Overcome financial fear to grow your business (Part 1)

In the chaotic early days of starting a business, it can be easy to overlook the numbers, especially if you don’t understand them.

You place all your focus on things like marketing and manufacturing, but before you know it, you have lost track of your finances.

You might not even know what “good” looks like when it comes to cashflow or profit margin—or where to begin when it comes to managing your money.

Well, Julie Wong is here to break down the jargon and help you to create a more profitable and resilient business.

She is a business mentor who specializes in helping entrepreneurs use their numbers to build effective growth strategies so their small businesses soar.

Join us on this episode of the Sound Advice Podcast as we eliminate your fear of finance and help you to confidently manage and maximize your profits.

Here’s her unfiltered advice below:

• Everything you do within your business has a financial impact
• Conquering our fear of numbers
• The most common financial mistakes people make
• Understanding your margins
• Breaking down what having a financial strategy really means
• Understanding your finances in detail can help you optimize your business
• Anyone can learn to understand numbers
• From dentistry to becoming an accidental accountant
• Becoming a better business mentor
• How delving into your numbers can effectively change your business strategy

Everything you do within your business has a financial impact

Bex Burn-Callander:

I thought we’d crack on with the idea that business owners, when they start their business, they don’t tend to be numbers people.

They are either an amazing baker or an incredible carpenter, or they’ve got a great idea for an app.

So what tends to go wrong when you haven’t got your head in numbers mode from day one, from the jump?

Julie Wong:

It’s always dangerous not knowing your numbers because it’s the actions that you’re taking around your business.

I say that everything you do in business has a financial impact, whatever it is you do.

So from the moment you wake up in the morning and make a decision or take an action, when you turn the light on, you’ve incurred a cost.

If you open an email, or ignore an email, you could either make a sale or reject a sale or you’ve upset your customer and you’ve lost a customer.

So every single action and thought that you have can potentially have a financial impact, and knowing that then helps you take actions that are data-driven or you know what the impact is going to be.

So it’s not a case of doing something and hoping for the best. You can then have an understanding as to what potentially might happen and be mindful of that.

Bex Burn-Callander:

I was going to say this sounds like mindful finance, where literally every action you’re sort of pulling yourself back to what are the implications for my business?

Julie Wong:

Absolutely. And then if you understand the actions and then you understand what the numbers are, then you could own it a bit better.

It’s not like these numbers sit outside of your business because a lot of people, as you say, they focus on the fulfilment side of whatever their business is, so they shovel it all in and then they focus on the marketing and sales and doing all that stuff and then hope the numbers fall out the bottom.

But actually, if you know what’s going to impact it, then you can drive what your fulfilment process might be or what you’re selling and your services and then actually understanding that to drive your sales and marketing.

Then it all comes together and I think of it a bit like a three-legged table.

If you’re only focusing on the sales and marketing, or you’re focusing on the fulfilment. If you’re not looking at your finances, your business is going to fall over somewhere along the way.

You can wing it for a bit, but as those two grow, the disparity will grow and then your table will just fall over.

Conquering our fear of numbers

Bex Burn-Callander:

Why aren’t people hotter on their numbers? I mean, for as long as I can remember, I have voices in my head saying, “I’m not good at math” or, “Oh, these numbers confuse me.”

Is that basically what holds people back that they’re worried it’s too boring or that they’re worried they’re not good enough at it? What is it that’s the blocker here when clearly it’s such an integral part of this three-legged table?

Julie Wong:

I think it’s the fact that especially in the UK, we are taught to be scared of numbers and I don’t even know why because I think learning numbers 1 to 10 was far easier than learning the alphabet at the end of the day.

And it’s visual as well, it’s a quantifiable thing.

And they think, “Okay, it’s numbers”, but if you can add, subtract, multiply and divide, that is all you need to understand your numbers and it’s being connected to what that number actually means.

It’s like a vocabulary. What does this number mean in essence?

So your finances and your accounts are a bit like your health metrics. If you know what number is good, so what is your weight in kilos? Well, you begin to know what you want that number to look like and it’s different for every person, like it is for different for every business.

And then you start learning the more complicated numbers like your blood pressure and your body fat and your cholesterol levels and all these numbers are just adding to the vocabulary in the same way that your finance is just adding to the vocabulary, and you become connected to that number.

If I sit there eating doughnuts, my weight’s going to go up, as is my cholesterol, as is everything else.

And so you go back to mindful action, and you go, “Okay, what is going to affect my profit?”

And then that is just a factor of your revenue and your costs, and so it is just understanding all the numbers behind each different number.

The most common financial mistakes people make

Bex Burn-Callander:

So tell me a bit about the common mistakes that you see business owners making.

I mean at the beginning I talked about profit and loss and cash flow. Are they things that tend to boggle people’s minds?

What are the top three, I suppose, financial mistakes that people often make?

Julie Wong:

First thing is when people are starting up, they use their bank account as a measure of profitability, and that’s very, very dangerous because it doesn’t give you the bigger picture.

It’s only a snapshot of a moment in time. It doesn’t show what you owe to somebody, and it doesn’t show what somebody else owes to you.

And a bit like having a train coming down a track, you don’t know when that train’s going to hit you, just like the big bills that are going to hit you and can you afford those?

It’s trying to look ahead and so many business owners don’t understand that you can use your finances to look at the future.

All the bookkeeping and accounts that people think about, it’s all historic, it’s all the road that you’ve covered behind you.

And I think people sit there thinking, “Oh, the accountants and bookkeepers are just sweeping up the numbers behind them” and that isn’t the case. You take that data and you can start predicting what the road ahead actually looks like.

So the first mistake is using your bank account to predict your profitability.

The other mistake typically, is more of a vanity thing. It’s the, “Oh, I’ve sold X amount.”

And so, they look at how much they’ve sold, which is the turnover figure, but actually they’ve forgotten how much it costs them to sell that product or service.

They don’t understand the full extent of what a fixed cost is, which is the cost that gets incurred irrespective of whether you are making a sale or not.

People also call it the cost of standing still.

And then your variable costs are driven by if you make a sale, you’ve incurred that cost. If you don’t make a sale, then you don’t incur that cost.

So understanding the difference between those two and the liability of the fixed cost, which is what can send businesses under, because if your sales go down, you still need to have all these financial commitments like rent or salaries and all these other obligations that you need to pay.

So understanding those key numbers is very important to understanding your cash flow, which also then drives your profitability as well, which is slightly different.

Understanding your margins

Bex Burn-Callander:

And when people talk about margin and profit, why are they different terms and why should people be aware of the margin they’re making on a product or service versus the profit they make maybe at the end of the 3 months or the end of the year?

Julie Wong:

So margin, there’s two margins that people tend to focus on.

One is the gross profit margin, which is your sales once you’ve taken away your actual direct cost, which is the cost of sales. That is a very good indicator of how well you’re delivering a service because every time you sell, say a single product, you make your gross profit on that.

Say for example, you make a gross profit of a £100 (CA$174) per product that you sell. That is also known as your contribution because every time you sell 1 product, you’re contributing a £100 (CA$174) towards your fixed costs.

If your fixed costs were a £1,000 (CA$1740), then you need to sell 10 items in order to cover your fixed costs before you start being actually profitable in your business.

So understanding that gives you your breakeven point and your target as to how many sales you need to make, how many conversations you need to have in order to make those sales.

It starts driving all the other activity around your business.

Gross profit margins are also a good indicator as to how you are comparing to the market.

So if you are being more efficient, you managed to buy a product cheaper than anybody else or manufacture it cheaper than anybody else, then it stands you in good stead to be more profitable because you can sell fewer products before you start hitting your profitability.

And understand the margins around your markets and your industries because it will vary and that is a good indicator of how you’re performing against the market.

Breaking down what having a financial strategy really means

Bex Burn-Callander:

That is so interesting because as soon as you said, “If you can work out, you need to sell 10 of these items, these products to cover your fixed costs”, to have that information going into your working day, going into your working month, that changes your outlook immediately.

And it gives you, I suppose something to aim for beyond, “Oh, I just want to be successful” or, “I just want to sell lots of things this month.”

I can see how that then focuses the mind, so immediately it starts making sense.

But maybe we can break down, I mean taking it to its most basic level, what do we mean by financial strategy?

What do you mean by that and why is that something that people should prioritize in times of their time when they’re already really busy?

Julie Wong:

Absolutely, it is the case. Sometimes you need to take time out in order to plan where you didn’t plan your next day, otherwise you are just running from pillar to post. The hamster wheel starts kicking in.

So every business owner I see has a goal, an objective, a vision where they want to go to. And so visually I imagine it like a destination they want to go to.

And so your business, like a car, takes you to a destination, but you’ve got to work out how you’re going to get there.

So that essentially is your strategy. What does your vision look like?

And it tends to be words or pictures and that’s really hard to gauge and measure. How do you know when you’re going to achieve it?

“I want to be the best.” I mean, what does that actually mean to be the best?

“I want to be the most efficient, I want to be the best well known” or whatever that vision might look like.

You can’t quantify it and you can’t measure it in that case.

If you say, “I want to lose weight.” Well, how much weight do you want to lose? By when?

So a strategy tends to be words and pictures. A financial strategy is literally converting that into numbers so that you can track how you’re going.

So I think of a financial strategy a bit like the Google Maps.

You know how you’re going to get there, what route you’re going to take, how long it’s going to take you, and how you are going to track the milestones on your route. And also understanding what resources you have in order to get you to that destination.

So the key resource would be cash. So like a vehicle needs fuel, your business needs cash and cash is essentially the sales.

So you’ve got to have some sense of understanding how much cash you need in your business and how long that will last you until you need more revenue again.

Hence the burn rate, you need to know how long it will take you to get to your destination and how much cash you’ll need to get there.

Bex Burn-Callander:

I’m loving these examples because it feels like you are really breaking down these financial concepts to things like managing your weight and getting from A to B in your car, how you’d get to your destination?

Do you feel like that is the way to help people get over that financial fear factor, making the concepts a lot more relatable in this way?

Julie Wong:

Absolutely. I think all my analogies are just the way I visualize things, and so I then use it to describe, and I’ve realized that it does really help people make it feel relatable.

Because they think, “Okay, I can have this analogy” and it does help join the dots in their head as to what it actually means.

And I try and make it relatable to everybody in their specific industry because whilst the concepts are very generic, trying to bring it into a different person’s industry, it has to connect the dots for them.

So whether you’re a service-based industry or a product-based industry, you just have a slight nuance in how it’s applied and it does help.

Understanding your finances in detail can help you optimize your business

Bex Burn-Callander:

There might be people listening thinking, “Oh, you know what? I know basically if I sell this many I’m doing all right. I don’t need to dig into my numbers.”

But you’ve helped a lot of business owners.

What do you see in terms of their confidence, their ability to succeed once they do face their financial fears? What is the consequence? Is there a general improvement in their ability to get results? What have you seen in your experience?

Julie Wong:

Definitely. Especially for females, because we focus on what we don’t know and it’s kind of like the little elephant in the room and you know it’s there, but you’re kind of like, “Yeah, I’ll deal with it later and I vaguely know.”

When you know something with a bit more certainty, then you can understand whether to go forward with it.

So back to the car analogy, if you can visualize the road ahead and you can see the road is clear, you know you can put your foot down and you’ve got plenty of fuel in the tank you need, you can just go for it.

But if you’re driving through fog, you’re kind of guessing your way and you can hamper your own progress because you don’t know the road ahead is clear, and you can get really ahead of the competition if the road is clear.

But if the competition knows the road is clear, they’re going to beat you to the destination if the destination is of a very similar place.

So knowing where you are and what you have with vision and clear understanding, you can then optimize your own business, irrespective of anybody else.

And we always hesitate in life when we don’t know what we’re doing and if we’re going for funding and we don’t know the numbers, it’s going to come across when you’re pitching.

And you know that if you ate a donut one day, you need to compensate by not eating donuts and being really good for the next few days.

It’s the same thing with business.

You have a bad decision, or a bad situation, you then know, “Okay, well that happened. I need to find some other way to mitigate or compensate for that downside.”

Or if you know for a fact that something went really well, you can double down and go, “Right, I can really forge ahead.”

So it’s being far more proactive around your decisions when you really know the finances and the implication of all your actions.

Anyone can learn to understand numbers

Bex Burn-Callander:

And it’s interesting there that you mentioned women in particular.

So is that a trend that you see amongst the female business owners that come and see you that there’s a lot higher barrier to the grappling with the finances, grappling with the numbers, or is it sort of equal for men and women?

Julie Wong:

I think women are far more willing to admit to it, and I think personally, I’m not very good at blagging it.

So I think it does hamper women because they can’t blag it. Men can blag it and they sound more confident, like they know what they’re doing.

But I don’t think necessarily men know any better when it comes to their numbers because sometimes, they think they know and that can actually be a disadvantage.

They start forging ahead thinking they’ve got money in the bank, et cetera, but they don’t realize the fact that they actually don’t, their profitability is not being measured correctly, they don’t have the right records.

I mean, if you put numbers in the wrong buckets and you’re looking at the wrong number, it’s telling you a different story.

If we go back to the metrics, your numbers tell you a story, but if you’ve got the wrong words telling you the wrong story, then you’re going to take the wrong actions as well.

So in that sense, male and females, not necessarily, but women just are more reticent, they tend to admit they don’t like numbers.

And I think it’s also probably societal pressures and thinking women are no good with numbers. I don’t believe that’s the case at all because like you say, anybody can add, anybody can subtract and just understanding what that number means, good or bad.

If you can understand your own weight number, you can understand a number in your business.

From dentistry to becoming an accidental accountant

Bex Burn-Callander:

No, that’s really interesting. And how did you get here, Julie?

So what’s your background? How did you become the financial fortune-teller? I would want to know a bit about your path.

Julie Wong:

You know what, you’ll never believe this, but I’m a completely accidental accountant, I became a reluctant accountant and became an accidental mentor.

So really dialing back, I mean at the age of 10 I wanted to be a dentist and so I did all my A-levels, got to university [collage], did 1 year of dentistry.

Fortunately, I actually like sciences, not knowing that at the age of 10 I was actually any good at sciences, but I did love science and math and things like that.

So anyway, I got to dentistry, I didn’t want to be a dentist, so switched over into business, and became an accountant because I wanted to do business, but my sister said, “No, don’t do business, do accounting.”

I’m like, “Okay then.”

So I ended up graduating, got offered a job as a chartered accountant.

So I trained as an auditor and it was so dry. I mean really, it was not a gratifying experience. I understand why people think numbers are just boring because they are, until you understand the story behind them.

I had many different jobs trying to find my niche. I went from practice to different industries.

So I’ve walked so much distance width ways as opposed to the classical finance director route. I’ve been in banking, and I mean budgets, I completely understand.

I was doing a banking budget at 3am in the morning at Canary Wharf, not a gratifying experience.

So I took a massive career break after that, not surprisingly.

And then somebody invited me to collaborate and support her being a business mentor, and I started doing accelerators for universities and I became a mentor for the British Library on the finance modules.

And it was during lockdown when somebody said, “Julie, you’re not the typical accountant, that is not what I expected.”

I went like, “Oh my God.”

I mean, I’ve just literally got goosebumps now just remembering that because it made me really happy dance.

It was about helping people and I suddenly thought, “Oh my god, yeah, I now understand.”

So it’s not about what I do, it’s about helping others with the knowledge, and that’s what I find really gratifying.

It’s really about helping everybody else achieve their dreams and remove their blockages when it comes to numbers because it then helps them just go ahead and just do what they want to do.

That’s the bit that makes me excited and everybody has a greater risk appetite than I do, and it is just brilliant. I love that.

Bex Burn-Callander:

I can literally see you radiating enthusiasm and joy through the screen.

You clearly, you are just glowing thinking about the fact that this is the path your career has taken, whereas when you were talking about becoming a dentist, you were just all freezing up, withdrawing.

I wanted you to say, “Yeah, I would say then I looked into someone’s mouth and realized I never wanted to do that again.”

Julie Wong:

Didn’t get as far as looking into somebody else’s mouth. It was a pre-clinical year, but I did get to dissect a cadaver, which was interesting.

So yeah, I’ve done a few interesting things in my life, so it’s gratifying for that reason.

Becoming a better business mentor

Bex Burn-Callander:

And you are obviously building a brand now, so you are not only advising other business owners, you are yourself a business owner.

So I want to know a little bit about any interesting challenges or bumps in the road that you have experienced which have made you in turn a better mentor.

Julie Wong:

I completely understand the whole journey of being a mentor, what it takes to be a business owner. Because when I switched over to being a business mentor, I didn’t have a steady income.

It was literally like, “Oh my God, what do I do?”

And it’s like I have all this knowledge, I want to share this knowledge, but how does that actually work?

So it’s packaging up my services and then who is my ideal client? I mean, that is still slightly more generic than it is.

Everybody says niche, niche, niche, but I feel like a chef that can cook anything, but it’s what do you want to eat?

Somebody might want a burger, somebody might want something more refined, somebody might just want a sandwich, but I can do all of those, but who actually wants something?

And the problem with finance is that most business owners think of finance as being the historic bookkeeping, annual accounts.

I call those people the file and forget brigade because you literally get it, put it in the drawer and you’ve forgotten about it.

But there’s so much magic in unlocking those numbers and trying to tell somebody the story of the magic that’s there is quite hard.

It’s not selling, but it’s trying to convince people the value that is there because small business owners don’t have an in-house strategic element.

Whereas you think about big businesses, they’ve got whole teams of people crunching numbers going, “Where are we going? What is the business doing?”

So I think of it a bit like Lewis Hamilton out on the pit lane. He’s driving, he’s the CEO of his vehicle.

He’s driving there, but he’s got a whole pit lane team with all the data telling him where is the competition? What is the track ahead like? Is there going to be a wet weather spell? And all the data around his car, are you going fast? Have you got enough fuel? What’s the state of your tires?

Your engine’s overheating, your fins need adjusting. You’re not holding track.

It’s all this data that your pit lane team is feeding you and that’s what your financial metrics can help you do.

So that story is quite hard to convince people when they’re focused on trying to make a sale and bring business in.

But when you’re early stage, you need to have a high level, a bit like me, I need to vaguely know how many sales I need to make, and then you can focus on the marketing and sales side of things.

But as you get bigger, you’ll start looking at the numbers because the numbers will get more complicated as you go on.

So it’s a bit like learn a bit of knowledge, go away, learn a bit of knowledge, go away, until you then need somebody, like a personal trainer, by your side. Because this is when you really need somebody by your side constantly feeding you the information because the information is changing.

When you’re early stage, the information doesn’t change as much. So it’s just understanding when you need what you need.

How delving into your numbers can effectively change your business strategy

Bex Burn-Callander:

I’d love if you don’t mind, if you could share some examples. You obviously don’t have to use names.

I understand you probably want to keep it all confidential, but I’d love to hear about an example of where you’ve delved into the numbers with a client and that has brought about maybe a complete change of strategy or a pivot or a focus on something that they perhaps wouldn’t have done if they hadn’t spent that time with you, when the insights meant that there was a demonstrative impact in terms of strategy.

Julie Wong:

I had a client, she had a hospitality business, and on the face of it looked very good. It was in a wonderful location. She seemed to have a very nice lifestyle out of it.

But then when we looked at the numbers and we started looking at cashflow, and when she really looked at those sorts of numbers, she actually realized it wasn’t as profitable as she thought it was, and she decided to exit her business instead.

So potentially she thought that she was ahead of the market, but she told me, she said, “Yeah, I wouldn’t have looked at my numbers in the same way.”

So she exited her business, which is not something typically people do when they think, “I want to grow it.”

Likewise, I have another client, they’re debating whether they want to invest more money into growing their business in order to exit it and sell it on or just wind it down.

So that’s another thing that you can look at is what do you need to do to get your business to where you want to be? Are you exiting, are you selling or are you just winding down?

Also, something that I love is marketing.

I mean that’s why I wanted to do business actually. I love marketing and I think maybe that holds me in good stead is actually understanding the relationship between marketing and finance.

And so with another client, it’s not necessarily a financial thing, but the blockage for her was she created paint products, but in order to test her paints, it wasn’t like a colour chart, you had to buy the colour chart. But the colour chart was actually quite expensive compared to picking one up for free.

So that became a barrier to entry for her sales.

So I just said, “Well, can you break it down into smaller colour charts?” And she said, “Yeah.”

And so she did that and I think that just opened up the gateway for lots more people being to take the colour tiles and being able to then buy her paints.

It’s just little things like that, just little small tweaks that an outsider can sometimes bring you by looking at numbers and understanding what the obstacle is and seeing how to remove it.

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