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Once upon a time (not that long ago) Jesse asked our YNAB podcast listeners how many of you would be interested in a podcast for small business owners about money management, and a lot of you were. Like, a lot.
I think the official quantifier would be “a lot a lot,” which is definitely a real unit of measurement.
You people love podcasts and we love you for it.
And so Beginning Balance, a business podcast (and the newest addition to the YNAB podcast network) was born.
A Podcast for Small Business Owners
Despite how it may sound, Beginning Balance is not just an excuse for Jesse to get together with his long-time friend and small business financial coach, Mark Butler, for candid conversations about stuff they love to talk about anyway, like money, business, and YNAB’s Four Rules.
I mean, that part does seem to have worked out well, but the purpose of Beginning Balance is to help small business owners—from the tiniest of tiny online businesses and freelancers all the way up to companies with hundreds or thousands of employees—gain total control of their money.
Entrepreneurs and business owners, are you ready to conquer your cash flow, save your sanity, and build your bottom line? Well, you’re in luck. Here’s what we learned about running a successful business in episode one of the brand new Beginning Balance podcast:
A New View of Rule One
A lot of business owners are surprised, and a little skeptical, about using personal budgeting software to manage a business budget, and we get it, because Jesse, the founder of YNAB, the podcast host, and a legit budgeting guru, wasn’t using his own program for that purpose at first. Yes, seriously. He finally had some money and had no idea what to do with it. Ironic, isn’t it?
So when YNAB started making money, he’d check the business bank account and always felt that there wasn’t enough money to do anything with—no matter how much money was there.
At the time, he knew that Rule One in YNAB is to Give Every Dollar a Job (because he’s the one who made that up). But when those dollars existed solely as a checking account balance, their job was to soothingly murmur, “You are safe,”—and that was okay, but every potential expenditure felt like a threat to that sense of security. YNAB had money, but could we afford stuff? Hard to say.
When he remembered that he literally invented a whole system for this sort of thing, Jesse set up a business budget in YNAB and started laying out his categories and funding them. It was like the cash from the unwieldy bank balance got organized into envelopes: the rent envelope, the payroll envelope, but these were all laid out in one neat and tidy digital view.
The dollars formerly hanging out as a bank balance got a promotion and actually started working—some went to the rent category, others to the electric bill, a few to payroll…they all essentially got real jobs.
And lo and behold, once those dollars were divided up into categories, there was money left over and he knew that he could afford stuff.
Turns out, being able to afford stuff is way more fun than guessing if you can or not.
Emotions Make Bad Math
In an attempt to avoid risk, Jesse was missing out on opportunities. While he had a pile of money serving as his emotional security guard, it wasn’t supporting the type of growth that could create real safety.
And that’s how most people do it. It may sound crazy, but even successful entrepreneurs are often afraid to grow their business.
After all, there’s an emotional influence of money, combined with personal bias and a limited ability to do accurate math off of the top of our heads (even if you’re super good at math). When we try to answer a simple question: “Can I afford this?” our anxiety shows up screaming, “ARE WE SAFE?” and no, we do not feel like we can afford something. Even if we can. It’s all very unhelpful.
Learn how to manage irregular income with our comprehensive guide.
Employ Your Dollars
As Mark says in this episode, “I simultaneously want to feel safe with my big bank balance but also feel like I’m allocating money to growth. I’m in a constant fight between those two.” So how do we find the balance? By the habit of allocating cash proactively and thoughtfully.
Basically, Rule One shushes that wild part of your brain that’s always screeching, “ARE WE SAFE?” by using evidence to confirm that you are, indeed, safe. That frees up room for your brain to screech about other stuff, like that time you responded with “you too!” when your server told you to enjoy your meal. So, it’s a win-win, really.
Consider this real-life example: Mark had a business client who was asking if she could afford a new employee. The new employee would cost around $10,000 per month. Mark proposed creating a budget category to “test out” the cost of this potential employee and funding it for the next 60 to 90 days (but not actually hiring yet). At the end of that experiment, not only will she know if she can afford the new employee, but she will also have a nice little chunk of money saved up.
Opportunity Costs
The biggest benefit of giving every dollar a job in the business world? Once all of your categories are funded with existing dollars, each new dollar becomes an opportunity—you can spend it as you wish, with the confidence that you’re safe to do so.
The thought of budgeting can feel like you’re depriving yourself of doing what you want, when in reality, the ability to make data-driven decisions actually allows and encourages you to make smarter choices while getting a real (and not-fear based) pulse on your financial health.
When possibilities are based in the reality of cash, your aspirations may shift from “I want a private island” (which is cool, who doesn’t?) to “I want to hire a CEO to run my business so I can spend more time thinking about private islands”—which is, frankly, a better first step to getting your own private island. I think. I’m not sure since I don’t have one but that sounds right.
When it comes down to it, a budget is really a list of wants that enables you to spend without stress and it’s a budget that does the job of assuring you that you’re safe, not a bank balance.
So, step one: create a budget. Step two: give every dollar a job. Step three: private island??? Maybe we’ll find out in the next episode.
Tune in to YNAB’s podcast for small business owners, Beginning Balance, on Fridays on Apple or Spotify, and if you like what you hear, be sure to subscribe, rate, review and share with a small business owner who also wants to gain total control of their money.
