#1 Thing You Need to Organize Your Finances
You’re familiar with the saying - those who fail to plan, plan to fail. Well, it’s a very true statement, especially when it comes to organizing your finances. Regardless of whether it’s money coming in or going out, your business has financial activity that, if left unorganized, can cause you some major headaches.
That’s why the number one thing that all creative entrepreneurs need to get their business finances organized is a spending plan that helps them proactively organize their financial activity and feel confident that they’re making sound spending decisions each day!
What is a spending plan?
A spending plan is your roadmap for future revenue and future expenses. It’s all of the ways money will come in and got out of your business. Spending categories can be general like fixed expenses vs. variable expenses or specific like marketing, general business, contractors, etc.
You may be more familiar with the term budget. But, in all honesty, I loathe budgets. They remind me too much of a diet - the kind where I won’t be getting any dessert for the next month!
What has worked for me is having a spending plan for my business in which I allocate a percentage or dollar amount for particular categories of spending. This method of planning gives me more freedom and flexibility within each of those categories because as long as I spend within the allocated percentage or dollar amount, I’m all clear!
Here’s what I mean.
I want to run a lean business. That means that I want to operate using the least expensive and most efficient (yet, effective!) resources I can.
How do I run a lean business?
My goal is to use less than 25% of my revenue maintaining my business. So, I’ve allocated 25% across my two main spending categories - general business (15%) and contractors (10%).
You’ll notice that I’m only considering categories for maintaining my business, not those for growing such as marketing, advertising, coaches, and education. I considered those investments apart from the everyday operations of my business, and they’re usually a set dollar amount.
How can you run a lean business, too?
A freelance graphic designer might decide to spend a bit differently. Let’s say, she’s comfortable spending 20% of her revenue maintaining her business. She allocates 5% to software, 5% for licensing and digital rights, and 10% for outsourcing design and print work.
However you choose to do it is ok. Find what works for you considering your profit goals and what it costs to run your business.
Setting a plan will help you determine if your goals are reasonable and in line with the overall strategy and vision for your business. But, no good plan is complete without a bit of accountability. Are you ready to know what it really costs to run your business? I created the Spending Plan for Creatives to help you do just that! Sign up for the insider list to get the instant download today.