Episode #98: How to Create a Profitable Business with Donna McPherson
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This week, Caterina is joined by numbers gal and master CPA, Donna McPherson. In this informative and thought-provoking episode, Donna teaches you about the Five Numbers to know in your business, why you want to make your numbers your BFF in your business, and how to calculate a profit that will help your business thrive now and far into the future!
I believe that entrepreneurs who know what to do and take action can achieve business success and financial independence. One of my goals is to provide business owners with the knowledge and know-how to build a business that will provide the income, impact, and freedom that they desire. -Donna McPherson, Donna McPherson CPA & Associates, LLC
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Expand Your Fempire Podcast #98 Transcript
How to Create a Profitable Business with Donna McPherson
Welcome to Expand your Fempire with Caterina Rando, the podcast for women in business on a mission. Sharing ideas to support you to grow and thrive. Now here’s your host, Caterina Rando.
[00:00:00] Caterina Rando: Welcome to another episode of the Expand Your Fempire Podcast. I am blissing to be with you today because I have the fun, fabulous, super smart, amazing Donna McPherson with me. Donna, welcome welcome.
[00:00:44] Donna McPherson: Thank you. Thank you. I can’t believe you’re talking about me like that. Okay.
[00:00:48] Caterina Rando: You help women make their numbers their BFF in their business. I love that, we’re gonna talk about that. Before we do that, your journey to being a CFO for businesses I’m sure has been a circuitous one. Would you take a moment to tell us, because I’m sure you were a young, extroverted, loud and proud gal, how did you get from wherever you were to where you are now? And I think that you’re not born in the United States either, is that right?
[00:01:26] Donna McPherson: That is true. That is very true. I was born in Guyana.
[00:01:32] Caterina Rando: Wow. Okay. So how did you get from there to the super successful gal you are today? Give us the report.
[00:01:38] Donna McPherson: Well, I followed my dad who followed love. My dad, moved to the US in the late seventies. And fell in love, and got married. That’s after my mom had passed away several years ago. And then he wanted to have his children here with him, and so he brought us, and my life began here in the US. I was 20 going on 21.
[00:02:05] Caterina Rando: All right. Good. And how was that for you when you landed here?
[00:02:09] Donna McPherson: You know, it was really strange in the beginning, cause first of all, Guyana’s very warm. And so I was hit with this cold weather that I had to get used to. But I got used to it eventually. And then I thought, you know, Maybe I’ll stay a couple of years and then return to what I call my homeland then. But I didn’t, I instead wanted to pursue my education. Actually, I wanted to be a nurse, believe it or not. How do you go from being a nurse to being a financial person? Because I learned early that in order to do that I would have to do an internship and could not work, and I needed to work to support myself.
[00:02:46] Caterina Rando: Tell us about your career path a little bit. What did you start with? What went next? And how did you get to having your own business and being an entrepreneur?
[00:02:57] Donna McPherson: I recall when I couldn’t pursue nursing, one of my coworkers who was, I was a bank teller, and she said “you know, I’m going to school for accounting. Why don’t you try it?” And I was like “okay.” My mom and dad trusted me with their finances at home as a little girl, I helped run the household money. And so okay, it’s in this, in my blood, in my gene somewhere. So I decided I was gonna do that. And that’s how I switched to accounting. I went to school for a few years.
[00:03:23] Now. I remember that when I decided I wanted to be an accountant, I said “okay, if I’m gonna do that, I wanted to become a CPA.” Cause I wanted to get to the top of the ladder. And I was told it was gonna take me 10 years to do it. It was daunting, Cat, it was daunting. But you know what? I decided that 10 years would’ve come and gone, and if I hadn’t done it I would’ve had regrets. Time goes anyway, right? And I did that. And from there I went into an auditing firm. I was in New York city. I worked for a Jewish accounting firm, where I did financial audits. And from there I worked overseas for about six months in Croatia, right around when they had the Bosnian War. And so after that, I decided this is just too dangerous because there were incidents where we had to be really careful where we went. And so I came back and got a job as a controller for a New York City think tank. And from there I became their CFO and stayed there for a good number of years, and then decided okay, I was gonna relocate to Texas thought I was gonna get married and relocate to Texas. And that didn’t work out.
[00:04:32] And I said “you know what? I’ve always wanted to own my own business, what a better time than now, rather than going to look for another job, I can just try this entrepreneurial thing and see how it works. If it doesn’t, I can always go back and get another job.” That was 14 years ago. 14 years later, I’m here still an entrepreneur business owner and loving every minute of it.
[00:04:56] Caterina Rando: That’s great. Donna. I can tell that you love every minute of it. Now tell me what are some of the things that you’ve discovered in working with women business owners that we wanna shine the spotlight on to support our listeners to make their numbers their BFF?
[00:05:18] Donna McPherson: Yes. Here’s the thing. I think that in life in general, our numbers are our guiding light. Everything really comes down to numbers. When we look at our health, you watch your health numbers. If you want to buy a home, you wanna look at your credit score numbers. Everything really comes down to numbers and it’s no different in business.
[00:05:44] In business the numbers are even more important, because it helps you take the emotions out of making decisions. And sometimes as women, we tend to do that more often than men. If you use your numbers to guide you, then instead of thinking that you should do something based on how you’re feeling –and not to discount our gut feeling and our intuition, cause that’s important too– but alongside that, if we have numbers that tell us okay, if I want to grow my business, how much more? Are we looking for $2000 more a month? $10,000 more a month? Those numbers are what’s gonna help us make that decision. Cause then what comes with that is what else is involved in getting those numbers.
[00:06:34] Caterina Rando: So often, Donna, I hear women say “I don’t wanna look at my numbers.” I just had a client tell me that the other day. I couldn’t believe it cause she’s been my client for years and you know I talk about numbers all the time. And she, she said “I, I don’t know.” I asked her about her numbers. She said “I don’t know. I don’t wanna look at them.” Okay, Donna, this is not the first time I’ve heard this. I’m sure you’ve heard this.
[00:06:58] Donna McPherson: All the time.
[00:06:58] Caterina Rando: How do we get ladies to embrace their numbers?
[00:07:00] Donna McPherson: It’s like this: I don’t like getting on the scale because I may not like what it’s going to tell me, but I need to know so I can fix it. If this is the thing you want the most, you cannot shy away from it in any form. Ladies, the numbers are what’s gonna help us get what we want. So we have to start embracing them. They may not be great in the beginning. Then you may not like them. They may not look the way you want ’em to look. But just knowing, gives us an opportunity to fix it.
[00:07:33] Caterina Rando: Right, because then we can make a plan to get there. Now, you know, one of the reasons why I like to focus with all the ladies in our community on numbers and talk to them about their numbers is that oftentimes women are not acculturated to be good at math or be good with numbers. Now I know that that’s changing now with younger generations. When I talked to women in their forties and fifties and sixties, they haven’t spent so much time with numbers. Most women start their businesses because they wanna be of service. But what are some of the first things that you wanna recommend that people put in place with their numbers so that they can build a profitable and sustainable business?
[00:08:22] Donna McPherson: Well, the first thing is you have to understand what numbers matter. What are the numbers that matter? It can be overwhelming if you think of it, so let’s bring it down to five numbers. It could be less.
[00:08:36] I work with five numbers, and the first number is: what do you want to accomplish? How much income do you wanna get out of your business? What is it that you need money for? If you need to generate a specific amount of money, whether it’s to replace the salary you’re used to getting, whether it is to supplement your household income, know that number. Don’t just leave it as I want more money. I wanna have enough.
[00:09:04] Caterina Rando: You’re saying what’s the number you wanna take home, right?
[00:09:08] Donna McPherson: Yes.
[00:09:09] Caterina Rando: Okay.
[00:09:09] Donna McPherson: What’s the number you wanna take home? What’s your number?
[00:09:13] Caterina Rando: Okay, that’s the first one. What’s the second one?
[00:09:16] Donna McPherson: The second number is how much money can I generate in my business? Because it’s one thing to want a specific amount, but if you have a business, then you’re gonna have to look, take a second look at the amount of money that you want if it’s not possible. So the first one is know that number. The second one, know how much is possible for you to make
[00:09:36] Caterina Rando: Okay. I like that. My friend, cuz I like to talk about possibilities. Yes. Now here’s the thing though: how does Mary Jane or Sheila figure out what is possible for them to generate?
[00:09:50] Donna McPherson: Yeah, that’s a great question. Mary Jane will need to work with someone such as a business coach or an accountant or a sales coach, someone who can help them take their talent, their knowledge, whatever they know and do, price it a certain way. Know what’s possible, how much they can sell it for, so they know how much money they can generate from each thing that they sell. If they’ve never done it before, if you’ve never done it before, this is not something you wanna do a trial and error thing on.
[00:10:23] Get with someone who knows how to do it. And they can tell you based on what you’re selling, how many of it you’re able to sell and how you’re pricing it, this is how much money you can make.
[00:10:35] Caterina Rando: Okay. Number one, what are you gonna take home? Number two, what can you generate? What’s number three?
[00:10:40] Donna McPherson: Number three: what is the cost of generating that revenue? In order to make money it’s gonna cost you something. What is the cost of your goods? What is the cost of your help? What is the cost of your supplies, your phone, your internet, all this stuff.
[00:10:59] Caterina Rando: When you have a product, you’re selling Widget A, you say “okay widget a costs me $5. I’m gonna retail that for $10 or $12.” That’s fine because it’s a product, it’s much more solid. As you know, many of the people that we work with have service businesses, and oftentimes it’s hard for them to figure out the cost of the service. Now they know how much the utilities are and the lights and their overhead and the cost of the business side of it. The challenge is often what price do they put on their expertise? What do you advise?
[00:11:41] Donna McPherson: So pricing can be a bit tricky because it’s really about demand and supply. And the first thing I usually advise is: see what people are willing to pay. Check your competitor’s price. See what they’re getting. Now, it doesn’t necessarily mean that you will get the amount that they’re getting. Cause it depends on how long they’ve been doing it, the geographical area, and all that stuff. But a great place to start is see what this specific service is selling for. People are already spending money on it.
[00:12:15] Now, once you have that number, you make it your own. You look at your own distinctions. How are you packaging it? How are you offering it? And then you can narrow your price down and try it. With pricing you have to put it out there, see how people receive it, and then you’ll see whether you’re too high or too low. But a great place to start is what they’re already buying at the price point.
[00:12:41] Caterina Rando: Love this Donna. Now, one of the things I suggest, and I want your opinion on this okay, I always like to do an introductory price. For example, if I think the regular price of the course or the program is gonna be $2,500, I’m gonna start it out at $1,497, make it an introductory price to introduce this new thing to the marketplace, tell everybody it’s never gonna be this low again, and create hopefully some urgency to get them in the first program. What are your thoughts about introductory price?
[00:13:18] Donna McPherson: I love it because that’s marketing. That’s part of your marketing budget. If you had to hire someone to market for you and this thing that you would’ve been selling for $3,000 now you’re selling it for $1,500, all that it means is the other $1,500 to bridge that gap is coming from your marketing budget.
[00:13:38] Caterina Rando: I’ve never thought of it as marketing. I just thought of it as getting the ladies in the door quickly.
[00:13:43] Donna McPherson: Well, you’re getting the ladies in the door, but you’re giving up something that you normally would get a certain price for. So if you have a marketing budget, the way accountants do it, they will take a piece of that cost from the marketing budget to make it up.
[00:14:00] Now, one more thing I wanna say with pricing is when you price, once you see what’s possible, I don’t believe in exchanging time for money. I don’t believe that you should charge hourly rate at a certain level in your business, but you need to have that in mind to know that you’re not giving away your time. But then you add your value on top of that to get the price that is aligned with how you’re serving.
[00:14:29] Caterina Rando: I hear you. Now, this is where a lot of women trip up is about the value. How do they price their value?
[00:14:37] Now, Donna, sometimes I will do a coaching session with somebody and they will say to me “that’s a lot of money for one hour.” And I have to say to them “well yes, but you’re not paying for the hour. You’re paying for the 30 years.” Because in one hour I can turn somebody’s business around. Put their sales program together, tell them where their holes are, help them with their pricing, anything. And really the value you have to look at is that’s gonna help them over the next 20 years. They’re only paying for one hour, but they’re gonna get benefit for 20 years. Really, I’d like to charge ’em $20,000.
[00:15:22] Donna McPherson: And you probably should. You know, that’s interesting because the talk that I did earlier this week, in afterglow, that’s what I focused on, how to anchor yourself in your value so you’re comfortable asking for your money. And I gave three questions that I asked everyone in their private time to think about it. And the first one is, how did you gain your knowledge? How did you get to be so amazing? You have had to invest if not in formal education, in training, in coaching, in something that you’re bringing to the table, that somebody doesn’t have to invest. How did you gain your experience? How many times have you fell down? Got up, made mistakes, recover? You’re gonna be able to save somebody from making those mistakes. And the last is how many years have you garnished your reputation so that you can stand firm and deliver your value so amazingly?
[00:16:24] That’s what they’re buying. They’re not buying an hour. They’re buying everything that you’ve put into becoming this expert, this competent expert to serve them so they can get up quickly and start running.
[00:16:38] Caterina Rando: Donna, I need to 10x my pricing, I think. Well, of course, it has to be what the market will bear. I’ve got one more thing I do that I wanna run by you, and then we wanna make sure we’re hitting all five of those numbers.
[00:16:53] Donna McPherson: Okay.
[00:16:54] Caterina Rando: I talked to you about the introductory price. The other thing I do is what I call the pre-publication price.
[00:17:01] Donna McPherson: Yes.
[00:17:02] Caterina Rando: For example, I did my first Train the Trainer for Thrive at Sales earlier this year. Seven women were in that program. There was no marketing involved. I did not even put up a website, a webpage. I hand-selected the ladies that I thought would be good. I actually only talked to eight ladies. Seven of them signed up. Now I see what you’re saying. Because there was no cost of a brochure or a fancy web page or an email sequence or posts or special calls or anything like that, all of that time and money that would’ve been spent on that, instead I said “You get this special pre-publication price, because I think this is a great match for you,” and seven of the eight ladies were “Insta-yes”, so that means I saved a ton of money on marketing, even though the price was lower. Is that, is that correct?
[00:18:06] Donna McPherson: Bingo, bingo. If you were to take a quick stab at, if you were to promote this the old-fashioned marketing way, what would it have cost you in your time, in your assistant’s time, in online ads and all that stuff. You were to add that up, including your time again, the discounts that you’ve given, and match it up to that, you will probably be ahead of the game. And with marketing, it’s not a sure thing.
[00:18:37] Caterina Rando: Right.
[00:18:38] Donna McPherson: You got a sure thing.
[00:18:40] Caterina Rando: Right. It was very successful, very effective. Had a great group the first time. And of course, that pre-publication price is never gonna be seen again, the introductory price is gone. So now we’re gonna be at the regular price, yay. Bing, Bing. But the other thing that happens with that is that now there’s a track record, now I can get testimonials, now I can talk about the results that the first group got, and that will make it easier for me to fill the next group.
[00:19:12] Donna McPherson: But you know what else you can do?
[00:19:13] Caterina Rando: Tell me, tell me.
[00:19:14] Donna McPherson: Since you’re a great SOP gal, you can make that SOP and sell it.
[00:19:18] Caterina Rando: The marketing part of it.
[00:19:20] Donna McPherson: Yes, the marketing part of it. How to reduce your marketing cost using these strategies.
[00:19:27] Caterina Rando: Great. I love it. Now Donna, okay, so we talked about what are you gonna take home, what’s possible for you to generate, what is the cost of your goods or services sold, those are the first three numbers. What are the next two numbers we wanna make sure we talk about?
[00:19:43] Donna McPherson: What is the profit that you wanna make?
[00:19:46] Caterina Rando: Okay, I know that profit is the difference between your costs and what you make, what comes in the door, let’s talk a little bit about what’s the purpose of profit? Now I know that’s the purpose of business is to be profitable. I am a big fan of surplus and building up surplus, six months of surplus, for the business owners, for the business, so that they experience no financial stress.
[00:20:12] Donna McPherson: I agree.
[00:20:13] Caterina Rando: Okay, good. Now tell me how do we figure out the profit and what do we do with the profit to have a profitable and sustainable business?
[00:20:21] Donna McPherson: That’s great. That’s a great question because when you’re going into business, you should go in with a profit mindset. You start with a profit mindset and you should know what that profit could be. Every industry has averages, standards for what your profit should be. I know with the service industry, with the coaching and different businesses, it varies, but you can get your profit margin, your cost margin and your profit margins from places like score, from an accountant. Like when I work with someone, I tell them based on their industry, their geographical location, and their budget, what their margins should be. That information is available.
[00:21:03] However, you wanna make enough profit, if you are not on payroll in your company, and most solo entrepreneurs are not on payroll, profit is what would allow you to pay yourself. Profit is what will allow you to set aside money for the surplus. Profit is what would allow you to invest in growth, like hiring someone to grow, or hiring a business coach. That comes from profit, because you have your revenue and you have your normal operating costs.
[00:21:36] Caterina Rando: If you wanna buy equipment, if you wanna buy a building, if you wanna buy a new vehicle for your business…
[00:21:43] Donna McPherson: Yes. And that goes back to why you must know the numbers, because if now you wanna buy a piece of equipment that’s gonna cost you $5,000, you wanna make sure you build that into your profit. You want profit that would be in excess of that, that would allow you to do that. Profit is really what lets you take your business to the next level and pay yourself the income that you want and help you prepare for the future, for retirement, or whatever it is. That’s important.
[00:22:13] Caterina Rando: All right, we’ve got the take-home number, the possible revenue number, the pricing cost of goods, the profit number. What’s number five, Donna?
[00:22:26] Donna McPherson: Your sales number. How much do you have to sell to have enough to cover profit, cost, and paying you what you want?
[00:22:38] Caterina Rando: How much do you have to sell of X, Y, and Z,
[00:22:43] Donna McPherson: At the price that you set it at.
[00:22:46] Caterina Rando: How many clients does that equal or how many contracts?
[00:22:48] Donna McPherson: Exactly.
[00:22:49] Caterina Rando: Et cetera.
[00:22:50] Donna McPherson: That’s the information now you’re gonna give to your marketing person or your salesperson to help you. If I come to you and say “Caterina, I figured out my numbers. And in order for me to make $10,000 a month, I need to sell 20 of this item at this price. How can you help me?” When you’re that clear you are a marketer and a salesperson like dream client.
[00:23:20] Caterina Rando: Yes. Wouldn’t it be great if everybody came with all that information and simply said “this is what I need and how can you help me get there?’ Rather than needing help, figuring out all of those other things. Well, that’s what you are for Donna.
[00:23:34] Donna McPherson: That’s what I do.
[00:23:36] Caterina Rando: You’re gonna help them figure all that. Now Donna, we’re gonna put in the show notes all your information for people to connect with you. Let’s though, take a moment right now for what is the best link, the best thing you wanna let people know to connect with you.
[00:23:54] Donna McPherson: So for this purpose, I’ve created a gift for everyone listening to this podcast. All the things that we’ve talked about. It’s called fivemoneynumbers.com.
[00:24:08] Caterina Rando: Great. Okay, fivemoneynumbers.com. Everybody go get your fivemoneynumbers.com information, that will also connect you with the fabulous, amazing, uplifting Donna McPherson. Because, Donna you know I talk about this, it’s not only about knowing your numbers, it’s about mastering your numbers.
[00:24:32] Donna McPherson: Yes.
[00:24:32] Caterina Rando: It’s about having number confidence, because the more confident we are about those five numbers, about all the numbers in our business, the more we’re gonna feel secure in our business, the more we’re not gonna be worrying or having stress.
[00:24:48] Because of course, you know Donna, you’ve heard me say, your business is supposed to be your bliss. If you want your business to be your bliss, part of that is knowing your numbers. Bing, Bing.
[00:25:00] Donna McPherson: And that is why I say your numbers should be your BFF, your best friend forever.
[00:25:07] Caterina Rando: That’s right. That’s right. Well, Donna, I’m gonna say one thing: you, my friend, are one of my BFFs, okay?
[00:25:14] Donna McPherson: Thank you!
[00:25:15] Caterina Rando: Cause you’re fabulous. Donna, any final thoughts? Words for our listeners?
[00:25:21] Donna McPherson: Before I do that. I wanna thank you for inviting me. You are one of my favorite people and I’m so excited to be in your community. So thank you so much for inviting me.
[00:25:33] And the final thing I will say to everyone is start with the number that you want for yourself. And if you don’t know how to figure out the rest, work with someone who can help you. You don’t wanna get your numbers wrong. You wanna get ’em right. You wanna master them and you wanna love on them.
[00:25:54] Caterina Rando: That’s right. You wanna love your numbers. You wanna treat them good because then they will treat you good as well. Donna, thank you so much for being with us here today on the Expand Your Fempire Podcast. Everyone, Donna’s told you the numbers, go figure out your five numbers. Go get her free gift for more information on it, because the more you master your numbers, the more you will bliss and thrive in your business.
[00:26:25] Talk to you next time. Bing, Bing, Bing. Remember you got massive value to bring, be loud and proud, go bring more of your massive value.
We hope you enjoyed this episode of Expand Your Fempire with Caterina Rando.