I have to admit that I love the topic of today’s article and the lessons I learned from this experience. Why? Because now I can say clearly: Not investing in my company protects my wallet from stupid or impulsive expenses that my mind could easily rationalize as a good financial plan.
The conclusions I have drawn from this experience stop me now from implementing immediately ideas that mean additional, unspecified, and unexpected financial expenses. In other words, when it comes to finances, I remember the adage: “‘marry in haste, repent at leisure.”
But from the beginning!
I don’t know if you will believe it, but I was an entrepreneur who was mainly focused on increasing business turnover. That is why I was focused on the development of the company and investing in it – in equipment, advertising or various other services – everything that could bring more sales and higher turnover!
Those 8 years ago, I was so keen on developing my business that I often shared my plans,
challenges and problems while talking to other entrepreneurs. They, on the other hand, started (for good reasons) something that I call “an attack of a helping hand”. What does it mean?
It means nothing more than sprinkling with advice what they think I need to solve the problem. Most often it was about changing my way of acting, sometimes about acquiring a certain skill, sometimes about investing in equipment.
And they were right. The things they talked about were necessary for my business.
So I used their advice a lot and put more money into the business!
Now the question arises: Was it good or bad?
Was I doing the right thing, especially since all my investments ended up being good?
Well exactly, these words “end up” play a key role here!
The advice I was getting was good. Services, tools or equipment were needed, but … my budget and cash flow were not able to bear everything in a given year.
My savings were also diminishing because I believed that first, you need to invest in the business before it starts paying you back. In the end, I was creating financial holes both in my business, as well as my home budget – also because of I was enormously investing in my company.
And today? Today I see it differently!
I’m planning investments today! I plan the development of the company today. I do not allow it to leap forward uncontrollably. I also do not allow investments in the company to disturb my financial plan and cash flow.
Now, eventually:
- My financial plan is ready and I know what the costs will look like month to month.
- I know how my sales are planned.
- I know what revenues I can expect, what sales goals I need to achieve.
- I know what surplus I should have and whether I will actually have it.
The fact that in a given month I generate tens of thousands of dollars does not mean that I can spend
them freely. You still have to look at how the next months will look
in terms of costs and revenues.
Do I need to leave the money with the company?
Can I pay it out as an additional salary, or can I invest it?
So, yes, I still like talking to entrepreneurs about what tools or investments they have made in their company, how they have paid off, what challenges I have and what do they think I need. Except that instead of going shopping immediately, I look at what is happening in the financial plan and I check what will happen and how the investment will affect my financial liquidity. And most importantly, I check when and what kind of money this investment will bring me.
Because the investment has to pay for itself within a certain period and generate a certain income!
Have I started to act like this recently?
No! I have been implementing this approach since 2014 when I was still a “micro” entrepreneur not generating a lot of money.
Why? Because when you already generate high income, you need a financial plan, so as not to get lost, to be able to manage the business and multiply the profit.
But while you are still a “micro, micro” entrepreneur, the financial plan protects you from investments that you simply cannot afford at the moment. It helps you plan your spending and make selections. Because in this situation, each $100 matters.
It gives you clarity and peace. You know what you can do and when. You have the financial situation under control. The business simply becomes predictable. You can finally say: “OK, everything is fine. I don’t have an urge of investing in my company every penny I have”.
And how is it with you?
Have you already thought about starting to apply the financial plan at home?
To track costs and income accurately?
To calculate prices based on your costs and financial goals?
How is it for you to be a financial director in your own business?
If you do not feel confident about calculating prices, creating a financial plan, implementing it, or creating more expensive products but you would like to feel more in control of all this, you can schedule a consultation with me. Based on the answers to my questions sent to you before the meeting and our conversation I will show you step by step:
- What you need to recalculate and how to start the calculations in your business,
- What to pay attention to so that your turnover in the company goes hand in hand with profit and with your free time.
So yes – no selling pitch on that meeting but honest analysis of your business, roadmap tailored to your business needs, and a bunch of handful tips on how to implement it!
Also, check out our other articles:
