You run your own business, congratulations! You’re an entrepreneur! Or so you think…
Here’s the thing: if you’re working for money, meaning you don’t get paid unless you are personally there, operating the business, you’re as good as any old employee sitting in a cubicle in Corporate America, except you’re not getting any discounts on your benefits package and you’re likely working overtime. Sure, your income can ebb and flow and the excitement of your income potential is probably what drove you to “go at it on your own” in the first place. But just like an employee who gets paid as long as they show up day after day and week after week, you only get paid when you work. Instead of “having a job”, you effectively “own a job”. This is eloquently described in Robert Kiyosaki’s book Cashflow Quadrant as being on the “left hand side of the quadrant”:
In essence, you’re not so much a business owner as you are a “job” owner. It’s not the news you wanted to hear; it’s the news you needed to hear.
What do you do about this predicament? How do you become a true business owner, a true entrepreneur? Cover your ears kids: you need systems. An operating manual that runs your business even while you’re asleep. Systems, to be honest, aren’t fun to build, but they pay massive dividends. It’s like the 8th Wonder of the World: compounding interesting. Invest now and reap the benefits over and over again into perpetuity.
The same principle applies when it comes to scaling a service-based business. Build the systems to run the business now, and reap the benefits when you realize you could walk away and the business could keep running (and you’ll keep on getting paid!). And here’s the best news so far: all of those systems already exist, they’re just inside your head!
Thinking about all the systems you need to build can be daunting, so we’re going to start with potentially the most important one first and let it snowball from there. Over the next 14 days, we’re going to build your cash management system, a streamlined and easy-to-use way to manage your finances in 15 minutes or less per week. No more using your checking account as your singular gauge of success. Yes, it’s important there’s money in there, but it hardly tells you the full story or helps you understand where there’s potential to cut expenses or expand your operation.
For example, if your checking account said $10,000 right now, is that good? What if there was $100,000? What about $1,000,000? It’d be nice if there was a cool $1M in the bank right now but what if your monthly operating expenses were $1.2M? Then we’d have a problem, wouldn’t we? My point is this: your cash balance is relative. Yes, you may know intuitively whether the balance is enough for the time being, but will it be enough when you need to pay for a new furnace? Hire a new employee? Pay this year’s tax bill? You need a cash management system that works for you and helps give you those answers without you throwing your finger in the air and saying, “Yeah… I think we’ll be okay?”
Today’s 5 Minute Action:
Take 5 minutes and list out all unusual, non-monthly expenses your business may incur throughout the year. The list should include items like taxes, known one-time annual payments like subscriptions, insurance, and car inspection/registration, as well as unknown one-time payments (replace broken equipment or car repair). This list could also include things you may need in the next 6-18 months like a new employee, a new car, down payment on a building, etc. As an example, your final list might look something like this:
- Accruals (known one time annual payments)
- Emergency (unknown one time annual payments)
- Long-term Investments (Conferences and Trips, New Equipment, Building Expansion/Remodel)
Keep it simple and don’t worry if you miss something. See you tomorrow!
Oh, and if you’re interested in diving MUCH deeper into this topic, check out Profit First by Mike Michalowicz: https://amzn.to/36vKgLK