Seven Steps to Make Sure Your Business is Profitable, and Not Just a Hobby
Ultimately, your business needs to pay you for your work, and when someone decides to become an entrepreneur, they almost take it for granted that the first few months or even years will be lean. But there are things you can do to start drawing a paycheck sooner than later.
Separate your business entity and assets from your personal ones. Work with a lawyer if possible to set up a legal entity, so if there is an unfortunate event or lawsuit, you don’t lose everything you have.
Set Up A Budget
This may sound simple, but thinking about how much it costs you to run your business, produce a product or provide a service is important. Setting up a realistic personal and business budget is a big help in the short and long-term.
The Price is Right
Don’t try to compete with large chain store pricing, you’ll start out at a loss right away. Accurately charge for what your business budget permits and be wary of offering deep discounts or sales which can set a future expectation of more of that, which then perpetually leaves you at a loss.
Invest in Systems & People
You may not be able to hire someone to help with tasks, but if you can, do, even if only for 5 or 10 hours a week. Additionally, are there other ways you can automate your business, for example with scheduled messages, social media posts or an answering service on the phone? Anything that can help you get business done quickly and for you to not have to do every task yourself.
Build a Cash Safety Net
Start small, in whatever amount you can, but start somewhere – even if it’s only $10 a month. Try to build towards $1K in savings, and eventually three-six months worth of rent if you have a physical space.
Save yourself from time, money and mail delays by doing automatic invoicing and payments through a digital set-up.
Pay Yourself According to Scale
Start with the following formula no matter how much you’re making. (Again, even if you can only pay yourself $10 a month, start somewhere):
The following is a typical breakdown you can follow:
- 20% owner’s draw (your paycheck)
- 20% taxes
- 40% operating cost
- 20% long-term expenses or investing
Read the longer and more detailed plan by Financial Advisor, Sylvia Inks, here.