When you started your business, did you do it because you wanted to work 80 hours a week? When you took the plunge, was it your hope that you would never see your family? Did you want to lose sleep, lose hair and make Tums your own personal food group? Of course not.
Most small business owners become small business owners because they want a better quality of life: more time with family, vacations, a beach house, picking children up from school, etc. Just last week, one of my clients said that her most important personal desire is to have breakfast with her children every morning.
Folks, if you want to achieve personal victories through your business, you have to run your business like a business. Redundant? I don’t think so. How many of these questions can you answer?
- Year to date, what is your average monthly gross revenue?
- What is your year to date average monthly net profit?
- What % of your capital is tied up in equipment and inventory?
- What are your top three revenue sources?
- Where did you receive the best return on investment for your marketing dollars?
How did you do? If you did not know the answers off the top of your head, would be able to get them within 20 minutes?
Three Key Financial Items Small Businesses Should Track
Strategic planning is not just an item to check off your list of things to do. It is essential if you want your business to support the life you’d like to live.
Karen Chase of Chase and Chase CPA’s recommends these three things as the minimum small business owners should regularly track:
1. Your Revenue/Sales Monthly or weekly sales tracking will you help you identify cyclical trends and your sales to budget. Having these numbers handy will help you respond quickly to changes by increasing your sales efforts, cutting expenses or looking at new products.
2. Cost Per Sale Tracking how much it costs to deliver a sale is crucial to your small business. Are you putting in 30 hours for a $500 sale? What are your out of pocket expenses for each sale you obtain? Chase says, “Most businesses will prepare a budget to project how much it may cost to deliver a product, but the projection needs to be tested for accuracy. This is where most small businesses fall short.”
3. Accounts Receivable Sales are only as good as your ability to collect the fees or “receivables.” Chase suggests you track the age of your receivables, contact clients who are approaching or have passed the due date and make tough decisions when necessary. “Many small business owners will continue to provide services to a non-paying client,” says Chase. “However, that practice will quickly drain your business of operating capital for other parts of your business such as marketing or equipment upgrades.” Being in business for yourself means that sometimes you have to be “the bad guy” with some clients to be “the good guy” to other clients, your employees and your family.
For Your Consideration
What is your “beach house?” What is that thing you aspire toward in your personal life? Will you dedicate yourself to planning your business to help you get there?
Photo Courtesy of Dilipkumar.
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Alicia,
Your ‘beach house’ reference is perfect! I’ve had a series of such aspirations during my 12 year- business ownership gig. Most recently, ‘we’ (hubby and I) have aspired to a tropical lifestyle, more nimble access to our sailboat and a consistent pattern of warm breezes and waves.
The reality is reaching that destination requires the constant and strategic business analysis you describe as well as intimate tracking and tweaking of revenue, costs, profits, etc.
Your blog post is a firm, yet encouraging reminder as the new year looms, of the importance of business acting as a ‘business’ to achieve both business AND personal goals.
Cheers,
Jacqui