“A successful business has enough cash set aside to pay the bills on time”
What does that mean? And how do you do it?
It’s all about the cashflow isn’t it?
And it starts with getting paid on time by your customers.
But let’s go back a step because first you’ve got to have enough Sales to get you the cash to pay all those bills. How you do that is a topic for another day.
Today we’re going to take a step back even further. Let’s ask the question – How many Sales is enough? How much do you need to sell in the first place?
And it all starts with planning and having a Budget.
You need to know what your expenses are. Your fixed costs like rent and phone and your variable costs like materials. You need to write them down.
How much each month and how much in total for the year?
Once you work out your expenses and how much you want to pay yourself you need to add some extra to cover unexpected costs. And don’t forget your profit. Your profit is what you earn on your capital investment, the money you’ve put in to fund the business. And yes, that is over and above what you pay yourself as salary.
Add it all up. What is the total? That, my friend, is how much you need in Sales. And if that’s a bit scary then you’ve got a couple of options. You can look at how to reduce your costs or you can learn how to make more sales. A conversation for another day.
But the thing is, now you know. If you hadn’t done the budgeting exercise you would be flying blind, driving down the road with no headlights with your kids in the backseat. Because face it, if your business isn’t making enough cash then it’s your family that will suffer.
But if you can meet your Sales target then you will have a business that can pay it’s bills, all it’s bills, on time. And if you exceed your Sales targets? That means more cash in the bank and you can take your family on a holiday, or employ a staff member to take some of the pressure off you and give you back some time. Or you can invest it back into the business to buy new equipment or do a training course.
But it all starts with the budget and knowing where you need to go.
Listen to your numbers, read their story and watch your business Bloom!