Master the money game: How do you make money? How do you spend it? (5/6) 🤑
Investor pitches need financial information, and so does your business plan.
The simple question: “Can I afford it?” has to be a part of every decision you make.
There’s more to this question than how much money you have. It’s about how your money behaves.
Work with an expert, or do it yourself but make sure that you always know how money behaves.
How you make money
Know where your money comes from. You have one or several products for which people pay you money. (You can simplify services by thinking of them as products).
And then know how much of that money you get to keep.
After you have spent all the money you have committed to business expenses and wages, debts, operating costs, and anything else.
This brings us nicely to …
How you spend money
Where does it all go?
Be aware of all the obligations, promises, and commitments you have for your money.
You probably spend money on wages & benefits, services & vendors, possibly rent and utilities, equipment, service agreements, insurance, marketing commitments, product development, learning & training, inventory, and don’t forget taxes and other obligations.
Not to mention petty cash, employee events or engagement, company retreats, company events, bonuses, client appreciation, and more.
Some of these are regular and fixed, some are variable, and some are rare. Account for all of them.
This brings us nicely to …
How you track money
Oversight and insight – never sacrifice either one of these.
It doesn’t mean you have to analyze every single expense every day.
It means you have to know what is going on in your business, whether you do it yourself or review reports from your CPA, CFO, or equivalent.
Make sure you are using your bank accounts wisely, storing receipts and expenses, and have simple and accessible software or tools to automate as much as possible.
What next
Work with an expert to get yourself set up with the necessary tools and reports (need to find someone? Drop me a line and I can provide introductions). Make sure you always know what you can afford.