Shanna Skidmore makes it her business to help other women succeed in business.
Five years ago, at the age of 29, she launched Shanna Skidmore, a consultancy that helps creative women. She started the company after seeing, first-hand, how women entrepreneurs were spinning their wheels — hustling day and night to get their businesses up and running but never having much to show for their efforts. She came to realize that's characteristic of most start-ups, at least the 'creative' ones she works with: Wedding photographers, floral designers, interior designers and artists. These women love what they do and they're good at it. But they don't know how to turn their creative passion into successful businesses.
So, she built a business to help them.
She drew on her five-year experience as a Northwestern Mutual financial representative and as a controller at a small design firm to launch her consultancy. Here, she shares three things she focuses on when helping women learn to treat their ventures less like a hobby and more like a business.
VALUE YOUR TIME CORRECTLY
Do you know what it really takes to get your product or service out the door? Entrepreneurs are pretty good at understanding their up-front material costs, but often underestimate the value of their time. That's why, when I start working with a client, the first thing I do is have them start tracking their time for each project or engagement. It's an eye-opening exercise; they often find out they're netting out at about $5 an hour. No wonder many of these women feel overworked and underpaid. But once you do the math and see what it actually costs to produce your goods, you can shift from setting prices based on emotion — that 'pay me what you can' mentality — and start charging an appropriate amount.
ACCOUNT FOR OTHER COSTS
In addition to being fairly compensated for your time, you also need to cover other overhead expenses such as income tax, liability insurance, licensing (if necessary) and professional services from an accountant or attorney. It's very easy to overlook these costs, especially if you're a sole proprietor who's set up shop in the spare bedroom or the basement. But these costs can eat away at profits pretty quickly if you don't account for them in your pricing.
MANAGE CASH FLOW WITH A SPENDING PLAN
I once worked with a floral designer who brought in multiple six figures but didn't know how to hold on to it and couldn't even pay herself a salary. Admittedly, it's hard to manage cash flow when there can be wild fluctuations in income from one month to the next. And unfortunately, many budgeting tools don't really work for entrepreneurs because they're built on the assumption that you have a steady, predictable source of income that gets divvied up every month across categories of saving, spending and investing.
Entrepreneurs need to create a spending plan based not on what you know is coming in (since you don't always know it), but on what you need. How much do you need this month or this year to cover your costs, pay yourself a salary, put something away for retirement and generate a profit? From there, work backward to determine how many clients you need to take on (or how many products you need to sell) and, more importantly, how much you can spend from each sale or engagement and still have money in the bank.
That's one of the things I learned when I was at Northwestern Mutual, and something that's so relevant for entrepreneurs: Wealth is not about how much money you make. It's about how you spend the money you make.
DO YOURSELF A FAVOR. OR THREE.
When you have a spending plan (and stick to it), you'll be able to overcome the big fear most entrepreneurs have: Running out of money. Imagine how much better you'll sleep at night knowing exactly what you need and where your money is going. And when you feel more confident about your financial situation, you may also free yourself to spend. That's something entrepreneurs sometimes have a hard time doing.
You may also find that as you begin to treat your entrepreneurship less like a hobby and more like a business, you'll live a more balanced and fulfilling life. So many women I work with sacrificed much of their time with family because they thought they needed to hustle all hours of the day and night to build a profitable business. But I help them see that they don’t need to be answering the phone at 8 p.m. or writing proposals on Saturday. They just needed to get a better handle on their costs, price appropriately and follow a spending plan. Now, they work smarter, not harder — so they can spend less time making a living and more time making a life.
Shanna Skidmore is a Client of Northwestern Mutual. She works with financial advisor Anthony Bussey.