Most small business owners only have one frame of thought when it comes to running their business and money. Its simple make money off what they are selling. Today, I want to discuss 10 financial moves you should be making a small business owner to make sure your companies future is bright.
Understand Financial Terminology
One thing for sure you need to have knowledge of financial terms being used in your personal life and business life. Not only so you can understand what others are talking about but for you make sure your business is aligned. When I was in my twenties everyone was talking stocks, bonds, IRA, 401K and more and my eyes glossed over. Take the time to learn the key terms that apply to your finances and what they mean for you.
Right now if your business was sued and the person won their case where would the money come. Most small business owners are operating as sole proprietorships with no protection for their small business. Selecting your legal entity for your business is one of the best financial things you can do for your business. In some states its only $25 every five years to have. Brandi of Brandi Howard Law has great content on legal for small business owners.
If you are running a home based business having business insurance is a great protection for your business. Outside of having rental or proptery insurance you need to legally protect your business assets. Currently my business insurance is also supplied through my car insurance and life insurance company.
This is something I think I will harp on until the end of time. Having an emergency fund is so important for your business and personal life. What happens if you lose your laptop today? Or your whole inventory is wiped out because of an accident? How are you going to replace everything without missing a beat. Having three to six months of business expenses saved is a great emergency fund to have.
Your business should be moving towards a financial sales goal every month. Currently ICB Consults sales goal monthly ranges between $7,000 to $15,000 a month depending on the month. These numbers were determined based on past sales within the company and adding 10-15% to the base line. Creating a yearly, quarterly and monthly sales goal will keep your business on the right trajectory.
Plan Out Big Purchase
No business is an island that only relies on wifi to run. You need to tools, equipments, resources and more to run your business. In November, I sit down and think about all the things I want to purchase the following year from my business. There is no way I could function by buying three iMac, software, paper cutters and more in the start of the year. Its best that I plan out each purchase for separate quarters of the year.
What is your companies yearly, quarterly and monthly operating budget? Are you operating your business on every penny that came in the month before? I truly hope not. Its important that you plan out what your company will be earning and budget your business out for the year, quarter and month. Operating on a budget will keep you focused.
Pay Off Debt
Having mounds of debt and running a business can be extremely stressful. Imagine running a business, personal debt and business debt. That is a lot of money going through your hands. If you are planning on launching a business, I suggest launching a business without debt. Then create a strategy to knock any personal debt you might have.
Start A Retirement Plan
After you have paid off your debt and established a year worth of business expenses look into creating a retirement account. A couple years ago, bankers were suggesting I create a retirement account in that moment. Yes, I could but honestly that too little going to it. Imagine investing money back into the company, paying off debt, saving and trying to put money towards a retirement account as a business owner. Its best to knock those first two out and then start planning for your retirement as a business owner.
Create Extra Streams of Income
Once your business has one solid income stream its time to add another stream. Let me point out your extra stream income for your business should not come into effect until that first income is enough to make it your full time job. Too many people want seven streams of income but all seven together make one income level don’t do that. Get one income level that is bringing in $40K a year by itself than introduce another one.
These are ten financial moves you should be making for your small business to align it with success. You only build long lasting wealth by having a solid plan.