Running a podcast isn't just about creating great content—it's also about managing your finances effectively. Whether you're generating significant cash or just starting to monetize, implementing sound financial practices can be the difference between a sustainable podcast and one that drains your resources.
Copywriting expert Ray Edwards‘s cautionary tale demonstrates how even successful entrepreneurs can struggle financially. Despite generating between $1-1.6 million annually for seven years, Edwards found himself declaring bankruptcy (he had some health issues that nobody plans for). His story highlights a crucial reality: revenue alone doesn't guarantee profitability.
You can listen to this episode at schoolofpodcasting.com/podcast-as-business/
Why Financial Management Matters for Podcasters
Managing your podcast as a business requires understanding the difference between revenue and profit. Many podcasters with a small business celebrate hitting revenue milestones without examining how much they actually keep after expenses.
Financial decisions often become emotional rather than logical. Dave Jackson shares his personal experience with bankruptcy in his 30s, explaining how emotional decision-making led to financial trouble despite understanding basic money principles.
For podcasters, common pitfalls include:
- Subscribing to numerous services that are rarely used
- Purchasing equipment as “tax write-offs” without considering true necessity
- Maintaining multiple domain names that add up significantly over time
- Attending expensive conferences without measuring the return on investment
Understanding the Profit First Methodology
Profit First, developed by Michael Michalowicz, flips traditional accounting on its head. Instead of the typical formula (Income – Expenses = Profit), this approach prioritizes profit from the beginning (Income – Profit = Expenses).
This methodology is particularly useful for podcasters making at least $300-500 monthly from their shows. It helps create intentional spending habits while ensuring profitability isn't an afterthought.
Steve Stewart, founder of Podcast Editor Academy, explains: “When you flip those two last things, the expenses and the profit, you're forcing yourself to look at the expenses even more. And the expenses are the things that you can really control.”
Implementing Profit First for Your Podcast
Separate Your Finances
The first crucial step is establishing clear boundaries between personal and business finances. This separation helps with:
- Simplified bookkeeping
- Clearer financial tracking
- Tax preparation
- Maintaining business focus
Create Your Account Structure
While the original Profit First model recommended seven accounts, Stewart suggests a simplified approach with four primary “buckets”:
- Income: Where all revenue initially lands
- Profit: Funds set aside for quarterly distributions (starting with just 1%)
- Owner's Compensation: What you pay yourself
- Operating Expenses: Funds for running your podcast
- Taxes: Money reserved for tax obligations
Stewart advises business owners to: “Twice a month, 10th and 25th, go in and now you send the money out of that account into four buckets. You're actually doing your bookkeeping as it were.”
You can get Steve's spreadsheet by going to podcasteditoracademy.com/sop
Automate Your Distributions
Modern business banking solutions can automate the distribution process. Services like Novo and Relay offer features that allow the automatic allocation of incoming funds to different buckets based on preset percentages.
Practical Steps to Get Started
Audit Your Current Spending
Begin by examining where your podcast money is currently going. I discovered he owned 335 domain names—a significant annual expense he hadn't fully recognized until tracking his expenses.
Start Small with Percentages
When implementing Profit First, avoid drastic changes. Stewart recommends: “Focus on, here's what I've been doing. Let the engine run and warm up, and then I can start tweaking things.”
Start with small, manageable adjustments:
- Begin with just 1% allocated to profit
- Decrease operating expenses by 1% at a time
- Gradually increase the owner's compensation
Choose the Right Tools
Several financial tools can help podcasters implement Profit First:
- Business bank accounts like Novo or Relay
- Accounting software like Wave Apps (with free options available)
- Xero is another great accounting software.
- Moxie is geared toward freelance workers.
Red Flags that Sneak Up on Content Creators
Be vigilant about these warning signs that your podcast finances need attention:
- Subscription Overload: Paying for numerous services you rarely use
- Equipment Accumulation: Purchasing gear you don't actually need
- Ignoring Cash Flow: Not knowing how much is coming in versus going out
- Tax Negligence: Failing to set aside money for taxes
As Ray Edwards cautions in the podcast, “I made some questionable operational choices. I look back now and realize I knew something was wrong.”
Tips for Small Business Podcasting Success
Having a branded podcast can boost your credibility (when you deliver great content consistently), which leads to business growth. When you start a podcast, I recommend starting an email newsletter about your topic or industry. Studies show that email newsletters grow podcasts faster than social media.
You need to know your target audience, understand what they need, and deliver fresh content that meets their needs. Creating content that resonates with new audiences helps you create and gain trust. If your goal is to be an influencer, avoid being a content creator where AI writes most of the content (it's hard to be a thought leader using someone else's thoughts).
One advantage of podcasting is that you get to know your audience (who may be potential clients), which enables you to create content that will increase your brand awareness while bonding with potential customers.
One tip on podcast hosting is to avoid free services. I like Captivate and Buzzsprout as they make it easy to dynamically insert promotions for YOUR product (not an ad that pays .005 per download).
Don't try to be “Everything to everyone” and define your niche. I recommend starting with audio and later moving to video (unless you have a deep desire to create video).
You don't need to spend thousands on podcast production, but in the business of podcasting, you need to be at least “Listenable.” I always advise you to get feedback on your content from a potential listener before you launch.
You need to promote your show. This is now a “Build it and they will come.”
Conclusion
Running your podcast as a business means treating your finances with intention and care. The Profit First methodology offers a structured approach that ensures profitability isn't left to chance.
By separating your finances, creating clear “buckets” for your money, and regularly monitoring your income and expenses, you can build a financially sustainable podcast that serves both you and your audience for years to come.
Remember Steve Stewart's advice: “Pay attention to your relationships, your relationships get better. Pay attention to your career; your job gets better. Pay attention to things, and it just gets better.”
Ready to put profit first in your podcasting business? Start by separating your finances today and taking that first step toward sustainable profitability.
If you want to start a podcast and launch it soon, check out the School of Podcasting
