Episode 80: 5 Money Habits That Prevent Q1 Burnout for Creative Entrepreneurs

Welcome to the Creative Minds Smart Money Podcast, where we turn financial confusion into creative confidence. I’m Samantha Eck, bookkeeper and fractional CFO for creative entrepreneurs. Each week, I’m sharing my financial expertise and actionable strategies to help you build a thriving creative business.

Plus, you’ll hear from industry experts who bring fresh perspectives on growing your business beyond the numbers. Because building a successful creative business starts with strong financial foundations. Your next chapter starts now.

Gaining money has a funny way of convincing people that they need to reinvent their entire financial life overnight, but you really don’t. What you need are a handful of habits that make your numbers easier to run, not harder. Today, I’m going to walk you through the five money habits I see inside businesses that grow the smart way in the first quarter of a year.

So let’s dive into it and get started. The first habit is to know your profit levers. There are two to four levers that change profit the fastest.

First, one of them is your pricing, one of them is your volume, another one is your efficiency, and the next one is your cost structure. When you understand which lever is the most responsive in your business, you stop guessing at what’s going on and you start to actually understand. So let’s dive into each one a little bit more and give you some examples.

So for example, some of you raising your prices 10% would change everything, but for others, tightening scope by five hours per client is what will actually bring you a profitable jump. So that’s where I’m talking about pricing. So looking at your pricing and saying, do I need to increase my pricing? Do I need to decrease my pricing? Pricing is revolving around the pricing that we’ve already set and how we can make an impact with that.

The second one we have is volume. Do I have the capacity for this? Can I take on this new job without driving profit down? Will it bring me down five more hours than what I planned and bring down the amount of money that I’m making? The next one is efficiency. Do I have the time and the availability to actually do this? And can I do it quickly enough that it will actually produce for me the amount that I’m actually looking for? And then the fourth one is your cost structure, of course.

So profit drivers and margins, when you really understand what impacts your margin most, you know exactly where you’re going to be able to focus in your first quarter because you’re going to be able to look at that specific area. If you know that it’s your pricing, you’re going to be analyzing your pricing in that first quarter and saying, okay, do I need to raise my prices in Q2? Or am I good where I’m at? Do I need to stop taking on new projects for Q2? What is my capacity? Do I need to change up my systems because my efficiency is down? Or do I need to structure my costs a little bit better? Maybe you have 16 different softwares that are eating up most of your business expenses and your business revenue, but you have some overlap between a few of them. So looking at that and making sure that you’re focusing on getting that kind of cleaned up.

So you do want to identify one to two income producing projects or offers and then look at their true margins. So if you are a website designer and you just did a website, looking at the hours that you put into it, what software did you use? What, if anybody, did you have help with it? How efficiently did you get things done? Did there feel like there were bottlenecks anywhere? Combining all of that and knowing what your profit levers are is going to help you immensely in the first quarter in knowing and having that. So your next habit is to check your cost of goods or your cost of service every month.

And I know as a service provider, as a creative service provider, you’re probably looking at me and saying, Samantha, I don’t have cost of goods or cost of service, but you do. And most creatives do ignore it because it feels too accountant-y, but this is where a lot of your profit leaks hide and how you can really, once you have that profit lever, you can kind of go into this. Because again, cost of goods apply even to service pros.

You have contractors. So if you are a social media manager and you have contractors under that, that is a cost of service. You are paying them to do some of the things that you would usually do, and that is a cost of your service.

The tools that are required to deliver. So again, in that social media manager context, if you have a scheduling software, if you have editing software like Canva, things like that. And then the production and fulfillment of that.

So if you have some sort of software that you use to actually fulfill it. So you show them it on ClickUp, like you have your processes on ClickUp. Those are all part of the cost of service of doing a business.

If your cost of service creeps up, your profit will shrink even if your revenue grows. Because of course, your cost of service is going to rise as your revenue does. So we need to make sure that we are looking at the contractor spend, the revisions, the scope creep.

Because those can all be masked in your deliverables, and you want to actually make sure that you’re looking at them. We want to look at our gross margin and make sure that that number is good. So the gross margin is the number that we take when we have our revenue.

We subtract our cost of services, because that’s the easiest way that we can spot trouble, especially in the first quarter, and make sure that we’re making those adjustments on a yearly basis. So you do want to review your cost of goods percentage for January, and then of course, compare it to your target margin. So this is again, something you want to keep in mind is your target margin.

You want to know your target margin and have it instilled in you so that you can make those quick changes, those quick decisions for the first quarter of the year. Cash flow is the backbone of decision making. That is another habit, following your cash flow, not your feelings.

So we want to look at this simple sequence, and understanding the sequence is going to be very vital to you and your business. Cash in, cash out, cash left, and what you do next. So there is a difference between revenue stress, which is I need more sales, and cash flow stress, which is I need payment schedule stability.

All that means is that if you are saying you need more sales, you need to up your revenue, whereas cash flow stress is making sure that you are consistently having a cash flow throughout the month. This is something I’ve worked on with a couple of my clients, where we were making sure that we have money coming in throughout the month, and that we aren’t missing a bunch of stuff in between. Because irregular cash flow, so if you have cash flow, maybe just on the first of the month and nowhere else during the month, can also lead to really poor decisions.

Because you could end up discounting, because you just want to make more revenue. You could end up overbooking, you could end up hiring reactively, because you just need someone to help you out, or creating marketing that’s not necessarily good for your business. So one of the things that we would always do as a bookkeeper slash CFO, is making sure that we have a cash flow forecast that goes out to 90 days, that’s updated monthly.

And with my clients, we even look at it on a weekly basis, and say, hey here’s where our cash flow is at. We aren’t expected to hit zero anytime soon, so we’re doing fine. You know, we’re going to have a positive number at the end of the month, or we’re going to have a negative cash flow outflow at the end of the month.

So sometimes when my clients see that they’re going to have a $300 cash outflow at the end of the month, they’re not going to have enough money to cover everything that’s going on in the business. They push to get those extra $300, that way they are making sure that the cash flow is consistent throughout the month. So the next 90 days, mark out your expected income and expenses, so that you can see where the tension point falls.

So if you have all of your expenses coming in on the 1st to the 15th, and then maybe you have your contractors paid on the 20th, but you don’t have any income coming in on the 20th, you know that, okay, I need to make sure either that I have income for the 20th by setting it aside, or having some sort of contract that it falls on the 20th, so I can make sure that my contractors get paid. Just noticing the flow of cash in your business is going to help you a lot. So that is the third habit that we want to focus on.

This is something that we spoke about in December, which is our scope and boundaries. The fourth habit that we want to discuss is tightening your scope and boundaries, because of course this one is going to change so much about your business, and so much about the way you operate as a business. So we want to make sure that we are kind of analyzing it.

This is where a lot of creative service providers lose money without even realizing it, because underscoping is a profit leak, and overscoping or overpromising is where you have a time leak. You want to understand how to tighten the scope in Q1, and increase both your profit and the bandwidth that you will have to run your business appropriately. Which is having clear deliverables, so outlining your deliverables not just in your contract, but in everything to make sure that they are very clear, and that whoever you’re working with knows exactly what’s being delivered, and that anything outside of that would be considered something that is additional.

Having defined revision limits, so if you again are if you’re a website editor, making sure that you only have maybe two rounds of revisions, maybe a round of revisions, and saying that after these two rounds of revisions, like that’s it, you should have made sure that you really looked at everything. Having those communication boundaries, so if you’re someone who doesn’t want someone to text you on your phone, on your work phone, or on your business phone, making sure that you understand that email is the only communication way with you. And of course having capacity limits, so knowing your capacity limits, but also knowing your contractor’s capacity limits, and saying okay, can who I’m working with, or can I handle what is going to be added if we add this into the business? Because when you have that operational efficiency, you have that protection with your profit, okay? If a project is priced at $2,000, but takes 40 hours instead of $25, you didn’t make $2,000.

You made $50 an hour, because you’re now working longer on it than you initially did. So you want to review your top three offers, and adjust the scope, the revision structure, if you have one, because maybe you don’t have revisions, and then the delivery expectations, so what is expected once you do deliver. And that habit is also going to save you a whole lot, okay? Our final habit is to plan your retainer and capacity numbers early.

A lot of entrepreneurs, a lot of creative service providers, guess their capacity instead of calculating it. And that’s why you have that burnout in the first quarter. So we want to have a simple equation for capacity.

The hours that you have available, the hours that are needed per client, or per job, and the actual deliverable time versus the assumed time. So obviously you will have to do some time calculations to actually make sure. And this is something that you want to kind of look back on throughout the year, and analyze this to make sure that your scope, and like your retainers, and the capacity is there.

And this isn’t just the hours that you have available, this is also the hours that your contractors have available. Everything that you kind of need to make sure that you are analyzing the capacity that you have, and that your team has. Planning that capacity early is going to prevent you from taking on too many clients, from underpricing your retainers, because you know exactly what you’re pricing at, from rushing any sort of delivery, and from having that burnout before March.

Because you are having so many people come in in the beginning of the year, but you don’t have the capacity for that. You just kind of like booked as many jobs as you could. This is where we want to look at having some sort of resource allocation and operational capacity planning.

So we’re making sure we’re looking at that. There’s so many different applications out there as well that can help you with capacity planning, such as I think ClickUp does it now. But it’ll just show you the amount of time that’s being spent to see okay who has a gap, where, things like that.

But the most important part is of course making sure that you’re getting that time tracking in, and knowing exactly how long a project might take, so that you can plan for that capacity. So what you want to do is map your current client roster, or your current projects that you have currently booked for the first quarter, and then the actual time needs. And just put it on a spreadsheet.

Put it in ClickUp. Put it somewhere where you can analyze this, and decide how many slots you truly have for the first and second quarter, and if you’re feeling ambitious for the entire year. That way you can say okay I have four slots per month.

That’s the amount of clients I can book. I cannot over commit to that. Now if you take less time, and you’re like okay I have a surprise spot open at the end of March, that’s a different story.

But you want to at least understand what your capacity is, so that if you only want to take on five clients in a month, you really only have to take on those five clients in a month. Now that we have the five habits, we want to put it all together to create kind of like a money system for the entire year. So as these five habits work together, they create this powerful rhythm.

Because you understand your profit level, so you understand what creates your profit. You are watching the numbers that move the fastest, like your cost of goods, and your cash flow. You’re protecting your time and margin with the boundaries that you have set up, and you’re planning your capacity so that your revenue is sustainable and actually accessible.

This is where you kind of have a CEO dashboard without ever opening a spreadsheet, because you already have that instilled in your numbers. And this is something that I also work on with my client, is making sure that they understand these things, so that they can grow their business with purpose, and have that actual system. Okay your business doesn’t need more work in Q1, it just needs better habits.

If you build these five habits early, you’re going to feel more grounded, you’re going to feel more confident, and more in control of your business than you ever have before. This is how you stop running your business on panic, and start running it on purpose. Okay so if you enjoyed this episode, as always feel free to like, subscribe, share it on social media, so that others can find it.

And if you have any topics that you’d like to discuss, please fill out the form in the description box below, so we can touch on some of the topics that you’d like to discuss. As always you guys, I wish you the best week ever, and we’ll see you next week. Farewell fellow travelers.