Becoming Financially Free
“Let’s face it, if we have piles of money in the bank, we SPEND it.”
A little bit ago I had the opportunity to sit down with my good friend, Rick Jordan– founder and CEO of ReachOut Technology, in his podcast ‘All In’ to discuss what it means to become financially free, and how. Rick and I have been good friends since what feels like forever and share a passion for entrepreneurship. He loves asking the hard hitting questions tailored to helping his audience progress in their career and personal entrepreneurial endeavors, so be sure to check out the podcast after the article!
Here is a recap of my top five entrepreneurial tips that can lead to financial freedom.
Time Blocking
Many entrepreneurs and business owners are always on the go and rarely have a minute to relax. I honestly credit much of my success to my ability to time block my schedule.
I use a calendar and when I say I live and die by it, I really do mean it. I am also a big proponent of having a hard stop time. Being a mom of 3 and an entrepreneur can be a lot of hats to wear at times, so by designating a specific time to hang up my work hat and pick up the mom hat, that has been a real game changer. Don’t get me wrong, being home during COVID has made it difficult at times, especially when I am on a Zoom call and one of the kids comes into my office asking for a snack! It’s all a balancing act when you get down to it, but by having carved out times where you know you only need to focus on one job makes it a lot more doable.
Cash Flow Methodology
The book Profit First, by Mike Michalowicz is a cash flow methodology book that I truly believe in based on the success it brings business owners who follow it– including myself.
Remember the simpler days where your grandmother would keep a separate envelope of cash for groceries and one for mortgage, and one for unexpected expenses? Essentially how much money they had in that envelope was all they had to spend. Well, that’s basically what Profit First does for entrepreneurs. Let’s face it, we like bank balance accounting. There is something in the simplicity of pulling up your bank account and seeing one big number and knowing you can make payroll, and even pay off the American Express this month.
However, with Profit First you have multiple bank accounts, or ‘envelopes,’ and it lets you know how much you have, but also what it’s for. A lot of times, we will spend whatever is in front of us, but with this method, you put it in smaller categories, so you can see how much money is allocated for each. One of the best and most important features is that you pay yourself first and foremost. As entrepreneurs, we tend to take the financial hit as profit ebbs and flows, even though our time and effort never decreases. With Profit First, you plan for profit and allow your business expenses to be limited by what remains.. This way it is much easier to see if you cannot afford one category, or are falling short in another. It helps you know that if something is off, you need to look within your company to see where you can begin cutting expenses. It is built for the entrepreneur, not your common accountant so don’t be surprised if yours greets you with resistance when you try to implement it!
“Before Profit First, I never knew how to make financial decisions. I never knew how much money I actually had. Now that we have it implemented I know how much money I have, what it's for, and I have more money than I ever had.” - client who implemented Profit First
Advice To Those Starting a Business – Especially During COVID
This past year, things have changed drastically. It almost feels as though the odds can be stacked against you and your business during this trying time.
Implementing Profit First might seem a bit scary as a business owner in the beginning.. Especially when implementing a model where you are deciding what you are going to make right off the bat.
What I say to my hesitant clients is that starting off is the perfect time to start. You don't even really notice, to be quite honest– for example, when implementing a 401K, you quickly forget about that 3%. The same applies to starting off with Profit First -you designate 1% in your profit account, 1% in the tax account, and 1% in the owners comp and you run your business on 97%. You’re not even going to miss that 3% (just like with the 401K). Flash forward one year and now you have $10,000 in those accounts. Implementing this is a great way to set aside funds you can use to reward yourself and your team, as well as eliminate the financial hit from taxes and other business expenses. All with minimal effort!
Know Your Numbers
I have worked with many entrepreneurs and business owners who simply don't know their numbers. Entrepreneurs start companies because they are good at fixing/selling something, but this doesn't mean they know how to handle every aspect of their company. In fact, most of the time they will hire someone to look at and manage their books so they never have to. But this creates a preconceived notion of, “If I have money in the bank, I’m good.” Unfortunately there is a big difference between money in the bank and money in your pocket. This is where you need a business accounting firm such as Pivot Business Group where we can take your numbers and help you get to where you want to go through strategy.
More Cash = More Options For Entrepreneurs
With more cash, comes more choices. It allows you to have several options because you have cash available, as opposed to feeling backed into a corner trying to make one idea work. To be quite honest, this is attainable for all business owners, but the trick is to have a good partner. If you hate numbers, find a complimentary business or financial partner who enjoys financials, and can carry the weight of that. This gives you the freedom to focus on your business strengths. Good teamwork can get you there.
If you want to learn more, be sure to listen to the ‘All In’ Podcast with Rick Jordan and discover how to become financially free as a business owner.