It’s a great time to be an entrepreneur. Small businesses have so many opportunities to connect with their clients and truly deliver everything they need. However, struggling to manage finances is causing many businesses to close their doors when they should be thriving.
If you're an entrepreneur, put these 5 things into practice to best utilize every dollar coming in.
1. Keep Your Money Separate
There’s a common saying, “Don’t mix your work life with your home life.” It’s important to keep the two things separate. By bringing personal problems into your job, you jeopardize the quality of the work you produce. Likewise, if you bring the stresses of work home, you’ll probably find it hard to relax and your family will suffer as a result. It’s important to keep work and home separate. This includes your finances.
Many entrepreneurs run their business through their personal bank accounts. This means any sales that come in, and any business expenses going out, are all done within the same bank account that pays the home mortgage and buys the groceries. Keeping it all in one place may seem convenient, but it can actually be costing you money.
If you don’t have a separate business account, go to a credit union and open one. If you mostly accept online payments, you can set up a PayPal account to field all business expenses. When you have a separate account, you can easily track all money that’s coming in and going out. Whenever you need to pay yourself a salary, write yourself a check from that account.
Having a separate account can save you a ton of grief when tax season arrives. You now have a detailed log of all income and expenses.
2.Have a Budget
If you’ve read my tips on personal finance, you know that I’m a HUGE advocate for budgeting. Well, it should come as no surprise that I think your business should have a budget, too.
Think of a big company. A place that everyone has heard of. Got one in mind? Now, imagine the CEO and the top tier employees of that company getting together in a conference room in a high rise building. Together they’re going over numbers and creating a budget for the upcoming quarter. Large companies don’t operate without a budget, and neither should you.
I always recommend young businesses start out by doing a monthly budget. Look back to your past 6-12 months of sales. What was your worst month? Base your budget on that number. Plan out all expenses for the month. This could include advertising costs, website maintenance, purchasing products, or paying employees. Don’t forget to budget your personal salary as well. Tracking all expenses ensures that every dollar is being spent to its highest potential.
If you make more that month than you projected, use the overflow in the next month. Maybe you want to put a little extra into your advertising, or pay yourself a small bonus for having a good month. The important thing is tracking it all within your budget. As your business grows, your projections will become more accurate.
3. Income > Expenses
This formula, although simple, is incredibly important. While you may be thinking this is an obvious one, it’s something a lot of young businesses struggle with.
The thing is, there are so many things out there to spend your money on. The brand new master class that guarantees more sales. Or the expensive email marketing website that has proven higher conversion rates. While all of these things are great, and probably will help your business, you have to stay within your limits.
I encourage all young businesses to take advantage of as many free products as possible. A lot of fantastic resources offer a package for small businesses at no cost. While these packages are typically basic, they usually provide enough until you grow enough to upgrade. Check out my previous blog on 5 free resources for your business.
4. Be Patient
This one is hard for me. Blame it on my generation, but I want results immediately. I don’t want to be the turtle. I want to be the hare and still find a way to win.
Unfortunately, overnight success is rare. Chasing it has sunk many promising businesses. It’s important to be patient and grow at the pace that your business grows.
When spending money, don’t compare your business to a larger one. They’ve likely been around for much longer than you, so they have the income to reinvest in their company. If their website looks ten times better than yours, it’s probably because they spent ten times more than you did.
Grow with your business. If it’s small, take small steps to draw in more sales. Your DIY website will do just fine for now. If you can’t afford a graphic designer, use Canva.com to create a free graphic yourself. Wait to spend the big bucks for when you’re making the big bucks.
5. Don’t Get Ad Happy
Facebook ads are an incredible resource for a business. Not only does it offer your business access to the largest social media platform available, but you have the opportunity to target specific audiences that would likely be interested in your product. If you have a business, Facebook advertising is something you should definitely look into.
However, young businesses need to be careful. It’s very easy to spend a ton of money in advertising and yield little results. Much like tip #4, be patient when starting out with your ads. Spend small amounts and test out different target markets. Research Facebook pages that might draw in people that would also be interested in what you’re selling.
Most importantly, wait until you have something to sell before paying for a Facebook ad. While likes on your page are great, pumping a bunch of cash into a Facebook likes campaign can be a waste of money. Instead, direct traffic to your product, or into a well-designed sales funnel. The important thing is to have a plan for sales before you launch an ad.
Struggling with the financial side of your business? I’d be happy to help! Email me at firstname.lastname@example.org to set up a consultation.
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