Financial management and planning can be overwhelming for a new entrepreneur.
Isn’t it enough to get the order, deliver the product or service, and collect money?
If you would like to enjoy long-term profits and growth, you must develop habits that will serve you well during your startup phase and even after you’re able to hire a bookkeeper or accountant.
Here are four habits to practice on a regular basis:
- Set quarterly financial goals. Set specific goals and track the metrics that are drivers towards success. For example, if you want to earn an additional $20,000 in sales, determine how many new or repeat customers you need to serve that quarter and multiply that number by your average dollar sale per customer to reach your goal.
- Track weekly performance through simple record keeping. Whether it is your marketing response, conversion rates or your financial records, be sure that you have a system that allows you to capture and track your financial performance. If you are a solopreneur, you will need to set up tracking systems that are automated (e.g. point of sale software) and get transferred to an accounting system each day. If you’re a growth company, be sure that all of your team members understand what numbers are being tracked and how they will contribute to meeting your performance goals.
- Analyze and evaluate your outcomes and trends each month. Once you have accumulated financial data you may begin to see trends and patterns you did not anticipate or previously deemed irrelevant. Are your costs increasing? Is a marketing campaign not converting? I typically don’t analyze performance until I have at least five weeks of data. This helps me determine what adjustments I need to make for the next quarter.
- Plan for profitability upfront. We’ve been using the Profit First approach; we set aside a small percentage of each week’s income into a separate profit bank account BEFORE we start paying bills. This has funded all of our family vacations over the past three years and made our family a big supporter of the family business. Check out this helpful Profit Assessment Worksheet from Root Financial to find out where your business stands in regards to your Target Allocation Percentages. I recommend you read Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine by Mike Michalowicz if you are interested in learning more about this.
Don’t put off these habits any longer. They will pay off in the long run, and as you learn more about financial management, you’ll know what data to look at and how to grow your business to help you achieve your financial goals.
What other habits have worked for you? Reply back and let me know.