This is a guest post from Yu-Fen Chang-Pett, a business financial consultant I highly recommend for sorting out all the scary money stuff in your business. Yu-Fen has offered to answer any questions you have for 10 days in the comments section. So feel free to ask her whatever’s on your mind, even if you think it’s tough or too specific! – Laura
I ran across Leonie Dawson last week. I was immediately drawn to her because of something she wrote in her “Biz & Blogging” workbook. In it, she tells a story about how a few years ago, she stumbled upon what she calls her “One Hundred Thousand Dollar” idea because of a book she read called One Minute Millionaire. Though she admits she only read half the book, it did plant a question in her mind: what would be her One Million Dollar Idea?
To answer this question, one of the first things Leonie tried was a “profit clarity” exercise, which helped her to lay out a variety of different models that might enable her business to reach $100,000 a year in profits. Today, after just three years, she now owns a company that makes half a million dollars a year!
Recently, I launched a private financial mentoring program called “The Path to Profitability” to teach start-ups and solopreneurs how to organize their business finances and create a profitable revenue model with a clear vision.
Whenever I see entrepreneurs who don’t look at their business finances seriously, I get nervous. There are so many risks you face if you let the financial issues slip out of your hands. Here are three examples:
1. If you don’t have a financial system to track your revenue and expenses, you won’t likely have a clue how to pay your quarterly and annual taxes – BIG mistake.
2. If you also don’t know about your net profit and cash flow, you’re essentially running your business in the dark, and aren’t going to get too far. Without a profitable model as a map to run your business, how do you expect to increase profitability?
3. Having detailed, organized financial statements is a crucial requirement if you ever want to ask for a business loan, or look for partners to expand your business.
The truth is, understanding your business finances thoroughly will help you increase your profitability dramatically.
I understand that for many entrepreneurs who don’t have a finance background, it can be difficult and frustrating to try to navigate through the financial side of your business. But you really need to get a grip on the numbers if you want to make a profit. What’s an entrepreneur to do? Here’s how to take control of your business finances when the numbers terrify you:
1. Take a business financial program to learn more about the money flowing in and out of your business.
2. Hire a local or virtual financial expert to help you manage the financial aspects of your business. (Note: this person should not be your aunt or cousin who doesn’t have a financial background; I can tell you countless stories about how bad bookkeepers can ruin a business.)
3. Hire a business financial consultant or coach to teach you how to manage your finances. (I personally don’t recommend reading accounting or financial management books by yourself. Most likely you won’t finish the whole book and you’ll get confused about some of accounting principles.)
Yu-Fen Chang-Pett, the founder of Money Wisdom Empowerment, is a business financial consultant and certified money coach with 15+ years of experience in financial and accounting management. She teaches small business owners such as coaches, yoga teachers, artists, and holistic practitioners how to better understand the complicated financial aspects of running their businesses. She clarifies profitable business models and reveals the blockages of unconscious money behaviors and patterns in order to earn more money, enabling you to live the life you have dreamed of. Check out Money Wisdom Empowerment to revolutionize the way you deal with money or ask Yu-Fen a burning financial question in the comments!
Yu-Fen has a soft spot for artists, being that she is a professional potter. She has been working on pottery since 1995 and owned a pottery studio and gallery in Virginia for four years.