Why it’s OK to Make Money Doing What You Love

Around-about this time of year, people are receiving their tax returns, or their tax bill, and the question of whether all this is worth the trouble floats around a bit. Do you want to do better with your money? Do you want to feel that the effort you put into your business is worthwhile? We can take the permaculture principle: “Obtain A Yield”, and do some permaculture financial calculations to help you run your business in harmony with your values and beliefs.

Money is a funny thing. It’s always been a love-hate thing for me. Hating the materialism and greed associated with it, loving the things it makes possible. Hating the absolute need for it to survive, loving the way it provides for my family and helps people around me. Hating how I never seem to have enough, and the associated energy that takes away from more fulfilling things. Loving the opportunity to make more, to be able to do more and make more of a positive impact.

You work so hard, and that takes you away from the other things you would need or want to do. At the end of the day, even when we do something we love, we are bound by the need to make money, and in my decades of working with small businesses, I’ve seen too many well-meaning but stubborn business owners get the money management side of it wrong, and they don’t survive. They had a good business, great concept, great potential, but the financial management was left under-done, and they were not able to keep going.

It always hurts when I see it happen, especially knowing it could have been avoided if they had followed a better process. Being a numbers person, I always have and always will promote the saying – numbers never lie. Time and time again, it is as indisputable as the night that follows day. So I want to share with you what you need to do, to make sure that your business is sustainable – meaning – your business is sufficiently viable to ensure its continued operation, and to be a source of income to support your family.

Align your business with your beliefs

But this isn’t an article just about how to do a financial projection. We are exploring how permaculture ethics and principles apply here, to help align our actions with our beliefs.

Since coming to learn about permaculture, I’ve noticed a common mindset among people in this community, especially those who run their own business.

It’s so refreshing to be around people who are not driven by greed and materialism. In the business world, there’s often an individual crossing my path who is still primarily motivated by making as much money as they can, who happily inflates profit margins just because they can, and many of the decisions they make in their business are centred on the impact it will have on their tax return.

I’m not opposed to making good use of the tax incentives on offer, nor of making a decent profit, but it’s not my core motivator, either. And it certainly doesn’t influence every single decision I make!

Permaculture people are often very modest. I’ve seen evidence of this quite a number of times. We take on the “Fair Share” ethic, and we shun the greedy capitalist who exploits the resources available to them for their own gain. In an effort to be the opposite of that, however, many get it wrong going the other way, and they don’t make enough to ensure that their business remains viable. I know many people want a life of simplicity, which is definitely a good thing, but there is a difference between simplicity and poverty. Choosing a life of poverty does free you from the trappings of a shallow materialistic life of consumerism, but there is another perspective I would like to suggest:

Here’s why it’s ok to make money, and still be a good permaculture person.

• When you run your own business, you are being self-reliant, self-sufficient, and that is a good thing to do. You’re relying on neither a boss, nor on the government, for the welfare of your family. You provide this by yourself. Kudos to you.
• When you make money, not only are you providing for your own family, you have the means to help other people around you. You can share the bounty of your good management and industry, and everyone around you benefits. That’s awesome “People Care”. If you’re in a perpetual state of poverty yourself, it’s harder to help people around you.
• When you offer a product or a service that helps people, it’s only fair to make it an equal exchange. People are happy to exchange money for the things that make their lives better. You’re in business to offer a solution to some problem that people experience. It’s only fair to recognise the value that you are contributing, and in this fiscal society that we live in, yes, it needs to be money that is exchanged. A barter society would follow the same rules of exchanging value for value. Don’t under-value yourself or the way in which you contribute to a better world.
• By running a viable and responsible business, you can use your business as a vehicle to promote the permaculture movement. You can’t do that if you’re chasing your tail trying to survive. That foundation needs to be firmly established first, and then from that firm foundation, you can build on that to create a launch-pad for whatever you would love to do to help bring permaculture into mainstream society.
• Money is a tool. It’s not inherently good or bad, it is used by people to do good or bad things. It’s the same kind of tool as the internet. There is a lot of bad and good on the internet, but that doesn’t make it good or bad itself, it’s a tool, the thing by which people do things, and the intent and result of what they do is based on the person, not the tool they use.

When you choose the life of a small business owner, you have obligations to fulfil, and the best way to meet all these obligations is by making more money than you spend.

I get it. You want to run a business, but you don’t want to be greedy. You want to offer your product or service for as little as possible to make it available to as many people as possible.

So, have you got the evidence that this strategy of yours is sustainable?

Picture a water tank. You need the water for your garden, for your animals, for your household. These needs are indisputable. You can’t tell your goat that she’ll just have to wait until it rains again before she can get a drink. You can’t tell your tomatoes to hold out just a little bit longer. You can be frugal with your water, absolutely. Use it only when it’s definitely needed and not waste a drop. There’s lots of water-saving techniques and strategies and hacks and tips that can all make a difference. But at the end of the day, you still need water. Based on your situation, there would be a specific number of litres that you absolutely must have each year.

Does that number match up to the amount of water you can collect in your water tank? If you take out more than you collect, I guarantee you, eventually you will run out. That is an irrefutable fact. This concept is at the core of sustainability.

To ensure the sustainability of your water supply, you could get a bigger tank, you could set up more collection sources (roofs and gutters to feed into the tank), but can you control how much rain falls each season? 

With a bigger tank and better collection, you can increase your input. What if you could do this, but you chose not to, because you didn’t want to be greedy? What would be happening to the water that didn’t get collected in the tank? It would fall on the ground, which does need the rain, but then there’s all the rain that gathers in the drains and flows down to the sea – (Wasted! Rain should stay where it falls, IMO). What if the amount of water required was still more than what you could collect? Can you influence how much it rains each season?

If you are running your business in a way that spends more money than it’s bringing in, you will eventually run out, guaranteed, even with a metaphorically bigger water tank. The input needs to be greater than the output. This is where you DO have the ability to influence how much it rains (aka your income), by applying responsible financial practices to your costing and pricing process. Taking the time to know your financial plan is essential.

Establish Sustainable Financial Management

Here’s a little financial exercise for you to follow to work out your financial plan. This is a starting point, a quick heads-up to let you know if you’re on the right track.

1. Know how much money your family needs to live for a year. Add all your costs and expenses, everything you need for the whole year. Doesn’t have to be exact, but estimate as best you can.
2. Know how much money your business needs to operate. These are the costs you will have whether you sell a single thing or not. Telephone, marketing, subscriptions and memberships, insurance, administration, equipment, motor vehicles, etc etc etc. Add it all up for a whole year, then add this number to what you need for your family. This is your total cost.
3. Now, you put on the number you want to have as your net profit. Even if it’s modest, there needs to be some element of growth, or reward for all your effort and intellectual property and investment. You determine what the yield will be that makes all the work and effort and risk worthwhile. If you want to keep it modest and un-greedy, then go with at least a bare minimum of 10%. Remember that there will still be tax on the net profit as well as your personal income, so make sure you’ve allowed for that. Add everything up: your family’s costs, your business’s costs, and your target net profit. The sum is your target income. 
4. Know what your core offer is. There is a different process for a product-based business, this exercise is for a service business (where too many people are under-charging themselves). Read on below to learn more about working out your labour cost price for services.
5. Know what you are going to charge for your core offer. This is the variable, this is where you can turn the rain (income) up or down. Start with what you feel is reasonable, and then we can come back to that later if needed. Typically, it will be an hourly charge-out rate.
6. Take your target income, and your charge-out rate. How many hours do you need to charge out to reach your target? Divide the target income by the charge-out rate. Is that number achievable? Can you work that many hours? Would people pay what you want to charge them? How does that compare with what you’re doing now? It’s helpful now to break it down into months or weeks. Take that number of hours for the year and divide it by 12 for a monthly target, or 52 for a weekly target. You can play with it a bit as you try different charge-out rates and see how it impacts the number of hours you need to work.

The determining factor here is the impact that the costing and pricing has on your net profit. A thorough costing is a dead-set essential for a product-based business, but it’s the service businesses that often find it hard to do a proper costing. Your time doesn’t cost you anything and you’re just happy to be out doing what you love, right?

Oh no, my dear, in business terms, that’s just so wrong….

Would you work for a boss that under-valued your time, or your training, qualifications and the years of experience you have? To work out the costing of a service-based business, you MUST treat yourself as an employee. In my opinion, the end goal of running a business is that you hire people to do your work, and bring your dream to life, to eventually replace you working in the business. So you need to do the costing for that right from the start. What would you need to pay someone to do your job? But don’t be mistaken, the hourly rate is not your charge-out rate – what about super, and workers comp insurance? What about public holidays, annual leave, sick leave and smoko breaks? This all adds up, so much that as a general rule of thumb, take that hourly rate and add as much as 50% to cover yourself for the rest. This is still NOT your charge out rate yet. This is still just your labour cost price. 

From the exercise above, take your charge-out rate, and subtract the labour cost price. The number that is left over is for your business overheads and net profit. Multiply all these parts by the number of hours you have worked out for the year to reach your target income. Does it match up?

I realise that there’s a lot of maths in this little exercise, so to help you in your quest to find that balance between running a sustainable business and still being an un-greedy permaculture person, I have prepared a spreadsheet calculator with all of the instructions above included. Just enter your numbers and it will work it out for you. (I just love spreadsheets, so any opportunity to make one is a bonus for me :-D)

Be the best permaculture business person you can be.

As you operate your business, making enough money to support your family, and helping people with your beautiful contribution, I hope that you come to appreciate the security that making good money can provide. You’re still a good permaculture person, and getting your costing and pricing right will help you make your business sustainable, and the world a better place.