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Disclaimer: This is not legal advice. I am not a certified financial advisor. This advice does not include the legalities of businesses like LLCs, trademarks, copyrights, and other similar things. This advice is just to help you get started on the right path.
I recently launched business budget coaching.
Things like etsy stores, direct sales representatives, photographers/videographers, artists and so many more. All of these businesses usually start with a big dream for financial freedom and quickly get overwhelmed with the details. I was kind of shocked at how many people didn’t have the very basics set up like a separate checking and a list of monthly expenses.
I think that this is so important because according to data from the US Bureau of Labor Statistics shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years.
For the last 4 1/2 years, I have written about different budgeting skills to help individuals with their debt-free journey. There are millions of people who don’t have the basic budgeting skills to run their own personal finances, so honestly, why do we think that these small business owners are any different.
We have a money management issue more than a small business support issue.
There is a statistic floating out there that 90% of direct sales representatives lose money. But how can we preach that people need personal finance knowledge without touching on the fact that the average person does not have the business skills to run business finances. Well, that is ultimately my goal to change that. I want to work with direct sales reps, etsy stores, home based businesses, and other irregular incomes to help them create a business plan and a personal plan to pay their bills and control their business finances.
Here is just a small checklist to get you started with your business financial journey.
Things you MUST have for successful business finance!
1) A bank account SEPARATE from your personal
First, there are very few people who actually need a BUSINESS checking, but opening a separate personal account is the first step to setting up your business for success. Unless you have your own LLC for your business, you should be okay using just a personal checking account. The main differences is liabilities and fees. If you are just starting, start with personal checking. **Not legal advice, do what is best for you.
ALL of your income should go directly into this bank account. Not into your personal account and “I will transfer it around later.” The goal is to create as few things on your to do list as possible and “transfer around money” is a good way to spend the wrong money before it gets crossed off your to do list. A checking account for your business prevents money from being in the wrong spot. It also makes it much easier if you have one business debit card and use that account to pay for ALL business expenses.
This will also make it MUCH easier if you don’t have a great tracking system when it comes to business expenses, because you will be able to just pull business transactions. I do not recommend relying on this, but it is a starting spot.
I have found that keeping my checking at my local bank is the best way to make sure that I have access to the money without a bunch of transfers. This also allows to deposit cash from any sales.
2) Sinking Funds
I talk about sinking funds on another blog post, but these are so incredibly important to your business. A sinking fund is basically a savings account that you add a little bit of money to every single month to make sure that you have the money when you have an upcoming expense. You are planning for the future. For example, if you pay $120 a year for your website, putting aside $10 a month is a lot easier than coming up with $120 when it is due. You can have sinking funds for all different things in your business. Every business is also different.
Some examples might include:
- training/courses
- coaching/mentor
- events
- travel
- new/upgraded equipment (laptop/phone/Cricut machine)
- website/ software subscriptions (Canva, Tailwind)
- taxes
- anything specific to your business
For business sinking funds, I use an Ally Online Savings. Ally has a cool “bucket” feature where you can set up different goals within one checking and make it easy to save for different things without a bunch of different savings accounts. This feature is really great for setting up sinking funds for different things like taxes and events in one account, but still seeing how it is separate. Below is a screenshot of how I had my buckets set up at the beginning of the year.
3. A clear business budget
If you don’t have a clear business budget, it can be easy to let money slip in a few places. I have seen everything from people not paying themselves at all and reinvesting every single dollar. To people paying themselves everything and not having a single dollar to reinvest. There is a happy medium. You should be paying yourself SOMETHING.
Using The Savvy Business Workbook (In my shop for $11), I walk you through setting up a set budget to include monthly expenses, materials, sinking funds, and any other business expenses.
4. An Income Plan
Having an income plan means knowing where your money goes every time you bring in income. If your business makes $100, you know exactly where that $100 needs to go in order to set your future business up for success. It isn’t always as easy as covering materials and paying yourself. We can figure out sinking funds, taxes, and all of the other goals you have for your business.
This is the meat and potatoes of my coaching sessions. I help you figure out exactly where you need the money to go to set your business up for long-term success.
5. A Tracking system
A solid, realistic tracking system can save you a major headache when it comes to tax time. Let me be the first to tell you that a shoebox can be a viable tracking system. You just have to check it more than once a year at tax time. I personally prefer a combination of excel and The Savvy Business Workbook, but there are tons of great options out there. The more expenses that your business has, the more important a solid tracking system is to your success.
At the beginning or end of EVERY month, take just a little tax time. Sit down and just record income, expenses, mileage, and anything else specific to you. This helps you keep it fresh in your mind, but also saves you so much time. It can be 10 minutes a month, or 10 hours at tax time.
6. A mentor/coach
It is so easy to get frustrated and distracted. Being an entrepreneur can be a total roller coaster of emotions. One day you make $400 in sales and the next week you don’t make anything.
Having a mentor or coach who is not directly impacted by your business can mean that you have a built-in cheerleader. Sometimes, it is easier than talking to the people close to us. The people close to us are quick to tell us that we can quit if this isn’t what makes us happy. And you can. But do you want to quit because of a bad day or because of a bad business.
My mentor always told me that I wasn’t allowed to quit on a bad day and that advice has stuck with me so long.
Having someone to be a voice of reason has been one of the best things for my business. It gives me someone to complain to that understands. Having a coach also helps me set goals and reach for big things. I have had a few different mentors/coaches and they all want you to succeed.
A reason why…
Ultimately, if you are struggling with your business finances, my goal is to get you set up for success and help your small business thrive. I started Business Budget Coaching because I saw SO many small businesses with BIG dreams and little financial knowledge to get them there.
If you want to know more about my Business Budget Coaching, you can sign up right here. Once you sign up, I will contact you individually and we will chat about if my program is the best fit for you. Signing up is not committing to anything, it is just the best way to show me that you are interested in more details.
If you want to start something small for you, download my FREEBIE The Savvy Mini Business Workbook. This is the small version of The Savvy Business Workbook to help you get started with our business budgeting journey.
