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.
Download a complimentary excerpt, “The Ten Commandments of Startup Profit,” here.
Connect with Ed on LinkedIn here. His email is Ed@ThePurposeIsProfit.com