Learning about your business finances can help you make leaps and bounds towards more fruitful interactions, purchases and investments, overall smarter spending decisions, and a comprehensive outlook for where your business is now and where it could be in the future. I sat down with Fractional CFO and Business Financial Coach, Carrie Cook of Revive, to chat about her four-step approach to building financial stability.
Carrie believes that with deeper financial insights comes the empowerment of choice and a better balance between what we do, how we make money, and our own personal lifestyles.
“I truly believe that it’s when people start viewing their business as more than just a job but instead an empire that could serve them well into retirement, that their commitment to financial, operational, and creative organization becomes what it needs to be. I love working one on one with new business owners; the interaction amongst us and witnessing those sparks of understanding through shared knowledge is really what I am all about at my core.”
The first of the four pillars is time management. When Carrie first meets with a client she wants to know if they are aware of how they spend their time on a regular basis. Events can be treated as equally important as long as they are scheduled into your day.
“Attending a child’s sporting event is just as important and valuable as balancing your books, but carving out dedicated time for each of these activities is what matters most. It’s a way you can track your own productivity, evaluate the return on your time investment, and set boundaries in both your personal and professional life.”
By understanding where the day goes, you can set realistic goals to accomplish tasks of any size with directed focus. No more aimless time sucks from your day; instead a well-structured calendar to ensure the fruits of your labor do not go to spoil.
The next is understanding where your money goes. Is it frivolous spending or does the return on the investment prove it a valuable move?
“Setting a budget is all about assessing what you should be spending your company’s money on. Often I work with people that overspend in operational costs when they could streamline their software or subscription services and underspend on marketing their brand. By spending more dollars on promoting your business and brand awareness, you will increase your potential client base with an expanded audience – never a bad thing.”
For myself and Avery, we are consistently reviewing our subscription-based services assessing whether we can downgrade, combine, or even upgrade to a better “bundled” deal. I feel like such a responsible adult when I take our monthly spending budgets into consideration. Like the powerful business owner I am.
Carrie likes setting up percentage-based budgets with her clients. “I always recommend 15% of your income rolls into a designated business savings account, with another 15% going directly into a tax savings account for the end of the year. With yet another 14-18% of revenue being automatically reinvested into your business…whether that’s for marketing purposes, new equipment, networking or conference travel, the choice is yours!”
Carrie’s third pillar is evaluating job profitability. What is your cost of doing business vs. your revenue? Are you making a profit? If so, how much?
To ensure that you have healthy enough profit margins, you need to know how to properly price your goods or services. And this takes research. Find out what others in your industry are charging and under what parameters. Are they charging by project? Hourly? Service or product bundles?
As we talked a bit about the budget section, understand what your monthly expenses are for your business. If you aren’t coming out ahead you will either need to evaluate your current situation and decide a course of action to improve for profitability. This may include charging more, service/client analyst or cut your expenses down.
Which will it be?
“We all know what we’d like to be doing, both with our time and our money, but if we continue to go blindly into our business without actually knowing the numbers, we could be sinking ourselves into either immediate debt or a future financial storm.”
As Carrie illustrates, ignorance is not always bliss.
Something Avery and I learned firsthand was the need to pay ourselves. So many of us entrepreneurs get stuck in the mindset that since we are technically the only employee we can hold off paying a salary until we are profitable. But that’s just not the case. If you aren’t paying yourself, how are you affording your life? Food? Clothes? Shelter? You know, the basic needs we all need and deserve for all the hard work we do as entrepreneurs. Entrepreneur’s Hierarchy of needs.
Paying yourself keeps the lights on in your home office and the internet flowing to your laptop… very important things when owning your own business!
Partnering with a Professional
Finances are hard. Harder for some more than others. But the good news is that you don’t have to wear a financial cap alongside the other hats you are already balancing. There are professionals there to teach, guide, and manage the numbers you may not have the capacity or interest to do. I know getting financial advice or coaching is something I would have done sooner in my business so consider reaching out to Carrie.
In the meantime, be proud of taking the first responsible step forward in your finances – by reading this article!