ep. 048 • Let's Talk Money Systems: "But Where Does Your Money Go?"

Chelsea: Many times as creatives turned entrepreneurs, we enter the world of business with very limited exposure and experience to business finances. In fact, many of the hennapreneurs I consult with explain that they don't have money systems in their business at all, because they feel overwhelmed by the whole idea, embarrassed that they don't know what they don't know and really unsure about how to deal with their money once they get it in the bank. 

In this episode, I'm breaking down some of the basic financial elements that I suggest building into your business for more sustainability and ease. 

If looking at your money or knowing what to do with it is something that makes you nervous, then this episode is definitely for you

Welcome to the Hennapreneur podcast – the exclusive podcast of its kind dedicated to giving you an honest look at the realities of making a living as a henna professional. I'm your host, Chelsea Stevenson, a tea-loving, shoe-collecting mother of three in constant search for the most popping pair of earrings and the perfect shade of red lipstick.

I'm also a professional henna artist and business strategist who went from barely being able to piece together a fluid to being the owner of the most celebrated henna boutique in my city. I'm on a mission to help henna professionals to harness their skills and grow vibrant, profitable businesses that they absolutely love.

If you want to make more money with your art, you are definitely in the right place. Let's get to it!

Hey, hey, hennapreneurs! Welcome to another episode of the Hennapreneur podcast. I am excited to talk with y'all about one of my favorite things – money. 

Many times, as you know, as creatives and as entrepreneurs, as artists, we are coming from a place or a history where we are unfamiliar with business finance and how to manage money inside of a business, right? And one of the things that I oftentimes will hear from my clients or my students is that they feel nervous around money, that they feel very unsure, that they feel embarrassed, sometimes ashamed, that they don't know what they're doing with their money and these sorts of emotions, these sorts of feelings, lend to a very disempowered experience that they have with their money. And then that causes them to show up differently in their business, as well. 

So when we're coming to, you know, to this table and having this conversation around money systems and what it is to properly allocate and properly manage the funds that exist inside of your business, I want to invite you to just be very cautious and be very aware of any internal narratives that come up for you because if you are currently finding yourself in a place where you feel disempowered, you feel shame, you feel embarrassment, you feel unprepared, if you feel unworthy or incapable of managing money inside of your business, then it oftentimes will manifest as avoidance. 

And once avoidance enters the room, especially when we're dealing with something like business finance, you really set yourself up for failure because you don't even know what's going on inside of what you're building and inside of the work that you're doing. 

And so I want to, again, just kind of highlight that for you and let you know if you have historically had those feelings, they're likely going to come up inside of this episode. That's okay. We'll work through them. And as you're moving forward, just be aware of when those sorts of things start to come in and start to enter the room because when they do, we want to make space for them and also we want to affirm that what you don't know, you can learn. 

And that's the nature of learning, isn't it? You can't learn something that you knew already and so, it requires us being uncomfortable and it requires us taking a step outside of what we know to be the norm right now. 

With that said, let's take a second to look at some financial systems, right? Because that's what I want. That's what I really I want to help you with today.

Again, many of the, you know, many of my students, many of my consulting clients, they tell me that they don't have financial systems or strategies inside of their business. When they first come to work with me, sometimes they will have something set up. 

Like, they may or may not have a separate bank account. Perhaps it's a personal account. It's not a business account. Perhaps they're still co-mingling their business money and their personal money and they're like, "I don't even have that set up. Like, what do I do?" 

Oftentimes, what I'll hear is, "So, I've set up a separate account. Now that exists, but I don't know what to do with the money that's there and so it feels kind of redundant. And so I'm not using that business account. Instead, I'm just transferring the money straight over into my personal account," or, "I've kind of gotten away from that and I just let people pay me in cash and I just deposit it into my personal account." 

Like, it very quickly becomes: as soon as the money hits my business bank account, I don't know what to do with it, so I'm just going to move it to my personal account because the money's there and it's mine. And like, I'll do what I need at the time. 

And occasionally, occasionally, I'll have someone who will come to work with me and they'll be like, "Well, you know, at least I track expenses. And so, like, I put the money for those expenses in the business account." But what's left over after the expenses, oftentimes, they also don't know what to do with. 

And, you know, I shared this with you because I want to normalize that experience. If you find yourself in that place where you're like, "Okay, the money comes in and I don't know what to do with it," or "The money comes in and I don't know where to put it," or "If I put it over there in that separate account, like, then it feels daunting or it feels like I'm not sure that's okay," all of those feelings of uncertainty are normal. And also, they're very, very common. And that's why I wanted to make this episode today, um, to kind of unpack some of that, right? Because, let's be honest, financial literacy is oftentimes brushed aside in schools and especially, especially so in the case of women and girls, right? 

Historically, it has not been prioritized for women and girls be educated about financial literacy. I mean, it wasn't until literally just a handful of years back that women here in the states were able to even open a bank account without their husband's signature and approval. It should not come as a surprise that many of us lack financial literacy and that's okay. Many of us are limited to whatever experiences and teachings we have around money and those experiences and teachings oftentimes are tied to our childhoods.

Also, if we could just make space in the room here to acknowledge that money is one of those areas around which we oftentimes carry a lot of baggage and a lot of trauma, often unknowingly, so sometimes it's a known experience. 

For example, if you're someone who was raised with a lot of scarcity and a lot of lack, perhaps if you are someone who's very experienced in being raised in poverty or on the flip side, you might be someone who was raised with a lot of financial abundance, and thus, never learned what it is to self-restrict or to have boundary around money. 

Or perhaps the money was there, and also, it was one of those things, like, we don't touch that because 'what happens if...' and so, even with abundance being present in the room, scarcity still might have been something that was taught over the dinner table. 

And so, oftentimes, these traumas are unknown or unacknowledged, but it's not until we actually get in there and start to dig around in those stories and experiences that we can identify trends and behaviors that we still act out today with our bank accounts that are informed by things we learned when we were, you know, very, very little.

Today, I want to step away, actually, from the psychology of money – I just wanted to point that out because it gives some context – but today, I'd really like to focus on the practical, okay?

Business finances and personal finances are not the same. 

So, I just want to start right there. So, if you're coming from a background where you've received a paycheck, your ideas around how to handle business finances are likely very skewed as there is a very vast shift in context between W2 or paycheck/pay stub employment and business finance or self-employment. These are two very different worlds and there is not much overlap. 

In my opinion and in my experience, there is not much overlap there that actually leads to someone being a good steward of their money in their business if they're coming at it from that paycheck to paycheck W2-style, if you will, employment mentality, okay? Where, for example, where you might use the account for all of your revenue as money in the bank, ready to be dispersed, ready to be used, that isn't actually so in a business context, right? 

There are a number of key allocations that business owners can't ignore as it relates to their revenue. So, when you bring revenue into your business, there are four things that you should be looking at, or that I would suggest that you look at based on the way that I manage my own finances in my own business and what I teach my students as well.

Those four things are profit, your owners pay, your taxes, and your operating expenses, okay? 

Not all revenue-. Let me, let me pause and just share. Not all revenue is actually even broken out into these categories because there are certain costs of doing business that we'll actually need to account for before making these disbursements, right? Because all of the money that comes into your business, isn't real and true revenue. 

So first, we need to look at, okay, what does it cost for you to actually do the business? What are the material costs that exists there? And once we've removed that, then we can look at real revenue, right? And then that real revenue is then broken out into these different forms. 

Now, after these allocations are made, there are a number of additional secondary disbursements and allocations that we also complete, but today we're just going to keep this pretty high level, so I'm not going to get into that, okay? 

One of the things that I like to highlight is that profitability and sustainability, they go hand in. They must go hand in hand. You need your business to be profitable, meaning that you're bringing in enough revenue that you are able to pay yourself, cover your expenses, cover your taxes, put away for savings, and like, do the things that are necessary for your business to be able to grow. And you can only grow at a sustainable rate if that profit margin exists, right? 

What I choose to use of my own business is what's called the Profit First Method. Looking at those four buckets, there are very specific allocations that one would make, and this actually would apply to, probably, all of my listeners. This applies to any businesses that are making – per the system's recommendation – this applies to any business that is making under $250,000 per year. Annual revenue, right? So, if that's you, this applies. 

Our breakdown for your allocations would be that 5% of your revenue would go towards profit, 50% goes as owners pay – which feels really exciting and also very disappointing and sometimes kind of terrifying depending on where you're at in your business, and that's okay. Also, taxes we're setting aside for – about 15% of our real revenue, we would place towards taxes. And 30% would be placed towards operating expenses. 

And, of course, inside of your business, you can make adjustments as needed. So some people are going to have a little bit different rates of expenses versus how much they choose to pay themselves versus how much they need to set aside for taxes.

Obviously, each of us has different, you know, regional requirements as it relates to the tax component, um, depending on the nature of your henna business. If you're someone who's mobile versus someone who has a brick and mortar versus someone who's, you know, doing the things, whatever, your operating expenses might differ so you might be well within the 30% when it comes to your operating expenses or you actually may need to allocate more of your revenue towards operating expenses. 

I would actually suggest if you, as a henna artist, right? I mean, I've been doing this for a very long time. I've tried a lot of different business models, a lot of different delivery methods for my clients, and in my opinion, there's no reason why a henna artist, specifically, would need to exceed 30% of their revenue unless they also had a team. And if you're working with a team, even still, at that point, for me, I'm looking at like a 35% revenue cap for operating expenses. So this is, you know, something for you to keep in mind.

Now, the beauty of this is, as you have these, you know, these, these numbers are our baseline and you would make adjustments as you see fit inside of your business. And obviously, this is something that I help my students with, um, when it comes up and if I see that there's a need for some sort of adjustment, but when you have these sorts of outlines for yourself or, you know, guidelines for yourself and how you're going to disperse your money throughout your business, it makes it very easy for you to see what needs to happen next, right? 

So, for example, if you know: ok, I want to make- in my business, I want to make $3,000 a month. I want to make $5,000 a month. I want to make $8,000 a month. Now you have the question: am I wanting to pay myself $3,000, $5,000, $8,000? What is my salary? What am I wanting to pay myself? Because if that number, if that number was the number that you came up with, well, then you're going to have to multiply that times two, and that needs to be your revenue goal, right? 

And so, oftentimes, when I'm speaking with hennapreneurs and they're sharing with me about their goals, they're not accounting for everything else that goes inside of their business. And so, you know, we get really excited. "Oh my gosh! I've made this revenue!" But is your revenue actually aligned with the goal that you have in your mind, or is your goal missing? 

And we talked a little bit about this last week on our past episode, you know, for me, as someone who's coming in with this experience and with this insight, I always like to look at the business and say, "Okay, well, you know, what's the goal for you, personally? What do you need at home to be good and to be whole, and to feel complete and to feel, you know, well-maintained and cared for and safe and secure financially and whatever that number is, then after that, we can add a little cushion to it because we always want to make some space for growth, and then we're going to double that. And that is your now your new revenue goal for your business," right? 

And so, you can see very easily how, you know, using these percentages allows for you to set better, more financially informed and holistic goals. And when you run your numbers each week or each month, depending on how frequently you sit down and review your finances within your business, you can then assess when or if your business is underperforming. 

In my own business, I do a money review every week. Every Monday – I call it Money Mondays or my CEO Day – Monday mornings are when I sit down and I look at the businesses finances for the week prior, in addition to some other things that I review on, you know, every Monday and while I'm sitting down and I'm looking at those numbers, I look to see: okay, first of all, where did the money come in? What generated this revenue? Great. This is something for me to be mindful of because do I like doing that work or do I not like doing that work? I, you know, I can make adjustments and I can shift things around inside of my marketing, for example. 

And also, now that I've got this money and I'm making the allocations into these separate buckets, if you will, this profit and this owner's pay and this taxes and this operating expenses, now I can see where, you know, where does this play into my cashflow? 

If, for example, I know that typically, you know, my clients like to book around the third week of the month, they oftentimes, you know, don't book towards the beginning of the month, but like, towards the middle of the third week of the month, then that's where I see an increase in sales, generally, then what does that tell me? 

It means, also, that as I'm planning my expenses for my business, as I am planning the investmentsfor my business, like, I need to be aware when does money most frequently come in so that I will have the appropriate allocations ready to use inside of the appropriate buckets or accounts for my business as well, right? 

And so, even just kind of touching very high level on what cash flow looks like. You need to be aware of cashflow in your business. Having that context, having those reviews, those weekly reviews. I suggest weekly. I love weekly, but if you want to do monthly, then that's fine. That's on you. But having those regular check-ins with your money gives you more data and it gives you more context with which you can then make decisions around your business's finances moving forward. 

And if, for example, you notice that: hey, you know, I'm finding that, you know, earlier on in the month, my business was kind of underperforming and, you know, when it comes time for me to pay myself, ooh, I'm also seeing that I've got, you know, the bills at home tend to lean towards earlier in the month. For example, let's say your water, your electric, your whatever, obviously, your mortgage or your rent is coming out on the first of the month. You know, those earlier weeks in the month, may be heavier for you inside of your personal finances, so if you can identify that: hey, I've got a cashflow issue where I'm not able to take my owner's draft. I'm not able to pay myself or the amount that I'm paying myself through my owner's draft in those first and earlier weeks of the month, it's not really meeting what my needs are. 'Ooh, I can see that my business's underperforming in this context, how can I change my marketing practices that are going to, you know, in a way that's going to increase my revenue during that time?'

Can you see how it makes it makes it so much easier for you to kind of take the emotion out of it? It takes-. It removes the emotion. It removes the shame. It removes the feeling of, like, I don't know. I can't do. I'm not sure. All of those, like, incertainties and that very, again, like disempowered perspective kind of has to, and it kind of has to move to the side. It kind of has to leave the room when you can approach your money factually, when you can approach your money from a place of knowing, 'okay, this is what's going on, and this is what I can do now to fix it' or 'this is where I've noticed a problem. Here is now where I can start to strategize to find a solution' or 'this is where something's going really, really well and I want to do more that, so what am I doing in that space so that I can make those changes elsewhere in my business also, or so that I can go a little bit deeper and lean in to what's working?' 

You know, inside of Hennapreneur PRO, I teach my tried and true method for building, like, a very profit-driven and sustainable service suite so that you can arrange your bookings in a way that really feeds these accounts, that really feeds your bank account while also feeling expansive and easeful and well-aligned for you and your life. And so, that's, you know, another piece that kind of goes into these financial systems, right? 

We want to have money systems, not only with how we handle the money when it arrives, but we also want to have plans for ourselves and how we're going to strategize to bring that money in. And of course, while we didn't talk much, we touched on it a little bit, we didn't talk much about personal finance. Of course, you also will want to have your systems in place inside of the, you know, the personal realm so that when you're making those owners payouts, you're also feeling very supported and feeling very, you know, very met with abundance, very supported by your business and the revenue that it's generating. 

For me, I'm hopeful that all of what I'm sharing with you in this episode is landing. I'm hopeful that you're able to take away, you know, a couple gems, a couple of nuggets here that will help you to feel more empowered around your money, or that can help to shine some light, perhaps, on holes in your current financial systems, your current money systems inside of business because it's my goal, and it's one of the values of Hennapreneur. I mean, money matters and for us as henna artists, as entrepreneurs, as, um, as human beings, right, who are trying to make an impact on the world who are trying to leave a greater deeper legacies, right, with our families, our communities, and so forth, financial power matters, right? It matters. 

And so, we can make more impact when we are more empowered with our finances. We can make more impact when we have more resources available to us. For better or for worse, we live in a capitalist society. 

So I'm hopeful that you are able to, you know, to take away some, some learnings, some teachings, some things that you can very easily implement in your business today to help you feel more empowered with your money so that you can make the right next best steps for yourself, um, as you are, you know, continuing along on your journey. 

I do have a question for you and I'd love it if you would answer, um, over in the Hennapreneur Community on Facebook. I'd love to know: do you currently have a financial system at play in your business? And if so, excellent! Love that. I'd also love to know what's been the most helpful for you as you arrange your business's financial systems. If you didn't have anything to date perhaps the answer is this podcast, I don't know, but I'd love to know what's been the most helpful for you as you've organized your business's finances up until now.

All right! With that said, I'll let y'all go and I'll talk to you later. Bye for now. 

I've got a serious question for you, hennapreneur. 

Are you ready to stop playing small with your art and to take your business to the next level already?

Are you tired of feeling like you're doing it all to grow your business, but you just aren't seeing the results and the success that you're looking for?

Perhaps you've got clients here and there, but you know inside that your potential expands far beyond what your business is generating today.

You may know that you're a solid artist, but you can't seem to crack the code on the business side of things, and you may find yourself wondering, "What gives?!" 

If any of this sounds like you: listen up, because I've got some really great news for you!

I've got a free, on-demand masterclass called 5-Figure Foundations where I'll teach you my framework for how to build a profitable henna business.

During the masterclass, you'll learn things like how to position your henna business for success -- even if you don't have any background and practical business management. You're going to learn the critical steps you need to take in order to get your budding business started off right or to correct the broken one that's burning you out. You're going to learn why you need systems, not feelings, to make more money and to expand your business. We're going to get real clear, real fast about how you're likely getting in your own way right now and how you can remove the frustrations that are holding you back.

I'm also going to share my tried-and-true framework for establishing a profitable, sustainable business, and I'm going to tell you all about how my students are continuing to grow their businesses and celebrating some pretty big wins in the process -- even through those everyday challenges that you might expect, like juggling work and home and even those massive challenges that you might've never seen coming, like navigating a pandemic while being a business owner.

At the end of the masterclass, you'll no longer be in the dark. You'll know exactly what to do and what to avoid to build a solid foundation for your own profitable henna business as well. 

To register for the masterclass and to watch it instantly on-demand, visit hennapreneur.com/foundations.