1) Anything can happen and we always need to have a cash safety net
I talk a lot about buffer cash and why you should have at least 3 months overheads in the bank; because stuff can happen.
And the last year is the ultimate example of why we just cannot afford to run our business on empty. We always need fuel in the tank…. because you never know. You should make it a priority to build your 3-months buffer cash before investing in growth.
You should also make sure that your taxes are put away into a separate bank account. Even if you’ve sensibly got deferred VAT and CT on a payment plan, you should ring fence that money if possible, AND make sure all your current taxes are put away.
Remember it’s not your money and should never be used to fund your cash flow (I’ll give you a pass for the next few months though!)
2) Stay lean
Don’t carry overheads unless they’re adding real value to your business.
Overheads can creep up over time, until suddenly your break-even point is scarily high. I’m certain you’ve been brutal with your cost cutting during the last year, but keep that lesson in the front of your mind as we go back into growth.
Question every subscription, every new staff member, every capital purchase, every new commitment you take on. IS this truly needed to get you where you want to be?
Can you automate any tasks to increase your capacity? Tools like Zapier (which I LOVE) can automate all sorts of business processes, and there’s an app for just about anything and everything now.
3) Keep overheads variable where you can
Where you can, keep your overheads as flexible as possible so you can turn the tap off if you need to.
- Subscriptions you can pay monthly for and cancel if you need to
- Freelance workers to fill resource gaps instead of recruiting just yet (this is also a great way to make sure you really need someone and just what they’d do)
- Avoid long term financial commitments unless you’re VERY sure of how they will add massive value AND you’ve thought through what would happen in the case of another crisis
4) Financial information keeps your business safe and lets you plan ahead
A common story when the pandemic hit was people scrambling to pull together their financial position and frantically trying to plan ahead. In a state of panic.
Every business needs financial information; how much will depend on how large and how complex your business is.
The right information will always tell you where you are right now, give you a forecast of future months AND let you to scenario plan so you can always see where you’ll be.
If you’ve let your information drop since the madness, then learn that lesson and make it part of your business.
It’s not just there to manage a crisis, but to put you control of creating the future you want WHILST keeping you safe!
So there you have the big 4 lessons we all need to learn.
As things go back to normal and our inherent business-owner optimism kicks in, don’t forget these lessons. I’ve been teaching these for years; it shouldn’t take a global pandemic for you to take your finances seriously!
By Serena Humphrey
I help ambitious business owners master the money in their business so they can build Financial Freedom.
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