We came across this article on the Think Big FG website and thought it was awesome, so we wanted to share it with you!
1. Have an accurate business plan
We aren’t talking about the 50 page document that feels like pulling teeth to actually write out and never sees the light of day after you’re done. We’re talking about a realistic, straight-forward business plan that you can use to guide your operations, development and financial goals.
When you are estimating costs and cash flow for your own purposes, be honest. There is no point exaggerating when it comes to establishing your true earning potential.
Having a business builds awareness for your money goals and actually helps you achieve them.
Need help with mapping out the numbers? We have an expert team to help you figure all of this out. Send us an email right now.
2. Have a budget
Part of having a realistic business plan is having a budget. Admittedly for a lot of people, the word ‘budget’ alone is enough to get the eyes rolling and the snores coming on. Budgets are not exactly exciting or fun to the majority of people – that’s why it’s a good ideas to have a numbers person on-hand.
There are a lot of other parts of running your small business that will be fun; when it comes to budgeting though, don’t ignore it, get yourself a measurable, and realistic budget, and map out your projected cash flow. These will create the foundation for your business goals.
3. Stick to your budget
Again, not fun, but necessary. Many of our clients have found creating a budget, and sticking to it, very very easy using the Profit First approach to money management.
Your budget cannot be considered ‘realistic’ if you don’t or can’t live within its parameters. Again, Profit First, makes this part easily achievable!
4. Know your numbers
Track everything that you spend, no matter how small. The bigger things are easier to remember, but it’s the small stuff that really adds up. Book some time in your calendar every month to look at your numbers.
When you are figuring out what to charge for your products or services, the first step is to know your numbers. You need to know all of the business expenses, your time involvement, and IP and value are also big determining factors.
If you notice unnecessary spending building or budget blowouts, it’s time to change your spending habits. Thank us later when your business is reaping the financial rewards.
Numbers doing your head in? We have an efficient team of bookkeepers that can help keep your books up-to-date so that you can ‘know your numbers’ at a glance.
5. Reduce costs
Sounds simple, but we often get caught up in the day-to-day running of the business that we forget to look for new opportunities to streamline systems and processes, or seek out new cost efficient ways of delivering products and services.
There are a lot of costs when you are setting up and starting out in your business. And every year there are additional costs, ongoing overheads, and things that need fixing or replacing or upgrading. Reviewing your numbers regularly, or checking in with your accountant and bookkeeper, can help you establish areas where you can save money.
6. Put money back into the business
There are two main things you want to do if you are running or growing a small business. The first one is pay yourself. The second one is to have more money to put back into the business to keep it going.
May sound like a pipe-dream to many, but Profit First can help you pay yourself, your expenses, and accrue profits – from day one!
Your Profit and Expense allocations can be used to invest in the development and marketing of your business.
7. Don’t forget to save
One of the best things about the Profit First money management system is the constantly building Profit Account. With monthly (compulsory) additions to this account, you have the choice to reinvest it, save it, use it for yourself, or all three!
Before you get too excited by that concept, our advice is to not spend every cent on growing or maintaining the business. Put some away for the future, allocate some to your superannuation, or save it for important emergencies.
Plus, if you are saving well, most savings accounts earn interest, which is even more money for you!
8. Don’t underestimate
Under-quoting is a very common problem in small businesses.
In small business, an hour is never just an hour, a product is not just cost plus profit margin. It’s also administration, research, training, accounting, marketing, networking, HR, travel, cleaning, and all the other little things that are involved in running your business.
Consistently underestimating is going to cost you BIG time in terms of lost revenue so it’s important to understand your expenses and price your products and services accordingly.
Book a pricing strategy in with one of our business strategy advisors to ensure you aren’t losing money unnecessarily.
9. Be proactive and confident when asking for money
If you are new to small business you may have always relied on a steady wage dropping into your account regularly. But when you run your own business, you have to ASK to get paid. Sometimes it feels like this is all you do and it’s often the biggest mindset hurdle new business owners face.
Inhibitions about requesting to be paid can cost you a lot. Getting help with your money mindset, while it sounds a bit woo-woo, can actually save you a lot of money and time in the long run. A money mentor can help you with this.
10. Create a list of strategies to increase cash flow
In small business, money and work can come in highs and lows.
For the low times, it’s handy to have a list of actionable cash flow injection strategies to boost your bottom line quickly.
This type of cash injection would be specific to your business, but could include:
- Have a flash sale
- Create a bundle offer
- Create a special offer for existing clients
- Offering incentives to current clients for referrals
- Create incentives that encourage customers to pay early
- Offering a one-to-many event or training
11. If you don’t manage your money well, contract someone who does
Not everyone is gifted with exceptional money management skills. But money management is critical to your business’ long-term success.
Outsource to keep your books up to date so you have accurate figures, work with a professional to build a budget you can stick to, or get cash flow projections to plan and budget accurately.
This may mean a bookkeeper, an accountant, or even contracting a CFO.
12. Consistently review
Money management is one thing where you should never really kick back and rest on your laurels. There is always something new happening, a better way to save money, or opportunities to grow your business.
There are always new ways to find new customers or increase the custom of your existing customers. But you can never see these opportunities if you don’t manage your money well and know your numbers.
Make it a priority to review your numbers regularly, to have a strategic plan (both business and personal) to work towards, and to think smarter about money.