It took me a very long time to realize the importance of saving. It's something my parents have always tried to teach me, and something I always took for granted..... up until I became an entrepreneur. Now suddenly, every time I spend $7.00 at a nearby Chick-Fil-A, I'm thinking, "wow, I could've used that money to buy some paper clips, or go towards printing costs.
What's crazy and ironic is that there aren't many business owners that are financially literate. THERE I SAID IT, and I am not taking it back! Many of us are still trying to master the concept of saving in our personal accounts, let alone in our business accounts. One part of being a business owner is being able to track your finances. After you reach a certain year and success milestone in your business, hopefully you can hire someone to handle your payroll, finance books, and track your spending, but until then, many of us are doing a lot more spending, rather than calculating where our profit from our business should really be going.
Now before you all get scared away from this blog, I will try to make this as painless and easy to understand as possible...
THINGS TO KEEP IN MIND
One thing I say to people all the time is, "as soon as you get a check from your business, most of it is already spent." For my line of work, the money I make honestly gets invested right back into my clients; whether if I'm paying for photoshoots, make up artists, videographers, equipment for events, or simple maintenance like fees for my graphic design programs that assist me with managing my client's social media platforms. There's this thing called OVERHEAD. All business owners have this. Within this overhead fee, you pretty much take care of all the tools and services that you use to maintain your business and your clients. So when you make a profit each month, anywhere from 20-50% of that profit could be going to your overhead.
Along with overhead, you have to consider your business credit. The best way to build credit for your business is to get a company credit card. I am assuming that at this point in your entrepreneurship journey, you have filed all necessary paperwork to be a registered business with the government, received your EIN, started your business bank account, and now you're ready to establish a line of credit. This is no different from establishing credit in your personal name, but probably more difficult to keep up with. The last thing you want is to have BAD BUSINESS CREDIT. I know many people who were able to purchase cars, houses, etc., all in their business name because they established good credit.
The final thing I want to address is budget appropriation.
The same way you budget in your personal lives, budgeting for your business is just as important. Don't overthink this, guys. Basically what I'm saying is: if paperclips cost $4.00 at Office Depot, and $2.00 at Wal-Mart, where do you think you should be buying your paperclips from? If you travel for work often, doesn't it make more sense to establish a line of credit through Delta Sky Miles? Doesn't it make sense to create a spreadsheet where you document everything you spend for your business management, so you can make tax time much easier, as well as track how much your spending on what? Simple things like this make budgeting a breeze.
HOW TO START MAXIMIZING YOUR FINANCIAL STRENGTH
1. LEARN STRATEGIC PRICING HABITS
As a business owner, do not short change yourself, or your prices. Ask yourself, "How much would I want to get paid for this if I were working a 9-5?" Are you paying yourself a salary? That could be a good starting point when generating a price sheet for your business. Most business owners take an incredible loss within their first year of business because they pretty much overwork themselves, and only require half the pay for what they are accomplishing for their clients. Including fees like, overhead and salary, in your price sheets will ensure that you are getting what you are owed, as well as enough to maintain your business.
2. CREATE A SPREADSHEET FOR YOU TO CALCULATE YOUR PROFITS AND LOSSES.
This is pretty simple. Whatever you earn, WRITE IT DOWN. Whatever you spend, WRITE IT DOWN. If after each pay period, you are in the red, then it's time to go back to the drawing board and advise your price sheets, your spending habits, and your savings. The goal is to make and save money.
3. BALANCE SHEETS HELP.
Business owners use balance sheets to understand their financial health. You can assess your assets and liabilities by understanding how to use a balance sheet. Many entrepreneurs will use this to measure if they qualify for business loans. Which leads me to my next point....
4. UNDERSTAND RISKS BEFORE GETTING CAUGHT UP IN BUSINESS LOANS AND/OR INVESTORS.
Applying for business loans, and having a team of investors sounds great until you realize you have to pay this back and you maybe haven't generated enough sales for profit to do so. Make sure your business is in good standing and worth the risk.
5. STOP APPROACHING ENTREPRENEURSHIP AS IF IT IS A "GET RICH QUICK SCHEME."
Business takes time, investment, and patience. It pains me to see so many people start businesses, and give up after 5 minutes because they didn't make a million dollars.
When you approach entrepreneurship with this mindset, you will suffer many losses, starting with risky investments, and unstable business plans.
Understand this: There is NO SUCH THING as a get rich quick scheme, in real business. Plain and simple.
*Drops mic. Walks away.*
I'm no finance expert myself, but for those of you who are very serious about learning more and optimizing your financial strength and growth as a business owner, I encourage you to look into the FDIC Money Smart for Small Businesses tool. They offer many training modules to teach you about cash flow management, details about credit building, budgeting, choosing the best price points for your business, and overall covering every detail of finance for small business owners.
Other than this, my advice is:
Make sure you PAY YOURSELF appropriately.
Cut down on fees by building your strengths in your company so you don't have to outsource
Work smart. Understand that being busy doesn't always mean you are being productive.
Hope this helps, guys.
Your Most Dependable PR Girl