How Self-Employed Business Owners Can Manage Money Better

hand-on-keyboardAnytime you hear someone talk about the benefits of being self-employed, the most common reasons are often things like, freedom, independence and not having to answer to a terrible boss.

Entrepreneurs tend focus on the creative parts of running a business, like coming up with new product ideas, or how to engage our clients better, because we love those aspects of the biz.

And we tend to neglect the money portion of running a business. But this is one of the most important aspects about being your own boss. If you don’t have a solid financial foundation, your business will have little chance of succeeding.

Below are simple actions small business owners can take to become better with money and increase their profits.

1. Understand Financial Terms

Before becoming self-employed it’s vital you know at least the basic financial terms, such as income, expenses, credits, loans and the like. As you continue running your business, you’ll have more exposure to in-depth financial terms.

Why is it important to understand these terms? It can help your business stand out and give it the best chance of succeeding. It’s especially important if you ever want to apply for a small business loan.

When you hire a bookkeeper or CPA to help with the financial part of your business, knowing these practical terms within your industry will help you understand the monthly profit and loss sheets, and the inner-workings of your finances. Otherwise, it could become too easy to lose your footing and waste a lot of money.

Take Action: what aspect of your industry are you lacking understanding of certain terms? Do a quick Google search and read a couple articles about the financial terms you want to learn.

2. Know Where the Money’s Going

We all know it’s common sense to spend less than you earn, so naturally this applies to running a small business too. If you’re wasting money on product development, and not spending enough funds on marketing — which could bring in more clients — you could be losing out on both time and money.

Not all of your entrepreneurial ideas are winners, so as you test out your theories you should be looking at the numbers, the data and the results. This will especially come into play when you’re just starting out because you’re in the bootstrapping phase, where you need to spend money on projects that will be a good investment down the road.

Keeping track of every penny earned and spent is an important facet to focus on. If you don’t know where your money’s going it will be very difficult see if you’re meeting your revenue and client goals.

Take Action: make a list of the expenses that are going out each month. Are there areas you can cut back? Do each one of these expenses help you reach your financial goals?

3. Become a Problem Solver

Between working with clients, managing projects and creating the budget, entrepreneurs are constantly troubleshooting and coming up with solutions. How can you parlay this into your finances?

Force yourself to be a problem solver and think outside the box on a daily basis. For example, if you don’t have the funds to hire a designer try to strike a deal to barter services.

As a business owner, you’ll likely do whatever it takes to give your business the best and this applies to your finances as well. Instead of focusing on the problem, focus on the solution and see how quickly your business can bounce back.

Take Action: if you’re short on cash flow, what can you do to increase your revenue this month? Do you need to think of alternative marketing methods to cut back expenses?

small details

4. See the Small Details

When you’re running the show — either with a team or by yourself — you’re in the thick of your business day in and day out.

You’re responsible for creating a plan, managing your projects attending to the details. Even if you aren’t normally the most organized person, you still have to put systems in place, and utilize online tools to get your work done.

Can you imagine trying to set appointments with clients, or deadlines for big projects without having some sort of organization?

Use the talent of seeing the small details to improve your financial situation and leverage the money in your business ventures.

As the boss you’ve got to know what’s happening within your business, pay close attention to the details and keep track of it in an organized manner. All without losing your sanity!

Take Action: start changing your bad business habits by making small changes everyday. What’s one small detail you’ve noticed, that needs to be improved? What can you do today to change it?

5. Evaluate Money’s True Value

You work hard for your clients, for your team and for your business, but do you have a true understanding of the value of money? Sometimes we forget the value our clients get out of our services, because it takes a lot of work, time and energy to keep a business running smoothly every day.

Pay attention to how much time you spend on each job and each project. This will help you fully grasp what it means to create a valuable service. You should also remind yourself to see the value in other people’s work and their business goals.

Knowing the true value of something, will make you to more appreciate of the work it took to get you where you are today. This has given you a better perspective about what’s valuable and what’s not. Which will make you a very thankful and positive entrepreneur.

Take Action: set aside 10 minutes to list out a few things you’re thankful for and what your business accomplished this week. Did your clients share any praise for your business this week?

6. Set Big Financial Goals

Successful businesses usually begin with a simple business plan, or at the very least, some sort of financial goals for the company to hit. As an entrepreneur, your financial goal may be to run a business without debt, create income while traveling, or build a business that has passive income.

What are the big financial goals for your business? These will come into play as you’re planning your revenue targets for the year, the products and services you want to launch and landing big-paying clients.

Not only is it important to see the small details everyday but you should have a handle on the big picture and what it takes for your business to succeed beyond the immediate future. This is a special skill that everyone needs when managing money, because saving for your future is an important part of reaching financial freedom.

Take Action: create a simple business plan for your goals over the next quarter, the next year and the next five years. Consider using something like a vision board or a whiteboard to create visual images for motivation.

How to Become Better With Money

There are lots of areas we need to improve upon as business owners, but one of the most vital areas to start with is with our finances. Why? Because the success or failure of your business will eventually boil down to money.

Even if you don’t have all of these talents within your business right now, they are skills you start to craft over the course of becoming a successful entrepreneur. You should become much more aware of where your money’s going, so you can make smarter future choices as a result.

Image 1 by sgback 

Image 2 by skinniyah

About Carrie Smith


Carrie Smith is a solopreneur on a mission to help artists make a living from their creations. She’s also a freelance writer for The Write Life, a site for writers to create, connect and earn. In May 2013 she quit her full-time accounting job to pursue entrepreneurship and blogging. You can read more of her work at carefulcents.com or find her on Twitter (@carefulcents).

Free Guide: 16 Simple Marketing Tactics
to Get More Clients

Find out how to get more clients with this free guide:

{ 5 comments }

Peter Coughlin

Great article Carrie.. and I really like the way you added a “Take Action” section to each point. Thanks!

Morris

This is a very informative article especially the planning and setting goals for a business Carrie,I also like the idea of evaluating the true value of money.

Penelope

Thanks for all the reminder to us entrepreneurs, Carrie. We are in the thick of things, and sometimes can’t see the forest for the trees. ;)

I love this quote, “Sometimes we forget the value our clients get out of our services, because it takes a lot of work, time and energy to keep a business running smoothly every day.”

Don’t sell yourself short. Value thyself and thy talents and be paid accordingly.

Carrie Smith

Thanks for the lovely comment Penelope! I’m glad you found the quote helpful, as it’s a great reminder not to sell ourselves short.

Gideon

I particularly love the point about knowing my business even if I will employ a professional to handle that bit. I hope to improve on that bit. Thanks Carrie

{ 1 trackback }

Previous post:

Next post: