It can be easy to get caught up in throwing money at this or that…
How do you start taking control of your finances when you’ve just been winging it all this time? I’ve talked to a lot of business owners who don’t have a good grasp of their numbers and have been just coasting along resulting in some serious financial issues. So if you’re one of those who’s just been paying the bills and taking a little home here and there when you need to, or taking out debt to stay afloat, or just feel lost financially, here’s the 5 basic steps I recommend to start taking control of your business finances.
#1 Assess the damage
First and foremost, you have to understand the exact position that you’re in so that you can even begin to know how to move forward out of the mess. Update all your financial statements; your revenue, debts, profits, expenses, etc. Don’t worry about what’s “good” or “bad” about any of it right now, just get the real numbers in front of you. It’s this data that you have to have in order to start moving forward.
#2 Determine necessary expenses
Not always, but oftentimes, there are improvements to be made to your expenses. Where can you make cuts? How can you ensure each expense is an efficient use of your money? So I want you to make 3 lists…
One list of absolute necessities, like the bare bones minimum to keep the lights on and the doors of the business open.
One list of the stuff that simply make things nicer or more comfortable.
And the other list for the definitely don’t need but want to have stuff.
The first is the only one to worry about right now. The other two can be cancelled and added back in when you’re more financially stable. When you’ve dug yourself into a hole, you have to swallow your pride, make some serious concessions, and stick to the bare minimum until you’re out of that hole. It may not be comfortable, and you may not particularly want to do it, but you’ll dig yourself out of that hole a lot faster if you’re willing to make some sacrifices in this first part.
#3 Take Stock of Revenue
What are you bringing in versus what do you need to bring in? This is where you want to recognize the amount of money you want to make and the savings you want to build, then work that into your revenue. What are you sitting at right now and what kind of changes need to be made to increase that revenue to give you that number.
#4 Create realistic goals and timeline
Understand that your business isn’t going to suddenly go from in debt and struggling to stay afloat to wildly successful overnight. It’s going to take time. So be realistic when setting goals and what you can expect to achieve in a certain amount of time. For those who are hanging on but not doing great, it may only take a few months of really busting butt to get things under control and be well on their way to a solid financial foundation. For those who are really in a hole, this might take much longer. Give yourself some grace here and expect everything to take longer than you’d like. It’s better to be pleasantly surprised when things move faster than you plan for, than to be disappointed constantly when it feels impossible.
#5 Create a plan of action
Knowing these numbers, coming up with goals, that’s all wonderful. But it’s only the starting point. It’s the clear path, a solid plan of action that you then IMPLEMENT that will make this work. So get as detailed as possible and start piecing together EXACTLY what you need to do to make this happen. What cuts will you have to make? What pricing structure will you need and how will you implement it? What marketing efforts will you need to carry out? All the things. Put it down in a list to check off as you go. Each step is progress.
It’s ok if you’ve made mistakes, gotten in over your head, or didn’t do all the things you should have. Wallowing in it and staying in that place isn’t going to help though. Do the hard thing and assess it, figure out what’s going on now and determine where you want and need to be, then start putting the pieces into place to get yourself there. You got this!