In the week of International Women’s Day, there’s lots of conversation centred around the gender pay gap, as one of the inequities that females and non-binary people face. And I see that play out so strongly in small business ownership.

Women are not making enough money

The gender pay gap is real. Many sources have quoted 13.3% this International Women’s day, which is actually pretty significant. My understanding is that these numbers only take into account employed people, and my gut instinct tells me that the gender pay gap in business ownership is even bigger.

The economic climate feels heavy right now. There is cost of living pressures, rising interest rates and the threat of a recession. And this is off the back of COVID and it has a far-reaching impact on women. These things are stressing us out and causing even more self-doubt about our value as business owners. But if we really look back at our numbers I think we might need to admit: this lack of income and profit dates well back before 2023 and all that has happened in the world since 2020. 

I see this with the women I work with in my 1:1 and group program work. Increasing their take-home pay is usually one of the first things we work on together.

The impact of Jobkeeper

I know that female business owners haven’t been earning enough for a long time, because of the impact of Jobkeeper on their finances. 

Being paid (the equivalent of) $40K per year by the government was the most money that many female business owners had ever earned. You saw it in their willingness to invest in education and support. People were spending money in 2020 and 2021, growing their brains through online programs and plumping their homes with online retail therapy. This caused a huge surge in eCommerce sales and an adjacent, dangerously huge spike in property prices in Australia. 

The median income in 2022 (according to the Australian Bureau of Statistics) was $65000. And yet self-employed women were earning less than two-thirds of this while receiving Jobkeeper and feeling flush. This has got to change. 

Understanding your numbers will help you to make more money

Once you understand how your numbers fit together, it’s easier to make more money. Your finances are a jigsaw puzzle with levers and drivers that you can control. Money is a hugely emotional and layered area of business and yet it is still something that you can logically understand and impact.

What can be measured can be grown

Lots of business owners tell me that they're intimidated by their numbers and that money stresses them out. It’s something they actively avoid, outsource, ignore, get frustrated about, and the source of self-doubt and overwhelm.

My industry has a lot to answer for. Accountants have held the keys to financial literacy way too close to their chests, and let’s face it. Most finance folks are poor communicators. Small business owners are crying out for financial understanding and we’re over here talking in lingo and doing the bare minimum. While business owners are drowning in financial overwhelm and making poor financial decisions as a result.

It’s not good enough, and on behalf of my accounting profession, I apologise and pledge to do better. 

Financial Literacy can be learned

Your finances can feel like a big messy place where numbers go to die, but with a few key landmarks, you can find your way around them a little more easily.

Profit and Loss

The report you’ve probably heard of. This report talks about the financial performance of your business, over a period of time. This might be one month, one year, or many months or years next to each other. Accountants like to compare one year to another because it helps to show your progress as a business. There are lots of numbers and words on a profit and loss report, but the crux of it is:

Income less expenses = profit.

You want your profit to be as high as possible, and ideally for it to be growing at least a little each year. Your revenue or income is also important, but your profit is usually more important and something to focus on. I like to understand what your profit is as a % of your income, which you can visualise as a slice of pizza. You want the profit slice to be nice and big, like when the last piece of pizza left in the box is a nice big slab. Yes. 

Cash Flow

The words you’ve heard many times. Your cash flow report shows money in less Money out. The difference between in and out is the net cash flow, for a month, a year, or whatever time period the report is for. Some months will have more coming in than going out, and some will have more going out than coming in. It’s ok for your net cash flow to be negative some months, as long as it’s positive in others. The key is to know how the cash flow rhythms of your business.

Cash flow = money in less money out.

Want to make more money?

Awesome. There are two ways you can make more money:

• Earn more income, or

• Spend less on expenses, or

• Both, although this doesn’t usually work well.

It’s easier to make more money by bringing in more income than it is to reduce your expenses.

Sure, trim your expenses down if you can. Don't spend your income on things that aren’t making your business easier to run, bringing in better clients, or making your life better. 

The best way to make more money (more profit) is to bring in more income. And the best way to bring in more income is to bring in better clients and charge them premium prices. Deliver exceptional value and customer service, so they feel fecking great about spending money with you.

Charging premium prices takes a certain courage as a business owner, a honed set of skills, the right networks (which you can build, laser focus and absolute clarity. The most important facilitator of premium prices? Excellent communication. It’s the number one skill in business and 100% required to express the value you have to offer to the right people at the right time at the right (premium) price. 

Simple, not easy. 

How can you make money if you don’t know how?

Good question. You can have all the courage and skills and connections and bleeding cut through on your communications, and all of that can fall if you don’t know HOW to make money. More specifically, how to make your income target.

Knowing how is actually quite simple too. Annoyingly so. 

It’s Price x Volume. 

How much you will charge (Price$) x How many will you sell (Volume)? 

It’s so much easier to generate revenue when you know exactly how to do it. Then all you need to do is monitor your progress towards that $ x volume target throughout the year. Tracking your income can be as simple as a notepad, whiteboard, notes app on your phone or lipstick on your bathroom mirror. 

Simple Steps to Understand Your Finances

If you’re a business owner who doesn't understand or feel connected to your numbers, start with the basics. Understand your price x volume target, read your profit and loss report each month, and write down how much is going in and out of your business bank account each month.

Understanding your numbers isn’t just about reducing overwhelm. Although that’s an awesome place to start. Understanding your numbers will help you to make more money.

Fi x

Want to work together on better understanding your numbers? I’m a business mentor who wants to cheer your small business on. You can join my group program waitlist at any time to be in the know when the next round kicks off. If this blog resonated with you, I’d love to hear about it, you can send me a message.