In this article, we’ll share five key steps towards achieving financial freedom as an online course creator, and an accounting system to help you progress.
Whether you’re a coach, consultant or speaker, many entrepreneurs have used online courses as a vehicle to achieve financial freedom. Creating an online course is a great way to deliver knowledge and create an income stream in a leveraged way.
But how can you ensure that adding online courses into your business model will create the financial, time, location or lifestyle freedom you crave? How do you go about creating a business that supports your vision, not one that becomes a burden because you didn’t build it in the right way?
In this article, we’ll outline five steps to improve your financial literacy to help you build an online course business that gives you true financial freedom.
Before we jump into the steps, it’s important to define what financial literacy is and why it’s important to achieving financial freedom.
What is financial literacy and why should you care?
Have you ever asked yourself questions like…
“How am I going to pay my bills every week?”
“What portion of the money in my bank account is profit?”
“When can I afford to hire someone, grow my team, and free up my time?”
“When will I be able to pay myself a regular wage?”
“How do I read and make sense of financial reports?”
If you answered yes to any of these, brushing up on your financial literacy may help you gain the clarity you’re looking for.
Financial literacy is:
A combination of awareness, knowledge, skills, attitude, and behavior necessary to make sound financial decisions and ultimately achieve individual financial wellbeing.
The Organisation for Economic Co-operation and Development (OECD)
In the context of an online course business, it’s your ability to use financial data to make smart business decisions.
Understanding the building blocks that make up financial literacy will directly affect your ability to achieve financial freedom. Whether you’re a coach or consultant, author, or lifestyle influencer, you need to understand what’s involved in building your business in a way that creates leverage, along with time and location freedom.
Let’s look at five ways you can improve your financial literacy on your way to financial freedom.
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Five steps to improve your financial literacy
1. Invest in financial education to avoid common pitfalls
As a business owner, your education process when it comes to financial literacy should be ongoing.
For example, learning the foundations for creating a cash flow positive business is key.
We see a lot of course creators skip this step, which is a big mistake.
There’s often a lot of focus on generating sales as fast as possible and doing massive launches, without enough attention placed on setting the right financial foundations for building a sustainable business from the get-go.
Would you attempt to build a physical house if you didn’t have some idea of how to lay the foundations to keep the house from collapsing in on itself?
Probably not, right?
Yet we see so many online course creators skip the vital step of understanding cash flow, and ending up making poor and expensive financial decisions in their online business. Don’t make this mistake!
To help guide your learning, here are a few common mistakes we see online course creators make. If you feel like you’re veering towards one of these pitfalls, take note, and start to dig into those areas as opportunities to learn:
- Hiring staff or a contractor when you don’t actually have the means to do it (or enough cash flow to cover unexpected changes like losing a client, an underperforming course launch, etc.)
- Purchasing software subscriptions, training or tools that you don’t have time to actually learn or implement effectively. This ends up becoming an expensive (and often silent) cash drain on the business each month or year.
- Making buying decisions based on gut feel or impulse (Black Friday anyone?), but not having the financial data to confirm that the decision is actually a good one.
To help you avoid these pitfalls, we recommend getting more financially literate by investing in your education around these topics, or seeking out an experienced advisor to work through roadblocks in your business.
2. Create your financial freedom system
In addition to setting up a cash flow positive online business, you need an accounting system to help manage your finances as you grow.
Bean Ninjas has an accounting model called the Financial Freedom Accounting System. This is designed to help you take control of your finances.
There are 5 elements in this system:
- Accounting software. Set up a cloud-based accounting system with guidance from an accounting professional (accountant or bookkeeper). Having a cloud-based accounting system enables you to keep track of your financial goals from wherever you are. There are many options such as Xero, Quickbooks, MYOB or Freshbooks.
- Flow banking. Create a process that separates your personal and business banking. This helps create structure to support tax payments, forecasting cash flow, and ensuring you can pay yourself a salary from your business income.
- Coding consistency. Get consistent with the way you categorize transactions in your accounting software. Make sure you communicate this system with your accountant or bookkeeper.
- Bookkeeping rhythm. Schedule time and a routine in your week to focus on prioritizing your accounting and finances. By creating a habit out of this, you’ll be able to more quickly assess your financial health and take action as needed.
- Relevant reporting. Produce and review timely financial reports that enable you to make data-driven business decisions.
3. Grow your income-producing asset
Invest in an income-producing asset that removes you from having to exchange time for money, and grows year over year.
If you are planning for your online course business to become a vehicle towards financial freedom, then you’ll want to consider how to build it in such a way that it can operate without you.
Approaching your business with this mindset will also give you option to sell your business one day, if you so choose. Whether or not you plan to sell or keep your business, creating automated systems to deliver a consistent client experience should be a priority.
4. Invest (or re-invest) earnings into an investment vehicle
One of the keys to becoming financially independent is to invest the earnings from your business into an investment vehicle that grows your wealth.
The idea here is to compound your earnings by letting your investment vehicle produce additional income for you, further freeing you up from the traditional time-for-money exchange.
Examples of these vehicles include:
- Investing in the stock market
- Investing in property/real estate
- Investing in online businesses that generate consistent affiliate (“passive”) income
A word from the wise: creating “passive” income does not mean there is no work involved. These types of vehicles still require an investment of time and energy upfront, as well as oversight to ensure your vehicle continues to provide value to your end-user.
Choosing an investment vehicle will require you to do your due diligence in researching which option is right for you, and the stage of your business. If you’re not sure where to start, reach out to people in your network who are successful investors who you know and trust, or hire a professional to walk you through options.
Suggested reading to get you started: The Intelligent Investor, Getting Started in Value Investing and The Barefoot Investor.
5. Enjoy the process towards financial freedom
Financial freedom can mean different things to different people. It’s important to define what this means to you. Not only so that you know whether you’ve achieved your goal, but so you can celebrate milestones along the way!
A common definition of reaching financial freedom is: once your passive income pays all your expenses, and you have control over which projects you put your valuable time and energy into.
Here’s a recap of the 5 steps to financial freedom in a handy infographic:
As you can see, to achieve your financial freedom goals using online courses you’ll need to understand the bigger picture of your business’ financial health, and then set up an accounting system that will allow you to track, measure and understand your numbers.
Are you on your way to achieving financial freedom? We’d love to hear what specific learnings have helped move your business towards this goal. Let us know in the comments.
Anfernee Chansamooth
Anf is the Learning and Community Lead at Bean Ninjas, a bookkeeping service company. Getting started and want some help to create an accounting system for financial freedom? Learn how to find hidden cash using Xero with the free Bean Ninjas video mini-course.
