You started a small business because you wanted to build a career doing something meaningful and fulfilling. You’ve built your business around your incredible expertise, but are unsure how to manage different parts of your business, such as managing finances. Understanding how to manage your finances is crucial to the survival of your business. When we work with small business owners, there are 5 tips for managing small business finances that help set the foundation for their success.
- Know Your Numbers: In order to achieve financial success, the most important rule is to know your numbers. If you don’t know how much you need each month to cover your household and business expenses, it will be like shooting at a target you can’t see. Set up a spreadsheet to calculate and track all your household and business expenses. Knowing your monthly target is powerful information and is the basis for financial success long term.
- Set Financial Goals: Now that you know your numbers, it’s important to set financial goals for your future. Even if you’re starting out and only have enough money to cover the essentials, it’s important to start thinking about your long-term goals. Some items to consider include savings, retirement funds, debt payments, vacations, college tuition, or buying a home.
- Put Yourself On A Payroll: When you get paid by a client, do you deposit your money and immediately spend it? Setting a monthly budget and keeping only what you need in your bank account to cover your monthly expenses can build your savings and keep your income stable. Additional funds should be kept in a separate, interest-bearing savings account and only removed when it’s time to pay yourself.
- Evaluate Your Pricing: Do you feel like you come up short every month and never seem to have what you need to cover your expenses? The truth is your probably not charging enough money for your services. Your pricing should be directly related to the amount you need to make to cover your monthly household bills, business expenses, and taxes (EEK!). Once you know your numbers you can adjust your pricing to make sure you are charging enough to cover all your expenses.
- Set Monthly Sales Goals: Knowing how much you need to make per month is a powerful number. Understanding what your target sale is per client can help you determine HOW many clients you need to book each month. Wouldn’t that be a wonderful thing? To KNOW how many clients you need to book? It’s all basic math. Simply divide your monthly income goal by your average sale target and this will calculate how many clients you need to target each month.
The most important step for any business owner is to educate themselves. By understanding these 5 tips for managing small business finances business owners can create a stable financial future and avoid pitfalls. If you’re looking for help in getting started managing small business finances, contact us today to learn more about our Accountability Master Group where we can help you set up the foundation for financial success in your business.