July 2017 Income At-A-Glance
Gross Income for July: $197,911
Total Expenses for July: $60,717
Total Net Profit for July: $137,194
Difference b/t July & June: +$1,893
Why We Publish An Income Report
This monthly income report is created for you, Fire Nation!
By documenting the struggles we encounter and the successes we celebrate as entrepreneurs every single month, we’re able to provide you with support – and a single resource – where we share what’s working, what’s not, and what’s possible.
There’s a lot of hard work that goes into learning and growing as an entrepreneur, especially when you’re just starting out. The most important part of the equation is that you’re able to pass on what you learn to others through teaching, which is what we aim to do here.
**We’ll receive a commission on the affiliate links below. If you click on my affiliate link and sign up for the products and services I trust and recommend, then I will earn a commission.
Josh Bauerle’s Monthly Tax Tip
What’s up Fire Nation, my name is Josh Bauerle. I’m a CPA and the Founder of CPA On Fire, where we specialize in working with entrepreneurs to minimize their tax liability while keeping them in line with the ever-changing tax laws.
I’ve been working with JLD & Kate at Entrepreneurs On Fire for years now, and they’ve included me in these monthly income reports with unlimited access to all their accounts so I can verify that what they report here is complete and accurate.
And because they believe in delivering an insane amount of value to you, my job doesn’t stop at the verification level; I also provide a new tax and accounting tip every month!
A business, or a hobby
Last month we discussed the startup phase of a business and how the potential losses in those first few years can offer a tax advantage.
To recap, lets look at an example.
Let’s say your first year in business you lose $5,000, meaning you spent $5,000 more than you brought in. And let’s also say you made $100,000 as an employee that year.
In this scenario, the IRS will allow you to take the $5,000 loss in your business to reduce your $100k income from your employer, making your total taxable income $95,000.
This is a great advantage that can allow you to recoup some of your loss in tax savings.
Business vs. Hobby
But what happens if you continue to show a loss in year two, or three, or even beyond?
Will the IRS allow you to deduct that loss against ordinary income indefinitely?
In these situations, the IRS makes a clear distinction between a business and a hobby.
A business is allowed to deduct losses against ordinary income, a hobby is not.
So where does the IRS distinguish between a business and hobby?
Well first, the goal of a business is to make money. The goal of a hobby is not.
If you are in “business” simply to create a tax loss for yourself, the IRS is going to put you into the hobby category and take away those losses.
After that, the IRS draws a line at the number of years you show a loss.
Generally speaking, they want a business to show a profit 3 out of every 5 years.
Show a loss in those first 2 years, and the IRS expects the next 3 after to show a profit.
How to Protect Yourself
Let’s say you do everything right.
You have clear intentions to make a profit, you actively work towards that, and yet you still show a loss in more than 2 out of 5 years.
Is your business doomed to be labeled a hobby, losing all the tax benefits that come with a business loss?
If you take the proper steps, you could protect yourself in the event this happens. Those steps are…
Create a Business Plan
A solid business plan is a great idea for a multitude of reasons. One of them being it could serve as proof to the IRS that although your business is still losing money, you are clearly treating it as a business with the intent of making money.
Doing the same thing over and over again and expecting different results is the definition of insanity. It could also be what the IRS uses to label your business a hobby. Show them that you are making attempts to change things to turn your losses into profits.
Do the Right Thing
Most IRS agents are reasonable. They aren’t looking to limit the ability of an actual business to deduct losses.
They are also very good at sniffing out people using their hobby to create a tax deduction. Just do the right thing. Treat your business as a business with the intent to make money and not as a way to reduce taxes. If you do, the IRS is far more likely to rule in your favor.
As we always mention, the IRS gives a very favorable tax code to entrepreneurs.
One of the benefits is the ability to use business losses to reduce taxable income.
But you want to make sure you aren’t taking advantage of these rules. Follow the tips above, do everything you can to turn a profit 3 out of every 5 years, and use common sense.
If you do, your business will stay out of the dreaded hobby designation.
As always, please feel free to contact me if you’d like to discuss what would be best for YOUR business. I LOVE chatting with Fire Nation!
*Bonus* Claim your spot in Josh’s FREE Course on Business Entities!
David Lizerbram’s Legal Tip: Rules for Influencers
Every day I see posts on Instagram and other sites that are in violation of the legal rules for social media influencers.
“Influencers” are, typically, people who are either well-known celebrities or people who may not be known to the general public, but who have a significant online following related to a certain topic.
Common examples include fitness, fashion, and consumer goods.
Sometimes they are referred to as “Brand Ambassadors” or something other than “Influencers,” but the effect is the same. They often receive money or free/discounted goods in exchange for posting about the goods in their online feeds. And very often they don’t properly disclose the nature of the relationship with whoever supplied those goods.
The U.S. Federal Trade Commission (FTC) has recently signaled that they are prepared to go after people who don’t properly disclose when a post is an advertisement. They’ve also clarified how those rules apply to Instagram.
An FTC press release stated that they have recently “sent out more than 90 letters reminding influencers and marketers that influencers should clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.”
So What Are the Rules for Social Media Influencers?
To keep it simple, I’m going to use the word “endorsement” to include any type of endorsement, testimonial, or affiliate arrangement.
The FTC has the power to investigate and prevent deceptive trade practices.
The FTC regulates advertising, so they set the rules that apply to online influencers and brands that work with them.
What if you don’t have a formal written contract?
If an influencer receives something for free – or at a discount – in exchange for a review or endorsement, they need to disclose that information. Even if it’s not a straight up quid pro quo, these rules apply.
The FTC Guides
Influencers and those who work with them regularly should take the time to read the rules and guidelines published by the FTC:
The current (as of this writing) version of the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising can be found here.
The FTC’s ebook .com Disclosures: How to Make Effective Disclosures in Digital Advertising can be found here.
Finally, the FTC also has an FAQ page called Endorsement Guides.
5 Simple Rules
For those who just want a quick reminder, here are some basic guidelines you want to follow. And by “you,” I mean either the influencer or the brand that’s working with the influencer.
1. Be Honest
2. If You Claim to Be an Expert, Actually Be an Expert
3. It’s About the Relationship (Between the Celebrity Endorser and the Company)
4. You Can’t Hide or Bury the Disclosure
5. Fancy Legal Jargon is Not Your Friend
The bottom line is that someone who’s endorsing a product, whether they received it for free, at a discount, or via some other sort of contract, must disclose the nature of that relationship.
What are the consequences of not disclosing?
“Once the Commission has promulgated a trade regulation rule, anyone who violates the rule ‘with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by such rule’ is liable for civil penalties of up to $11,000 per violation.”
No More “More”
The FTC clarified its position regarding some aspects of Instagram endorsements. They noted that…
“…consumers viewing Instagram posts on mobile devices typically see only the first three lines of a longer post unless they click “more,” which many may not do. The staff’s letters informed recipients that when making endorsements on Instagram, they should disclose any material connection above the “more” button.
The letters also noted that when multiple tags, hashtags, or links are used, readers may just skip over them, especially when they appear at the end of a long post – meaning that a disclosure placed in such a string is not likely to be conspicuous.
Some of the letters addressed particular disclosures that are not sufficiently clear, pointing out that many consumers will not understand a disclosure like “#sp,” “Thanks [Brand],” or “#partner” in an Instagram post to mean that the post is sponsored.”
What to Do
Whether you’re an influencer, always include words like “#Ad,” “Sponsored,” “Promotion,” or “Paid ad” in the post. Every time. On every platform. And do so in a way that stands out, #notinthemiddle #ofalong #seriesofhashtags #ad #thatnobody #actuallyreads.
Also, as the FTC indicated, saying “Thanks, Nike” when you post about your cool new sneakers doesn’t cut it.
These disclosures should be clear and conspicuous – which means they have to appear early in the text so someone who’s viewing the post on mobile will see the disclosure before the “… more” pops up. For Instagram that means the disclosure must appear within about the first 120 characters. For other social media platforms, this will vary.
What If It’s Not a Text-Based Platform?
I’m Looking At You, Snapchat.
The same basic guidelines must apply – the disclosure must be clear and conspicuous. You’ll have to adapt your practices to whatever channel you’re posting in.
The Bottom Line
Disclose that it’s an ad or a sponsored post. Do it early. Make sure it’s clear and unambiguous.
If you have a legal question that you’d like me to cover on a future Income Report shoot me an email with your request! I’ll be sure to give you a shout-out when I join John & Kate to talk about your legal questions!
*Bonus* Download David’s FREE Checklist on Intellectual Property for Entrepreneurs!
What Went Down In July
The new Free Webinar Course
Checks and balances are important to have, especially when it comes to running your own business.
We love talking about systems and automation; these are two things that have helped us scale and grow our business beyond our imagination.
However, just “setting it and forgetting it” is not an option when you’re an entrepreneur, because as we’ve expressed many times in these income reports: NO ONE cares about your business as much as you do.
For this reason (and many others), it’s integral that you continue checking up on the systems and automation you’ve implemented. What works right now isn’t necessarily going to work in six months. (And even if it does still work, that doesn’t necessarily mean it’s the best use of your resources.)
We came to realize this about Webinar On Fire in early 2017.
Looking at the numbers, comparing sales reports, and ‘listening to the market’, we came to the conclusion that, while Webinar On Fire is still a rockin’ membership, our focus and energy is better spent elsewhere in our business.
As a result, we started brainstorming ways we could still help those in our audience who are interested in running webinars – without continuing to promote Webinar On Fire.
Through creating an affiliate relationship with Amy, we’re now able to continue to help our own audience through sharing Free Webinar Course and also direct those who are interested in that “next step” to Amy’s course.
If you want to check out the all new Free Webinar Course, come join us! Free Webinar Course!
You can join JLD and Amy on a free workshop all about how to create webinars that convert! Register here!
A visit to Pencils of Promise, Guatemala
In July we were lucky enough to embark on our first #PoPFieldTrip to Guatemala!
If you’re a supporter of The Freedom & Mastery Journal, then you may already know about our partnership with Pencils Of Promise: a portion of all sales goes directly to PoP (now over $85,000 and counting!)
We’ve been supporting PoP since 2015, and so to have the opportunity to be on the ground in Guatemala was definitely something we were anxiously anticipating.
The field trip went a little something like this…
We arrived on Friday afternoon, and pretty much immediately started our 4+ hour trek to the hotel (transportation compliments of Santos and Elisa who are part of the “in-country” team in Guatemala).
The 4+ hours in the car was definitely well-spent: we were able to get to know our fellow field trippers, Sterling, Mike, and our trip director, Susie, (in addition to getting to know Santos and Elisa).
Once at the hotel we were introduced to the rest of the in-country team who would be showing us the ropes over the next few days.
- Franz, the lead for community programs in Guatemala;
- Jorge, the PoP direction in Guatemala; and
- Cesar, who works closely with Elisa to plan and manage these trips (among MANY other things).
Now I have to admit, before coming on this trip I saw PoP only for what I knew about it: an organization that built schools in developing countries with the help of donors. PoP is in 3 countries: Guatemala, Ghana, and Laos.
But what we learned from the incredible in-country team in Guatemala tells a much deeper story – one that goes way beyond constructing a school.
Our PoP orientation
During our 2-hour PoP orientation the following morning, we learned a lot about the “behind the scenes” stuff.
For example, Jorge talked about the process PoP follows and how they actually determine where they’re going to build schools; Franz talked about the programs PoP has initiated within the past couple of years, to include the WASH program and the Teacher Support program; and Susie talked about the overall setup and structure of PoP in all 4 countries (to include the US team).
How does PoP decide where they’re going to build?
We had been taught through the presentation the more remote and detached a community is, the more likely PoP is to go there and research whether or not a build can successfully happen.
And remote is the perfect way to describe the communities we visited.
There are so many incredible facts, checks, and hoops that the entire team has to go through in order to make a build happen, which made the numbers (PoP has now built over 550 schools in 3 countries) that much more incredible.
For example, the government has to approve every community PoP is going to build in. In addition, the community itself has to guarantee and dedicate 20% of the resources to that build.
I had no idea there was such strong involvement from the government, and PoP has entire teams of people who are solely responsible for building these relationships.
I also had no idea that the community had to dedicate its resources and labor before PoP would build anything, which makes perfect sense. If the community isn’t on board, the chances of a school being a success are incredibly slim.
Our school visits
At the first school we visited we learned about WASH: a program PoP has brought into their schools to prevent health issues, and therefore make it more likely that kids will be in school (instead of home sick).
Toilets, tooth brushes, and a faucet to wash their hands are 3 things these kids literally didn’t even know existed.
The WASH program not only builds the proper facilities for this to happen in – they actually teach the kids how – and why – personal hygiene is so important.
During our time there, the kids showed us how they’ve learned to wash their hands:
They gave us a few lessons on painting:
And they showed us their soccer skills:
After saying goodbye it was back on the road to grab lunch, and then we were headed to our second school of the day. It was there that we got to see the Teacher Support program in action.
Remember when I said there are a ton of hoops to jump through to even get to the point where everyone involved (PoP, the government and the community) agrees that a PoP school should be built?
The Teacher Support program brings that to a new level, because simultaneous to the build happening, the government is hand-selecting the principal and teachers who will lead these schools.
If they can’t find teachers to select (who are then paid by the government), then the build doesn’t happen.
So PoP put together the Teacher Support program so that local Guatemalans – who are a part of the PoP team, called “Technicians” – visit 1 time per week to run through a training program with the teachers:
- Week 1: they co-create a curriculum that’s based on government standards
- Week 2: they co-teach the class together
- Week 3: the technician observes the teacher
- Week 4: they meet to review what’s working and what’s not
This 4 week cycle repeats itself 7 times throughout a school year, each 4-week session focusing on a new part of the overall education to ensure the teachers both understand, and are able to communicate, the lessons.
Interesting fact: Guatemala is home to more than 20 different languages, many of them Mayan. However, the national language in Guatemala is Spanish. So in these schools teachers are not only educating students with basic reading and writing skills, but also teaching them a whole new language that 9 times out of 10 isn’t spoken in their home: Spanish.
Bright and early the next morning we were headed to our 3rd school visit – this time for an inauguration.
It was Sunday afternoon and we were headed towards a PoP school that would open its doors for the first time that very next day.
Upon arrival, it was impossible to miss the beautiful, hand-crafted sign they had hanging on the front of the school. It read:
The first seed for abundance is gratitude.
Being a part of the inauguration was our favorite part of the trip. About 100 community members were waiting for us to arrive with fireworks, balloons and a lot of clapping and cheering.
It was a pretty indescribable experience to not only show up to a school with a lot of happy children, but one that was also filled with the support of the community as well.
That morning we had packed up our stuff – our 3rd and final night was in Antigua, so after the tape was cut, we were headed for the city.
We had some downtime before our farewell dinner, so John and I decided to explore the city. During our walk we talked a lot about our experiences over the past few days.
It actually reminded us A LOT of Puerto Rico – specifically Old San Juan – with the cobblestone streets, unique doors and old buildings.
But our main goal of our walk was to make it to top of a hill that had a cross on it – one that John had visited with his family when they were in Antigua before.
Even though it was rainy, and I definitely had no clue where we were headed, we set off in search of the cross…
Lo and behold, mission accomplished!
While I’m the most directionally-challenged person you’ll ever meet, JLD is like a compass.
Our last night with the in-country team and our fellow PoP Field Trippers included a great dinner out in Antigua and good company. It was the prefect ending to a very special 4 days.
It’s really hard to put into words what it felt like to be on the ground in Guatemala.
To see the lack of opportunity, the lack of resources, and the lack of support was really eye-opening. And of course, it felt great to visibly see the impact PoP is making in these communities.
Thank you to our leader, Susie, and the entire in-country team for making this an experience we’ll never forget!
Prepping for an upgrade in Paradise
We’ve been working on this upgrade for quite some time now…
In fact, it started back in December 2016 with a lot of research.
This research phase had really been a long time in the making, but it wasn’t until recently we started discovering platforms that could actually offer us what wanted:
- Customization, and
- The ability to layout the content in a better way
When we first launched Paradise in October 2013, that platform didn’t exist. We chose Customerhub because, well, we really didn’t have many other choices.
Luckily, now we do have other choices, and for the past seven months we’ve been working hard behind the scenes to make sure we not only chose the right platform, but that the transition to it would be as smooth as possible.
In late July we officially brought all of our existing Paradise members onto the upgraded platform and we couldn’t be more fired up about the feedback!
Want to check out the upgraded Paradise? Join us on our next live Masterclass!
Our 1-yr anniversary in Palmas Del Mar
In July we celebrated our 1-year anniversary in Palmas Del Mar in style. It was a month filled with events and celebrations to say the least!
In the first 15 days of July alone, we rocked…
- The Rock fest (July 1)
- A 4th of July party
- Celebrating launch w/ ILSA (July 6)
- The Corona Music Festival (July 8)
- Krista’s Pink Party (July 15)
Talk about a party!
It’s hard to believe it’s already been a year, and we’re incredibly grateful for the amazing community we’ve connected with here in Puerto Rico.
This year has been a huge reminder that who you surround yourself with makes all the difference.
Product/Service Income: $115,913
TOTAL Journal sales: 770 Journals for a total of $30,860
The Freedom Journal: Accomplish your #1 goal in 100 days!
- TheFreedomJournal.com: $3,965 (76 Hardcovers & 35 Digital Packs sold!)
- Amazon: $13,771 (364 Freedom Journals sold!)
- Total: $17,736
The Mastery Journal: Master Productivity, Discipline and Focus in 100 days!
- TheMasteryJournal.com: $2,087 (40 Hardcovers & 19 Digital Packs sold!)
- Amazon: $11,037 (290 Mastery Journals sold!)
- Total: $13,124
Podcasters’ Paradise: The #1 Podcasting community in the world!
- Recurring: $20,849 (4 annual, 195 monthly)
- New members: $11,400 (30 new members)
- Total: $32,249
Podcast Sponsorship Income: $47,500
Podcast Websites: $5,000 Your all-in-one podcast website peace of mind
Skills On Fire: $92
Free Courses that result in the above revenue:
Free Podcast Course: A free 15-day course on Podcasting
Free Webinar Course: A free 10-day course on Webinars
Free Goals Course: A free 8-day course on Setting & Accomplishing Goals
Funnel On Fire: A free 8-day course on Creating a Funnel that Converts!
Affiliate Income: $81,998
*Affiliate links below – if you click on my affiliate link and sign up for the products and services I trust and recommend, then I will earn a commission.
Resources for Entrepreneurs: $39,755
- Audible: $86
- BlueHost: $600 Step-by-step guide and 23 WordPress tutorials included! Disclaimer: This is my affiliate link and I will receive a commission if you sign up through my link
- Click Funnels: $33,515
- Coaching referrals: $4,310 (email me for an introduction to a mentor for overall online business or a Podcast focused mentor!)
- ConvertKit: $125
- Disclaimer Template: $109 (legal disclaimers for your website)
- Fizzle: $188
- LeadPages: $572
- Virtual Staff Finder: $250
Courses for Entrepreneurs: $37,286
- Create Awesome Online Courses by DSG: $7,129
- Webinars that convert by Amy Porterfield: $844
- Zero to Launch by Ramit Sethi: $1,197
- The Amazing Seller by Scott Voelker: $5,472
- 10k Subscribers by Bryan Harris: $100
- Bot Academy by Andrew Warner: $22,544
Resources for Podcasters: $1,567
- Pat Flynn’s Smart Podcast Player: $24
- Podcasting Press: $413
- Libsyn: $1,021 (Use promo code FIRE for the rest of this month & next free!)
- UDemy Podcasting Course: $88
Other Resources: $3,390
- Amazon Associates: $687
- Other: $2,703
Total Gross Income in July: $197,911
Business Expenses: $57,731
- Advertising: $10,815 (includes FB ads)
- Affiliate Commissions (Paradise): $791
- Accounting: $816
- Cost of goods sold: $3,300
- Design & Branding: $2,021
- Education: $354
- Legal & Professional: $1,686
- Marketing: $1,500
- Meals & Entertainment: $651
- Merchant / bank fees: $1,261
- Amazon fees: $8,606
- Shopify fees: $90
- Stripe fees: $19
- PayPal fees: $618
- Office expenses: $461
- Payroll Tax Expenses / Fees: $1,422
- Paradise Refunds: $1,305
- Promotional: $2,525
- Sponsorships: $8,375
- The Freedom & Mastery Journal: $5,019
- Travel: $736
- Virtual Assistant Fees: $3,268
- Website Fees: $1,624
Recurring, Subscription-based Expenses: $2,986
- Adobe Creative Cloud: $100
- Boomerang: $70 (team package)
- Brandisty: $24
- Authorize.net: $91
- Cell Phone: $130 (Thank you, ShrinkABill!)
- Google: $45
- Internet: $300
- eVoice: $10
- Infusionsoft CRM: $396
- Insurance: $551
- Libsyn: $207
- Manychat: $25
- Chatroll: $49
- PureChat: $20
- ScheduleOnce: $9
- Skype: $3
- Shopify: $169
- TaxJar: $19
- TypeForm: $350 (annual fee)
- Workflowy: $5
- WPEngine: $49
- MeetEdgar: $49
- Taxes & Licenses: $300
- Zoom: $15
Total Expenses in July: $60,717
Payroll to John & Kate: $15,900
Wondering what we do with all of our net revenue? We share all in our April 2017 Income Report :)
Total Net Profit for July 2017: $137,194
Biggest Lesson Learned
The first seed for abundance is gratitude
Our Pencils of Promise field trip taught me a lot – both personally (by way of showing me that you can make a difference), and professionally (there is so much that goes on behind the scenes of a successful operation that we never give credit for).
But it also taught me a strong lesson about gratitude.
I’m already a very strong believer in the importance of gratitude, but like many of us, I can sometimes forget that the garbage man not showing up on time, or the fact that some of the gas stations make you go inside to pay, doesn’t signify the end of the world.
The gratitude we were shown in Guatemala was a shining example of how powerful it really is. Families with close to nothing went out and bought us bottles of water while we were visiting the schools; the teachers had coffee mugs made for us; and one principal made keychains for us.
With close to nothing, they’re giving us gifts.
Seeing the sign at the last school we visited with the words “The first seed for abundance is gratitude” was a perfect reminder.
Alright Fire Nation, that’s a wrap!
Until next month, keep your FIRE burning!
~ Kate & John
Note: we report our income figures as accurately as possible, but in using reports from a combo of Infusionsoft & Xero to track our product and total income / expenses, they suggest the possibility of a 3 – 5% margin of error.
This post was written by Kate Erickson, Content Creator and Implementer at EOFire. Follow Kate on Social: