Transcript
Alyson (host):
We've all seen it. The celebrations, the big wins, the humble brags about the six-figure launches from coaches and consultants and course creators and service providers. But how much are they really making? And what really goes in to creating one of those six-figure launches that we all seem to really want? And that's why we have asked Kathy Svetina here. She's a Fractional CEO. And don't worry, I'm going to ask her what that is on this podcast. But her whole thing is helping you understand the financial side of successful launches. Kathy, thanks for being here with us.
Kathy (guest):
Thanks so much for having me on.
Alyson (host):
What is a Fractional CFO?
Kathy (guest):
A fractional CFO is a person who takes care of the finances, not just in terms of accounting and bookkeeping like accountants and bookkeepers do, so the fractional CFO does not do that type of work, but takes care of all the planning of the finances of all the future. The best way to think about it is for your bookkeeper and an accountant, they take care of the past of your finances and the current state of it. For example, putting the financial report reports together, such as income statements, balance sheet, cash flow statements, but the fractional CFO is actually taking all that information and planning the future of your business, helping you figure out how your money, how you cash, how your P&L is going to look like your income statements going to look like how your business is going to look like, three, six, twelve months from now, three years from now, five years from now, really helping you plan for the future. And the fractional CFO is a person who works for a fraction of the time in your business. Small businesses really do not need the CFO in their business full time. But if they frankly did, they don't need it, and they don't can't afford it. But they really do need that type of expertise. The fractional CFO is a person who's there for a fraction of the time.
Jennie (host):
I have a follow-up question. We're talking about this fractional CFO. And I know when Allison was introducing, she said a CEO, but we definitely meant CFO question for you.
Allison (host):
Oops, Oh, good.
Jennie (host):
In the beginning, when we're starting our businesses, these online businesses are we're starting to build these out. When do we need a fractional CFO In our business? Is it year one? Is it year five? How do we know when we needed this person on our stuff?
Kathy (guest):
And that's a great question. The answer to that is there is no clear answer. It's when the business gets really complex, and you have all these questions that your bookkeeper or your accountant cannot really help you with anymore. It could be the businesses that I've worked with, for example, are already past the $1 million mark, because that's when it gets like really, really complex. The businesses I've worked with are between $1 million to ten. But you do need that type of expertise before you are in that particular range. However, the way that you should be looking at is the are the management decisions, for example, that your accountant and a bookkeeper cannot help you with such as, when should I hire? Who should I hire? How should I structure these new services? What should my pricing look like?
Kathy (guest):
Also for example, if you are putting a new offering or a new product into your business, how are you planning for that? How are you planning for expenses? How are you planning for your hirings? How much money are you going to get? And if those are the type of things that you are not comfortable planning yourself, and you cannot get help from your bookkeeper or your accountant because some of them do the minimal planning for you. That's the time when you should be looking at someone like a fractional CFO to help you with it.
Alyson (host):
Alright, so earlier, right before I called you a CEO, I don't know why I did that because I know you deal with the financial stuff. And that's CFO.
Kathy (guest):
That's okay because I am the CEO of my business.
Alyson (host):
Busy narratives! You're the CEO of the Fractional CFO there. That's what I meant to say, of course, thank you for saving me on that. I mentioned these big, big launches these six, maybe seven-figure launches. What's with all of them? Are they really making that kind of money? Let's just brass tacks it.
Kathy (guest):
So first, let's put it in perspective. The Six Figure launches, what does it really mean? Because a six-figure launch can mean a lot of different things. It can be the money that they actually getting in - the sales, the six-figure sales. Let's say $20,000 for example, $20,000. But how much of that people are actually keeping? Because yes, you do get $20,000 in. However, there are expenses such as Facebook Ads, for example, which we all know can get super, super expensive.
Kathy (guest):
Then you have the copywriter who's actually writing your landing pages. Then you have the staff that you have, for example, a virtual assistant. You might have someone who's handling your Facebook groups. You might have someone who's handling your correspondence, who's helping you in the business. You might have another coach that you have to pay for. When you thinking about this, the six, five-figure launches, it's not just revenue, it's also the expenses that come into it, how much is it really after all of it is deducted? And you still have to think about your taxes as well. How much are you really getting out of it? It's not just about the sales, it's about the whole financial aspect of it, the whole 360 views, not just the sales.
Jennie (host):
When people are, this is a follow-up for you. When people are claiming, “I just had a six-figure launch.” Are they saying that they had net revenue of six figures? Or is this like gross revenue? What are people? What's the right way that people should be talking about this because it feels sometimes a little misleading.
Kathy (guest):
Yeah, and you're right. It usually means revenue that people are bringing in. That's what it means. Okay, it's not gross revenue, it's not net profit, it is the revenue that's coming in.
Jennie (host):
Okay, fair enough. And for people who may not completely understand because I'm not going to judge people's financial literacy, tell us the difference between net and gross.
Kathy (guest):
When you think about it, the number that you're bringing in, let's say $20,000, and the difference between that and all the expenses that you have to support this number are - what you brought in, and the expenses, and then there's the net. So you brought in 20,000, you spend 19,500, you make $500, and that's your net.
Alyson (host):
To clarify, the 20,000 would be our gross, because I'm a hashtag writer for a reason here. The 20,000 top revenue would be our gross, and then after all the expenses and all the payouts, that $500 is what we net. That’s right?
Kathy (guest):
No, the 20,000 would be your actual revenue. The gross is the way how you look at the expenses. If you have the expenses that are, for example, that you're supporting that particular so. For example, a copywriter would be your gross expense. The gross profit would be 20,000 minus the copywriting that would be your gross, particular profit. And then you take the additional expenses to get to your net expense. It's just how you classify expenses. But the best way to look at it is you brought 20,000 in, and you had all of these expenses in between; whether they're gross or whether your operational expenses, your net was $500.
Alyson (host):
Should we be focused on that six or seven-figure income? What number should we be focused on here? To try and hit?
Kathy (guest):
Yeah, the best answer for that would be your net. What is your net profit, after everything is said and done. And the other pieces also cash as well, because that comes into play if you are offering payment options. For example, someone can pay you, let's say $5,000, however, because for the particular customer clientele that you are servicing, who might be offering payment options, and that's very common. Let’s say, “Well, I'm going to offer this in two installments. $2,500 now and $2,500, let's say in three months. So think about also when are you going to be getting cash because of your expenses, you might have to pay them now, but your cash is going to come later. Think about not just in terms of the profit, how much you're making, but also when are you going to be getting back cash.
Jennie (host):
There's a whole lot to take into consideration when we're trying to do a larger launch. And for the uninitiated or for people who have done it, maybe not successfully, it didn't go really well. What are we missing in our planning and what we're doing with our launches that we should be looking at instead? I feel like people sometimes are focusing on the wrong thing. And I'd love to hear how what we actually should be focusing on.
Kathy (guest):
Yeah, and that's a great point, I think the best way to really look at it is to put it in a spreadsheet. It doesn't have to be complicated. But if you put it in a spreadsheet first, before you start spending money, you really going to see how much you plan on getting the money in, and then along with all the expenses, they're coming through. And that will give you a good indication of whether you need to tweak your expenses, because you're not going to be hitting your profitability as we said before, or you might actually find out that by doing this launch, even though it's super exciting, because of all the expenses and everything that you're going to have to put out, it doesn't really make financial sense for you to do it right now at this moment. It doesn't mean that it's never going to be a good time to do it. But right now, at this moment, it might not be a good time. Putting that on the spreadsheet and actually planning it out before it happens. It also gives you a good indication of whether you should be going down that route and if there are any ditches that you might fall into. Right? And it's a good exercise to do.
Alyson (host):
Yeah, I think a lot of times we see people that are like, “Okay, I'm gonna do this.” They're going to do, let's say, a summit, because I have done one recently, and Jenny does a bunch of them. And they think, “Okay, so I need to get Zoom Professional, so I can record my things, and that's this much a month. And then I might need a page builder so that's this much a month, and they don't think about things like copy, video editing, hosting ads, but they just kind of pay for it as it comes up. Which then just doesn't allow them to really project very well. What would you suggest? I mean, would you really just think about sitting down and brainstorming all the potential things you might need and figuring out costs for those? Is that what you would do?
Kathy (guest):
Yeah, you're right, especially if this is your first launch. Because if you've done two, three, or more than that, you already know all the little details that the expenses just creep up that you wouldn't even think- editing, video editing, copy. You have to update your website. They're all these little things that just add up, and if you don't have someone in your business is doing this full time, that's a part of their job. You're gonna have to outsource it. You have to get a freelancer or whoever's that you're going to be getting in. Of course, you have to pay them. It's a lot easier when you have already a full-time employee or a part time employee that's already doing that. You don't have to think about those smaller nuances. But if this is your first thing, and you've never done this before, really think about it, walk through the steps of what is it that I'm going to do, it's almost like you have to do a workflow before and then put a number on each of the steps of that particular step in the workflow, right? If this is your first time, go through it, all the particular staff is brainstormed and put on a spreadsheet, and plan it out. How much do you think it's going to cost?
Kathy (guest):
Also, the good thing about that is as well, because it's going to give you the guardrails. Once you're in the middle of it is very exciting to see the money coming in. And oh, if I spend a little more, I'm going to get this out. No, if you haven't on a spreadsheet, you have it planned out. You know that you're going to be spending. Let's say $1,500 on a copywriter and not a penny more. And that way, you know that you have the guardrails for that particular expense, and you're not going to be left with, you know, $500 at the end of the day in your pocket by doing all this work.
Jennie (host):
Absolutely. And I think a lot of people will fall into that trap. I have another question I want to ask you, and it's a little off the cuff here. But what else are we missing to make sure that our next launch is actually financially successful? You were mentioning some steps previously? What steps do we have to take to make sure that we're not missing anything at all?
Kathy (guest):
Yeah, the steps would really be looking through the entire launch. So not just looking at it like we were right now discussing, what are some of the steps that you have in the particular launch, in terms of expenses, what needs to happen in the workflow, but also think about your business in three ways? What does it look like before the launch, what are some of the expenses and those streams of revenue that you're having right now, and how are you supporting that?
Kathy (guest):
Also, during the launch, we just talked about it. Then think about your business after the launch. How is it going to look like, because you're going to bring all of these people in, all of these customers in great the giving you their money, now you have to support them. Now, it comes to customer support. And it might be that the people that you have right now, for example if it's just you, you might be that you're at capacity, you're going to have to hire more people. You're going to have to hire more coaches. You're going to have to hire more assistants to help you with it. So that's going to be another expense that you have to account for to give you the support. Also the other pieces to how is it going to look like operationally? Do you have to put new systems in place because your particular website or you're particular what whatever you using to support the subgroup, if you have a group, that's software use you right now, it's not really good in support of all these new customers that you're bringing in. You might have to switch to a provider, and that's going to be another expense. Think about it in those ways: not just your expenses during the launch, and what needs to happen during the launch, but also what needs to happen after the lunch to support that volume you just brought in.
Alyson (host):
I really like that, and I'm experiencing that now. At the time of this recording, I have recently completed a summit. I've been doing a lot, and we'll call that a launch because that's exactly what that is. Well, now I'm more slammed than ever with copy work. And so now I need to hire someone to help fulfill this in my own business. That's an expense I didn't think about when I planned out that launch. That's what you're talking about. Right?
Kathy (host):
Yes, that's exactly what I'm talking about.
Alyson (host):
How do you keep on track in the middle of your launch? If you're like me, right, you get excited about that stuff. How do you keep on track instead of going for the stuff? I know, you said if it's not on the spreadsheet, you don't do it, but how do you keep yourself from doing it anyway?
Kathy (guest):
And this is where it gets easier when you have help. Because if that is not something that you enjoy, and let's be real, most people do not like spreadsheet work. You can have someone help you. You can have an assistant help you. You might be able to have your bookkeeper help you with it as well. Someone that is tracking all these expenses. Because just because you have it in a spreadsheet, it doesn't mean that it's going to happen. You have to be accountable to that particular number, and that means that you're going to have to track it. You're going to have to track all the revenue that comes in. All the expenses that you're putting in, and that's a lot of extra work on you, especially if you know you're the one that's really driving this particular launch. So really do think about do I need to get help from someone to come help me keep track of all these numbers because when you're busy, you might just say, “Well, I just forget it, I'm not going to do it.” And that's when you can really fall into it because if you're not tracking it, you can easily run over those numbers. Then all this exercise that you've done to help you get into that particular profit number that you want it to, the guardrails that you put together. You're just ignoring them because you can’t track it. So that is a very practical thing to do. Don't just put it in a spreadsheet, but also track it.
Jennie (host):
You're talking about guardrails. If we're brand spanking new, and we can't, or even if we're further along, and it's our first launch, and we have never had to project our finances? How are we going to understand the guardrails? but also how are we going to understand every particular thing that we need to do? We've never done it before?
Kathy (guest):
That's a great question. The best way to do this is if you talk to other people who have gone through it before. If you have friends or if you're in a community, if you have like network community where people have done these particular launches, these particular groups are very helpful with that. Have a conversation with a couple of people who have gone through it, who are a little more steps ahead than you, and ask them, “How did you do it? What are some of the expenses that you went through? What would you do differently? If you were in my shoes right now, what are some of the things that I should be careful of? What should I be looking at?” How those types of conversations because you're going to have the knowledge that you because essentially you don't know what you don't know. And if you have someone that would be willing to help you with that to share the knowledge with you. That will go a long way. It's going to make it a lot easier for you.
Alyson (host):
I can't thank enough, because all of this is so good, and I really love a lot of the stuff that you said, I know Jennie and I are gonna have a ton of takeaways for this episode. But really, what it boils down to is get yourself together, think things through a little more thoroughly and think about stuff that's beyond just the blinders of the launch, which I know is something that we all have during launch, we put these blinders on. And I'm really excited to do that, in my own business. How can we find out more about you? How can our listeners connect with you all of that good stuff?
Kathy (guest):
You can find me on LinkedIn under Kathy Svetina, or you can go to my website, www.newcastlefinance.us.
Jennie (host):
There's some things from today, which I thought were really interesting, and that we can pull for pretty much anything in our business. And I think some of this doesn't even relate 100% to launches, but it's just a just relates to your expenses on a whole. I mean, you were when we first started off, you were talking about P&L and balance and stuff like that, and I know not everybody is like me. But I have an accounts payable, and accounts receivable background. I have a projection document. I check my p&l, my expenses, I enter all my expenses by the end of the month. Do you know what I mean. I know not everybody does that, and I totally understand. But that's my comfort level. Because having that accurate picture on a month-by-month basis in the business allows me to plan for future launches, and allows me to look at and I love diving into the numbers. And Allison, I know she loved it, because she actually looked at her numbers for her summit, like all the finance and stuff like that, and took a look at what was put into it versus what's come out of it. And I think if you take a minute, and it sounds like a lot, you can actually fall in love with this process. And enjoy the process, like Alyson and I both have these cool spreadsheets that we use now. When it comes to talking to potential clients and deals and things like that, and how that plays into the finances.
Jennie (host):
I just want to say thanks so much for doing this, we've got some really great takeaways from today. My first one is, that you have to not only think about what and the amount that you've sold but also consider when that money is going to come in, especially if you're doing payment plans. You might actually be needing to pay some expenses, but haven't gotten that money in from those clients or from those new you know, coaching clients and whatnot on those payment plans, and you have to adjust accordingly.
Alyson (host):
A kind of related to that when it comes to launches, it's not just about the sales, it's about how much it costs you to get those sales in the first place. It's about the expenses. You really need to consider the whole picture while you're planning and while it's happening to even tell if it's going to be a success or not.
Jennie (host):
And that so plays into the fact that sometimes we've got these creeping expenses that happen during a launch, and we don't even think of. Like right in the middle of a launch, you be like “Oh, no, I got to do this, or I'm going to put more money into Facebook ads or video editing took twice as long or cost twice as much.” And the creep starts happening. This is where it all starts to add up and having that spreadsheet that Kathy was talking about is super important.
Alyson (host):
And this one really hits home for me, look at your business and what it's gonna look like after your launch and really think about what could happen, and whether you're prepared to handle it. If you need to be like Allison and scurry around to hire someone on your team to serve all the new clients. Or if you're going to have thought about that ahead of time and put those systems into place to prepare yourself and save yourself some headache. It's also going to impact the bottom line for you. Right?
Jennie (host):
Absolutely. Kathy, thanks so much for taking the time to be on with us today. We really appreciate it. This has been a really insightful opportunity to share some of the finance side, which not everybody talks about. Our people don't talk about it enough. How's that?
Kathy (guest):
Yeah, that's true. And when it comes to six-figure launches, make it a six-figure net profit launch if you're going down that route.
Jennie (host):
Whoo, a good way to put it. Yes, let's make it a net profit. And, not just the revenue coming in. If we can make a six-figure launch, a real six-figure launch, that would be awesome, and we wish everybody so much luck with doing it. And also, if you've got questions that go beyond this episode, or you want more clarification, please go find Kathy online. She's everywhere and she's incredibly accessible. So please go and connect with her there. I just want to say thanks to everybody who is listening. If you haven't already, do follow us, wherever it is that you listen to your podcast episodes. Then find Allison and I on systemtothrive.com and check us out there. Thanks so much for listening. We'll be back again soon answering another big question.