Some small businesses seem to have it all together—the entrepreneurial equivalent of the beautiful mom with the perfect kids. They have budgets, make profits, and know where every penny is—all of which helps them grow into big businesses. But how do they do it? How do they keep on top of their finances with any regularity? Just like brushing your teeth or exercising are good personal habits, there are good financial habits for your small business. With the right plan and some discipline, you can develop these habits too.
Set a schedule for reviewing and updating your books
First priority: You need a process for regularly reviewing your books. Consistency is important, whether you review them monthly or quarterly. Quarterly may seem like it’s not frequent enough, but it’s better than not at all or every once and a while. Make this one of your key financial habits.
Don’t just look at your books; know what you are looking for. Decide ahead of time on your Key Performance Indicators (KPIs). KPIs tell you if a particular part of your business is succeeding. The metrics will be different for each company. It might be the number of sales you had in a month or the number of widgets you manufactured or the number of proposals you have out to prospective clients. It’s also important to have KPIs for failure. At what point do you pull the plug on a project or line of business that isn’t profitable?
Understand what you’re looking at
I can look at html, but that doesn’t mean I understand it. When you review your books, you should understand the significance of each piece of information. You should know what you’re looking for and how to find it. Otherwise it’s a waste of your time and a missed opportunity. If you feel like you don’t really grasp all the important things in your financial records, you might need an expert to help you learn how it works.
Have a way to record ideas
Entrepreneurs are idea generators; they are always coming up with cool new things to try. But they can also end up flying off in a dozen directions at once. Not all ideas are good—and not all good ideas are ready to be instantly implemented. Keep a parking lot list of ideas so you won’t lose or forget your good ideas. Those ideas are valuable. But recognize that you probably can’t—and shouldn’t—take action on them immediately. Putting it on a list ensures that you won’t forget it, but it gives the ideas time to mature.
Set a strategy
You should know what your strategic goals are for the year. Do you want more sales? More repeat customers? Do you want to broaden your company’s offerings? Do you want to reach a particular milestone? Remember that strategy should also set up your KPIs and will be adjusted depending on how your KPIs change.
Getting a spark of inspiration is good, but it can lead you down the wrong rabbit hole. If you know what your strategic goals are it helps you set priorities and figure out which ideas are worth pursuing. If a particular idea is really cool, but it doesn’t fit your current strategic goals then you know it’s not the right time. Save it and maybe it will fit future goals. Otherwise you could end up jumping from thing to thing without any real plan and use up resources without much to show for it. I know it’s hard. But you need to get used to saying, “that’s a good idea but not for me now.”
If you’ve read this whole blog, you may have gotten the idea that the #1 financial habit of small businesses is planning. You need to plan how often you will review your books, plan how to consistently record ideas, and plan a strategy. So, get out your planner and get started!
Maybe planning isn’t your strong suit? You might need some help. Talk to the experts at Office Accomplice.