Jan 5, 2016
EPISODE 70- GETTING OUR FINANCIAL HOUSE IN ORDER BY CREATING A
BUDGET
As artists it's not always easy to change the way we think
when it comes to financial topics like salaries, budgets, profit
and loss statements, inventory, or sales. My goal is to help
you to start thinking, if you haven't already, like a CEO.
As a small business owner you have to wear a bunch of different
hats which is not only exhaustng but can be
overwhelming.
Over the course of the first quarter of 2016 I will be
breaking down each area of our businesss such as customer service,
inventory, marketing and help you change your mindset in regards to
these areas. In this episode we will begin this process by
talking about the one word we all Dislike but all know the
importance BUDGET. By creating a budget as John Maxwell
says "A budget is telling your money where to go instead of
wondering where it went."
Instead of making an order, selling the order, then spending
the money or paying a bill or debt we must learn to take the
revenue earned from said order and immediately begin the allocation
process of where it is going. We all have our personal bills,
business expense, entertainment. Etc. the only way you will
be able to turn your business into a profitable one is by not only
changing how you think about money but also by creating and
implementing systems to manage the money.
https://www.dropbox.com/s/g9atv16lfmpzzg1/MONTHLY%20BUDGETS.pdf?dl=0
BUDGET FORM LINK
*** Remember first and foremost that when you receive payment
for goods and services the business is to receive the money. If you
pull any money out of this revenue you will do yourself a
disservice. I remember the days of driving to a shop completely
broke in hopes that the shop would buy everything or at least buy
enough to allow me to put gas in my car, some food in my belly, and
hopefully buy more oxygen to keep the ball rolling. This
struggle is real and if you continue to think on a day to day basis
this struggle will continue. If you begin to change your financial
habits not only will you grow your business faster you will also
grow confidence in yourself as a business owner. There's
nothing worse for your creative spirit the standing behind your
torch wondering how your going to pay a certain bill or worrying
about your house getting foreclosed. ***
So let's start by writing down all the areas of your life that
you spend money. I have included a worksheet to help make this
process easier. There are 2-columns. 1-personal bills/debt.
1-business.
Setting a budget for your business: examples
areas of expense
- Rent
- Oxygen
- Propane
- Glass
-
- Clear
- Color
- Opals
- Misc
- Equipment repair
- New equipment
Use the forms to fill in the monthly totals you have projected
to spend.
Now in the area for income write down your estimated income
based on last years sales. Now if you don't have a number what you
need to do is add up your total estimated business expense and
times that by "3" to calculate a generic number of what you should
set a your goal for that months total revenue. If your
expenses totals $500.00/month then you should shoot for
$1500.00/month. That way your business expenses are covered leaving
you $1000.00/month to be allocated to areas like your taxes, salary
and retained earnings.(these 3-areas are of importance as well and
will be discussed further in future episodes) Out of the $1000.00,
which would be considered profit take 15-25% out and stick that
into a separate savings account to later be used for your quarterly
estimates. The remaining balance of $750.00 will then be paid to
yourself in form of a salary. Now obviously the more revenue
generated the more business expense you will have but this will
also give you the ability to pay yourself more. That being said if
your personal bills total $1000.00/month and your paying yourself
$2000.00/month you may want to think about cutting your salary back
a little to then be used as retained earnings for the company.
The budget forms include savings for the business and for
your personal. But having extra called retained earnings
which is the profit your business has made after all salaries and
dividends have been paid. Now as a small business you won't be
paying dividends but you will be paying a salary and with retained
earnings that money can be allocated to pay help like an assistant
or even paying an apprentice piece work.
By taking all of this into cosncideration and truly beginning
the process of how you think in terms of how money can work for you
not only will you grow your profits you will grow your financial IQ
and have a drive to want to learn more about accounting and
marketing. How you can improve in areas of expenses in your
business and personal life. Having everything on paper in
front of you on a daily basis you will begin to create financial
habits that will resonate for theorist of your life. Allowing you
to setup retirement funds, live the lifestyle you want to live and
grow to your fullest potential as an artistic entrepreneur, get out
and stay out of debt and financially have the ability to change the
world.
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