How much does an online business cost to run? (My business cost breakdown)
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At the end of the year, I always review what we made and what we spent.
Sometimes the expenses look normal; other times they really surprise you!
Like the fact that we spent on average over $2,000 a month just on software alone last year! 🫣
I mean, I guess I run an online business, and software is kind of like the digital bricks and mortar of the business, but still, that one a little bit caught me off guard… urgh
Now I like to do this periodically, looking through every expense in-depth because sometimes there's stuff in there that you didn't realize that you're spending on.
And wasting money is one of my biggest pet peeves in life.
So I figured, why don't we go through my expense sheet together and figure out exactly where I spent my money in my online business this year.
Okay, let's go.
We spent an average of $2,000 a month last year on software.
That includes two websites on Squarespace* (Get 10% off your first year on Squarespace with code PAIGE10), a few domain names for $20 each, our email marketing software ConvertKit* (save 30% with this link!), which is one of the best things that I spent money on all year.
We also spent on
Xero which is our accounting software
Google Drive Storage, a few email addresses via also Google,
Riverside, that's an interview recording software
and Loom.
Loom also falls squarely into one of the best things I spend on in a year. If you are not using Loom yet, it is a productivity game-changer, believe me - check it out!!
Next up, the thing we spent the most on this year, the biggest piece of the expenses pie was actually paying our affiliates, which makes me so happy.
What you'll notice in this as we go is that there is not any ad spend in this expense report. We didn't spend a penny on Facebook ads or YouTube ads or Pinterest ads or none of them basically.
We decided a few years back that we'd rather pay our own students and fellow small business owners and influencers rather than Mark Zuckerberg to help us promote our products. So we started an affiliate program to be one of our big marketing efforts.
And so we paid out, these numbers are only up until September, so they're not final yet, but somewhere in the neighborhood, give or take, of around $100,000 to affiliates.
I love that.
So much better than spending money on ads, in my personal humble opinion!
If, by the way, you're struggling on which marketing strategy might fit your business, by the way, affiliates, ads, content creation, etc., I actually created a quiz which will answer that for you in like under a minute.
Okay, back to expenses. Another big expense was payment processing fees.
That is the 2.9% you as the business owner pay for every sale made via credit card or debit card. I think we actually pay a higher percentage than 2.9% because we charge in US dollars as most of our customers are in the US and that's what they're familiar with.
But because I'm in Europe, and I'm pretty sure they just add on some fun extra charge because of that too. So that's the next big slice of the pie!
I also pay for a co-working space, internet, cell phone, data when I'm traveling, that sort of thing.
Speaking of travel, that was another expense, for myself to mastermind events mostly.
And then we also did do a team trip this year to Mallorca. So that's a new cost which we had for the first time, but well worth it. We went wine tasting and did a day in a spa and hung out on the beach and it was just fabulous.
Now another big business expense is accounting and legal stuff.
We have a bookkeeper and an accountant and a lawyer who works with us to keep us all legal and filing everything correctly. Managing outside of the business is admittedly the most painfully boring and unenjoyable aspect, I would say, but regardless, very important.
The next big chunk is books slash education slash mentorship.
I'm part of a mastermind. I also buy probably like five books a month.
And we also take a few courses every year, this year too. I love spending money on courses. I genuinely just love to learn.
And I know that the fastest way to achieve whatever it is that I want in my business is to pay the person who is the expert to just teach it to me.
So I took a few courses this year on YouTube and storytelling and filmmaking. We also spent on Masterclass. That thing I swear is the best $120 you could ever spend in a year!
Hearing from the most successful people in the entire world on what they've learned over the course of a lifetime for $120, like honestly, Masterclass, take my money!
One thing that we didn't spend at all on this year, which was kind of unusual, was photography and design items.
So normally we buy stock photos or I do a photo shoot, but this year I just honestly didn't get around to that. And we still have a ton of stock photos in our Google Drive, which we had bought previously. So we haven't had the need for more yet.
Granted, the branding of the business is gonna be getting redone sometime this year. So I'm sure I'm gonna need to spend a good chunk of money in this category next year to refresh all of our photos.
Another thing we don't spend on is website design costs or copywriting.
Between myself and my team, we have all of those skills in-house, which is very nice. And I know that's often a huge expense for business owners, but years ago I learned to write copy. I took a few courses, not to toot my own horn, but I literally created the course on website design!
And so everyone on my team, when they're hired, they go through that.
So between myself and my team, we are golden on the whole doing our own website and copy thang. So I guess that cost is technically more like “in our team cost” than in the like website copy category.
Speaking of team, they're doing a few things, video editing, customer service, affiliate management, tech stuff, help with content creation, that sort of thing.
The next thing is business insurance.
Costs a few grand a year, helps you sleep at night.
The business also paid into my pension.
So when I'm all old and gray, I'll be set, which by the way, if you're watching this and you're not paying into your pension…
Well, this actually probably depends on the country that you're in, but often depending on the country you're in, your company can pay into your pension and then becomes a business expense, which is slightly more tax-efficient than paying the money out to yourself, a salary, and then having to pay income tax on that. And then taking that money and putting it into your pension, if you drew directly from the company, it's a genuine business expense paying into the pension of you, the employee of the business.
So it's a good little tax efficiency there.
So yeah, those were the main categories, lots of expenses, but also lots of revenue, so all good!
Now, I don't know about you, but when I started a business, I was so confused as to how much money I should be spending.
Was I spending too much and being like really irresponsible with the business money, or was I underspending and therefore limiting the growth of the business by underinvesting in it?
So I read a book which I would call mandatory reading for any business owner, it's called "Profit First*" It's the most hilarious and informative book on business finance you could ever hope to find. So defs read that.
It tells you how much of what your business makes you should actually be spending and reinvesting back into the business versus taking for yourself. And it also does that based off the size of the business as the business grows or changes in size, what you should be taking, percentages, changes.
And now, if you're wondering what exactly is worth your money to spend on in your business, I think this really depends on your stage of business.
To be honest. I used to do a lot more online courses. I didn't study business or marketing in school. So I didn't have any clue when I started. And so I bought courses on just general, like how to run a business. I did B-School with Marie Forleo and that was incredible.
Also some of the best money I've ever spent.
I then took courses on whatever marketing strategy I'd chosen.
So I bought courses on blogging and SEO and Instagram, even though I never implemented the whole Instagram thing because I just hated it. But when I started growing a team, I also took Run Like Clockwork, a course on basically how to like scale a business in a very easeful way and like grow and manage a team as well.
I also took courses on copywriting because I found outsourcing that to be both really time-consuming and inefficient because we just write way too much copy to have to hire it out every time.
So yeah, online courses, I'd say well worth it if you implement them.
I have a rule for myself actually, when it comes to buying online courses.
I used to buy them just cause like, I know I want this and at some point I'm going to do the thing which the course teaches, but oftentimes that resulted in me buying a course and then like a year later feeling like, oh, I should probably get around to doing that.
So my rule for myself now is if I plan to implement the course right away right now, and that's the next project I'm gonna be working on in my business, then I buy the course without a second thought.
Now in terms of who to buy from, I always figure out who is the go-to most successful person in that industry, which everyone talks about being the expert and then I just buy from them.
I also think that coaching can be really great to invest in once you've actually established your business a little bit.
Coaching is obviously more expensive than courses because you're getting more individual attention and that's obviously costlier realistically, but you don't need a coach, I would say, to tell you like the very basics.
You can get that information cheaper with a course and then you just follow the steps laid out for you inside the course, whereas a coach is really great once you have one, more money to invest and two, need some more help and feedback or like help on one specific area that that coach is specialized in.
I don't love the idea of just investing in general coaching, but if it's not a specific topic, then I think that's fabulous.
When it comes to events and conferences, I think this is worth spending on depending on who you are.
I actually find that for me, this isn't a great use of money. I'm slightly socially awkward in large groups and I don't like walking up to a group of new people and having to introduce myself, whereas if it's a small group, that is definitely more my vibe.
So I would invest more in small business retreats, but those massive hundred-person or thousand-person conferences, I just learned they're not for me.
Now, this also depends on your business marketing strategy. If networking is really your thing for marketing, then going to conferences is fabulous. I can't say that conferences are the best investment in terms of learning I've found because you basically get like 30 minutes on 20 different topics and then you just leave the conference and you feel like you need to go implement 12,000 things, which you don't have time for.
And I think that can lead to alot of confusion on what you need to be working on.
So I'd personally just rather pick my focus for the year and then buy the course or invest in the coach on that specific topic, rather than going to a conference where I'm going to be inundated with a million ideas on the next hot trend.
Now, masterminds are a good thing to invest in once your business is at a higher level.
Why?
When you get the business to the point where it's much bigger than the average, it can be hard to find people who you can discuss your problems with because there are just not that many people with similar issues.
So that's what a mastermind with people of a similar level of business is really great. There doesn't tend to be as much mentorship and coaching, but instead you’re making friends with other business owners who are at the same level as you.
And then when you have a problem and you know like, “oh, Jane is the expert at X”, then you just WhatsApp voice message Jane, for example, and ask for the solution.
I found that on a few occasions, the advice and solutions that you get from these people are genuinely worth their weight in gold.
But I don't think masterminds are great, however, when you're still just scratching six figures a year in revenue.
I'd hold off until you're at multi-six figures because they tend to be pricey and your business needs to be of a big enough size that when someone shares a tip or an idea and you implement it, it can have a really massive impact in order to genuinely like make the mastermind investment worth it.
So in terms of order to make investments in, I'd say start with courses, they're the cheapest, they're the best for beginners, then start working your way up through coaching and conferences and masterminds.
But basically, as a business owner, I hope you love to learn because that's pretty much what running a business is!
It's like a personal MBA.
As an entrepreneur, you wear a lot of hats and you're gonna need to learn to wear them well, even if you might not be naturally well-suited to that specific hat.
Now, running a financially successful business isn't just about making wise investments. I was chatting with a good friend of mine, Catherine Morgan, who has helped thousands of female business owners with their finances. And she shared with me that the mindset problems are often the biggest factor that leads her clients to overspend or underspend and stash every penny away, never enjoying the moment.
If you have a sneaking suspicion that your money mindset issues could use work, then watch this interview next, and Catherine will sort that out for you.
