Your decision to build a profitable business is directly proportional to your ability to take charge of the money. Taking control of your money is a commitment to take responsibility for all of the following financial disciplines:
- Developing a realistic budget and operating the business within it
- Understanding how the timing of revenues and expenses affects cash flow
- Keeping a stranglehold on salaries and operating expenses
- Retaining your earnings for reinvestment as a first priority
Develop the discipline to generate and review simple financial reports and budgets on a daily basis until you achieve breakeven. Thereafter, continue with this financial discipline on a weekly basis until you achieve ongoing profitability and hire a qualified financial officer that you can trust. Besides sleeping better at night, you will gain a clear understanding of the rhythm and flow of your revenues and expenses and their impact on your operating budget.
During my company’s (USI’s) first three years of operation, I knew where every dollar of revenue came from and where every dollar was spent. I reviewed make-shift financial reports every single night and made judgments about budgets every day. We started out with the one-write checkbook system, quickly shifted to Excel to generate budgets and financial reports, and later migrated to QuickBooks as our primary financial management system. Throughout the life of USI, I always stayed very close to the money, and I was very cautious about extending trust when it came to the money. As a result, I was never surprised and slept peacefully most nights.
Ed McLaughlin is the author of the upcoming book, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, along with co-authors Wyn Lydecker and Paul McLaughlin. The Purpose Is Profit (Greenleaf Book Group) will be available in bookstores on August 2, 2016.
Preorder the book here.
Connect with Ed on LinkedIn here. His email is Ed@ThePurposeIsProfit.com