As Lauryn Hill sings, “It could all be so simple, but you’d rather make it hard.”
As a business owner, I finally now understand how it applies to us, too.
There is so much power in creating simplicity in business:
- Simplicity in how you think about your business, so you stay focused, set goals and take action.
- Simplicity around your finances, so you know the right prices to charge and how many sales you need to make to reach your financial goals.
- Simplicity in your management and operations, so you don’t have to sacrifice your whole life to run a successful business.
Yet, time and time again, I watch business owners complicate everything.
So, I’m determined to help us change this, once and for all!
Last week we covered your mindset, how it impacts your businss and how to better manage it.
This week, we dig into your money matters!
step two to simplicity in business: understanding your money
First things first…you do not need to be motivated by money. Nor do you need to have a desire to be wealthy (although I truly believe we all deserve it!).
But you do need to understand your money matters in order to create simplicity in your business.
Because ultimately your business needs to make money in order to survive. You need to be able to generate enough money to pay all the bills and pay your people.
And you need to pay YOURSELF so that you can survive, too.
It is only with money that you can be independent, take care of yourself and your family, build the lifestyle that you dream of and achieve many of the other things that are important to you.
So regardless of how you feel about money right now, you really need to get comfortable with it. Otherwise, you won’t be able to keep doing the work that you’re doing.
But money matters do not need to be complicated.
getting confident with your numbers
You may have been telling yourself for decades that you’re no good with numbers.
Maybe you had a sh*tty maths teacher who made you feel dumb.
Or maybe you have an aversion to spreadsheets and calculations.
Perhaps you tried to figure out your numbers a couple times and gave up too quickly.
Maybe you’ve even worked with an accountant who only communicates in jargon and makes it far more complicated than it needs to be.
Whatever reasons you’ve had in the past for hiding from your numbers, you CAN get it right.
Working out your numbers is all about attitude and not about ability.
You just need the right tools and the right instructions.
And you need to believe in yourself a bit more.
working out your financial goals
Your business finances actually begin with your personal finances.
How much money do you need to earn (after tax) to fully support the lifestyle that you desire?
And not just what do you need! What do you actually WANT?
I know that I could survive on as little as $1,000 per month if necessary.
But I don’t want to!
I don’t just want to survive.
I want to be able to put money towards my short term and long term goals – my dream house on the coast and my retirement.
I also want to enjoy life NOW, which means having the disposable income to visit friends and family in other parts of the world, to take holidays to faraway locations, to celebrate my birthdays on the beach, and to socialise in whatever ways I desire.
And in order to afford all of those things that I want (and deserve!), I need to draw a proper salary from my business.
And you do too!
Your financial goals may be different from mine, so start understanding what yours are.
managing your business finances
Once you work out your personal financial goals, you now understand what salary you ultimately need to draw from your business.
With that, you have the starting point of your business expenses. Add up all the other expensese you incur in your business. This should include your office charges, raw materials, service providers, staff, production costs, legal fees, taxes and more.
When you have the total figure, you can next work out your pricing.
How many products or services do you need to sell, and at what price, to cover all of these expenses?
Are you able to sell this much?
Will your customers pay the price you have calculated?
If not, you will need to rethink your pricing and sales strategy (or reduce your monthly business expenses!).
simplicity in business requires clarity with your numbers
To create simplicity in your business, you need to truly understand your personal and professional financial goals.
When you have clarity on your numbers, setting strategy and managing your business becomes so much easier.
You can make informed decisions, rather than assumptions. You understand exactly what you need to sell to cover your costs and what changes may be needed to cover any deficits. You’ll know what salary you need to earn to live the life of your dream. And you can start to take action to get you there.
Remember, your business should support your personal and professional goals! If you’re serious about achieving them and creating simplicity in your business, you need to stop hiding from your numbers!
Next week I’ll be covering the final step in simplifying your business, and it’s all about managing your time, your focus and your business!