How often do you open up about money?
If someone asked you right now to disclose how much your business made in the last quarter, how it would make you feel? Would you squirm and retreat into yourself or would you feel proud and happy to discuss at length? Would you even know the number? Does the mere thought of this possibly happening make you uneasy?
If so, exhale. For most people, money is still —unfortunately — a taboo subject. Despite institutions like the Australian Bureau of Statistics enabling us to see that as of 2018-19, 75% of businesses in Australia have an annual turnover of $200,000 or less (25% make less than $50,000 p.a., 93% less than $2m), most business owners aren't too content to be completely transparent about money with friends, family or even (in some cases) their staff.
As someone who works with small business owners across the globe, understanding their financial situation is key to understanding what they most need to improve or expand upon in their business. It's one of the very first questions I ask them. (To be clear, I don't believe that more money = more success, but I do believe that more money knowledge does). Now in my fifth year of working alongside small biz owners, I've seen the full spectrum of attitudes when it comes to money; from comments like, "As long as none of our suppliers complain about a late payment, I'm good not to know my money figures" through to "I'm in Xero every morning and evening to check them".
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How would you rate your knowledge of your business' financials?
Not sure?
If I asked you right now to tell me:
a) your revenue goal for the year,
b) your profit goal for the year (gross and/or net), and
c) where exactly you're at with each as of today, could you?
If the answer is anything less than "yes!", read on...
I believe that knowing your numbers — and checking these on the regular — is the single most important thing you can do as a small biz owner. I have to be honest, for years I did this weekly and in the last few months I've let that slide. Today's email is inspired, in part, by how easy I found it myself to let that habit drift away. If you, like me, have allowed a few cobwebs to form on your tracking of your financials, check out the four tips below to help:
1. Know your numbers. The absolute basic figures for any small biz owners to know is total revenue, total expenses, total profit and cashflow. If you need help understanding the basics, check out my Money Mapping online training or email us for a 1:1 business coaching session. For more in-depth help with this make time to see your accountant or financial advisor (I'm neither of those!)
2. Set up a tracker. This can be as simple as a DIY Weekly Business Review excel sheet in your Google drive or an automated report from an online accounting platform (like Xero, MYOB or Quickbooks), or a more complex completely in-depth detailed report set up by your CFO or accountant. The point is to find some way to review and analyse your money on the regular. Ensure this tracker can be accessed by you easily, that you understand what it's telling you and that you can use the numbers to inform future business decisions. Schedule time in to check, amend and review this.
3. Understand The Buyer Cycle. Yes, here I am yet again [FIRST NAME GOES HERE], mentioning this fantastic framework for business. The Buyer Cycle as you may know (if you have ever worked with me, come to a workshop, read my blog or been on my email for a while) outlines the five stages everyone goes through when looking to transact with a business. When it comes to your money, you want to understand where it's coming from and also where the potential for making more is failing (aka the drop off). Are you spending all of your marketing efforts in the awareness and research stages but none in the evaluation or purchase? Are you getting sales then never talking to those customers again? Reviewing your money figures alongside The Buyer Cycle can trigger ideas for how you'll increase sales in the future.
4. Make it a habit. Depending on where you are in your business, or even in the sales or calendar cycle, tracking money can be a horrible or happy experience. Regardless it has to be done. Consider an average week in your life (use my free Weekly Planner if you need help visualising this). Where might you create a habit to check your money? This may be bringing your laptop to your fave cafe one morning each week and having your beverage at a table while you review your figures. It may be choosing an evening per week to pour yourself a wine or kombucha and look through your figures. If you feel you're already rushed for time, consider using the tomato timer tool to keep your review short and sweet. Habits help you commit. How can you create one for checking your financials?
Issues with money is one of the main reasons that around half of all business fail within their first three years of operation. If you're not completely across your financial figures, look at how you can carve ten minutes into each day or half an hour into each week to review, assess and make changes based on the numbers. As Arthur C Nielsen once said, "the price of light is less than the cost of darkness". Small steps add up. How might you make changes this week to understand your money numbers more?