Plenty of business owners can tell you their revenue. Fewer can tell you their profit margin, how many months of expenses they have in reserve, or whether they are on track for retirement. That is not a character flaw. Nobody hands you a finance department when you start a business. But financial planning is one of the things that most determines whether a business gives you security or just keeps you busy.
This is general information, not financial advice. A good accountant or financial planner can help you apply it to your situation.
Know your numbers
At a minimum, you should know your monthly revenue, your monthly expenses, your profit, and your cash on hand. Look at them every month. A simple monthly review, even 30 minutes with your bookkeeping software, catches problems early and makes decisions much easier.
Pay yourself on purpose
Many owners pay themselves whatever is left over, when there is anything left over. Decide on a regular owner’s pay, even if it starts small, and build your pricing and budget around it. A business that cannot pay its owner is not finished being built yet.
Build a cash reserve
A business reserve covers slow months, late-paying clients, and surprises. Set a target number of months of expenses and put a small percentage of every payment toward it until you get there. Cash in the bank buys you the ability to make decisions calmly.
Set money aside for taxes
Keep a separate account for taxes and move a percentage of each payment into it. Your accountant can help you pick the right percentage and figure out your estimated tax payments. Surprise tax bills are one of the most avoidable financial problems in small business.
Separate business and personal finances
Separate bank accounts and cards make your books cleaner, your taxes simpler, and your business finances easier to understand at a glance.
Plan for retirement
When you work for yourself, nobody is automatically contributing to your retirement. There are retirement account options designed for self-employed people and small business owners. Ask your accountant or a financial planner which fits your situation, and start contributing something, even if it is small.
Protect what you are building
Business insurance, personal insurance, and good contracts protect you from the kind of events that can undo years of work. They are not exciting purchases, but they matter.
Plan for growth
Before a big investment, like a hire, new equipment, or a new program, work out how it affects cash flow, how long it will take to pay off, and what happens if it takes longer than expected. Growth that strains cash flow can hurt a business as much as a slow year.
Get the right help
A bookkeeper keeps your records accurate. An accountant helps with taxes and strategy. A financial planner helps with personal and long-term goals. You do not need all three on day one, but most growing businesses benefit from at least one. If you need recommendations, ask in the WEN Facebook group. Other members are usually glad to share who they trust.
Related: Business Resilience for Entrepreneurs.
