How many times have you heard these financial truisms?
- Don't spend more than you make
- Keep your overhead low
- Avoid unnecessary spending
- Try to increase your profit margins
The list goes on. You could probably add 10 or 12 more. Financial advice for small business owners is easy to come by.
You know that stuff. I know that stuff. But we often miss the bigger picture, the overarching financial goals that should guide how we build and run our businesses.
So here are three financial goals you might not have heard. And they apply, across the board, to small businesses of every type and size. They are appropriate for my one-man freelance shop and for your 50-employee family business, your growing franchise or for your virtual storefront.
Goal 1: Financial Knowledge
Delegation is a great idea. If you're not great with accounting, that may well be one of the first areas you outsource. Or perhaps you have an accountant or an entire accounting department on staff. As the boss, you must still be aware of what's happening financially. You should know where your money is going and what it's doing.
No, you don't have to keep the books yourself. But you do need to review the books, review the budgets, talk to department heads, check in on projects and do whatever it takes to know where the money is.
For freelancers and one-man shops such as myself, it's easy enough; I do the books, so I see the money. But my challenge is in the lines that can blur when you work from home. I need childcare for date night and for workdays, Internet for business use and for personal use, a printer and office supplies for my company and for my kids' schooling. It's in my best business interest to figure out exactly what portion my business needs to pay for, exactly how much is tax deductible and so on.
Financial knowledge is the key to making financial progress. If it's your business, it's your money; make it your business to know everything you can about that money.
Goal 2: Financial Management
Managing your money means making your money earn its keep.
Never let your money sit idle. Your money should always be working for you. Pop it in an investment account, a mutual fund or an interest-bearing savings account. Lend it out and earn interest that way.
It doesn't matter if the amount you have to work with is $100 or $1 million. Every dollar you have can work for you, and should. Think of your funds as an employee. You wouldn't let your employees sit around idly on your time, twiddling their thumbs and taking up space. You give them work and you expect them to do it.
You should expect the same from your money. It takes only a little time out of your workday to manage your money; it's not an active role that you have to do every day. It's something you set up and check, just as you set your employees up with their work and check in on their progress.
Goal 3: Financial Perspective
See your money for what it is: a means to an end. Money is a tool. It's not good; it's not evil. It's not the pinnacle of achievement to have lots of it, and it's not the depths of utter failure to have little of it. Money comes and goes. It is meant to flow, not be stagnant. A prospering business has money coming in and money going out.
Keeping this perspective is tough when money is tight and you're barely avoiding the red ink. My mother-in-law recently invested thousands of dollars in a new phone system for her business. It was a tough decision—they could have made it with the old-school, simple system—but the new system has improved efficiency for all of her employees.
The new system prompts callers through a menu of options, leading them to the right department and providing basic information such as store hours and address. As a result, everyone has to deal with fewer dead-end or misdirected phone calls, and they've all been able to handle one of the busiest and most profitable spring seasons they've ever had.
Stop the money from flowing in, and your business will soon run dry. Stop the money from flowing out, and the business will stagnate. No money out means you're not growing and improving your business. Your customers will soon catch on, and the money will stop flowing in.
Sure, apply the financial truisms above to this goal. Don't let more money flow out than you have flowing in; but do let it flow. And yes, by all means, avoid unnecessary spending; but don't avoid necessary investments back into your business.
If you want your customers to value your business, you need to value it first.
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