April is Financial Literacy Month. It’s also the month that finds most American thinking about income taxes. This is a perfect time to take a hard look at how you are managing the dollars and cents of your business.
If you are like me, you boot strapped your business to the break-even point. Now that the dollars are flowing, you can breathe a little easier. But believe it or not, having positive cash flow can make it easier to throw your business off track. If you develop the “I can afford that” mentality, you can “afford” yourself out of funds and throw your business of track. Here are five Master Points that will help you stay on point and maximize your hard earned dollars and cents.
Dollars And Cents Master Point 1
Spend only what’s absolutely necessary
Resist the urge to buy what you think you will need. I bought several pieces of equipment that I thought was crucial to the success of the business that have not been used in the last year. This was money that could have been put to better use. Try renting the equipment that you think you will need and don’t make a purchase until you are absolutely sure you need it. If you find the expenditure is absolutely necessary, renting in not feasible, and it is a fiscally responsible move, then make the purchase. Remember, there is always a cost of doing business. Just resist the urge to splurge at this point.
Dollars And Cents Master Point 2
Buy used when possible
If you are just starting out, do you really need the most up-to-date equipment or software? I have a client who wants to start a video production company. He started filming with a camera that was purchased for a few hundred dollars. While working with another videographer, he learned that they wanted to sell their equipment because they wanted to upgrade. Well their equipment constituted an upgrade for my client so he bought it. Now, my client has equipment that is new to him and the other person can use the money towards their desired upgrade. It was a win-win for everyone.
Dollars And Cents Master Point 3
Marketing is absolutely necessary
You have to get the word out. Just because you build it doesn’t mean they will come. Prospects can’t buy your goods and services unless they know that you are open for business. Marketing doesn’t have to be expensive. There are plenty of free and low cost methods to spread your message. Having said that, the cheapest option may not be the best option. People will judge your business by something as small as your business card. Invest in your branding upfront. You don’t have to spend a ton of money to give your business a pleasant face, but you don’t want your materials to look cheap or homemade either. People won’t take you seriously. Find someone affordable who specializes in brand development, graphic design and/or website development. You may spend a few more dollars than you planned, but you will save money in the long run. You’ll thank me later. I promise.
Dollars And Cents Master Point 4
Prepare for the slow seasons
Once you have positive cash flow (when income is more than expenses), you can reached a major milestone. But don’t start just dropping dollars here. I know, you have scrimped and saved and done without. But now is not the time to get fast and loose with your hard earned dollars. Yes, reinvest profits back into your business and start paying yourself or give yourself a small raise. But also make sure you set aside some money to carry you through the lean times because there will be lean times. Businesses go through cycles of peaks and valleys. As good as you are, your business will not be the exception. Those who make it through the tough storms are those who recognize their industries cycles and prepares in advance. Again, you’ll thank me later for this one.
Dollars And Cents Master Point 5
Know your end game
I am usually slightly amused when I read social media posts bemoaning the fact that someone, usually a minority, sold their business. In these posts, the writer usually talks about the impact on the community, the decrease in the number of ____ (you fill in the blank with the minority of your choice) businesses etc. But what if the original intent of the business owner was to sell the business? Which brings me to my point. Know your end game. Did you start your business to build a family or do you want to be bought by a larger company for millions of dollars so you can relax on the beach. It takes money to build an empire and a strong balance sheet to entice some other big baller to buy you out. If you know your end game upfront, you can make strategic moves that will position your business to achieve your desired outcome.
Whatever your motivation for starting your enterprise, businesses must ultimately make and keep money to thrive. Having a positive cash flow gives you options that may not be available if you must depend on credit to move your business forward. By managing the dollars and cents of your business well, you will be positioned to take advantage of any opportunities that you believe are a good fit for you. And who doesn’t like to have options?
Need a little help creating a plan to bring your business past the break-even point? Click here to see how we can help you reach your goals.