Mastering Profitability and Predicting Cash Flow: A Guide for Course Creators and Online Business Owners
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How do you know if your business is *actually* making money?
If you don’t know how to answer this question, you’re not alone. But you’re also going to have a hard time EVER having the answer to questions like…
How much does it cost me to deliver a specific course, product, or service?
How long will the money from my last launch last me?
When should I plan another launch?
How do I know if I need to raise my prices?
Can I afford to make a big investment right now?
How much can I pay an additional team member?
And if you’re ready to start playing big in your business, these are the types of things you need to start getting comfortable with — and knowing how to get the answers quick!
You can’t just hop into Stripe and pull up your sales report to know how much money you’re making. Instead, you’ll follow a formula to be able to answer all the questions listed above and so many more!
In this blog, we’ll tell you exactly how to:
Understand how to calculate the profitability of your programs, products, and services
Predict your cash flow, know what you can afford, and plan ahead to overcome slow seasons
Level up your money management and make bookkeeping for your business more approachable
These key data and strategies are the same that industry leaders like Amy Porterfield, Jasmine Star, and Jenna Kutcher use in their business to reach astronomical levels of success. You know they didn’t just wing it the whole time to get to where they are now!
Remember, the best way to level up your business is to understand your numbers inside and out — start now by learning how to master your profitability and cash flow without sobbing all over your keyboard. It’s 100% possible and probably easier than you think!
Understanding Profitability
The only way to have a full understanding of how well your business is REALLY doing is to know your profitability. In the simplest terms, Profit = Sales - Expenses, but you have to know which expenses to subtract to get the most accurate data (more on that later).
Let’s imagine you’re a course creator who had a launch that did $100k in sales. You know you didn’t get to keep all of that cash! Whether you spent money on Facebook Ads, a course designer, a copywriter, or prizes for a challenge you ran to get people in your funnel, those expenses cut into your $100k.
Which isn’t necessarily a bad thing, as long as you know how long the money you brought in can support your business (aka cash flow prediction).
When you know how much you profit on your products and services, you’ll also know:
If you need to raise your prices
If you need to cut expenses (and where)
If you need to evaluate your team members
If you need to streamline your systems
And that’s just scratching the surface of how data like this can support your business! Then, you can learn how to spend less and keep more on your digital products and services — aka the DREAM.
Tracking Income and Expenses
I know it can be SO intimidating to look at your numbers — maybe even scary!
But the reality is that if you’re trying to build an empire like some of the big names I mentioned before (or your own version of one), knowing your numbers is a MUST.
Avoiding your bank account, ignoring your expenses, and pretending that the actual dollars and cents aren’t important will get in the way of your progress eventually.
So you can start taking control of your finances right NOW by doing things like:
Track your income: Either in QuickBooks Online, another accounting software, or a simple spreadsheet. We HIGHLY recommend QBO because it’s easy to use and run key reports. That way you’ll know how much your business is bringing in and you can compare it to previous years/months. This is also called gross profit (aka you haven’t subtracted expenses yet).
Track your expenses: Once again, you can use any of the methods listed above to create a system around tracking your expenses. The important thing is that you do it! When you know how much you're spending to keep your business running versus how much you're spending to deliver a specific offer, it’s SO much easier to find places to improve so you’re not wasting time, money, and energy where it won’t really make an impact.
Track your time: If you really want to get granular on how profitable you are, you can start tracking your time on each and every task you do when you’re working. That way, you can better estimate how much a product or service is costing you and know exactly how long to expect a team member to accomplish the same task. We ALWAYS recommend clients and teams track their time to get valuable data which we use to increase profitability. You can use something like Clockify for this!
Pro tip: If you sign up for a QuickBooks Online account yourself, choose the Simple Start or Essentials plan (NOT the Self-Employed plan) so you get access to all the right features!
Calculating Profits Per Course, Product, or Service
A lot of folks have questions about how to determine which expenses should be included in the profit equation when they want to know the profitability of a course, digital product, or service. And we have the answer!
You should count expenses that directly impact the delivery of your product or service.
If you hired a copywriter to write a sales page ✅it counts!
If you hired a graphic designer to create slides for your course ✅it counts!
If you hired a social media manager specifically to create content for your launch ✅ it counts!
Note that any expenses you would regularly have during the year (things like website hosting, ClickUp, QBO, or a full-time team member) wouldn’t count towards your expenses for the product.
If you use something like Kajabi as your course platform, but you use it for email marketing, community, and hosting other products, it would already be part of your business expenses and not necessarily directly related to this product. If you ONLY use the platform to host a course or membership, it would be counted against your product’s profitability.
Now, let’s say you have a group program which includes an additional coach you’ve hired on contract. Since the delivery of your offer relies on that coach’s support, whatever you’re paying them would be included in your profitability equation!
Want more support when it comes to your numbers? We’ve helped dozens of coaches, course creators, and creative entrepreneurs master their money over at Magnetic Bookkeeping & Consulting! Schedule a complimentary call to finally get clarity on what bookkeeping for your business should look like — with no pressure or awkward sales pitch at the end.
Projecting Cash Flow in Your Business
We all LOVE to see that cash coming into our business.
Stripe notifications blowing up your phone? Yes, please!
But the reality is that the money coming into your business will eventually run out, so you need to be able to predict WHEN and put a plan in place to protect yourself from overspending.
This is what’s called cash flow. We like to create a cash flow spreadsheet for our clients so they can know (sometimes down to the day) when their current income will dip. Then, they’ll know exactly when to plan another launch or run a promo for their services!
If you offer a payment plan option for your clients, you also need to know how long those payments will be coming in — and more importantly, when they’ll stop. Projecting your income from launches, payment plans, or any other kind of recurring payments is going to help you understand how long your money will last so you can make sustainable decisions in your business.
Thinking about when your money will run out sounds scary, but it’s actually so empowering! When you know exactly when to prep for a launch, or if you can afford a large purchase, you’re taking control of your finances and making smarter moves.
And this information is powerful when you’re ready to hire a new team member (or think you might be) so you know how much you can afford to pay them, and for how long.
The Best Way to Master Your Profits, Cash Flow, and Sustainability for Your Business as a Whole
Using a bookkeeping software like QuickBooks Online doesn’t automatically make you a bookkeeping expert.
Just like using Canva doesn’t make me a designer.
Honestly, the best way to feel SUPER confident about your business finances isn’t to try and figure it all out yourself. We do believe that every business owner should know exactly what’s going on in the back end of their books, but that doesn’t mean you have to know how to make it all compliant with the IRS, run analytical reports, or create these cash flow projection calculators.
In fact, that’s exactly what we LOVE doing for our clients at Magnetic Bookkeeping & Consulting, in addition to regular bookkeeping maintenance and support. Our whole mission is to make sense of all the number stuff for passionate creatives like you.
If you need a safe space to ask questions about your finances, the next right step, and creating sustainable growth in your business, we want to meet you!!
And if you’re not sure *what* you need right now, we’ve got you covered there, too. Take the Money Mastery Quiz to learn where to start in your financial empowerment era.
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