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Establishing a Financial Foundation

The Key to Consistent Cash Flow

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Cash flow problems can spell disaster for your business – but it doesn’t have to be that way! With the help of a finance expert, you can get a cash flow review and work with them on a strategy to maintain consistent cash flow in your business. (Learn what a consistent budget looks like here).

A cash flow review would benefit your business because you can keep track of the fluctuations, figure out how to time out your cash flow for consistency, and you’ll have more money to invest and play around with. 

The cash flow review shows you how much is going in, how much is coming out, when those peaks and valleys occur and why.

Do you know if you’re making a profit? Are you breaking even? It can be difficult to run a business that isn’t producing a regular stream of revenue. While that is the nature of most service-based businesses, it’s important to collect and look at your spending data. 

There may be certain times of the year where sales decrease. You might notice a dip in cash flow but realize that it matches up with the time you made a big investment. A cash flow review makes the patterns of your cash flow clearer so you can have peace of mind. (Discover how to take time off in your business with peace of mind here).

With the information from the cash flow review, an expert can help you time out your investments more wisely. You might even get some surprising advice if they recommend you put yourself in debt.  

Some investments are such a sure thing that the temporary debt is worth it. An expert can show you both which investments are worth making and when. Timing out your investments according to your expected cash flow ensures that you make investments when you can afford it and not during a slow period. (If your money’s not adding up, look here).

If you can minimize the fluctuations in your cash flow, you can be less restrained with your spending! That means more money to play with and invest.

When you’ve got the right cash flow strategy, you have the freedom to put more into the growth of your business. You know you’re making the right decision to invest because you’ve created a plan that will keep that cash flow going. Make enough good investments and your business will be growing nonstop. 

Your worries about cash flow will melt away once you work with a finance expert to conduct a cash flow review. You’ll have a better grasp of what your money is doing, if you’re making the right investments at the right time, and how to minimize the peaks and valleys to account for growth.

You can have consistent cash flow! Fill out the questionnaire to see if we’re a good fit to be your cash flow expert.

What Your Money Story Means for Your Profits

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You might think you know your attitude towards money but is that attitude being reflected in your actions? When faced with growth opportunities for your business, the mindset that you developed as a kid is likely to kick in. Sometimes your reaction isn’t what you expect it to be.

I bring this up because getting to the bottom of what’s driving your behaviors that hinder business growth is the first step to developing a healthy mindset. Your current mindset, and those messages you absorbed from your family growing up, are called your money story. Once you make a mindset shift, you’ll be open and ready for business growth. (Find out how to go from mindset to money here).

It’s almost like therapy, the process for understanding the mindset that’s stunting your growth. You’ll need to dig deep, diving into all the details of your money story from your childhood onwards. That will take time so there’s no need to feel bad that you haven’t adopted a new mindset overnight.

First, I want you to think about the way you used to perceive money and your family’s relationship with it. 

Was money a source of tension in your family or did you not even have to think about it? Maybe you never even broached the subject. If you gathered that money was taboo as a kid, you probably shied away from learning more about it. That neglect can create an unhealthy relationship with your money and make it difficult for you to set up a solid financial foundation for your business.

After that, consider whether what you were taught developed into a scarcity mindset or an abundance mindset. 

With a scarcity mindset, you’ll shy away from investing in your business because you aren’t confident you’ll see a return. You believe there’s a limited amount of money for everyone, usually making you overly cautious about spending money on your business or charging more. (Find out how to price for profit here.) If money was a source of tension in your family, you may have taken that tension with you into your business.

An abundance mindset is the opposite of a scarcity mindset. People with an abundance mindset believe that money is an unlimited resource and that if you make good investments, you’ll see even greater returns. This mindset gives you the boost of positivity and hope that’s essential to growing your business.

Once you’ve determined your mindset, think about how that mindset impacts you today.

Start paying attention to how you react to growth opportunities in your business. Do you turn down that opportunity because it requires you to put in skin in the game and it seems like a risky opportunity? Or do you jump on that opportunity because you see its value and have faith that you’ll reap the rewards and see growth in your business? 

Entrepreneurs who have that abundance mindset are open to possibilities, which means they’re open for growth! If you catch yourself saying yes to the first option, you’ll want to adjust your mindset. (Learn how to develop a growth mindset here).

Your money story carries you from childhood to young adulthood to business ownership, which is why it’s important to understand yours. This form of financial literacy will help you heal your relationship with money and allow your business to grow.

Want to dig deeper into your money story? Use my free resource, What’s Your Money Story? here.

Why Financial Literacy is Important for Small Business Owners

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Here’s an inconvenient truth: Your financial role models are probably still affecting how you handle your finances today. 

Maybe your parents weren’t responsible with their money and you learned your money habits from them. Maybe because they never talked about finances in school and all you were taught is that wanting more money is bad, you’ve learned to downplay its importance and ignore it. Now cash flow is at the center of your business’s survival and you’re finding out you can’t ignore it or bring any bad money habits into your business if you want to succeed.

With some dedication, you can gradually move past your conditioning. You can let go of those limiting beliefs that are keeping you from abundance. (Read more about limiting beliefs here).

The way forward is through financial literacy. Financially literate women business owners are a million times more confident and more prepared for whatever money situation that gets thrown their way in their business. 

Convinced you should grow your financial literacy? You’ll want to make it a habit to regularly seek out education, learn to see your money objectively, and get an accountability partner.

Seek out education.

There are so many resources out there. Unfortunately, you’ll probably only be able to touch the surface of all the available information but it’s worth asking and finding an answer to these two questions: What don’t I know? and Where can I learn what I don’t know?

You might prefer learning through a blog (Get more actionable advice and learn more about the basics, like small plates accounting, here), a book, by reaching out to another business owner, taking a course, or attending a webinar. Follow how you prefer to learn so that you’re engaged and absorb the information.

Get objective about your money.

We all tie emotions to our money. It’s a human reaction because your money affects your quality of life. It’s what gives you access to your vision and allows you to provide for your family. However, that makes decision-making in financial matters difficult. If you can manage to separate your feelings from your finances, you’ll be able to make responsible decisions based on the data. If not, you may need to outsource your financial matters. (Find out whether your business could benefit from a bookkeeper or an accountant here).

Find an accountability partner.

Getting familiar with your finances can be a scary prospect to face alone. The fear and uncertainty might convince you to continue to ignore your finances or that you’ll pay attention to them later. An accountability partner won’t let that happen. They’ll encourage you that you can get a handle on your finances and help remind you why you’re learning more about your finances in the first place. Working by yourself, you might let yourself slide and then be disappointed about not reaching your financial goals or improving your finances. With an accountability partner, you’ll be kept on track. Plus, you’ll have someone to celebrate with when you reach your goals!

Keep educating yourself, separating the emotions from the money, and checking in with your accountability partner and you’re bound to be in a better financial position in your business. Financial literacy is powerful because knowledge is powerful. (Read more about the power of applying that knowledge here).

No matter what you were made to believe about finances, you are more than capable of shedding your limits and creating abundance in your business. I can’t wait to see you succeed.

Your Gross Profit Margin and Why It Matters

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Want to make more profits? Not even sure if you are making a profit? Calculating your gross profit margin should be the first thing you do. Your gross profit margin is what’s left after you factor in what it costs to sell your services. The money that you take from that goes towards paying yourself and your employees. 

Your money’s in the margins. If you don’t know what those margins are, you can’t properly plan on how to run your business with the most efficiency and profitability. (Find out how to get more efficient here). To get the gross profit margin rather than just the gross profit, you’ll want to follow this formula:

Revenue – Cost of Services Sold / Revenue x 100

Once you calculate that percentage, you’ll have the necessary insight into how your business is doing and how you can do better. (Here’s how else you can grow your business.) It will reveal the answers to these questions: Are you producing a profit?, What services are you profiting most from?, and What services are you not profiting from?

Are you making a profit?

Delivery costs can make or break your profitability so it’s important that you take them into account when you’re determining how much money you are actually taking home at the end of the day. 

Your expenses fall into two different line items: Cost of Services Sold and Operating Expenses. An example of the difference between the two is that the amount of time you spend specifically on client deliverables is your Cost of Services Sold whereas the amount of time spent on every other task like filing paperwork and marketing your services is part of your Operating Expenses.

The gross profit margin only takes into account your Cost of Services Sold and not your operating expenses. That way, we can focus on the variable costs that are relevant when you make a sale and not the fixed costs that you incur regardless of whether you make a sale.

If that gross profit margin is in the negative, you aren’t making a profit. That means that your production costs outweigh your revenue.

What services are you profiting from?

You can calculate your gross profit margin from your services overall to determine the general profitability of your services but you can also calculate the margin on each service to find out how each service is performing.

For instance, if you calculate your margin from providing a brand audit and your margin from creating a social media campaign, brand audits yield a higher profit margin. That is your more profitable service that you’ll want to continue to offer and work to improve. (You might want to change your pricing too. Discover how here.)

Maybe you have a negative profit margin overall but one of your services has a larger gross profit margin than the other services you offer. That service will likely be the key to making more of a profit. You don’t have to worry about whether you’re spending time on the right things because the numbers tell you that you are!

What services are you not profiting from?

A service with a small profit margin is probably not even worth offering. The more time you spend delivering that service, only to hardly profit from it, the more business time you’re wasting. 

Your gross profit margin isn’t just another number on your financials, it’s a percentage that informs you about the financial health of your business. It also tells you how to get your profits to grow. If you’re wondering how to get to your next financial goal (Read about financial goal setting here), follow the numbers and you’ll be headed in the right direction.

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