It's the question that weighs on the minds of many small business owners, “When do I draw a salary or profit?” If you aren’t asking yourself this question, it's only a matter of time before you do. What’s the answer? What is a good rule of thumb to go by so you don’t hurt your business prematurely? On this episode of The Amazing Seller, Scott goes of his mindset and what he suggests for new ecommerce sellers as they consider this question. Don’t wrestle with this question without getting an expert perspective! Scott has been a small business owner and an ecommerce seller in particular for many years and only wants to help sellers like you succeed. Don’t miss this helpful and valuable episode!
Don’t neglect the importance of bookkeeping!
It’s that unsexy topic that no one really enjoys talking about (except for maybe accountants), bookkeeping. As boring and complicated as this topic can be, it is supremely important for small business owners to take it seriously and keep things in order from day one. On this episode of The Amazing Seller, you’ll hear from Scott as he explains the importance of good bookkeeping habits and helpful tools you can use to stay on top of it. Make sure you don’t cut corners on this vital aspect of your business! Learn what you need to get started and keep your new ecommerce business on solid footing by listening to this episode!
You’ve got to have the right mindset if you want to succeed.
As eager as you may be to pull a profit from your business when things start rolling, you need to have a patient mindset. Before you even start, it's a good idea to commit to waiting to draw a profit for at least six months. On this episode of The Amazing Seller, you’ll hear from Scott as he breaks down his reasoning for why sellers like you need to embrace the mindset of waiting for six months. The thought process behind this mindset is that instead of drawing a profit, you take that money and reinvest it into your ecommerce business. You can reinvest into your business by starting new sub-brands, launching new products, hiring virtual assistants, and much more. To hear more about this important topic, listen to this episode!
If you don’t put yourself as a line item, you will never get paid!
While many small business owners need to fight the temptation to draw a salary when they see their first bit of profit coming in, others who will be so focused on the businesses success that they never draw a salary for themselves. On this episode of The Amazing Seller, Scott shares a resource that has been helpful to him as he has navigated the question of when to start drawing a salary for himself. That resource is the book, “Profit First” by Mike Michalowicz, you can find a link to the book in the resources section at the end of this post. Don’t worry about drawing a full salary at first, you can ease yourself into the equation, the point is, you’ve got to determine when to start putting yourself on the books. Make sure to listen to this episode as Scott expands on this important lesson.
Why you need to create a plan and goal for launching new products.
One of the most important lessons that you need to put in place, as an ecommerce business owner is setting a goal for growth. Do you have a goal and a plan in place for launching new products? Does your goal push and stretch you? On this episode of The Amazing Seller, Scott explains why it’s important to have an ambitious plan in place to grow your business by launching new products. If you don’t have a plan in place and line item in the budget to launch new products, you’ll never do it! Don’t let your business become complacent, find out how to pursue growth in a smart and aggressive way on this episode!
OUTLINE OF THIS EPISODE OF THE AMAZING SELLER
- [0:03] Scott’s introduction to this episode of the podcast!
- [5:30] Don’t dismiss the importance of bookkeeping.
- [10:00] You’ve got to have the right mindset.
- [16:00] Apply for a credit card for your business.
- [23:00] When it’s a good idea to start drawing a salary.
- [26:30] Plan your future inventory and orders due.
- [29:00] Scott recaps how to get more cashflow.
- [30:30] Create a plan and a goal for launching new products.
TRANSCRIPT TAS 470
TAS 470: Business Cashflow and When to Pay Yourself Profit
[00:00:03] Scott: Well hey, hey what’s up everyone! Welcome back to another episode of The Amazing Seller Podcast. This is episode number 470 and today we're going to be talking all about…
[read more=”Read full transcript…” less=”Read less”]
…business cash flow and when to pay yourself profit. It's a big question because when we start a business guess what, we want to pull cash eventually. Some people are starting a business to go out there, make some cash really fast and then from there put it in their pocket. Now, if you're building a business that's generally not how it's going to work. If you're doing something on the side, which we also call a side hustle and that could be fine as well, that would be more like you buying something at a low price, flipping it.
It's like when you're seeing all these people out there doing house flipping, or buying something low and selling it high on some of these TV show sand I've watched a few of them. It's like that. It's like you want to go out there and invest like in something but then turn around and flip it. Then maybe you're going to put some of that money right in your pocket immediately. That would be the best strategy for that. But that's not what we're talking about here. What I'm talking about is actually building a legit business. If you talk to anyone that has started a business from scratch they generally don't make money.
The business does not make money the first year, maybe the first three years. Yes you may pull a small salary but a lot of times the owners don't. It's like the money is just rolling back into the business. Or, maybe it's someone that bought a Franchise and they know that this investment is going to take at least three years before they see a return. It's like an investment in general. You're putting money into a fund and you're not expecting to get that money back for a while. The cool thing is, is with building a business like an ecommerce business that we're doing here, all of us that re listening. The TASers, you guys and we're mainly focusing on physical products, private labeling and we're looking to build a business and eventually start to pull some profits.
[00:02:08] Scott: That's what we want to do. I mean, let's face it. We're in this thing to bring in some cash so this way here we can build that lifestyle business that we've talked so many times about. That's what we're here to do. But the thing is we have to switch our mindset a little bit if we're building a business. If we're building a business, versus just going out there and maybe doing some thrifting or maybe doing some retail arbitrage which also if you're doing retail arbitrage a lot of times you're going to buy inventory, you're going to sell it, make a profit, you're going to buy more inventory.
You're going to keep going through that cycle and then once you get to a certain level, you can start to pull some profit and put in your pocket. That's what we're talking about. So today what I want to do though is go through even with the newest brand that we've launched and give you the play by play. Kind of how that's looked over the past nine months. When we decided to pull cash and cash flow, because cash flow is a big thing when you are starting and also how it can help you start taking your momentum and really building on it or pouring gas on the fire in a sense because you start to get that fire going and you want to keep it going, you want to get it even a little bit bigger and continue to grow.
That's what we're trying to do here. Cash flow is a big thing and we're dealing with that like right now and not really dealing with it in a negative way but dealing with it like okay, so how much do we actually pay ourselves at this point? Because we don't want to cut ourselves shot because we have inventory we want to buy, we have new products we want to launch and all of that stuff. Now, the other thing I'm going to talk about is how to get more cash flow. Then the last thing I'm going to talk about in today's episode is when to pull those profits.
Now, these are our rules kind of in a sense of what we've been doing and it's not really like an exact process for everyone or an exact blueprint for everyone but it will give you some things to think about as you're going through this process and before you even get started knowing that you're not going to start a business today and pull profits tomorrow and quit your nine to five.
[00:04:05] Scott: If you're thinking about doing that, you're probably dreaming a little bit. To me it's not possible. It's like, yeah you want to go out there, you want to scratch off a lottery ticket, a lot of you want to win a million dollars. You guys know, I've said this before. I'm not a big fan of that. You got to go out there and you got to put some work in and I think then you'll be rewarded and it's going to take a little bit of trial and error and it's going to take a little bit of ups and downs but eventually you'll get there. So, before I get into that, the show notes to this episode can be found at theamazingseller.com/470.
Then the other thing is if you guys are brand new and are like, “Scott I haven't even started my business yet and I want to do this thing, then I'd direct you to our free workshop where I actually walk you through how we've recently in 2017 and in 2018 now, how we built a six figure brand in five months and then from there we're going on to building it to a seven figure brand. And we go through everything from everything we've done there, the five phases, the five steps that we talk about on how that's been built and what we're doing to move that forward. It's like a case study but a workshop all in one.
Definitely go check out that at theamazingseller.com/workshop. Register for an upcoming one there and we'll see you there live. Let's get into this.
Number one, rule number one, book keeping. I know, it's not a sexy topic. Bookkeeping for me is like number one when you're starting. This can be as simple as a spreadsheet. I've done this where you just take a spreadsheet in your favorite spreadsheet software right now it's probably like Google Sheets or one of those. You can use one of these free ones out there but Google they have their own little crave that you can have as part of your Gmail suite and super easy. Just go in there and start like figuring out your numbers and then plugging them in. I'm talking like basic stuff.
[00:06:00] Scott: Like how much did the product cost you? How much did it cost you to get it shipped? How much did it cost you to ship it into Amazon? How much did it cost you for your fees as far as your Amazon FBA fees and all of that stuff? What was your software that you used last month? All of that stuff computed in there because it's really important you know where your numbers are because as you're going through this and as you add more products, it will become a little bit harder to track this stuff but you want to know where your numbers are so you know how much cash is being allocated for new inventory, how much is being allocated for your sponsored product ads, how much is being allocated for possibly profit like online item and we'll talk about that, about this book that I'm pretty big fan of called Profit First.
It talks all about that because if you don't ever pay yourself, well eventually you'll never get paid so you want to pay yourself eventually. But we'll get into that. So bookkeeping is really number one. Like I said, option one, spreadsheet. You can use anyone you want, if you want use one that's more an accounting system, that's Wave app and I'll leave the link in the show notes to that. I've used that for a long time but now what I'm using and I am a huge fan of, I recommend it to anyone that I can because it's so super easy and it lets me know exactly where I am every single second of the day, pretty much. It's Fetcher. This is another tool created by my good friend Greg Mercer.
I actually seen this tool when it was in really beta but even before beta. It was even before it was like a thing. He was showing me what he was thinking. It was in rough form, and it was amazing. I'm like, you know what, this is going to be awesome because it does a lot of things that a lot of people don't want to do and that is it pulls all of the data in from Amazon so you don't have to think about it. Anything that has happened in Amazon is going to be pulled in and it's going to track refunds, it's going to do your pay-per-click. It's going to do any storage fees, any of that stuff. Fees that you might not even know that are there.
[00:08:02] Scott: Or even credits will go back there so all of that stuff is pulled in automatically. That's why I love it so much and the other cool thing is you can then plug in your own numbers. So let's say that you have another tool that you use. Or maybe you have a monthly thing for your website, a fee for your hosting. You can plug all of those numbers in, and either put it on a recurring basis, so this way here it will automatically add it in every month or you can do it manually. So you can do your mileage, you can do everything. It's really your accounting system. When I seen this, I go holy cow, this is amazing because I don't have to do all of that work that I was doing to even plug it into a tool like Wave.
Wave is good but you have to input all of that stuff. So I'm saving hours on it and I know exactly where I am all the time. I don't have to dig through all of the reporting and all of stuff. So anyway, I know it sounds like I'm pitching it pretty hard here and I kind of I'm because it's amazing and it's a great tool and anyone that is starting that says, “I don't like bookkeeping orI want to know where I am every second of the day,” that's the one I recommend. Now, you guys know I'm always transparent about this. I am an affiliate for Fetcher but the only reason is because I believe in it, and I use it and I know the team over there and I think it's really, really useful. So, I only stand behind products that I actually, use and I think are useful for you.
So if you are at all interested definitely check out Fetcher. Go through my link at themazingseller.com/fetcher. You'll get a 30 day free trial so you can go and check it out without even having to spend a dime. So, it's pretty awesome. You can pull in all of that data. It will start pulling even back reporting. It's pretty awesome. Definitely go check that out theamazingseller.com/fetcher. So, now let's move on. That's really important though. Your bookkeeping has to be in place. You have to be doing this stuff and your accountant will love you for it as well because at the end of the year you're going to have your numbers. So definitely, definitely get that on track right away.
[00:10:01] Scott: Now, let's move into this, mindset. Now, what's mindset have to do with this? You have to be in the right mindset when you're starting your business. So what I like to do, whenever I'm either coaching or whether I am starting a business from scratch is you want to have the mindset that you're not pulling any profit. Anything that comes in that door you're going to reinvest for a minimum of six months. Let me say that one more time. When you start a business, have the mindset that you're going to reinvest any money that comes through that door for a minimum of six months. If it needs to be longer then you got to do it longer.
The idea is we want to grow a product line. Again, I'm going through the new brand because it's so recent, it's so current but we're always doing product research. We're always building out our product line or our product catalog if you will. We have products that might be six, eight months out before we would even launch them but we keep compiling a list. We keep our finger or our thumb on the pulse. We're always trying to see the market. We're trying to see what direction we want to go and we're always planning for that. But you have to figure on growing the product line because I believe moving forward whether it's 2018 and beyond you're going to want to increased that footprint. You're going to have more products that one customer could buy. So what we've done especially in the very, very beginning was take in all the profits that are coming in from product one and reinvesting it into product two.
Obviously you're taking any money that comes in to replenish that inventory that funds itself. But then anything over top of that let's say you're at a 30% or a 40% margin, anything over top of that we can then reinvest that into the next new product. But the mistake that I see a lot of people making is they'll have that one product and then they pull in the money and they might reorder one that to keep that going but then they'll take the money and put it in their pocket. But now you got to launch another product. Well now you got to go out and borrow again, to fund the next product and hope that it does well.
[00:12:10] Scott: I'd rather do it the other way. I'd rather take the profits, reinvest it into another product and then start building that product and then take those profits from that one and then reinvesting into another product and do that for three or four maybe even five products. Now, we did this for the first seven months before we even pulled one dollar out to pay ourselves. Everything was being paid for like we didn't have to go out and take these massive loans but we were able to fund our product line. We were also, here's another tip, the other thing that we were able to do is we were able to launch products and then from there see which ones were having some good momentum and the ones that weren't.
Then what we did is we just liquidated the ones that weren't doing good and then we reinvested that money into another product. So what you might also find is that you launch one product and it doesn't do all that well. Well, you're going to have to take that product and liquidate it maybe before you move onto product two. Or maybe you're in a situation where you've launched two products and one of them is doing pretty well and the other one isn't. Before you launch product number three, you might want to liquidate the one that's not doing that well. We did this a couple of different times. It was funny. My partner was like, “I've got this other idea, I want to launch this, I want to get it going.” I go, “Fine, let's go.
Go ahead and get the sourcing done, but we're not pulling the trigger on that until we liquidate the one product that is sitting there in inventory and that is kind of like weighing us a little bit because it's money that's there that we could reinvest into another product.” So it's a little bit of discipline there that you have to have when you're doing that. I get it, you want to be the first to market, you want to get there. Depends on how much funds you have that you are able to get started with and how much the inventory is costing you and all that stuff. But in the beginning, you definitely want to reinvest for the first six months minimum. Grow that product line with the profits that are coming in from product one, two or three.
[00:14:08] Scott: Also have some discipline that if you've kind of maxed out your budget in a sense, you don't reinvest until you liquidate one of those products that isn't doing as well. I say liquidate, that just means you might have to lower your price a little bit, you might have to spend a little extra pay-per-click just to break even. I'm saying like if we have invested $3,000 to $5,000 into a SKU, and it's not doing that well, I want to get that three to five grand back or even a little bit less so I can get some working capital because I know the minute I get it back I can reinvest it in the next product and then that next product might be the one that gets me my ten units per day that I always talk about.
So that's what we're talking about here. Again, just to repeat myself a little bit to make sure you guys get it, reinvest the first six months, minimum. Grow that product line and always be doing product research. That's another little tip for you. Then here's the other little tip. Once, you pick the market that you are in. That's why I talk a lot about picking a market, actually creating a brand, that's why I talk a lot about that you are going to find it much easier to launch future products because you've already had the market picked. So now you can really start to focus on that market and what their need and wants are and then launch new products.
So you might want to create a little spreadsheet of your new products and just keep a bucket full of those things. I always talk about buckets like take your bucket, just fill it with as many ideas, may products as you can and then bring them into another bucket that you've already started doing the sourcing for so it's like you have these different buckets that you can keep adding to. Then that can keep you going as far as like product ideas because you don't want to sit there and be like, “All right, I'm ready. I've got some profit coming in but now I got to start from scratch.” You want to have that already done and it will keep that momentum going.
[00:15:55] Scott: The other thing is apply for a credit card whether that's just solely in your own name or if it's for your business. Now, when you have a business and it's new, it might be hard to get a credit card for that. What I was told by my CPA is just go after a credit card that has points, that has rewards. This way you can benefit from it but just make it maybe in your name if you can't get one for your business and just only use it for that purpose. If you do that, and this is my CPA saying, obviously ask your CPA or your accountant then from there you can use those purchases as a business expense because you're the business and your name is on the business.
As long as you're not mixing purchases on that card, it will work. Apply for a credit card. This way here it will give you a little bit of a buffer in a sense too. Maybe you have some inventory that you want to purchase and you're waiting on your pay out because you know that your payout is 10 grand but you need to put $5,000 down on your next order or $3,000 whatever. Well, why not slap it on a credit card. You know your payments come in a 30 day cycle. So now you can just go ahead and pay that off. I like to keep it at a 30 day cycle. So I'm not paying that interest. But if you found something that was a low credit card, maybe for six months and it was like a 1.9% or something like that, I would purchase my inventory at 1.9% if I'm making 30%. That would make sense to me.
But again, I'm not a huge believer in going out there and borrowing a ton of money to get started at all. I'd rather see you start with what you have or what you've worked up. We talk about that a lot with like retail arbitrage or like you talked in the beginning about like flipping product, like taking 100 bucks turning it into 300 bucks and then taking that 300 turning it into 600 bucks and moving on, trying to start it that way. It's kind of bootstrapping it if you will. But I know some people said, “I'm going to put $5,000 on a credit card and my goal is to pay that off in 60 days and I'll only have one cycle of interest,” but if you want to do that, you want to make sure that you find a good term on that.
[00:18:07] Scott: Now Amazon will start to offer you loans and I just checked our accounts we're already at like $52,000 they are willing to loan us. With a couple of clicks I can have $52,000 as a line of credit. Now, the downfall is it's 17.99% annual interest which is insane and it will be a nine month term. So in a pinch, could I use that? Yes. The only way that I would use that it is if I use the money for 30 days and I paid it off and I wasn't hit with any interest. It's the only way I would do it but right now we don't have to do it but it's there. It's always there. They have it in your little dashboard in your seller central account but if you don't see that, it just means you haven't been selling long enough, you don't have long history.
The reason why they do that, that will increase as you have sales is they know that their money is pretty good because you are going to pay them is because they have proof of your sales. They also have control of paying you. So they can pretty much lock your account and pull their money if they want to. So that's another option if you get to that point for cash flow. Now, we were very, very fortunate but I think it's also because we planned really, really well. What I mean by that is we took our initial investment and we never went out outside of that and we were very disciplined on that. We didn't over purchase but we were able to plan for fourth quarter pretty well.
We actually undershot it. We were thinking we were going to sell like this order we ordered 3,500 I think it was and we went through all of those and right now we've reordered but the thing is we didn't want to overdo it but we figured we'd go safe but yet within our range. We didn't overdo it. We didn't borrow money to get there. I know some people that have and it's worked out for them. I'm just not a big believer in that. I like to work fast but slow if that makes sense. I like to get products to market and be resourceful but also bootstrap a little bit. And that's what we've done.
[00:20:05] Scott: So we'll grow this business really now on the money that the brand has made. That's within nine months. And we're starting to pay ourselves the past two months we've paid ourselves out of the payouts but also leaving money in the pot. I'll talk more about that when we talk about drawing profits. But basically it in a nutshell for the cash flow thing because cash flow is going to become important because the one thing that I found is the more SKUs you have, the more inventory you have to order. It gets a little bit more complicated as far as planning. You have to do a little bit more predicting. You have to guess a little bit in a sense. Then you also want to be always ordering ahead.
You're going to find that like right now we didn't order enough ahead of time and because of that we're paying the price. We're out of inventory on like four SKUs. Luckily we have other SKUs that are really holding down the four and we're still doing really well over 120 units a day. Some days are as high as five grand a day still. Our month in December was crazy. That was over $100,000 and this month we're on track to do about $85,000 or $90,000 and that's with being out of inventory. But that's because we spread out that product line. That's why I'm a big fan of that.
But you always want to be planning and the other cool thing is if you want to invest in your inventory for future inventory that is understand this, you really have to come up with like 30% of that generally. So if you have an order for ten grand, you only have to come up with $1,000 to come up with those units started. Then you're not going to have to pay the 70% until you are going to be receiving those goods which could be 30 days, could be 40 days, could be 60 days. Depending. The other thing is you might be able to split it up because they are not going to charge you for the shipping until you have it shipped. So you're only going to pay the 30% on the amount of inventory, not necessarily the shipping.
[00:22:04] Scott: So let's say that that $10,000 order, I'll just do it for easy math, was $3,000 of that was for shipping. Well, you're only going to pay 30% on the $7,000. That's going to be less, and then you're going to be paying the balance once that order is due and then the shipping will be paid separately. So you almost have three separate payments which makes it easier. So again, that's another thing to think about when you're purchasing for additional inventory and also dealing with the cash flow because that is big. How do you plan with how much money you're going to need leave in the cue because when you start paying yourself you want to leave enough money in the queue and that's been my big thing with our partners.
It's like, okay let's be conservative here. Let's make sure that we're not pulling too much and we're leaving enough in there. That's what we've been doing every single time and it's been working out really, really well. Everybody is getting paid now. Everybody is starting to get a little extra kick in their step, everybody is a little bit more motivated because all that hard work is starting to pay off. That's what you want to do though moving forward. It's just really planning that inventory but then planning to pull that profit. All right, so that's the mindset.
Reinvest for the first six months minimum. Period. So let's talk about when to draw pay or profits. Well, first off, there's a book that you should probably read and it's called Profit First. I forget the author but I read it, I have it on my Audio Book little file here and then I also have the book itself here. So, Profit First is a great read and he talks all about paying yourself because if you do not pay yourself ever, or if you don't put yourself as a line item you'll never get paid. So eventually, you want to start putting yourself as a line item on the books. It might not be that much. Let's say it's 500 bucks a month. You're like, “You know what, for all this work, I got to figure out a way that I got paid, a salary of 500 bucks a month or 1,000 bucks a month.” Whatever it is.
[00:24:03] Scott: Well, you got to figure that in now. So when you're doing your ordering, you want to also figure in that for the month, you need to come with 1,000 bucks or 500 bucks or whatever it is. Well, that's going to be part of the money coming back into the business. Then you might have instead of having $3,000 left, you got $2,000. Well, that $2,000 now is working capital for the business so now that $2,000 could become advertising. It could become Facebook ads, it could be building a list, it could be buying more inventory. Not even on that product but on additional products. So you see what I'm saying. You have to be a line item and I believe in that. I definitely believe in that. We're in a place in our business that we will become that.
Right now we're kind of predicting what future sales are going to be, what future products that we're launching and that we're paying down payments for, the money coming due. And then what we feel comfortable that we can pull. There have been nice little payouts. I got to be honest. There are nice little payouts for all of us and everyone is really happy but it took us seven months to get to that point. So Profit First. Let me just say this. The longer you can wait the better. Like I said, we probably could have pulled profit after three, four months. We could have, easily. But we wanted to really expand the product line. I keep stressing that. I'm telling you. The more we get into this business, and really in Amazon or ecommerce or any of that stuff, the more that we get into it, other people get into it, it is getting more competitive.
It just makes sense. But that's any business. But the longer that we can keep putting into the business to grow it and to grab a bigger footprint or more real estate in a sense the wider net that we're casting and it's going to keep us afloat. it's going to keep us building, it's going to keep us growing when other people are going after the one product and they are going to try to profit off that one and we're going to be able to go over there and just dominate because we have all these resources because we put all this, all this thought and this time and this energy into doing it this way. All right.
[00:26:10] Scott: So the longer you can wait, the better and especially for the times that are ahead of us because to me it will become more competitive but if you build a brand with a strong suite of products, you will be able to dominate. I believe. And if you do the list building stuff that we talk about. If you start doing your building out of your social platforms and all of that stuff or hooking up with influencers, any of that stuff you will be a lot harder to compete with. Trust me. Now, you want to also plan your future inventory or like I said, orders due before you pay yourself.
You need to figure out and you need to maybe just use a pen and paper or use a Google sheet or whatever. But plan your future, inventory and orders due. Because you don't want to sit there and go, “Holy crap, look at this. I got ten grand. Awesome,” but you look over here and you've got $8,000 that's going to be due for an order that you purchased three months ago. You want to be careful. You want to be careful with that. And then once that you've done that, once you've done the planning for the future and you've got a good grasp on that, then you can say, “All right, cool. I'm going to plan on pulling a small amount for myself.”
Now, the first one you might want to go a little easy. You might say, I probably could do three grand. I'm going to do $1,500. I'm going to leave it in there. It's in there, it's still my money. It's in the business. It's in like in this little pot but I want to leave it there just in case. I don't want to take the money out and then after go and put it back in a sense because then that would be like going backwards and we never want to go backwards if we can help it. So just be conservative on that. Don't overdo it and just be smart about it. Because you want to always have enough working capital in there. Cash flow.
[00:27:59] Scott: We want cash flow so this way here we're never strapped and we can have the flexibility of going out there and expanding our business and growing it and pouring more gas on the fire and all that fun stuff. Then again, I'm going to talk about this because I think it's important is when it comes that time, create a monthly line item for yourself. Like I said, if it's $500 or $1,000 that's a given. Let's say that that's a given line item. That's the one that's going to be just like it's a bill every single month. But you might have another part of this equation where you go, you know what and then I'm going to reevaluate at the end of the month and see where we are and I might pull an additional two grand. I might pull an additional five grand because you're going to be able to see where the business is and how much cash you need in there in order to fulfill orders, in order to even do products, all that stuff but you're guaranteed $500 or $1,000.
But you have to create that monthly line item for yourself as a salary in a sense. So let's do a little recap here. Why cash flow is important. Well, because it allows us to expand and grow our business. Pretty simple. Now, how to get more cash flow, well, one thing you can do is you could go ahead and reinvest all of the money from your existing products and then roll them back into new products. That's number one. Number two is you could start to create, maybe little lines of credit if you will, like a credit card that has a low interest rate.
Or maybe you're going to take Amazon up on their terms and you're only going to use it and discipline on a 30 day run so this way here you're not paying 17.99%. You want to get those things in place as back ups and if you need them. You don't want to be in a situation where you need it and then you're going to through all of the things to get those resources. Definitely, definitely do that. Then when to pull profits, I would say I would at least wait six months no matter what. But then from there you got to reevaluate the inventory that is being due, the products that you're going to be launching.
[00:30:03] Scott: Then from there you can decide when you can pull that profit comfortably but then at some point you do have to put yourself there as a line item and a pay yourself first kind of line item. That could be like I said, $500 or $1,000 or whatever you feel the business can afford on regular basis because you want that to be a recurring bill in a sense. Now, what I want to do here though is I want to wrap up with saying that you need to create a plan and a goal for new products and you need to budget for them. That's part of this entire thing. Set money aside for your product development. I can't stress that enough because with everything we just talked about, that's great and all.
But you always want to be having a plan and a goal for new products. Now for us in the new brand we've got a pretty aggressive goal. It's one product per month. So we're going to try to roll out one new SKU every single month. Now, why are we doing that? Because we know the growth in that. We've seen what's happened. And we know out of those twelve, there might only be four that are winners. The other ones we liquidate and we move on. It's like anything, it's a numbers game. We have to put out the numbers or we have to put a certain amount out there in order to have a chance to get that 20% of the result. It's in the 80/20 rule.
There's 80% of the things we're doing might not work but there's 20% that are going to work really, really well or 80% kind of work. It's like that product that does maybe two sales a day but you know if you liquidated that product and you went out and tried to find a product that did ten, you'd have a better chance than just sitting on the one that's doing two and it's locking up a lot of your capital. So again, you want to have that plan and the goal for your new products. That could be for you maybe, four products for the new year. That's fine. One a quarter. That's fine but you need to stick to that and you need to focus on that. Then you need to be able to really take action on that. You guys always hear me talk about taking action.
[00:32:02] Scott: That's what we're talking about. Creating that plan and that goal for your company, for your business and really about rolling out new products and new SKUs. Because I believe that if you widen that net and really that footprint you're able to go out there and grab customers at different angles. One customer might come in on the left here that's looking for the garlic press and you might have someone else already has a garlic press but it's kind of on its way out but they are not looking for a new garlic press yet. They are looking for a garlic storage bag and then they find that garlic storage bag that you also sell and it leads them to the new one or maybe the bundle that has both together and then they buy our product.
Now you have a garlic press that is in like your ecosystem. Now, when you have other things that's in that space, maybe it's the cooking space, whatever then you'd be able to draw them in with those other offers. That's how you can really build out that product line, that product suite that's what we call it. That's when we really get to see to me like steady growth, and steady numbers. It's because now you're not balancing on one or two products. You're balancing on five or ten or fifteen. So you're going to have ups and down on all different products but they are all going to balance themselves out which then your business becomes more predictable and then you can have those payouts that are more predictable and also more steady. You can put yourself as that line item eventually when you're ready to pull those profits.
So that's pretty much going to wrap up this episode guys. Again, I just wanted to talk about the business cash flow because I know that's a big, big sticking point of struggle for a lot of people when they get to this point. And also when do you pay yourself. I've had a lot of people email me say, “Scott I don't know when I should pay myself,” and hopefully this episode has helped answer the cash flow situation but then also the profit situation and also hopefully give you the mindset that when you're starting a business, if you're building a brand you need to have the mindset that for at least six months you're not going to touch any of those profits. You're going to roll those back into the business and really start pouring more gas on the fire and start building out that brand.
[00:34:09] Scott: So this way here you can dominate that market that you are going after and just continually grow at a nice steady pace with your new brand.
So guys that is going to wrap up this episode. The show notes can be found at theamazingseller.com/470. Then again, if you're listening and you haven't even rolled out your first product yet or even you're ready to do a re-launch, and you wanted to learn our five phases that we just recently used, our five step approach here for building a six figure brand in five months it's our workshop, our case study where we actually walk you through that entire process what we're doing to really move that brand forward and the simple five step process.
If you want to attend that workshop, head over to theamazingseller.com/workshop. Register for that, generally we do them live so we'll be there to answer any live Q&A that you have or any questions. We'll be there to answer them for you.
All right guys, so that's it. That's going to wrap it up. Remember as always, I'm here for you, I believe in you and I am rooting for you. But you have to, you have to… Come on say it with me, say it loud, say it proud, “Take action.” Have an awesome, amazing day and I’ll see you right back here on the next episode.
LINKS MENTIONED IN THIS EPISODE
NEW To The Blog and Podcast?
I created a Page Just for You called…START HERE!
If you enjoyed this episode share the love with your friends…Click To Tweet the show.