Hey TPT sellers ready to seek growth in your business, you’re in the right place. Welcome to the savvy teacher seller. I’m Kristen Doyle. And I’m here to give you no fluff tools and strategies that will really make an impact on your sale. Let’s get started y’all.
Hey there, welcome to another episode of the savvy teacher seller. Today we are continuing the money series, talking about something that is essential for every business owner. And it’s something that so many TPT sellers have told me you have a lot of questions about, and that is managing your business finances.
Whether you’re just starting out, or you’ve been selling for a while I have got you covered in today’s episode. First things first, it is so important for you to separate your business and your personal finances. This makes it much easier to track your expenses to get everything ready and together when it’s time to file your taxes, and to figure out how much money your business is actually making.
So you’ll want to keep a separate account for business and personal expenses and income. So to do this, open a separate bank account just for your business. If you have an EIN number for the business, then you’ll want to open a business checking account under your business name. But if you’re not quite there yet, you can always open a second personal checking account in your own name, and use that one specifically for the business.
Then, once you have that account set up, make sure you go in to any platforms that you get paid from. So this would be TPT, through Hyperwallet, your own website, Etsy, any other platforms you might be using. And make sure you set up all of your payouts to be direct deposited into your business account and not put into your personal account or a third party tool like PayPal, or Venmo.
This helps keeps things separate, obviously, but for US sellers, this also will keep you from running into issues that you might have had in the past or you might have heard about where sometimes you end up with double reporting of your income on your 1099 at the end of the year. This happens because TPT is required to report what they pay you on your 1099. But PayPal and Venmo are also required to report any income you get on a 1099 from them as well. So that means if you take your TPT income, which they legally have to report on a 1099 and you put it into PayPal, then PayPal also legally has to report that income and it can just get messy when it comes to tax time.
Now, there are ways to clean this up and make sure that you’re not actually having to pay double taxes or anything like that. But it is much more neat and clean if you don’t have to deal with it in the first place. If you are a credit card user, I definitely recommend getting a separate credit card just for your business expenses and not using your personal card for business.
Now, I am not a huge fan of credit cards personally. In fact, I did not get a business credit card at all until just last year, and I am at almost 11 years in business now. So I am not a huge credit card fan. But if you are definitely get a separate one for your business. And it certainly can be good to rack up those points and rewards by paying these business expenses that might be higher amounts in some cases than some of our personal expenses.
Now let’s switch gears a little bit and talk about setting a budget for your business. I shared in last week’s episode about why having a personal budget is so important. And the exact same thing applies to your business. So if you haven’t listened to Episode 47, definitely go back and give it a listen. Because I truly believe that if you want to get your business finances in order, you have to do the same with your personal finances too.
People often ask what percentage of their business income should be used for different things? And this is a really tricky question. It’s one that I have kind of gone back and forth on and struggled with figuring out those right percentages in my own business. Keep in mind, every business is different. And these will change over time as your business grows. And as you are just in different seasons within your business. Whether you are growing a lot right now or you’re kind of just maintaining or maybe you’re having a little bit of a down year. These ranges do have to change and your budget has to adjust for those things.
But I will share some ranges with you that I have used at different points in my business. Keep in mind, these are ranges. And if you add up all of these numbers, they are probably not going to hit exactly 100%. But somewhere within here, hopefully you’ll find some good ranges for yourself.
Assuming that you are a solopreneur, meaning you’re the only person working in your business other than maybe some VA’s that you work with or something, you should probably be paying yourself somewhere around 40 to 60%. Now, if you are a very small business, and you are just getting started out, you might be paying yourself more than that. My percentage that I pay myself has gone down as the business has grown. And that might sound backwards.
But the reason for that is as the business has grown, I have invested more in some of the other things we’ll talk about, like marketing and higher prices for things like my web hosting, and my email list, because they have grown. Those sort of expenses grow as your business grows, and so your percentage might need to go down. Although my percentage is lower now than it has been in the past, I am actually making more money than I was in the past as well. So keep that in mind as you’re thinking through this.
Now, if you are an S corp, that 40 to 60% might be a combination of the salary you pay yourself and an owner’s draw. If you are just a sole proprietorship or an LLC, then you would just have the owner’s draw part, you would not pay yourself a salary.
This is another area that really depends on your personal situation and a lot of things outside of your business, like your family situation, and maybe how your spouse’s income looks. But if you are a seller in the United States, you should be saving somewhere around 15 to 25% of your gross income for taxes.
Now, this will vary a lot, it depends on the tax strategy that you have, and a lot of other things as well. The longer you’re in business, and the longer you file these returns, you’ll get more experienced and you’ll be able to better predict an appropriate amount to be saving for your taxes every year.
Along those lines, I do want to point out that when it comes to taxes, you should probably not be saving all year without paying some quarterly taxes. If you’re in a position where you tend to owe the IRS money at the end of the year and you have a business, it is most likely best for you to be paying quarterly tax estimates throughout the year instead of waiting until the very end. So definitely talk to your accountant or a tax strategist about that. And I know we will get into that in an episode in a few weeks with my tax strategist.
Now let’s talk about business expenses. You are an online entrepreneur selling digital goods. So in that regard, we are all very lucky and that our overhead or our business expense cost should be very, very low. So try to keep your business expenses to less than 30% of your income. You’ll also want to aim to spend around 10 to 20% of your total revenue on marketing.
Now this could be email marketing, Facebook, or Google ads or any number of other promotions that you’re doing to get people into your store. Don’t forget that this budget should change over time. So make sure that you are revisiting the budget you’ve created and adjusting it over time as your business grows as your financial goals change, and even as your personal situation changes.
Lastly, it is so important to keep your business finances organized. This will make tax season much much easier on you and less stressful. And it also helps you to stay within that budget you’ve created and make sure your business is profitable throughout the year.
Now, if you’re not great at managing money, don’t worry, there are plenty of tools to help. There are kind of three options that I would like to share with you today. And the first is using some sort of an accounting software. This would be something like QuickBooks, Wave or Fresh Books. These can all help to manage your money because you will connect them to your accounts and they’ll pull transactions in for you automatically. But you still have to be responsible for going in every month and categorizing all your transactions for the month. So it still takes quite a bit of hands on work for you.
If you want to do a little less, you can use an online service like bench or collective is another option. Personally I use bench and have for several years. They do all of the accounting for me. My accounts are connected to their system and throughout the month, they go in and categorize all of my transactions. They have a nice system that helps to show me my profit and loss every month and throughout the year. And then for me, all I have to do is upload my TPT sales report, because TPT does not integrate with any of these tools. And then I have to categorize whatever few transactions they have questions about, but they’ll flag those and ask me and I just have to click a couple of buttons to categorize those transactions.
So that really takes a lot of the pressure and work off of me, because they’re keeping track of that every month. Now, if you just need to hand this off completely to someone else, then the third option is obviously you can hire a bookkeeper to just do it all for you.
Keeping your finances organized, regardless of which one of these systems you choose is another reason that it is really so important to keep separate business and personal accounts. Because any of these services will connect directly to your business accounts to pull transactions in and it saves you so much time and effort from trying to separate out transactions throughout the year and keeping track of what was personal and what was business.
Remember separating your business and personal finances working within a budget, investing in your business and keeping your finances organized are all essential steps to stay profitable, and financially stable, especially in a niche like TPT where our income varies so much throughout different seasons of the year.
Keeping some money in your business accounts that is separate from your personal income can really help you to make sure that you’re not ever in a situation where you can’t afford to invest in some Facebook ads this month, even though you really need that additional traffic or there’s a course you want to take or you’re wanting to upgrade your website and you can’t afford to do the things that you need to do to grow the business because you don’t have the money saved to do it.
So make sure that you are keeping your business on a budget, keeping some money in the business accounts and keeping it separate from your personal. Your action steps for today are just to take a look at where you are in your business and start putting these strategies into practice if you haven’t already.
Well, that’s all for today’s episode. I hope you found these tips helpful for managing your business finances as a TPT seller. If you did screenshot this episode, and share it with a fellow teacher seller who might be interested, talk to you soon.
I hope you enjoyed today’s episode. If you did, please share it with another teacher seller who would also find it helpful. For more resources on Growing Your TPT business. Head to Kristen doyle.co/TPT. Talk to you soon.