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Thursday, November 30, 2017

So, You Want to be an Entrepreneur? Can you Balance a Chequebook?



A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

Synonyms: Businessman/woman, enterpriser, speculator, tycoon, magnate, mogul


These days it seems every other person is some sort of entrepreneur. I guess you can blame the end of the Baby Boom Economy where good jobs were guaranteed for all. This generation has had to get creative to make money. It is inspiring to see people young and old trying new things and following their passions. When going out on your own it isn’t all roses, however. Look back to the top of the page at the definition of entrepreneur. Most people focus on part one of the definition: “A person who organizes and operates a business or businesses.” Sadly, for all businesses, it is the second part that is the most important: “Taking on greater than normal financial risks in order to do so.” With a business comes risk and that risk is financial. To run a business properly and efficiently you must understand cash flow. In this post, I will give my 10 Tips for Managing Your Business Cashflow. Most businesses fail because they run out of money, let’s get ahead of that right now.


1) What’s your “Break-Even Number”

I talk about this concept in regards to personal finance as well. It is essential to know and understand how much money you need every month to run you home, and your business. This is your “Break-Even Number.” This is the number you need to make every month just to keep the lights on and business running. If you don’t know this number, you won’t have an idea of what you should be making every month in revenue. Chances are if that’s the case you will be running a negative and sooner or later debt will pile up and the doors will close.


2) Use a Cashflow Worksheet

For my personal cash flow and business cash flow, I use a simple excel spreadsheet to keep track of expenses. It works, and it is easy to understand. If that is not your jam, there are tonnes of resources online to help you track your inflows and outflows. Sites like Quickbooks offer you ways to track your cash flow and it comes at a very low cost, depending on the package. It’s not hard to do and it is a must to track everything.

Small Business Software – QuickBooks Canada


3) Focus on Your Businesses Cashflow, Not Profits

This doesn’t sound correct, but believe me, it is. Most businesses die within the first 5 years because they cannot run a profit. Most businesses cannot run a profit because they cannot manage their cash flow. You have to understand that in the first few years you will be struggling to meet your “Break-Even Number,” so increasing profits might not be the solution. Better understanding your business and how it operates is job one. This is all about cash flow. If you can run a positive cash flow every month, profits will increase. If you can find ways to limit expenses without sacrificing quality, profits will increase. Build up that solid foundation of good cash flow and you will be able to take your business to the next level.


4) Build a cash reserve

Within your first few years, it is imperative to build a cash reserve. Remember that Break-Even Number? Times that by 12 and that is what you should have as a reserve goal in your first few years. It is the natural instinct of new businesses to invest every last penny back into their business. While that isn’t all bad, it could be better served at first as a cash reserve to get you through the leaner times. Like in your personal life, the emergency fund, or cash reserve, should be ever growing. Set new benchmarks every year of where you want it to go. Look at the most profitable businesses in the world. Apple, Google, and Facebook all have HUGE cash reserves. Why is that important? Cash is still king, and you can make moves when you have it. If you don’t have it, you must borrow to do anything.

7 Things You Should Have Emergency Savings For – Budget Boss

Small Business


5) B**** better have my money!

You have to get paid for the work you do. Sounds simple right? Wrong! People will always try to get work out of you for nothing. People will always look for freebies. If you run a good business and have a good product you must get paid the full amount for it. Make sure you don’t let anything slide and don’t be afraid to say no. If you have a bad vibe about someone, it’s probably for a reason.


6) Build Incentives

Along the lines of the last point, build reasons for you to get paid sooner. For instance, give someone a 10% break if they pay you in full right away instead of half now and the other half at the completion of the project. Everyone loves a deal and the savings can be tremendous. For you, the comfort of having all your money right away will be worth the slight loss of revenue. Remember that until the money is actually in your hands, it’s not yours. I would rather have all of something less now, than none of everything later. Try saying that 5 times fast…..

Incentive Programs That Really Work – Entrepreneur


7) Build a fence around your clients

You have to be the one that your clients go to for work or information regarding the services you provide. You have to make yourself out to be a center of influence in that field. This will build brand loyalty and every dollar they spend on those services will go to you. This will help your cash flow tremendously. Recurring business can be counted on and that is what you need to survive. Look at any restaurant. It is not the people sitting at the tables that keep the lights on, it’s the old men sitting at the bar. When times are lean, you need that regular cash flow and only loyalty will provide that.


8) Delay your expenses, but don’t pay late

If you can put off expenses and pay them when it is most convenient for you, then do so. For instance, I have bills due at various times in the month, but they all get paid the same day. Why is this? This happens because I have chosen the day of the month, which happens to be today oddly enough, to pay everything. I build up my funds to the “Break-Even Number” during the course of the month and then boom, everyone gets their money. None of the bills are late, but some are just on time and others are very early. I chose the time that is most convenient for me. Having the reserve fund will help in this as well, so you will know there is always enough to cover the expenses even if you have to wait a day or two for money coming in.

Small Business


9) Monitor your Cashflow and create a “Zero” Balance

Watching over your monthly cash flow is important and if you cannot do it because you don’t have the time, have a trusted employee help. Create a new “Zero-Balance,” that is a number in your account that will be the warning area. Separate from you reserves, this account will be for your day-to-day expenses and once that zero-balance is crossed, know you must be on top of cash flow. I recommend that your zero-balance should be a few months expenses, just so you can absorb any small shocks that may occur. The key is being on top of those bank balances because overdraft will crush you.


10) Only spend on essentials

As a new business, you will be bombarded by people trying to get you, as a businessperson, to buy their services to help your business. I know, I’ve dealt with it a lot. That guy from Canada 411 still keeps calling me, he doesn’t give up. Make sure you are only spending on things you can afford and are essential for your business to run. Once you get your bearings you can splurge on the extras. Until then, focus on cash flow and running a sound business. There will be enough wasted money in the future, believe me.


Running a business isn’t easy, that’s why most fail. If you can focus on cash flow and producing a quality product or service, you will do well. Remember that even amazing companies with amazing products go bankrupt. Conversely, that terrible restaurant down the block is still open after 20 years. I wonder how that is? Cash is King, and it always will be my friends.


Thank for reading our post today as Cashflow Week continues at Budget Boss. Tune in tomorrow as we wrap up the week. Don’t forget to sign up for the Budget Boss 2018 Financial Goal Setting Workshop. It will be taking place on Tuesday, December 12, 2017, at Innovation Works in beautiful downtown London. Have a great day Bosses!

“I think for any small business that’s bootstrapped, the overwhelming challenge initially is getting to positive cash flow.” – John Mackey

Small Business

You Want to Take Away my Coffee? – The Latte Factor and Cashflow

Email – joe@budgetboss.ca 

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