting these calls. And hey, let's spruce up those sales calls. Transforming your pitch into a strategic presentation can be a game-changer, making your words come alive and showcasing your prep game. It's like giving people a VIP experience. For some help getting with this, check out our sales presentation template that walks you through it! (Our Co-op members have access to this and thousands of other templates and resources– if you’re not a member yet, check it out here)

Now, let's make it a no-brainer for potential clients to say yes. Special promotions are your secret weapon to fill that lead gap. I get it; discounting might not be your vibe, but in this lead gap space, think about creating promotions that get folks hyped for a new season without slashing prices. Let the excitement flow by talking about bookings and discovery calls—make them want to book you!

And here's a pro move: when the leads are taking a nap, expand your offerings. Ask yourself, what can you give clients that sets them up for success and shows them you're the solution they've been dreaming of? Toss them a taste of your magic while getting paid in the meantime. A lead-in offer not only gets a quick 'yes' for something less pricey upfront but also showcases your value, priming them for your bigger, grander offer down the road.

Enough of holding back—let's double down on what works and what's been pulling in those leads for you in the last six months!

If you need some support to help you with all the things I’ve just outlined, because I know it’s a lot, then The Co-op is for you! Sign up today and get access to all the knowledge and resources!

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Highlights

Cure Inconsistency With a Base Salary [0:09:45]
Create Your Business Lifeline [0:17:40]
Control the Lead Gap [0:31:10]

OUR HOST:

Abagail Pumphrey

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Abagail Pumphrey, the Co-Founder & CEO of Boss Project, has been a driving force in the creative entrepreneur industry since 2015. With a passion for empowering service-based business owners around the globe, she became internet-famous after the launch of the transformative training, "Trello for Business." This innovative system revitalized the operations of over 10,000 business owners, making a significant impact on the online business landscape.

Under Abagail's leadership, Boss Project has been featured in prestigious publications such as Forbes, Marie Claire, INC, and HuffPost. Her twice-weekly podcast, The Strategy Hour, is a staple in the business community, continuously topping Business and Management Charts on Apple with millions of listeners from around the world.

Abagail's superpower lies in her ability to break down complex concepts into easy-to-implement, duplicatable systems. As an expert in online sales and a data-driven strategist, she has turned a layoff into a 7-figure work-from-home business. Abagail's mission to help more female founders become financially free, without letting their businesses take over their lives, continues to inspire and guide entrepreneurs on their path to success.