Edmonton Business Consultant | Entrepreneur Personal Finances Myths – Part 3
Did and it should be an eye opener to the agent do it. Edmonton business consultant and a lot of people, the mistake that they make within their finances is they have way too many accounts. They have accounts at every single bank and lines of credit and credit cards over. But you do not need that many accounts. You know, who remembers decision making fatigue 168 hours a week. Simplify, simplify, simplify, paired down all the time. Um, so if you absolutely don’t need it, you know, pulls it in mine, that’s the way to go. And then will be, it should be simple for you. So then we’ll go to the next section is the personal budget. I think one of the biggest mistakes that people make in personal budgeting is they over categorize and they probably do this in every method of an accounting anyway, even in their business. Do they have way too many categories to track?
I like to think about it in terms of what are your fixed costs and then your variable costs. Okay. Let me explain that. Your fixed costs are things that you can’t really get out of your mortgage payment. It doesn’t matter how much you use the house or when you sleep or not, the bank’s going to charge the same mortgage payment, property tax, it’s the same payment every month. Condo fee, same payment, your car payment. It’s this. Unless you sell the car, you can’t do anything about it. The gas in the car, however you can drive it less, you can affect that, right? But you can affect the car payment a month, a month unless you sell it. You’ll have, you know where your required loan payments, your electricity, national, natural gas, Internet, phone, cable, they like very slightly, but for the most part, they’re going to be fairly fixed.
They’re not going to vary. You know, too much. House insurance, life insurance, disability and or critical illness, child care and support payments and other costs that don’t change significantly from month to month. Total fixed costs. That’s what I want you to do first and then underneath it, then you’re going to add to variable costs and I think you just need one number. In most households, they overcomplicate this, how much we’re spending on gas and how much we’re spending on groceries and how much they’re spending on clothes and shopping. And you can just view those variable costs as a pot and will in that pot, the pleats, you have to stop buying them because you can share from one to the other. You can not buy clothes. You can put gas in the tank. Edmonton business consultant, but you can’t, you know, uh, you can’t not pay your rent so you can buy groceries, but it doesn’t work that way.
Right? Um, so I want you to go through this in terms of the fixed cost, and then you’re going to get to a number of the fixed costs. I want you to itemize them. The variable costs, one estimate will do, do not overcomplicate this. Remember, you are business owners. If you can’t make a reasonable estimate on your variable costs for your personal life, you’re not going to make reasonable estimates on operating a business and the significant costs that are going to happen there. So itemize those fixed costs, make an estimate of the variable cost, and then you’re going to get the total household budget go. Okay, that should be not get out. It’s easy. The key is that that variable one don’t overcomplicate that. Edmonton business consultant, you get 160 hours and that’s okay. If you’re an employee of you wasting time on, you know, spending four hours on the phone with Telus to try to get $3 a month off your phone bill is a terrible idea of your student center.
Edmonton business consultant, so just bashed that together. Uh, so you’re gonna get your total household budget, you’re going to duct whatever your take home pay is of your spouse or the take home pay of your secondary jobs. Okay. Um, so going back to the question, um, right there. So you want to get that in there, the household budget less to pay of your or your jobs, right? That’s going to give you the total monthly funds required from the business. Now you’re going to have to consider what cash you have saved up and what credit you have available. And I’m just going to go back in time two years and say my number was $3,000 a month, $2,000 a month on the fixed costs and $1,000 a month on the, um, $1,000 a month on the variable cost. I had, you know, not really any cash available and I had $40,000 a credit.
So I had like, uh, operating capital was 40 and basically I had 13 months. I needed to be winning in 13 months, in 13 months. I needed to be making $3,000 a month. Like that’s just how it works. So that’s kind of the math, how much, how much runway you have to get this thing started. Right? And that’s why going back to the myth that your product has to be perfect before you launch it. Most people, if you’re perfecting it, are gonna run out of runway and they’re never going to watch. And even if you can start earning a thousand or 3000, you can increase the length of that runway, right? Cause then you’re not burning through the whole $3,000 every month. Edmonton business consultant, that’s the way it works. So flipping the page, what walls people don’t know is we talked about one of the myths is that you can immediately increase your personal income once you sell more.
I’m just going to walk you through like the, an average business of how that kind of looks. Let’s say someone sells additional monthly sales 4,365 and then from that they have costs of sales and those costs of sales or two thirds is a, they’re a contractor and they gotta pay their sub trades and they go and buy the supplies. Uh, that’s going to cost them $2,924. That means the core prick girls profits is going to be $1,441. They’re going to pay 11% tax. Thank God for that. 158 bucks. If that means the net corporate income is available as a dividend to you, it’d be $1,282. Assuming you have 22% tax rate on that dividend could vary depending on what your circumstances are. That would mean the net after tax cash available to you is $1,000. So if I wanna increase my personal income by $1,000, how much more do I have to sell in this scenario?
4,000, $365. So people are like, I want another thousand dollars for my business. You need to sell another $4,500 from your business and other $4,400 revisit then that’s, this is not an outrageous number. This would probably be a pretty common number. And then it would probably hold true for a lot of you in this room. So, Edmonton business consultant, you got to think about, I need that thousand dollars in this business. This is about growing the business and this Fox about, you know, what is the work that you put into the businesses, maybe taking a little bit less so that you can keep things going that you can build it to a point where you’re making more. Um, so Kevin, and what are some of the,
the sacrifices do you think that entrepreneurs think? Let me share a little bit about the year. When I s when I started here with power solutions, I left a pretty lucrative position as a general foreman, uh, with a company called Powell. And a 150 grand a year was what I was making. And uh, when I started at Halo when I was little, I didn’t realize what I would actually be able to draw or the company base opposed to what the company brought in. And, uh, it took about a year to really realize that I could not live the lifestyle that I had previously. When I started a table I went to, in that first year, I think I drew about $50,000. A person proposed to 150. Now there’s obviously the tax savings of running your small business, but there were some sacrifices I had to make when I started a halo.
I had the nicest jacked up diesel lt zed out there, $75,000 truck. Uh, I had the nicest Mustang gt convertible assured park. I love this car and this, this I’m car guy. I mean I’m going to church my car ad right. And, uh, ended up selling the truck, had to sell the Mustang because we needed to eat. Um, as you got into year two and brought on some employees in that we tell, we fell into some, some tough times. Edmonton business consultant, I had to bore, I had to take money. I’d have my personal line of credit that I did have to pay my guys. You know, it’s one thing when you’re running as a one man show, but when you start having employees that are depending on you to put food on the table and payroll’s coming up and you can’t make it telling you guys it is horrible, horrible, horrible feeling.
Uh, we’ve went through times where I couldn’t pay the guys on a Thursday and they waited till the Monday. It didn’t happen with volumes. You are tired. That is those rude awakenings that make you realize it. If you’re going to get into this third, you got to make some lifestyle changes. Um, and it, it’s good. I, I think it’s, it’s really good. It kind of resets yet. Uh, you know, I look around in here and I’m not calling anybody out, but I look at the Starbucks coffee cups and the thermoses from old. Okay? So I don’t drink Starbucks. I can’t stand it. [inaudible] if I’ll get, oh, I get a Tammy’s. But I mean, you look at it like this, your Starbucks costs you anywhere between the offending, what you get three to six, seven bucks rates. Someone’s real expensive. And my Curie Cup costs me 55 cents. Then I bought a case of a Costco and you know, made in through my truck as I left in the morning. Uh, that’s a big cost savings right there. Are you taking lunch? Maybe you better start taking lunch. You know, if you’re buying lunch every day and you want to live the life of the entrepreneur, make a sandwich and night before, you’re not going to go for dinner as much. If you want to keep going out for dinner, live in that lavish lifestyle that you might’ve lived previously, you could be in for a rude awakening. I mean now I drive a 10 year old jeep Cherokee that I bought from my parents. That’s my vehicle. And I’ve got two new vans that we’re using for the business as well. But going from that beautiful truck, I was so proud of down and it’s a little humbling, but in my opinion it resets you to really start building something up from there. So it’s a lot of personal sacrifice and be prepared for that. That’s, that’s my Edmonton business consultant experience in your five. I’m still not a nine not nearly pulling in the personal income that I was when I worked for somebody else as a GF. So, but I couldn’t be happier with where we’re at. Yeah.
People are going to dramatically underestimate how long it takes to get to that point that they think they’re going to get in a year or two. They don’t have the money in their business to buy the new vans that, that Kevin needed to put his new guys out on the site. Right. Cause they wanted to keep their truck. That’s how another electrician is going to roll. Right. And now he can’t bring on those guys and he’s still driving around in his truck as a one man show and it’s not building his business. Right. That’s a common scenario cause they’re not willing to make that, that, uh, that sacrifice. Right. Let’s talk about this is real. And most people think that that, uh, the trajectory of your business is just far different than what it is. You know, most of the value of any businesses that I’ve seen are plus they’re more than 10 years and supports it.
I don’t have the stat right in front of me, but I believe it’s 50% of all businesses that you’ll see are for sale are more than 10 years old. So the ones that actually get to a point where they’re, they’re have enough value to have a, a business broker represent them and have them listed like they’re more than 10 years old and people think that they’re gonna build it in one or two. Um, your life is probably going to just take a step back in years one through five, but then you’re going to start to get a little bit ahead after that. Right, Edmonton business consultant. But there is the, the light at the end of the tunnel. I mean, I should throw my, my first year as a CPA, I could have made 80,000 bucks at any job anywhere. I could have made 1000 bucks for sure. Um, I interview well, you know who credentials, good experience. $8,000 would have been easy. I made $40,000 my first year or 2000 bucks. Half. Literally I decided I was going to hire niece a first year because I realized it just wasn’t going to grow cause it was sitting there, you know, doing filings and stuff that, you know, that was just preventing me from growing the business. So I hired someone on, I thought I would operate it for the first year, but I said, no, I don’t, I don’t need to draw that out. I can hire someone else on. Um, and that’s how I rolled for the first year, 40,000 bucks in my first year as a CPA. And fast forward eight years, I got a nicer car.
Like my, I like my, I cause every accountant needs a 7,000 pound truck that it can do zero to 60 in five seconds. So I bought a Ford Raptor cause he need one, right? Because it’s can’t be a CP without one. So, Edmonton business consultant, without the sacrifice, you never get there. Most people would give up. They just get off the train because they look at that and I’m like, oh I’m, I didn’t do it. Or they just have this completely unrealistic expectations begin all right for me, your five, which is this year was the year that we really saw that light and things, you know, we crawled out of what the whole that get kind of, we kind of want to say dog, but it was just, you know, crawling out of that, that, that big sacrifice. And, and for me, this has been a really good year, you know, and, but it takes, it takes a lot of work. It really does. And yeah, like I said, I’m a car guy and in my financial plan on seeing the Josh, how can I buy that challenger Hellcat next year? Cause I want the halo elcat you’re going to see that, you know, but that’s, that’s what I want. Those are the things I could have been selfish and, and killed the business just to pull out money out of it. But then we would’ve been in disaster.
Um, good question. This might sound like a self serve answer. We, we’ve looked at it, we used to think that we could do proprietorships and like with our corporate clients, we do financial plans and business plans for them. And we thought when we started out that we could have for praxis and they grow up into corporations and there’s like two types of people we found. There’s ones that just like, they just jump in with both feet and they’re just gonna do a plan and they’re just gonna move forward. And there’s other ones that are just going to tip toe into the proprietorship. And we thought naturally they had some of the, would progress after eight years. How many ever incorporated these on and what happened to that one that did incorporate, yes. Dissolves. It’s all just never happened. So, um, the people who make like the sacrifice and there’s a numbers are, it’s not just, you know, hiring, you know, accounting to do a business plan.
I mean, uh, my Edmonton business consultant is multimillionaire. He, he, he shut off his air conditioning in, you know, in Oklahoma, in the, so he could run his yellow pages ads. It’s how it going to start. Like swimming the sacrifices is why can sharpen touch on that too, because I be with you for two years. Uh, the first three years I used a friend of the family who had his own little called herself an accountant. I, you wasn’t a CPA. And, um, he did our, what, what he did do for books or accounting, extremely cheaply. Thousand dollars a year, you know, this is fantastic, great guy. I was getting no tax planning advice from him and what he wasn’t doing for us costs me a lot of money. Even with the way I was using the business vehicle in the company. Uh, we fell behind, uh, with our, uh, our, uh, RP, uh, our payroll remittances with cra and they’re not very nice people.
When you’re in a position, let me tell you, so like strategically our evidence to show that is that it’s like right away, um, on the spreadsheet you could just plug it into the spreadsheet. Most people who are making 50,000, just $50,000 a year are paying more for back bad tax planning. So they’re actually paying more in taxes that it would cost the higher fed account. Like just when we look at the numbers, like, so you can give the money to Mr Trudeau or you can get it to count. There are different side pays in having bad attacks, funding advice or not having the right person is far offsets what I would have, where I would’ve been if I had been somebody would have been Josh from the beginning. Absolutely. But you don’t, you think you could do it all yourself. Okay. That’s a good spot for a break. We’ll be back in at 50.