How would it feel if you could get rid of the financial uncertainty in your business?
To know that your efforts will give you the life you want?
Healthy uncertainty
As business owners, we’re a bit twisted. We get a buzz from uncertainty; it stops us getting too comfortable, keeps us driving forwards, creating new products and having new ideas. Lets be honest, we love it!
When uncertainty becomes stressful
But beyond this healthy level of uncertainty, we can quickly descend into a debilitating place of anxiety and fear, shutting down our creativity and positivity, knocking our confidence to the point we stop taking enough positive action to fix the very things that are causing us so much angst.
Personally I love the unknown – not knowing who I’ll be working with, what programs and courses I might create. I love NOT having my life mapped out in front of me.
But I definitely don’t love financial uncertainty. Whatever I’m up to I want that certainty that there will be enough money, that I can book holidays and not worry, that there’s enough going into the pension, that I’ve got a healthy cash buffer ( for me that’s 6-12 months) and that whatever “retirement” looks like, we’ll be comfortable.
What causes financial uncertainty?
I think these are the main culprits:
- Not having a plan – not knowing what you’re aiming for
- Not knowing how to generate more sales
- Not knowing what sales will be in the future
- Not knowing you can bring in sales when you need them
- Not knowing when customers will pay you
- Not being able to see far enough ahead to plan
- Not knowing what your tax bills will be
- Not knowing if your business model even stacks up – can it make the sort of money you want it to?
There IS an answer
What if I told you there are simple ways to dramatically reduce the financial uncertainty in your business? That we can protect ourselves from the de-stabilising effect of financial insecurity (whilst keeping the bit we secretly love!)
The 5 ways to overcome financial uncertainty
1) Have a plan. Have a financial strategy
If you know what good looks like, and how much profit you need to make for things to be comfortable, you know what sales and margins you’re aiming for. It’s pretty hard to get a result you want if you don’t know what you’re aiming for.
2) Route to market, marketing and selling
For me this is the most important thing to spend time getting right, once you have a plan of where you want to go. Even the best financial system in the world won’t do a jot of good if you don’t have enough sales coming in and don’t know how to get them.
If you scrabble for sales then it’s your top priority to step back and work out what needs fixing.
- Do you know for certain what your route to market is? Exactly and precisely how you reach your target customer? If not I’d recommend taking some time out to get really clear on this. We have to know what levers we pull when we need to generate sales – otherwise it’s just luck.
- Is your marketing doing its job? Do you have consistent reliable marketing that connects you with your target market and brings in enough leads to give you the sales you want?
- Can you convert enough leads into sales to get the income you want and need?
If you can’t answer “yes” to these 3 questions you’ll never be free of financial uncertainty.
3) Know your finances
To have certainty about your finances you have to know where you are right now. Otherwise you’re just guessing, and that just wastes a lot of time and effort worrying.
- Cash flow – know your cash position now and for the next few months – the best way to do this is keep a rolling 13 week cash flow forecast. You need to see your debtors report every week too, so you keep a close eye on who owes you money.
- Taxes – put your VAT and corporation tax away every month – its a great feeling knowing you’ll never have to worry about finding the cash to pay your tax bills.
- Profit – know your financial position. You need to know every month what net profit you’ve made, after tax and dividends. You need to know how much profit you’re forecasting to make this year and what level of sales that profit is relying on. (notice I didn’t say you need to know what turnover you’re forecasting – I don’t care about turnover, cash and profit are your most important measures)
4) Visibility
How far into the future can you confidently see?
- Order book – how many months can you see – have you hit your sales target yet for the next month or two?
- Pipeline / quotes / enquiries – is there enough activity for you to feel confident you’ll hit your sales (and therefore profit) targets?
- Does your profit forecast show you’re making the money you want to be?
- And have you got a snappy weekly flash report that pulls all that together so you’ve always got the information you need to feel certainty?
5) Make this a routine
Make all of these things a routine;
- Look at your financial plan at least every month to make sure you’re on track for the life you want.
- Your marketing should be something you do all the time, not just a knee jerk reaction because you’re worried about sales.
- Financial control only works when it becomes a routine discipline – so every week you need to see your cash flow, and you need to see your management accounts with a profit forecast every month (not quarterly – that’s never ok)
- Put a weekly flash report in place that gives you great visibility on what’s going on.
Get these things right and it’s the recipe for the perfect mix of certainty and confidence that your finances are sound, with uncertainty and excitement of knowing the future is yours to create!