Don’t start a business without doing these 5 things with your finances.
If you want to become an entrepreneur, learning how to manage your finances is a skill that can make or break your success.
Sure, you need sales to build your business, but without good money management, everything will crumble.
Even when your business takes off and you’re making money you’ve only dreamed of, it won’t last without a solid handle on your finances.
Besides your financial plan, there are other items in your household and business that you need to organize.
I’m breaking down some things you need to make decisions about before becoming an entrepreneur.
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Danielle Towner (0s): The amount of money you have has got nothing to do with what you earn. People earning a million dollars a year can have no money. People earning $35,000 a year can be quite well off. It’s not what you earn. It’s what you spend. That quote from Paul Clitheroe is telling of what you’ll find in this episode. Today, we’re talking about how to financially prepare yourself for entrepreneurship. Because selling is one thing, but managing your money is something totally different. Selling and knowing how to bring money into your business and close sales is critical for the success of your business, but knowing how to manage your money and make the right decisions about your finances is equally important.
0 (49s): So today, we’re breaking down some of the most important things that you need to know to prepare yourself for a successful business and making the right decisions in managing your business’s money. So keep on listening for more. <music>
1 (1m 16s): Welcome back for another episode of Dreamer’s Den podcast. And if you’re here with us for a second or third time, thank you for coming back. And if you’re here for the first time, I’m Danielle Towner of Dream Work Creatives, and I help entrepreneurs build their brand awareness and online presence through web consulting, digital products, and content marketing. And today, what I want to discuss with you is how to prepare yourself financially for entrepreneurship. Now I’m speaking specifically from the standpoint of a mom and an entrepreneur. So if you’re a momprenuer, these are some great tips for you, but no matter where you are in the stage of your family, if you’re starting or wanting to build a business, these are some great tips to have.
1 (2m 3s): These are some things that I’ve learned along the way. Some of the things that I wish I had known from the beginning. Some of the advice came from my business consultant. And some of it is just things that I’m continuing to pick up because you will continue to learn and grow as an entrepreneur on your journey. So I’m going to give you five tips and five ways that you can prepare financially for entrepreneurship. And the first thing that you want to do is you want to get it in your mind when you’re planning, if you’re still on your day job, you want to decide whether or not you want to keep your job, or you going to quit.
1 (2m 44s): One reason why you want to do this is because when you’re planning, you want to take into account, whether you’re going to have this extra income or not. And either way that you decide, you want to look at your expenses in your household. If you have children, the expenses for kids, such as daycare or their monthly things that they need. Clothing, food, how much you have to pay as far as your mortgage or your rent and utilities. If you’re married and you do this jointly, you want to look at all of these things and take into account what you will need to have.
1 (3m 26s): Whether it’s coming from still coming from your day job, or whether those that will be coming from your business and the amount of money you need to pay yourself. So take a good, hard look at your expenses and let that lead you in the decision of whether or not you want to quit your job. But also let that lead you into having a clear and a realistic idea of how much revenue you need to be bringing in to be able to pay yourself this. The second thing that you want to do is to calculate your expenses, your business expenses, with the expectation that you want to scale your business. So meaning that you may start off with it just being a solopreneur, but you may want to expand and include more employees or contractors to help you get things done.
1 (4m 13s): But no matter where you start, if you’re starting from ground zero, even if you’re starting a business, like you took to me and vice versa, my blog. I have a blog where it talks about how you can start a business, how you can start an online business or home-based business for $20 or less. So if you’re starting a business with little to nothing, you don’t expect to continue to stay there because eventually you’re going to have to invest in your business. And eventually, that $0, that business for $0 is going to run out and you’re going to want to invest. You’re going to want to invest into different systems. You’re going to want to outsource so that you can free up some of your time and work on other areas of the business.
1 (4m 57s): And you know, these things are going to work together to help you to bring more money into your business. So you want to, from the beginning calculate where you anticipate or expect the business to go and how much it’s going to cost to add in these outsourcers, these other entrepreneurs, to hire more people or to bring in more systems and tools into your business. Now, these can start off as small, monthly amounts. These can be annual amounts that may save you some money, but you want to look at where you expect the business to go. And you want to look at how much it’s going to cost you to add these extra systems into your business.
1 (5m 43s): If you want to grow, you want to eventually start investing into your business. And one thing that I did, as I continued to grow and I planned out my different milestones and where I wanted to take things every month, is I took a portion of my money, a part of it, a portion of the money that I was bringing in each month. A part of it went to investing into tools, specifically tools that would save me time and keep me from having to do everything manually. So a part of it went to tools and automations that I still use in my business. And then I continue to find areas in my business. I looked at areas that needed automations and tools are that had things available that I can put into that business.
1 (6m 32s): And I started putting money into that. The other thing that I did is that I started outsourcing the tasks that I didn’t have time to do or things that I may have needed help with. Even though I’m good at different things, there are other people that are better at those things. So, once I learned the system or had a system in place, I started looking at outsourcing and working with collaborating with other entrepreneurs and paying them to do certain things in my business. So both of these things free up time, it helps to have a smooth running system and it helps the business to grow. So that’s an example of what I mean by calculate your expenses in the beginning, with the expectation to grow so that you can already prepare for what you’ll need to set aside, how much money you need to make to get there, and how you can continually help things to scale up.
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1 (8m 50s): So, number three is you also want to start applying the principle of paying yourself before you even get started. You may not have a goal in the beginning of wanting to pay yourself if you’re still on your day job, or if you have another source of income, or if you’ve had somebody invest in your business, you may not want to pay yourself. Some people don’t pay themselves for the first year or two within their business. You may not be anticipating paying yourself right away, but you still want to get used to practicing that because if you’re working on your business day in and day out, you want to see a reward or you want to see a return from the work that you’re doing.
1 (9m 33s): And a part of that is being able to enjoy some of the fruits of your labor. So even if you haven’t actually started the business or aren’t seeing a significant return from it to where you want to pay yourself, practice it with what you do have on what you are getting, even if it’s from your day job with setting aside a portion of that money for you. So I have a system to where I set aside money for savings and money for spending, money for bills. And I kind of talked about this in the last episode and money for ties. Of course, that comes first. But that money for spending is kind of my reward for the hard work that I’ve been doing in addition to being able to take care of those other expenses.
1 (10m 20s): So that’s one thing that you want to put into practice to prepare yourself for entrepreneurship. To prepare yourself for the working side of it, and also for seeing the results of your work and seeing some gratification from the work that you’re doing. So put that into practice today. Even if you’re in the planning phases of starting your business, you want to start applying the principle of paying yourself and not just taking all the money and blowing it and then saying, okay, what do I have left? So that’s another point. You don’t want to do things backwards. You need to get used to managing your money properly.
1 (11m 4s): Because if you’re not managing your money the right way, you can get to a point to where you’re making a lot of money, but you still won’t see it because you don’t know how to manage it. So that’s one of the things that you need to know from the beginning before it even starts coming in. Learn how to properly manage your money so that no matter what level you get to, you’re able to keep some of your money, see your money and allocate it to the right places properly. Number four is you need to have a clear understanding of how you will bring money into your business.
1 (11m 47s): So you may know, okay, I want to sell this product. I want to create this product. I want to have service, but where are your sales going to come from? There’s so many options and so many opportunities out there that sometimes you can get crossed up or try to do everything at one time. But if you map it out and plan out, okay, this is the channel. This is the route that I want to use to make sales. You want to decide that, is it going to be a physical business where you’re selling in your store? If you want to have an online business where you’re selling from your website or selling from a landing page, or if you want to do a combination of them?
1 (12m 29s): And have a clear idea of who you’re selling to and how you’re going to get them from becoming a window shop or an observer to becoming aware of what you have going on to get them to purchase it. So you want to have a clear idea of how you are going to bring that money into your business every month and all of that comes with a plan. And you want to have this math out before you get started so that it’s no surprises and you don’t get disappointed or discouraged or give up on your business. And lastly, you want to number five, you want to learn how to put away funds for a rainy day.
1 (13m 14s): And the reason why I say this is one thing that you’ll come to know, or if you’re already in the business, you’ll come to know that part of business are the ups and downs. No matter how people try to make it seem like everything is all good every day, there are ups and downs. It’s good to stay positive about it, but you want to plan for it on the back end because you know that it’s inevitable. It’s inevitable in life, and it’s definitely inevitable in business. So that’s another reason why you don’t want to just have funds coming in and going out, coming in and going out and actually having a plan of how, where are you going to distribute these funds and where they’re going to go?
1 (13m 57s): Because if there comes up month where it’s slow, if you have a business that’s seasonal, then you’ve already prepared for that. And you have money in place to be able to keep the business going, keep those expenses going. You have that cash flow in place. You have the money to be able to pay yourself. And you’re going to have to let go of any of the employees or the people that you contract with because you put away funds for a rainy day. So those are the five. Let’s recap. Number one was decide whether or not you want to quit your job. Consider all the expenses that you have in your household and plan for that accordingly and keep that in mind with your decision-making.
1 (14m 42s): Number two is you want to calculate your expenses on with the expectation to scale. So plan for growth from the beginning, not working your way backwards. Number three is start applying the principle of paying yourself before you actually do it. So whatever it is that you need to do, whether you’re using your paycheck or whatever it is, get used to distributing your funds and not just taking in money and spending it right back out, get used to paying yourself a certain percentage or a certain amount on a periodic basis, whether that’s weekly, biweekly, or monthly, get used to paying yourself and not just drawing out funds whenever you feel like it.
1 (15m 32s): Number four is have an understanding of how you will bring money into the business. Plan out the sales channels you expect to use, plan out how you expect to get your products out there. And get them from the awareness phase to actually making sales with your products so there are no surprises later on. And number five is learn to put away funds for a rainy day. So those are the five things that I would say would prepare you for entrepreneurship, whether you are a mompreneur or whether you are an entrepreneur or you’re planning to become a parent later on.
1 (16m 15s): Those are some of the tips that I would say that I wish I’d known from the beginning. Some of them I did know or did have advice about from the beginning. So let me know if this was helpful for you. If you have any questions, feel free to place those in the comments. And I will answer those. If you’re listening from the Anchor platform, you can press the record button and ask. If you’re listening from my website, you can place it in the comments. Or if you’re listening from YouTube, you can also place it in those comments. And if you happen to want a list of those business ideas that I was talking about, I will place a link to that blog in the comments.
1 (16m 58s): So you can look at those business ideas that you can get started with for $20 or less. And as I always say, Dream Until your Dreams Come True,
3 (17m 15s): <music>.