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Do you dislike dealing with the financial side of running your business? You’re not alone. Many entrepreneurs go into business to do something they are good at, or to fill a creative void. Spending time with accounting software and spreadsheets, however, isn’t often on their list of ways they want to spend their time.
The good news is, you can learn to master money, as the following entrepreneurs illustrate. These entrepreneurs demonstrate how they balance the practical aspects of running a business, including their finances, without losing inspiration.
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Master the financial basics to make better business decisions
Six years ago, Brittany Whitenack started hand-pouring candles. Little did she know that she was building a business that would continue to grow and expand. Her company, Antique Candle Co., now employs 34 people and every candle is still poured by hand. While creating and selling candles is her passion, she acknowledges that she wouldn’t be where she is today without embracing the less sexy side of her business: the financials.
Whitenack says that one of her keys to success has been mastering the financial side of her business. She’s invested time in better understanding her accounting software, she reviews her financials weekly and uses the information they provide to help drive changes as needed.
“I spend the most time assessing the Profit & Loss Statement (PNL); specifically, the expense lines for payroll, overhead, shipping costs, and raw materials. One area I’ve specifically been targeting is our shipping costs. As an e-commerce business, it costs us an enormous amount of cash to ship candles. They are heavy and fragile, which is reflected in how much we pay our shipping carriers to ship thousands of candles every day. By evaluating the PNL, I’m able to detect any abnormalities or changes in shipping costs. The carriers like to increase rates all the time! Sometimes that’s a signal to reevaluate our carrier or negotiate better rates.”
Whitenack encourages entrepreneurs to take a hands-on approach to their financials, too.
“I would strongly suggest that you take a class to understand the basics,” she said. “If your goal is to have a profitable business—and not a hobby—then it’s imperative that you are comfortable with your finances, even if you hire an accountant or bookkeeper to help.”
Strategy: Invest in learning the basics of bookkeeping and reading financial statements to make better business decisions.
Understanding your finances pays off during tough times
Angie Donatone is the director and owner of Sunshine Kids Day Care LLC. She’s made it a priority to know her numbers, and she says knowing her financials has been a big part of the reason she’s navigating the coronavirus so successfully.
During the pandemic, Donatone made the shift to caring for children of essential workers. She also shifted money from payroll to supplies, including purchasing masks and gloves.
“A lot of us open daycares because we have the heart for children and their families,” Donatone said. “But the majority (of entrepreneurs) who own and operate daycare aren’t knowledgeable about finances.”
Her journey to shore up her finances started in October 2019, before anyone had heard of COVID-19. She joined a coaching program called Cash Flow CEO and focused on organizing her finances, maximizing capacity, and creating another income stream. She says that groundwork was essential to allowing her to work on her business and not just in her business.
While it hasn’t been easy, her creative approach to her business has paid off:
“The business is going great,” Donatone said. So much so that she’s planning on opening another facility in the near future.
Strategy: Invest in the skills you need to work on your business, not just in it.
But, don’t let the focus on your financials hinder your creative spark
Michelle Garcia’s business, Heirloom Catering, has dealt with two crises recently: a personal health crisis last year that left the founder and CEO running her business from her hospital bed for a time, and then COVID-19 this year. Still, her catering business was one of the first in her community to pivot when the crisis hit.
Garcia’s business has traditionally worked with local farmers, ranchers and artisan food markers, and she wanted to continue to support them throughout the crisis. She quickly shifted her business to home-delivered meals, as well as a grocery delivery and pick-up service that disbursed $45,000 in 10 weeks to other local businesses.
She hired Kristy McDonough, who specializes in helping restaurants create new revenue streams, to run the online store that Garcia said was created “in a fast and furious way.” That, along with a PPP loan and EIDL, have helped Garcia to keep her doors open. In addition to her catering business, a cafe that was in the works when COVID hit is now open, as well.
Garcia admits it’s been tough. She’s spent countless hours analyzing her financials. She uses accounting software and credits her accountant for helping keep her afloat. She also attributes the community support she’s received as one of the reasons she’s still in business.
Lately, though, Garcia said it feels like she’s consumed with crunching numbers, applying for loans and all of the tasks she dislikes most about running her own business. While she continues to focus on her financials, she said it’s time to prioritize the creative aspects of her business again, the ones that made her want to be an entrepreneur in the first place.
Strategy: Stay on top of your finances, but don’t let them quash your creativity.
Bottom line: Put your financials first
Belinda Rosenblum, CPA and creator of the Cash Flow CEO course that Donatone participated in, works with many creative entrepreneurs to help them master money. She has found that most people start their businesses based on a passion, but without understanding the money side of their business, they often create an expensive hobby.
“There’s no money management ‘prerequisite’ to becoming a business owner,” Rosenblum said. “No course, plan, or test to prepare you. So, you’re left to figure it out as you go, trial-and-error style. You make mistakes and learn from them, but soon realize that every single little ‘lesson’ costs you… and eventually adds up.”
She encourages entrepreneurs to take the time, no matter what stage of business you are at, to get a better handle on the money flow in your business.
“Knowing your numbers and strategically growing your profit are essential to creating a sustainable business,” Rosenblum said.
She also added that getting a clear handle on your finances can help you to:
- Determine the right revenue streams to pursue and the necessary actions to take each day toward achieving your goals.
- Know your value in the marketplace and charge accordingly.
- Spend on items for the best return on investment for your growth.
- Plan for profit and not just for revenue.
- Maximize your time doing what you love (and what you’re great at).
You’ll never be nearly as successful as you can be until you know your numbers, and until you know how to manage them in order to align with what matters most to you and your business, Rosenblum explained.
“You can create income for yourself and create impact with your talents and skills,” she said. “They don’t have to be mutually exclusive. Money can help fund both.”