1. Have an accurate business plan
When you are developing your business plan, try to be as realistic as possible. Puffing up the numbers may help a little if you’re trying to coax banks or investors into partnering with you, but when you are estimating costs and cash flow for your own purposes, you need to be spot on. There is no point exaggerating your earning potential or covering up just how much your overheads are.
2. Have a budget
Part of having a realistic business plan is having a conservative budget. Admittedly for a lot of us, even the mention of a budget is enough to get the eyes drooping and the snores coming on. They 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, embrace the boredom and write yourself a thorough, measurable, and realistic budget.
3. Stick to your budget
Again, not fun, but necessary. Many of my 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 so achievable!
4. Know your numbers
Document everything that you spend, no matter how small. The bigger things are easier to remember and track, but it’s the small stuff that really adds up and will surprise you with the total at the end of the month.
If you notice unnecessary spending building or budget blowouts, it’s time to exercise some willpower over your spending habits now in exchange for the long payoff when your business is really charging along.
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.
5. Look for ways to reduce costs wherever you can
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. It is very helpful if you can look at the areas where you can save money. Remember, you don’t need the newest or best of everything right now!
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. Being able to cover both of these costs can sometimes be a stretch, especially in the beginning, but keep your eyes on these two goals.
When you are ready, you can utilise your Profit Account to start putting money back in to the business. This investment in your own business can be things like advertising, research and development, outsourcing, or training all with an outcome to build the business.
7. Save a little bit too
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 – BONUS!
Before you get too excited by that concept, my advice is to not spend every cent saved on growing or maintaining the business. Put some away for rainy days or when big exciting purchases come up (or let’s face it, your car or computer dies and you need a new one quickly!).
Plus, if you are saving well, you can earn interest on your account funds, which is more money for you. How good is that?!
8. Don’t underestimate
A very common problem with small businesses is under quoting, or generally underestimating how long something will take you to complete. For some reason, we are far better at underestimating than we are at quoting higher than what it will take or cost. In small business, an hour is never just an hour, it’s also administration, research, training, accounting, marketing, networking, HR, travel,
cleaning, and all the other things!
Don’t just count the hours you are working directly for the client, but the hours you are working in total. Consistently underestimating is going to cost you BIG time in terms of lost revenue.
9. Be proactive and confident when asking for money
You may need to challenge your own preconceptions of money being a dirty word. If you are new to small business you may have always relied on a steady wage, which tends to just turn up regularly without you having to fight for it much. But when you run your own business, you have to ask to get paid, sometimes it feels like this is all you are doing and it’s often the biggest mindset hurdle entrepreneurs face – especially women.
If you are in business, this mindset hurdle is unavoidable. Inhibitions about requesting to be paid can cost you a lot, so get help with your money mindset now to save yourself a lot of money in the long run. Part of the mindset shift is likely to be that you need to work on your self-confidence in knowing that you deserve to get paid, and standing up for what is rightfully yours.
10. Have a Plan B and a list of strategies to increase cash flow when necessary
In small business, money and work both come in ebbs and flows. You might be in a drought, or you might be experiencing a flood. For the drought times, particularly when they seem to be extending a little longer than is comfortable, you will need actionable strategies to put into place and get cash flowing again. This type of cash injection would be specific to your business, but could include:
- Offering discount incentives to current clients for further business or if they refer a friend
- Create a rewards program that encourages customers to pay early
- Survey existing and previous customers to get ideas on how to improve or expand your services
- Add extra services to broaden your market base
- Offer discounted services in return for positive reviews or testimonials
- Offer a giveaway through social media to get more followers, build your list or increase client numbers
11. If you don’t manage your money well, contract someone who does
Not everyone is gifted with the deft hand for money management. You might be amazing at whatever it is your specific business does, but struggle with the figures. That’s fine. Admit your weaknesses, and outsource in whatever way you need to to get accurate figures, a budget, or even just a cashflow management plan in place. This may mean a bookkeeper or accountant, or even contracting a CFO. Looking for a money mentor? Get in touch with me here.
12. Keep learning
Money management is an area where you should never really kick back and rest on your laurels. There is always something new you should be learning, or or a better way to save money or grow your business.
There are always ways to approach new customers, or offer more value and increase the custom of your existing customers.
To be good at making money, you can never really be completely relaxed about it; always keep your eyes peeled for the next opportunity to learn and to grow your business or yourself.
Profit First can benefit the growth of your business from DAY ONE!
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