There’s nothing more gratifying when you launch your entrepreneurial career than earning your first anything – it can be .05 off a Google Ads experiment, selling a $50 widget that only cost you $10, or getting your first paid consulting gig. The amount doesn’t matter – the fact is, you did it! You made your first – insert your meaningful financial win here. The truth is – that win gave you hope, confidence, and a new set of challenges. #Growth
3 Common Things
With your first sale and every sale thereafter – there are finances to manage. Three common things an entrepreneur like yourself continually explores in the journey is:
- How do I get paid?
- How do I get profitable?
- How do I keep more of the money I earn?
The answer lies in understanding the five ways you can keep the financial side of your life less stressful.
Create The Money
You conquered the first sale – way to go! The key is to keep making sales while learning to understand that “not all sales are created equal.”
Manage The Money
Letting the money “do what it wants” is not ideal. Money needs to be controlled and the longer you wait to get a grip, the more time letting your money do its thing will cost you. Give your best efforts early to understand where the money is going, where it should go, and who ultimately is in charge of the money. Look at your money often and direct it.
Book All The Money
One of the things we put on permanent repeat at The Bottom Line® is that “the best work is done when the books are done.” This comes down to categorizing your money and making sure you are maintaining an accurate set of books showing all the ins and outs of your money.
Plan Out The Money
Did you know that there are FOUR kinds of “money math” you will need to understand as a budding entrepreneur? No? Me neither – this is a lesson from the “hard knocks” of living an entrepreneurial life. After supporting thousands of entrepreneurs for over a decade, here’s the reality of your business finances no one talks about. You can add and subtract, you can create sales, you can organize and categorize all your benjamins, but getting (creating and using) the “plan” is where you will really start making some financial gains.
Money Math #1 – Cash Flow Math
We all relate to this one.. This is simply the in and out of your dollar bills and most often there is more going out than there is coming in. When you get a big sales deposit it’s like the money will never run out and from that lens only, you move that way too. When the sales dip, decline, or just dry up – there is typically never enough cash runway and this is the #1 reason why most businesses fail in their first five years. Cash flow.
Money Math #2 – Profit Math
Profit is all about what your business “made” after all the sales are finalized, the credit card fees, refunds, or discounts are applied, and the costs or expenses are covered. With enough “profit” there should be enough to do all of that and pay you too.
Did you know that you can be profitable and have little to no cash flow?
Did you know that you can be profitable, have little to no cash flow, and still owe taxes?
True story. If “not all sales are created equal” – it’s true that not all “profit” is created equal. There’s a whole slew of reasons why the two statements above can be true. This is why understanding all the different types of “money math” has to be part of your journey.
Money Math #3 – Income Tax Math
The least favorite thing about being an entrepreneur is paying taxes on your entrepreneurial endeavors. The good news is there are all types of tax optimization strategies a business owner can do to pay the least amount of tax legally possible. But, you have to understand how it fits in as it is largely derived from your “profit math” and funded by your “cash flow” math. It’s important to set aside for tax while putting strategies in place to minimize tax.
Money Math #4 – God Math
Yes, from our point of view at The Bottom Line®, there are things that happen in an entrepreneur’s journey with their finances that can only be explained with “God Math.” It requires faith and gumption to chase your dreams. When it looks like you might be down for the count – and then you’re not – it’s a “God Math” moment for us. Keep the faith, friends!
Report All The Money
Yes, the reality of filing taxes (and paying them!) on time is a great goal to drive outcomes.. It’s important to understand that the IRS is NOT your boss – YOU are the boss. Planning for your taxes is a best practice to keep you stressing less so you can grow.
The Bottom Line
Here’s the ONE truth you should know and understand about how to treat your decisions and your money that we believe at The Bottom Line®.
“Every decision is a profit decision and profit is measured in time, energy, and money.” ~ Jessica Mae Stafford
Remember, the amount of the decision doesn’t matter – it’s the quality of the decisions you make over time that will turn your dreams into reality. Getting your Finance & Tax Milestones locked in and conquered can go a long way to building up a bank of your best profit decisions. But, what are those? Here are three milestones to help you get started.
1. Create & Execute Financial Rhythms To Assess How You Are Doing
This is all about understanding your books, profit, tax, and cash on a defined schedule.
2. Evaluate Your Tax Structure and Explore Entity Options
It’s important to understand which entity or tax structure is right for you today and in the future.
3. Decide & Formalize Your Profit & Tax Partners For Today and Tomorrow
We believe that “partnerships fuel transformation.” Find the right advisors for you in the season you and your business are in. Look for those who understand who you are and what you are doing without a lot of “education”. When you find a “right fit” – those relationships will never take away from you. They will only add value that impacts your bottom line.
Your Entrepreneurial Opportunity
We’re releasing our 2023 Profit & Tax Super Bundle to help entrepreneurs like you uncover the strengths and weaknesses of your business finances. We’ve teamed up with Profit First, a company dedicated to eradicating entrepreneurial poverty, and topped it with our own special sauce to help you stress less about tax. We invite you to join us now!
If you want to learn more about our profit & tax super bundle, check out 2023 Profit and Tax Super Bundle.