Too many entrepreneurs neglect to make themselves a priority in their own business. The entrepreneurial spirit creates resistance to joining the ranks of corporate America because we value our independence and crave financial freedom. Yet the challenge of balancing priorities and making sound choices prevents many small business owners from achieving either. But with vendors knocking on the door and in-laws awaiting their monthly loan payment, how can soloists make their own financial needs a priority?
Let’s start at the beginning and take a look at some of the common mistakes made by small business owners as they launch and grow.
Start-up investment – Soloists often make the mistake of leaping in on a hope and a prayer that they will get enough clients or sell enough product to make ends meet. If you are considering the leap from job to self-employment, consult your accountant or a qualified mentor/coach to help you calculate the costs and a realistic financial projection. The excitement that you feel for your new venture will certainly cloud your judgment in this area. Don’t quit your day job until you have banked enough cash to carry the load. This includes both personal and business expenses, for an adequate length of time. And, of course, be diligent about your marketing plan so you know exactly where your clients will come from.
Cash Flow – Run your business by the numbers. My confession: For years I have kept a little “Beanie Baby” ostridge on top of my desk. It’s my reminder to NOT keep my head in the sand about cashflow and numbers in general. Sure, it’s scary to visit that P&L statement, but if you don’t face your numbers you will make mistakes – and mistakes compound themselves when they are not corrected pronto. Be smart about your cashflow. Set terms for collections and be diligent in collecting monies in no more than 30 days. Never make assumptions about how much and when a client will pay you and avoid spending money you don’t have.
Trading Dollars for Hours – Take a look at your business model. If you are a consultant, coach, massage therapist or the like, you are probably trading your time for a set amount of money. You have created a financial ceiling for yourself. And, you will most likely burn yourself at some point. You will always rely on your ability to attract the next client and, unless you are a very high-paid consultant who budgets for retirement, you probably aren’t planning for the future. Consider creating additional revenue streams with products, membership sites or another creative form of income. Many solo practitioners find products sold by network marketing organizations that are a great fit for their business. Some create information products and some can sell companion products on-line or at their location.
Scale up to a Salary – If you have investment dollars and are paying yourself from a bank account, rather than profits, try to split the bank. Avoid the comfort zone trap – fooling yourself into believing that your business is doing fine because you can pay your bills. How soon will you be able to withdraw less from savings and more from your business each month? What expenditures can you avoid so that you can take a draw and/or salary from your profits? Remember, you cannot truly prosper until you begin to pay yourself a fair wage, put money in savings and reserve funds for growth and unexpected expenses. Create a business and personal budget, account for every penny you spend and stick with it!
Do you have other tips or personal experience to share? Tell us how you’ve succeeded in taking home a healthy paycheck!