How do you start taking control of your finances when you've just been winging it…
It’s no secret that 2020 handed small businesses a horrible deal. Months with no revenue, landlords and utility companies still expecting payment, and extraordinary precautionary measures to take if and when you reopened. Entrepreneurs around the world have emptied their savings accounts and taken on debt just to stay in business. And depending on where you’re located, it doesn’t look like some of these things are going to change anytime soon. So how do you financially recover from this?
#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 this mess. Update all your financial statements and determine how they stack up against this time last year; your revenue, debts, profits, expenses, etc. Beyond just these numbers though, you’ll also want to consider other not-so-measurable information, like decrease in appointment availability (all that extra time cleaning that means fewer appointments each day), loss of employees or renters (those who can’t or won’t return), loss in market availability (locals who can no longer afford your services or no longer fit your ideal clientele), and other variable data points.
All of this can give you a clearer picture of exactly how your business has been affected and therefore what your next steps can and should be.
#2 Determine your financial obligations
Whether it’s back-pay on utilities and rent, debt you accrued trying to maintain your business during the shutdown, an increase in expenses and decrease in revenue due to local restrictions, investments that need to be made to improve your business’ likelihood of success, figure out exactly what you owe and what you can financially expect over the coming months. You’ll need to work these extra costs into your plans moving forward.
#3 Rework your budget
Your old budget probably won’t work anymore, so completely overhaul this. Take the time to work up a new budget with all this new data in mind. If you’re going to ramp up your marketing, invest in new equipment, cut out unnecessary expenses, restock inventory, or anything else, factor all of this into your new budget going forward. Also keep in mind that you’ll want to reevaluate and tweak this each month as you move forward. These uncertain times mean that your budget is going to have to be a bit flexible as you test and adjust to not only stay afloat but thrive during this time.
#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. Just like when you first start any business, it takes time to build your clientele, get your bearings around your market, and the ins and outs of all the aspects of running things…for many of you, this is like starting over. So be realistic when setting goals and what you can expect to achieve in a certain amount of time.
And let me just add as a side note, your short-term future may look very different from what you’d like. For some, going back to being an employee, doing something outside of the massage industry, or working multiple jobs may be the solution for a while. It may not be ideal, but sometimes we have to accept that a short-term hardship is the solution to get us back on track for our dream in the long-term. So please, don’t feel bad if that’s you. Don’t feel like you’ve somehow failed if that’s the road you need to take. COVID has left a scar on small businesses around the world, with some reports saying as many as 1 in 6 businesses are shut down already, and more are going to follow.