Whether you’re in a large or small business, money is absolutely an issue. If you’re part of a large organization you have many options available to you when it comes to how you handle money. You’re probably not the owner or founder, which means you’re dealing with someone else’s money.
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It’s different for small business owners. Even if you have a few employees, money issues are always cropping up here and there. Even successful business owners started out struggling for survival, and possibly made one of the 7 things we’re going to talk about here.
Let us preface this by saying that none of these are mistakes, and not everyone’s had to deal with all of these. Most small business have in one way or another. If you haven’t thought about any of these or most of these, we hope this information is helpful for you.
1. Budget for large supply items
We know individuals hate talking about budgeting, but a lot of small businesses hate thinking about budgeting also. It’s imperative for both groups, but could be detrimental to one’s business if it’s critical that they keep large cost items covered. Some businesses need to replace costly supplies on a consistent basis, while others might not need to replace anything for a few years or more, but it pays to budget for any high cost items that are imperative to keep your business going.
How much you budget and plan for depends on what your business is all about. For instance, if you’re an accountant or do consulting work, it’s probably important to keep your technology up to date, whether it’s a desktop computer, laptop or smartphone. Most of these items will run at least $500, some around $1,000. If you’re not the type to get regular maintenance on your technology, you might be replacing it more often than not, so it’s always good to have costs for these things in your budget if it’s something that’s at least 2 years old.
As a caveat, remember that just because you budget for something doesn’t mean you have to spend the money if it’s not necessary. Saving on costs you didn’t have to expend will make you feel better about your business decisions.
2. Budget for educationn
Every business we know about changes from time to time. Some change multiple times within a year while others might not have any changes to its industry other than minor changes every few years. Either way, there’s always going to be a need for education so why not budget for it?
When you’re budgeting for education, there are 4 things you need to think about. The first is offsite training. The second is purchasing material for study. The third are organizations that people in your industry are a part of. The fourth is thinking about how many people might need to go. The assumption is that you already have an idea of the costs associated with things like this, so it’s best to plan it out ahead of time, especially if some of these things might involve travel.
3. Don’t spend money without a plan for making it back
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Most self employed business owners start off spending a lot of money because they think it’s what they’re supposed to do when they go into business for themselves. It’s a wiser move to start small and close to the vest until you start making money or have enough money in reserve to cover both your personal and professional expenses for at least six months (a year is better).
Think about saving money by working out of your house or joining a co-working space instead of paying for office space; not paying for services you really don’t need initially (like people to answer your phones); buying supplies you’re not sure you’re going to use; etc. That’s not a good use of your money.
Counter that by looking for services that can do things you’re not proficient at or don’t want to take time from your business to do, such as having a bookkeeping or accounting service to help you log your income and expenses, someone to cut your grass and clean snow from your property or even to send out marketing letters for you that you create on your own.
4. With that said, learn to spend money to make money
The axiom “it takes money to make money” is absolutely true. Depending on what your business is will depend on the kind of money you need to spend upfront while still progressing towards making your business successful. For instance, Daymond John talked about spending money on finding celebrities who’d put on samples of his clothing so he could use the pictures for marketing purposes. That cost less money than making a bunch of shirts and trying to sell them to make the money back. During that time he was also gathering orders for his shirts, and once he had a guaranteed amount of orders then he worked on finding the money to get his operation started.
For the rest of us, we might have to start closer to home. Joining a chamber of commerce will help us get in front of other business people who might need our services or know someone who does. Having a website built gives you the opportunity to give people your business card with a link on it so people can stop by to see what you have to offer.
5. Save money for emergencies, even if you have to start small
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No one knows when trouble might come; that’s why they’re called emergencies. They’re harder to budget for, but there are ways to do things that might help you offset some of the costs.
It’s relatively easy to set up a fund on your own, in your home or office; all it takes is a little bit of discipline, spare change and dollars. Pool all of your change in one place and occasionally separate it by denomination and roll them up. We have one client who does this and averages $100 every 3 months. That same client takes any amount of dollar bills over $5 and puts them in another container. By doing this he was able to accumulate $150 within six months.
Of course you could always set aside $5 or $10 dollars in your monthly budget, maybe more, and put it in a place where you won’t always be dipping into it. You don’t even have to continually count it; just let it grow and only look at it when you’re putting more money in or if an emergency pops up.
6. Plan how much you want to make to consider yourself successful
One of the biggest problems new entrepreneurs have is trying to figure out how much they should charge for their services. The best way to help determine that is by first figuring out how much money you want to make yearly to consider it as a successful year.
Once you’ve made that selection then you figure out how many hours you’ll need to actually work to make that amount while still being able to cover all your bills and all the ancillary things that count towards living the life you want to live. It’s always nice having a set dollar amount to make but it’s better to try to make more than that; wouldn’t you agree?
Part of thinking about success if figuring out what it looks like to you. Do you want employees? Do you want to travel with your work? Do you want to be seen as a specialist? Do you want to try to work with clients on a recurring basis? Finally, what does the market normally bear for those who do similar work to yours? It’s always better to put these things in place so you have a goal to work toward.
7. Put aside money for your bills and life first
Now we’ve come full circle and go back to that budgeting thing again. We’ve talked about it a lot on this blog and with good reason. Budgeting gives you the opportunity to let go of things that might fog up your mind because with the proper plan you can automate the payment of most of your bills so you don’t even have to think about them. That leaves you time to think about those bills you have that are outside that process such as groceries, gas, etc.
It also allows you to see how much money you have left for things that hopefully will bring pleasure to your life, allow you to spend time with your family and friends having fun and enjoying the fruits of your labor. When all is said and done, worrying about money is depressing. Taking positive steps frees your mind and allows you to concentrate on your career and personal life more. Doesn’t that sound good to you?
