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Financial Tips for Your Side Hustle

Here is the final installment in our “financial tips for” different industries—Financial Tips for Your Side Hustle. This article is for anyone building a business on the side of a full-time job or on the side of another business.  Creating a side business and growing it to allow you to replace your 9-5 and go full time into entrepreneurship is an exciting journey. Here are a few financial tips to help you make that happen.

 

Financial Tips for Your Side Hustle

 

 

Start Your Separate Personal Financial Identity immediately

 

From day one, treat your business as a business. Separate your banking, get a debit card for business expenses, and have all income from all sources deposited into the account. Just point your PayPal, Stripe, Square, or whatever you use to the business account.  Pay your expenses from that account. You will file a different tax schedule when you own a business. Keep receipts and treat it like the real business it is right from the start.

 

 

 

Have a Pricing Strategy That Gets You Into Profit Quickly

 

Many times, when entrepreneurs begin side businesses they start off with pricing that is often too low to make much of a profit. This can be because there is the feeling that the venture is for “extra money,” so making even just a little bit is “fine.” Yet, the best strategy is to be priced correctly from the beginning, so you aren’t just breaking even or worse, losing money with your side hustle.  You are in business to make money, and that means pricing yourself to include your real costs, your paycheck, and some profit to make sure you have capital for growth.  Follow this link (Mastering Your Cash Flow (kartra.com)) for my free three part pricing formula.

 

You don’t have to lose money the first few years in business. See this blog post (5 Tips for Maximizing Business Profits (entremoneycoach.com)) more tips to maximize your profits.

 

 

Set up for your Self-Employment Taxes and pay them at least quarterly

 

Part of treating your business like a business right away is to set yourself up to file your taxes as a business. In the U.S. if you are a sole proprietor that means a schedule C.  When you file that report of self-employment you will need to pay your self-employment taxes. Make it a habit from the start, and you will always be in compliance with the IRS. I learned this lesson the hard way, and ended up owing over $27k in self-employment taxes back the year of my husband’s accident when we lost our consulting business.  We did not set ourselves up, and taxes were an afterthought. Oops.

 

It’s easy to set up to pay your taxes online, visit https://eftps.gov and register. They have to snail mail you a PIN so it takes a few days to set up, but once you are enrolled you can easily make online deposits into your “tax account.” You should deposit 20-30% to start, based on your other job, tax bracket, etc. Visit your accountant to figure out exactly what is best for your situation. But just do it. I withhold when I take a paycheck, I don’t even wait for quarterly anymore!

 

 

If you are going to scale and leave your 9-5 have a plan

 

As you are scaling and building your side hustle to become your full-time gig, I always recommend having a plan. It won’t be perfect, and it will probably change, but you should know your numbers, have some money squirrelled away, and keep debt down so that the payments, if any, are manageable on your new entrepreneurial salary. Plan your income and profit each quarter, knowing how much you need to make to pay everything, including yourself.

 

And know that sometimes businesses take off faster than expected, sometimes they take longer.  Have a real conversation with yourself around what the minimum number of sales or clients you have to consistently have to make a move. It doesn’t always have to be a calendar date! Make your plan around events that happen inside your side hustle and celebrate every milestone.

Financial Tips for E-Commerce Sellers

For the past few weeks, I have been doing a Financial Tip series. This week, we will be focusing on Financial Tips for E-Commerce Sellers. In this blog, we will tackle 4 topics that would allow E-Commerce sellers to take their businesses to the next level. 

 

 

 

FINANCIAL TIPS FOR E-COMMERCE SELLERS

 

 

Know what you are REALLY being charged to use the platform

 

If you are using a shopping platform such as Etsy, Poshmark, Shopify, or E-Bay, know that there are considerable fees that can be a part of each transaction. If there is an embedded payment service, there are transaction and interchange fees for taking payment. Then there are fees for listings, advertising, and renewing items on the platforms. These are common, and the cost of doing business with these services. Just know what they are. I had a client one time on Etsy who ended up paying almost 40% of an item with advertising (someone bought through the Etsy ad link), listing, shipping, and payment. When we looked at the numbers she didn’t realize it was so high.

 

 

 

Get your shipping down with pre-paid services

 

I got this tip from a friend of mine who mails out about 100 packages a week! There are places to buy pre-paid labels for the postal service here in the US to get shipping costs down. My husband has used Pirateship (Free USPS shipping software | Pirate Ship) to ship some packages from his coffee business, and it saved his customers anywhere from $1.50-$4.00 per package. That’s significant!

 

A few others to check out are:

 

If you are reading me in the US, another thing to do is to contact your local business development specialist at the United States Postal Service. They can give you referral codes for vendor partners to create your shipping labels at no cost! My husband had a short conversation with our local post office and had promo codes for five vendors the same day!

 

 

Maximize profits with good pricing and good transaction records

 

I frequently see pricing mistakes in this industry, and often it is because entrepreneurs just double or triple their wholesale costs. It would be better, and more accurate to do a breakdown of operating costs and labor that should be included above the wholesale price of an item. Finally, I like to see an added profit margin.  If you need a good pricing formula for any product or service grab my free resource.

 

Often times I see labor as a sticking point in pricing goods.  If you are a reseller, don’t forget to include the time it takes you to shop, take photos, upload and list items, and pack them, when you calculate pricing.  If you are selling items that you make, know how long it takes you to create the item you sell, and make sure that is considered above your operating costs and the actual wholesale cost to make, photo, list, advertise, and sell the item.

 

Once you figure out your operating costs, please include the costs of using the platform that we talked about above, consider adding a flat labor cost to every item, and then a flat profit amount. For example, you can add $10.00 to an item to cover labor and profit above what you need to recover to make the sale. If that isn’t enough, you can go up, if it’s too much, you can go down.

 

 

Another key to ensuring you are maximizing profit is to keep meticulous transaction records. If you need to pay to relist the item, that additional fee is coming out of your profit margin. Know exactly what to pay for everything you make and everything you sell. If you paid $23.00 for a designer item to resell on Poshmark, you need to record that amount.

 

Estimating what you paid or what it costs to make something is an easy way to lose money in your business. What you paid is the starting place of your pricing structure to make money in this business. You can use a spreadsheet, just a notebook, or some software, whatever feels good for you, but don’t skip this step.

 

 

Check your expenses and margins quarterly

 

A lot of things can change in 90 days in ecommerce. Set aside time to review the expenses in your business. Look at the time you are taking to create and list your items. See if your shipping rates are still working. Look at your platform expenses and make sure that you adjust prices as necessary to cover any new increases.

 

Take the time to check your profit margins as well. Is one platform outperforming another in sales? Are your margins staying relatively consistent or are you going wildly up and down on certain items? You can take an average sale at your average price in a few categories and look for trends. If you typically sell items at $35.00, $60.00, and $85.00, look at a few sales in each of those price ranges. That’ll keep you from feeling overwhelmed at the idea of reviewing 1200 transactions! Make sure everything you sell makes a profit. Likewise, limit your losses. Because I know that sometimes lose a little bit to move something stored in inventory for a while.  

 

There are million-dollar eCommerce businesses built every year around the world. People love point-and-click convenience. The ability to get items that aren’t readily available where they live and unique online finds.

 

Financial Tips For Writers

Let me start by saying that writers don’t have to be starving artists to be successful. Today, in this blog, we’ll be talking about financial tips for writers.

financial tips for writers

 

The fact is, you’re a business owner, you are self-employed, and you’re actually running the business of you. To run a business, you must have some money. When people say they just want to write and not worry about the money, what they’re saying is, I’m not interested in, protecting, growing, and developing the business of me, which is the income and revenue-generating source of my business.

 

 

With that in mind, here are some financial tips for writers

 

 

Have a monthly budget and put away enough of your advance or royalties to cover 3-6 months of expenses

 

In the book writing world, your royalty checks are held anywhere from 2-6 months after books are sold. That’s a long time to wait to get paid. I know that many writers have a feast and famine cycle in their financial lives for this reason. One of the best ways to break that cycle is to make sure your personal expenses are covered every month and the money is in the bank. This will bring some security and can support your ability to create by removing financial stress. Calculate the costs of your food, utilities, rent or mortgage and transportation every month and squirrel away the amount you need to pay a few months of your expenses.

 

If you are freelancing or writing for a magazine or other organization that pays regularly, know what you need to bring in every month, and price your articles and projects accordingly. Make sure you can cover your monthly expenses. As soon as possible create an emergency fund and squirrel away a few months of income to prevent the feast and famine of the publishing world.

 

 

Think of your labor in a book as a sunk cost  

 

It is very hard sometimes to imagine recovering some financial benefit to all the hours you put into developing your work. It is much more difficult than somebody who, say, a jewelry designer, who knows that it takes an hour and a half to make a certain piece, and we can put a direct dollar figure to what they want to recover. So, I’m going to start by saying I understand that writing is hours and hours and hours and having an hourly rate that you recover actually could be very difficult to calculate. This may give people a little bit of a pause about using a formula because it may seem more complicated.

 

But just pricing a book and hoping to sell a bunch of copies isn’t necessarily the best business model, because you don’t know whether or not you’re actually making back what you’re putting in to generating the work. It’s smart to have a sales goal; a financial goal, for the work.

 

think about pricing accordingly

 

There are two considerations you can use for this. The first one is you need to know how much you need to recover for your personal money. During the time you spent writing, on average, what do you need each month for food for your rent or mortgage for your transportation for all your utilities? Having that as a base as an operating figure that you would use?

 

Then, how many months did it take you to write this particular piece of work? How many months of operating expenses? Did you basically put out during the time that this was in development and being written, so having that number there gives us a place to start for you to recover money for your personal needs. If you were to consider your operating costs, let’s say that it took you five months to develop this particular piece of work, and your operating costs every month are $3,000, you’re looking at $15,000 as the minimum that you need to make back in order to cover your own time. Time that in reality you “loaned” the book to write it.

 

The second consideration is to come up with a number or percentage of costs that are profits. Adding a little bit of extra money to the cost of a book for profit is important, but in all honesty I get a lot of pushback from creatives on generating profits.

 

 

Don’t let your love of writing overshadow your need for profits

It isn’t just writers. For some reason, many creatives want to be the altruistic entrepreneur.  The fact is that the more profit you make the more impact you can have. Price your books and services and deals for profitability.

 

If you’re not making a profit, you can’t have a level of impact above anybody else. How can I say this? Well, how can you be insanely generous and donate to the causes that mean something to you?

 

How can you create opportunities or hire people? Whether it’s a cleaner for your home, or an editor, or an assistant? You can’t do those things without making a profit. In some ways, profit is your duty. As a business owner, you really are the only engine that is going to generate additional money in the marketplace; support other people and causes, or allow you to do volunteer work. When you look at profit as an impact you can see that it’s okay to make a profit.

 

Writers have unique gifts and storylines to bring to the world. But the vision of the starving artist does a huge disservice to craft. Follow the tips I had discussed to make sure you make money while doing what you love. 

 

 

Author’s Note: 

Did you enjoy reading Financial Tips for Writers? If this is something that resonates with you and you need further assistance to take your business on to the next stage, visit my RESOURCE CENTER

Food Business

Do you have a food business? Whether it is a cottage business like a home bakery, or a restaurant, or takeout place, there are a few key things you can do to stay in profit in your business. Here are some financial tips for food businesses. 

Food business

 

 

Financial Tips for Food Businesses

 

Know your real food costs on everything you sell and have good margins

 

  • Make sure you calculate your food costs, don’t guess. Take the time to know what it really costs you to create that dish or bake that cake. All the costs involved. Include costs of packaging, labels, and labor, to calculate the true prices. Consequently, that container adds to the cost of delivering the food, as do any food labels– whether it is served in-house or sold online.

 

  • Don’t forget operational expenses and waste costs in your pricing scheme as well. For instance, every business has fixed operating expenses such as rent, internet, and phone. However, as a food business, you also must include waste and other costs like linens, that other industries do not have to include.

 

  • Watch your margins. If you are producing food products, I like to see 60% or better, if you are reselling items, I like to see north of 35%. You will save money, and will have higher margins, by buying ingredients and producing items in-house versus re-selling food that was already made.

 

Watch your inventory spend

 

It is VERY, VERY, VERY easy to overbuy inventory in a food business. In fact, suppliers give volume discounts. It is important to remember that any money you have tied up in inventory is money that you do not have available for other things.

 

Keep in mind how often you can get a delivery from your suppliers. Is the savings of $10.00 worth the additional $77.00 in your walk-in or freezer?

 

Good inventory management will allow you to have better cashflow. Knowing your top sellers and the items that need to be on a regular schedule of ordering will prevent the “feast and famine” orders swinging hundreds of dollars each week.

 

Have an emergency fund and keep debt low

 

Lots of things can happen that affect revenue in your business. If you have bad weather and your restaurant doors are closed for a day or two, or a shipment of your cookies gets damaged and needs to be replaced, it costs your business money.  Relying on the public to decide to eat out or order in on a given night isn’t always predictable. Keeping some cash stashed is a good idea to offset any lower revenue months. Typically, quarter one each year is brutal on food businesses. Having the money set aside to cover any income dips can be the difference between staying in business and not.

 

Along the same lines, keeping debt low is important. Most of the inventory in food businesses are perishable and aren’t available as collateral to take out an emergency line of credit if needed.

 

For example, the depreciation of equipment also can make the food business equipment a little riskier for the bank to loan on for full value.  In addition, not having a lot of debt in the business can also make a difference in the success of a food business in a slower season.

 

Create a sinking fund for equipment repair and replacement

 

Food preparation requires equipment. Ovens, fryers, stovetops, refrigerators, etc., are commonly found in restaurants and home food businesses. These pieces of equipment will often need regular maintenance, and at some point, replacement. Creating a separate fund early in the business where money is parked for these specific needs can ensure that if a piece of equipment goes down, the restaurant budget doesn’t struggle to cover the repairs.  This fund truly protects the business from expensive appliance repairs that must be made to keep the business running.

 

 

Author’s Note on Financial Tips for Food Businesses:

 

Using these tips will help to ensure that your food business operates with finances in the black. You can protect yourself and your business from the most probable money issues facing your industry by:

  • getting good margins
  • only having the necessary inventory
  • having an emergency fund and keeping debt low
  • saving to maintain equipment.

 

Did this blog bring you a bit more clarity?

 

Then visit our linktree below for some useful resources!

 

https://entremoneycoach.com/linktree/

raising prices

I am not from the school of thought that believes in raising prices often. Yes, I am a coach and yes, I have raised my prices over time, but raising them was not my first response to making more money. I believe it is what you keep- not what you make- that matters. This means that if you can have good margins at lower prices, that should be a consideration in your formula. Here are a few reasons, however, that you should consider raising your prices as a response to market changes.

raising prices

 

 

 

Raising Prices

 

  1. Your margins have gone down, and your expenses have increased.

 

It is expected that increased expenses should be passed onto the customer and client. If your costs have increased, your prices may have to increase to match. Sometimes costs go up temporarily, for example,  gas prices in the summer, but if there are permanent price increases from your suppliers and service providers, you have to increase proportionally to stay in business. This can be a tough thing for businesses to do. Alternatively, look for lower pricing in your costs.

 

 

 

  1. Your financial goals require a price increase.

If you are at maximum capacity and availability in your products and services, the only way to make more money is to increase your prices. For example, if you coach 20 hours a week, and that is your maximum availability, the increase from $100.00 an hour to $200 an hour is the only way you can make more. This increase needs to be attached to a goal, and you can do the math to figure out how much you need to go up. I’m not necessarily a fan of a 100% price increase, as I used in this example, but I AM a fan of increasing to meet your financial goals.

 

 

  1. Your expertise and value in the market demand it.

 

Finally, sometimes you have to raise your prices because your value demands it. If you have a waiting list for your products and services and cannot keep up with demand, raise your prices. As your expertise grows and you are able to perform at a higher level, your value in the marketplace also increases. Raising your prices to match your increased value is important to keep up with demand.

 

 

AUTHOR’S NOTES:

 

Raising prices can feel scary. But it is a necessary step for maintaining margin, making more, and addressing your market value. Happy Entrepreneuring!

calculating profit margin

Marcus Lemonis loves to remind business owners that “If you don’t know your numbers, you don’t know your business.” And those numbers he refers to include “margin” as in the profit margin, expressed as a percentage, on every product and service you sell. To make things a little more fun, for our conversation “margin” can be expressed after production costs (gross margin) and after operating costs (net margin). It’s important to recognize the difference to ensure we are looking at the right numbers to make decisions.

 

 

 

Profit Margin: Gross Margin

 

Gross Profit Margin is calculated by subtracting what it costs to produce something from how much it is sold for. For example, it costs you $5.00 to produce a widget (labor and all materials) and you sell it for $10.00. You have a 50% gross profit margin.  This is only half the story though because you have other business costs (operating costs) that also have to be paid from the gross profit.

 

To figure out our net profit we need to further subtract the operating costs from the item. If each $10.00 item actually incurs $1.00 of operating costs, the net profit isn’t $5.00, it’s $4.00.  That’s the number we want to work with for managing pricing and expenses. In our example, this $10.00 item has a 40% net profit margin.

 

Anything that affects that $4.00 net dollar amount affects the margin of the item. If costs go up or down, that $4.00 can get bigger or smaller. Let’s say that materials go up in cost $.50, so that costs are now, $5.50 to produce, the net margin goes down from $4.00 to $3.50. From 40% to 35%. Make sense?

 

 

 

 

If you don’t know your margins, you need to take a little time to figure them out. The amount of margin that’s considered “good” or “healthy” varies by industry. Restaurants typically have lower margins than retail and retail is typically lower than many service provider businesses. Online businesses have lower operating expenses and often higher margins than businesses with physical locations.

 

 

 

 

PROFIT MARGIN: WHAT AFFECTS IT?

 

This article is about the things that affect your margins, and margins can be the difference between struggling and thriving. And those things are many. Changes in any costs can affect your margins and require you to address your pricing to maintain your profits. Any cost. Utilities, service providers, suppliers, and other expenses can go up in cost at any time unless you are under a contract.

 

As margins go down, there is less and less money left over, and it can affect your growth and your ability to weather any unexpected events. This is why I encourage entrepreneurs to check their expenses through the Breakthrough Number process once a quarter. You can use these resources to figure yours.  Keeping your eyes on the margin can help you head off issues that can affect the health of your business. Set aside the time to learn your numbers.

 

 

 

AUTHOR’S NOTES:

If you want to walk through a step-by-step method to manage your margins, your income, and profitability, join me for the next Quarterly Intensive. Visit https://entremoneycoach.kartra.com/page/quarterlyintensive to learn more.

“I don’t know what I am going to make.” I hear this statement all the time, and when your business is fairly new, I get it. But even from the very start, you should understand your capacity and availability to predict your revenue.  Whether you are a business or a service, you should be able to figure out how much you can make in a given time and create a path to get there.

 

 

It is so important that you figure out a predictable revenue at every phase of growth. Using these numbers can help you make the best business decisions regarding whether it is time to scale. The first thing you have to do is get your pricing right. If you need a pricing formula that will help you price any product or service for profit, you can find it in this blog: How Do You Calculate Selling Price? | Entre Money Coach .

 

Once your pricing is where you need it to be, we can talk about your capacity to make products and services for predictable revenue. I’m going to use a recent example, a client of mine who is starting a coffee roasting business.  We calculated his pricing based on operations, cost of the beans, labor, packaging, and shipping. We also figured out both a wholesale and a retail price for his products, because part of his model is to be on consignment in small local stores.  Here’s how we went from pricing to predicting monthly revenue:

 

 

 

 

  1. Capacity and Availability

 

Roasting coffee takes a certain amount of time per batch and based on the roasts and origins times can vary. But we averaged the time it takes to roast a batch, and the number of bags of product he can make in each roast cycle. That number alone will limit his capacity to make more than a specific amount of product each day. 

 

So, based on roasting time and resting time before packaging, we calculated the maximum amount of product that can be made per day, and then per week.  The cool part is that you can decide how much and how often you work. My client wanted to be part time to start, so the amount of product produced was also determined based on his availability and the number of hours he wanted to work.

 

 

 

 

  1. Number of items of each type to sell at each price

 

My client has two package sizes of roasted coffee beans right now, a 3oz size and a 12 oz size. How many of each size he makes, and sells, each week can help him predict his income. Some will be sold at wholesale, some at retail, with pricing at each size. Based on the number of wholesale and retail orders, plus the product he makes, without orders, to sell that week we can predict how much he will make each week, then month, then quarter. These numbers need to be reviewed at least every quarter.

 

For example: He sells 20 12 oz bags and 10 3 oz bags in a week.

 Ten 12 oz bags at $10.00 wholesale becomes $100.00 and ten 12 oz bags at $14.00 retail is $140.00.

Adding ten 3 oz bags at $2.50 wholesale is $25.00. With this mix of products, he will gross $265.00 this week on 30 total bags, mixed in size and price.

 

This is his “predictable” revenue. He can make more or less by selling more at a retail price instead of wholesale. This is just one small example of how knowing your “mix” of capacity. That and knowing your availability, audience and price can be brought together on paper. Doing this will allow you to predict how much money you will bring in.  I want to note that this isn’t actual sales at this point, but a very solid estimate.  You CAN predict your revenue, even as a new business.

 

 

 

Ready to plan your revenue for Q2 2021? Join me Saturday, March 13th for the three-hour Revenue and Profit Planning workshop! Visit https://entremoneycoach.kartra.com/page/quarterlyintensive for more information!

 

 

“I don’t pay myself; I just take a little bit here and there when I need it.” I hear this phrase all the time from entrepreneurs. Even from owners of businesses with employees. They just don’t take a check. But they do get paid. Here are some of the top objections to setting paydays, and some reasons you should really do it in your own business and for yourself.

 

Payday: image of someone counting money

 

 

 

1. Setting paydays: It’s all my money anyway

 

Maybe. Depending on the structure of your business that money belongs to your LLC or corporation. If you are a sole proprietor the argument can be made that yes, it’s all yours.  But you are earning it in your business and keeping business and personal finances separate is important. Now, I know some business owners that still use their personal accounts for business transactions. They accept credit card payments to their personal accounts. That creates kind of a mess for business expenses. There are fees for accepting cards, and these are co-mingled with personal money. And oftentimes, business expenses are missed when they are mixed in with the personal.

 

Separating your finances is one of the easiest things you can do that protects the integrity of your business record keeping. All of your payments earned in your business go into the business account.

Your expenses stay clean and you can still get your money from the work you do in your business.

 

 

 

2. setting paydays: I don’t need take the extra step to write myself a check.

 

Taking the extra step to pay yourself protects your business and personal cashflow. Here’s what I often see happen. The electric bill is due, and “just this once” you are going to use the business debit for your personal expense.  Or you just write a business check to the orthodontist because it is just “easier” than taking a check and depositing it in your personal account.  In both of these very common occurrences you are potentially messing with your cash flow.

 

If you dip into your account throughout the month for expenses you are increasing the chance for a cash flow issue.  There are always things that can happen to your income. You can have a chargeback. Or you can have a client pay late. Or you can have a down sales month. Many times, unexpected challenges affect our business financially for a time.  If you set two days a month that you would take time to write that paycheck (for what you really need to support your personal expenses) you allow the cash in your business to build up throughout the month. For example, instead of 8 draws on your cash for personal bills, you would have two.

 

 

 

3. setting paydays: I don’t take that much anyway.

 

The tax liabilities on small business owners can be huge where the taxes aren’t withheld when money is taken from the accounts. More than once when the books are actually reviewed did the entrepreneur have to do a double-take to see what was actually taken. Owner’s draws, those little withdrawals from the account for personal use, add up and they are taxable as self-employment income.  In the U.S. you have to pay Social Security and Medicare taxes on your personal income. It is very easy to take a little bit each week, and not pay taxes on it. Because it doesn’t feel like very much.

 

 

 

 

AUTHOR’S NOTE:

In reality, you can set up a process to withhold and deposit your taxes every time you take a paycheck. Having an online payment portal to the IRS is easy in the states.  You can make a transfer when you pay yourself.  Over the course of a year, it is very easy to take $20k or more from the business and not feel it. $20k a year is only $1667 a month, which is a little over $400.00 a week.  Pay your car payment and insurance, grab a little bit for groceries, and buy a birthday gift for your mom and you can easily hit that a month. You will then owe taxes on that $20k.

 

Take the time to set yourself up to protect the integrity of your business records, protect your cash flow, and protect your personal income by setting up paydays for yourself. Taking a check every other week is a great way to also predict your income for your personal expenses and allow you to have some income security.

Money management should align with your personality and the way you like to do stuff. Radical, right? I believe one of the biggest obstacles that business owners face when it comes to money stuff is the idea that there is only one “right way” to do it. This software. Or that spreadsheet formula. Or these guidelines. But if we are really honest, there are actually very few things that have to be done a specific way. Tax and employment filings, sure, but the way you track and manage your business money is up to you. The method you choose just needs to be in a manner that protects your business records and would stand up to an audit, just in case.

 

 

 

What is Aligned Money 

Management?

 

 

So, what is aligned money management? Managing your money in alignment with your financial style, so you stick with it (even if you never learn to enjoy it).  When we try to force ourselves to use a system that doesn’t naturally work with our style of doing things it rarely works. This is a common issue, and it often creates a struggle and resistance to doing the things that support our business growth.

 

A great place to start is with your financial personality (If you don’t know which personality you best identify with, visit this blog to learn more).  It’s important to know how you currently relate to your money. Particularly your business money. For example, do you ignore or obsess over your financials? Whichever it is you can then begin to work with your money in a way that feels relatable.

 

 

 

MONEY MANAGEMENT STRATEGIES

 

Next, we need to examine your comfort level with different management strategies. How are you tracking other things in your business now? Are you a pen and paper person? Do you prefer software or spreadsheets? Do you like more automation or are you comfortable entering data points regularly? Your natural comfort level with certain approaches can easily translate to your financial tracking.  There are templates for paper and pen tracking, apps and software, spreadsheets, and computer formats available for anyone and any budget.

 

Finally, it’s time to start trying things out and being open to tweaking your approach. If you know that pen and paper is how you like to do things, grab some templates, and try them. If you like automated software,  start shopping for one that feels pretty intuitive for you. Many have free trials, so try them. If you like spreadsheets but don’t know how to set one up, get some help creating one that works for you. If you are really at a loss for where to start, hire a money pro to help you. Ask your accountant or have a session with a financial coach.

 

 

 

AUTHOR’S NOTE:

It can take three months or so to get into the habit of managing your money if you don’t do it now, so make sure you build in some grace and room to make mistakes or forget stuff. Particularly your internal processes. If you are worried about the most important compliance things like taxes, turn them over to your accountant so you have the knowledge that they are done correctly. You CAN create a money management strategy that works for you, your needs, your personality, and your organizational style. Making sure your money approach is comfortable and aligned will help you stay consistent with your finances.

 

 

 

ANNOUNCEMENT!!!

 

Our Book Club for The Profit Accelerator for Small Business begins in a few days! You have free exclusive access to the club when you purchase your copy of The Profit Accelerator for Small Business book on Kindle or paperback.

 

 

 

This is the time of year when many small businesses make the bulk of their revenue. In fact, a third of all U.S. small businesses report that 4th quarter is their biggest earning quarter. It can be very tempting to take the additional income generated through December and tackle debt, especially this year when so many businesses incurred debt to stay open.

 

I want to caution you against really slamming down debt this quarter without having a plan in place to protect your business in January, February, and March, a time when many businesses have slower sales. This is particularly true for Business to Consumer sales companies. Now, to be clear, you don’t want a lot of debt hanging over your business, but before you completely pay off the Visa, do these two things first:

 

  1. Have a Bit of Money Put Aside for Unexpected Stuff. If you haven’t created an “emergency fund” before now, consider it. Have a few months of expenses in the bank to cover anything unexpected that may arise. You may not actually need it, and then you can make decisions to use the set-aside money for debt in the future. Just make sure your monthly operations are covered, first.

 

  1. Create Your Debt Snowball. A debt snowball is a great way to plan to pay off debt quickly, much quicker than making the minimum payments for the life of the debt. As a trained Dave Ramsey financial coach, I find his method of planning your snowball (and getting it done) to be the easiest and best. Here are the basic steps:

 

  • Step 1: List your debts from smallest to largest amounts. Don’t worry about interest rates or payments.
  • Step 2: Continue to make all of your minimum payments on all your debts except the smallest one.
  • Step 3: Throw as much money as you can on the smallest debt, until it is paid off.
  • Step 4:Move to attacking the next debt, adding the payment from the paid off debt to increase your monthly payment amount.

 

You will continue these steps until all the debt is paid, and as you go the monthly payments get bigger and bigger as each debt payment is rolled into the next one, creating the “snowball.” You should sit down and list the bills in order, the payments for each, and generally calculate the payoff dates. 

 

Now, you can throw extra money at the littlest one at any time. So, don’t be in a rush to tackle it if you are unprotected. I don’t want you to fear debt, just don’t plan to stay there forever. If you create your emergency fund, and sit down to define your snowball plan, you will be in great shape to get your debts paid off while you continue to operate with ease. Happy Entrepreneuring!

 

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