How To Gain Clarity With Business Finances
82% of small businesses fail due to financial reasons. Now you’re likely thinking “eek, help with my business finances!”. Don’t worry, there’s a solution.
As a business owner, quickly getting a grip on the financial side of running a business is imperative. These 4 essentials will help you gain financial clarity in your business, operate your business with confidence, and outlast the competition.
1. A Strategic Plan
As a business owner, you have a vision for what you want your business to be and many ideas that you’d love to implement. The key to success involves creating a strategy, a plan, to turn that vision into reality.
To get financial clarity, we have to first know where we’re going and have a strong strategy for how we’ll get there. Think of a strategic plan as the roadmap that charts your path forward based on your vision for your business.
Until we are clear on where we’re going and the different routes we can possibly take to get there, it’s nearly impossible to have confidence that we’re making the right financial decisions.
Often businesses overlook strategic planning and want to skip straight to financial planning, but, we must first be clear on what exactly we’re financially planning for.
Curious about how to build a strategic plan? In a previous post, I give you the foundations for building a successful strategic plan, you can find it here.
2. Money Mindset
A money mindset is your overarching attitude and feelings that you have about your finances and money. It drives how you make key financial decisions every day. It even has a big impact on your ability to achieve your goals. If you change your mindset about money, you tend to make better decisions and have an easier time finding solutions when you meet challenges.
A money mindset involves coming to terms with your worth and your worthiness to charge the prices you do for the products and services that you provide.
It doesn’t matter if you haven’t had a good relationship with money in the past, what’s most important is your future relationship with money.
3. A Financial Plan
Once you have your strategic plan in hand, and a money mindset, you’re ready to build your financial plan. A financial plan marries the strategy you’ll be implementing in your business with the money side of how you’ll bring that strategy to life.
A financial plan helps you to see how much revenue you’ll need to generate to help you accomplish that vision, and also how much it will cost you to execute on generating the needed revenue.
Similar to how a strategic plan maps out the strategy of how you’ll bring your vision to reality, think of a financial plan as your accompanying money roadmap to help you get to your vision in the most profitable way possible.
4. Consistent and Frequent Financial management
Now, roadmaps are great, but they only work to your benefit if you properly use them, and perform consistent, frequent check-ins to ensure you’re on the right path. If you’re going off track, no worries, since you have a roadmap, you’ll be able to see right away that you are off track and be able to course-correct accordingly.
Consistently and frequently managing your financial metrics and measuring this performance against your plan is absolutely critical to you being able to keep a gauge on the financial health of your business and ultimately gain financial clarity.
As a rule of thumb, I always recommend performing financial check-ins once per week. Ultimately, I do it daily, but when you’re just starting out with this concept, get in the habit of performing these check-ins weekly.
Financial clarity is key for any business owner to operate their business in a long-term sustainable, profitable manner. A strategic plan, the right money mindset, a financial plan, and consistent and frequent financial management will have you on the right path to financial clarity in your business.