Do you feel like you create emotional and financial stability in your business? One of the most challenging things about owning a business is the perceived lack of security. As a small business owner, you don’t necessarily have a dependable biweekly paycheck, built-in insurance plans and retirement savings funds like you would as a full-time employee. The security you receive from a 9-5 isn’t worth trading in your dreams for, and as a business owner, there is a level of abundance available to you that you won’t find anywhere else.
While it may feel that your business isn’t as consistent as a full-time job, there are steps you can take and processes you can implement to create more stability as an entrepreneur. Here are 5 ways you can create emotional and financial stability in your small business!
Implement Profit First Accounting Methods in your Business (And Pay Yourself)
Dare I say that Profit First changed my life? It definitely changed my whole business! I’ve always been a profitable business owner and paid myself since day 1. I believe it’s crucial for women business owners to pay themselves, even if it’s just $10, because you should value yourself enough to not work for free.
Though I’ve paid myself consistently throughout the years, I didn’t have a streamlined and efficient system for my accounting until I learned about Profit First! I would pay myself 50% from every payment that hit my business bank account… but that meant that my owner’s draws fluctuated each month based on how much money came into the business.
Profit First is a system that not only guarantees you will turn a profit in your business, but it also sets you up so you can consistently pay yourself a paycheck. The Profit First formula deducts profit from sales and leaves you with the amount available for your operation expenses. This formula prioritizes taxes, profit and owner’s pay first, and then the rest of the money is what you have available to run your business with.
By implementing the Profit First method, I slowly was able to build up the amount of money in my Owner’s Pay account while paying myself a consistent paycheck each month. Now, at any given time, I have about 7-10 months of my salary sitting in my Owner Pay account and the ebbs and flows of seasons in business don’t affect me like they used to. I could go several months without closing any more sales and my business would still be able to pay my salary.
There’s no room for a feast or famine mindset when the numbers speak for themselves and you have the funds to consistently pay yourself. Buy Mike Michalowicz’ book here to learn how to set up your bank accounts with the Profit First method.
Create a Business Budget and Operate Within Your Means
This will be easy once you implement Profit First, but an easy way to create financial security in your business is to stay within your budget. You create financial instability when you spend more than your business makes. I know you have to spend money to make money, but you should be diligent about the expenses you have in your business and be sure they are helping you grow your business.
One of the best ways to create emotional and financial stability as a business owner is to not make big investments until you have the money saved in full to invest. When I know I’ve been diligent to save for a specific investment, it makes it really easy for me to make that investment even if it feels like a stretch. I want my investments to be spent with ease and discipline, and for me that means putting away the money in a slower timeframe so that I can not feel anxious or nervous about the return I’ll get from the investment when it comes time to pay for it.
Hire a bookkeeper or learn how to understand your financial reports
Working with a bookkeeper was one of the best things I did as a business owner. A bookkeeper helps you organize your finances and categorize your bank transactions. They collect all your financial data and format it into a monthly report that you can analyze as the CEO.
Bookkeepers help you create financial stability in your business because they act as a sounding board while sharing accurate data you can use to make decisions. My bookkeeper reminded me once that I am emotionally connected to my numbers. I see my Profit and Loss statements or Balance Sheet and immediately feel a certain way about the numbers. Bookkeepers are unbiased and logical when it comes to your finances. They evaluate your numbers and report back to you with data.
Track your KPIs and know your business numbers
What is a KPI? KPIs are “Key Performance Indicators” and they are ways to measure your performance over a period of time. Some popular KPIs to track in your business are total revenue, number of leads, number of sales calls, etc.
When you consistently track your KPI’s, overtime you’ll learn the seasons of your business. You’ll learn when your busy seasons are, when you can expect to see a spike in sales or experience a dip in inquiries and leads. It’s easy to panic when you don’t have data to look back on. As you learn your numbers and understand the seasons of your business, you’ll be able to make informed and calm decisions when you experience slower months of sales or don’t reach revenue projections.
Recession Proof Your Business (Be Prepared)
There has been so much talk lately in the small business community about the impending recession. I mentioned to a friend the other day that I was tired of hearing about the recession. I see a narrative full of fear and doom, and coaches and gurus trying to tell you your business won’t make it without their help in this trying time. As an Enneagram Type 6 I’m typically the first to be anxious or worried about something… but this time around I’m not.
As a small business owner, you can’t control a recession. If it’s going to happen, it will happen. You can’t control if someone can afford you, if a recession will cause your sales to dip, or how long you may feel the impact of a recession. The only thing you can do is manage your cash flow as best as you can, and take measures to be prepared as a business owner.
To me, being “recession proof” goes beyond my business offers and what I sell. It’s important to build a business that you can pivot and have an audience that is receptive to a change of offers or services. But it’s also helpful to have the back end of your business working for you. Thanks to Profit First, I feel more confident in my numbers and know I can always pay my personal bills. That is what I believe would allow me to take the time I need to pause and create a new or different product or service if I needed to due to a recession or pandemic.
It is a gift to be able to create financial stability in your business for yourself. I am so grateful that I was able to quit my 9-5 job back in 2019 and go full-time with my business. I was hesitant at first and didn’t believe I was cut out for entrepreneurship because of the ebbs and flows. Running a profitable and financially stable business has allowed me to consistently pay myself and grow my mindset from one of scarcity to abundance. If you’re struggling to create financial security and stability in your business, I hope this gives you ideas for how you can create more security for yourself as the CEO of your business.