Managing Finances for Entrepreneurs

Entrepreneurship can be a lot like being a parent: you dream big dreams for your company, but before it takes off, you’ll have to make a lot of financial decisions. For parents, questions like, “Do I really need a wipe warmer?” come to the forefront, but the temptation to spend money you don’t have on things you don’t need remains for business owners as well.

Add to that the state of the economy lately (inflation) and your ability to manage finances and make wise decisions for your business could make or break your company this year.

In light of that, we want to cover how to be smart in making, spending, saving, and investing money, as well as how to improve your business.

Making Money

It can be tempting not to market your business when you find yourself overwhelmed by an influx of work, but the truth is that marketing will help decrease the severity of “dry spells” in your business. That’s why it’s important to devote at least part (most experts say half) of your working day toward getting clients. You can also spend time on personal development, learning, etc.

When it comes to doing the actual work, make sure you uphold the same standard of excellence throughout all of your projects. That consistency will ensure that clients know what to expect from you, and lead to more trust between you and them. More trust means more repeat work!

Take time to perform self-evaluations every now and then. What have you learned? Do you need to increase your prices to better reflect your knowledge and level of customer service? By building in a predictable workflow or plan to increase rates, you can eliminate some of the “hemming and hawing” about whether you should increase your rates.

Spending Money

People who make a lot of money aren’t exempt from the desire to spend their hard-earned cash. You have to think carefully about how you plan to spend your money to avoid buying every shiny thing that crosses your mind.

Here are some questions you can ask yourself:

• Do I need this? If you don’t need it in the immediate future in order to do an effective job, don’t buy it!
• Will I need this later? If you would like to invest in something in the future, you can start saving now (more about saving later).
• Will this improve my work? More specifically – will this tool improve an aspect of my work that I want to focus on right now?
• Do I need the brand name, or will generic do the trick? Decide where you’d be OK with “cutting corners” by opting for a cheaper version and where you absolutely cannot compromise quality.
• Am I willing to put in the work, no matter what? Some things you can spend your money on – like cohorts and communities – require that you put into practice what you learn. If you don’t do that, you’re just flushing money down the drain. Are you willing to participate, even if things get busy?
• Have I done my due diligence? Put in the work of determining which options are the best fit for you. It’s better not to buy then to buy something that doesn’t work for you and your business.

BONUS: Look for coupons. If you already know you’re going to need it, see if you can find coupons (through Honey or other money-saving apps) so that you don’t have to spend as much money on it.

Saving Money

Saving money is usually better than spending it – especially if you’re a recovering shopaholic. Sometimes business owners get into a trap of thinking, “Well, I can just write it off as a business expense,” when they don’t really want the product in the first place.

To save money, here are some tips:

• Check your budget regularly. Make sure you’re keeping track of where your money is going and how much you’re spending. This isn’t just good business practice – it also keeps you accountable to yourself.
• Deposit your money into a good savings account. Some savings accounts are locked in for a certain amount of time – 6 months to a year or more – and those ones have higher interest rates, which means you can earn money just by leaving it there.
• Find a cause to donate to. This may seem counterintuitive, but giving money to promote a good cause can help rally your target audience to you (especially if you make it part of what you do) and make you more mindful of what else you’re spending.
• Err on the side of caution. If you aren’t sure it’ll help your business, continue to research it until you are. Then be sure to follow through to learn how to get the most out of it – otherwise, you spent money on something you won’t use!

Investing Money

There are several things you can invest in, but the wisest thing to do is to invest in something that will give you a good return on your investment (ROI).

In this section, we’ll talk about some investments you’ve probably thought of already, and some that you maybe haven’t.

Here are some investments you can make:

• Gold. If you’ve seen any commercials in the last 20 years, chances are you’ve heard about gold. Since 1971, gold has had an average ROI of nearly 8%.
• Legos. Surprised? You shouldn’t be! Whether you’re a brick enthusiast or not, it’s a good niche investment, with an average ROI of 10-11% – not bad if you don’t mind storing Legos.
• Stocks. Stocks are probably part of what you think about investments, with bonds being the other half. Stocks have had an ROI of 10% since ‘71. Stocks are buying equity in the company, so this is considered a fairly risky investment.
• Bonds. Since bonds are not buying equity, but are a loan to a company, they’re a safer bet. However, the trade-off is that the ROI isn’t as good: an average of 6%. Like stocks, bonds are also digital, so there’s no space required for storage.
• Real estate. Like Legos, there is a physical aspect to this investment. Unlike Legos, there is also upkeep! But considering that real estate in the US has an average ROI of 10.6%, it might be worth it.

Ways to Improve and Innovate (on a Budget)

Want to budget for innovation? A good rule of thumb is to set aside 10% of your revenue. There’s wiggle room, though, so don’t feel like you need to stick to exactly 10% – you can add to or subtract from that number based on what works best for you.

To get the most out of your efforts, though, here are some quick tips:

• • Look into free trials. Thinking about trying a new software? Some companies allow you to take their software for a test run for free. Free versions typically have lower capabilities, but they can help you decide whether the flow works for you.
  • Ask about discounts. Some software companies (like Adobe, etc.) offer discounts for students, friends/family, etc. Check into what discounts might be available.
  • Look for coupons. Again, sites like Honey or KarmaNow are great resources if you’re looking for a coupon code to use at checkout.
  • Be organized. Make a plan for your innovation budget ahead of time. Don’t arbitrarily choose a few options and then end up not needing or using them!
  • Automate processes. Your time is money. If you’re responding manually to email inquiries, etc., that’s money going down the drain.

If you’re interested in automation, Zapier is a good start. There’s a free plan, a plan for those who need to move data between apps, and more. If you find yourself doing more admin tasks than work (or the admin is disproportionate to your work), it’ll easily pay for itself within a week.

Another thing you could do is make a list of several different products you would like to try for your business, from the high end to the low end. Rank each list in order of importance to you (for example, designers need Adobe suite – that’s a non-negotiable).

Once you know how important each one is to you, see if there are any free options that you can go with for the less-important items. For options that are rated higher, consider investing more money into them. This will help you prioritize your spending and keep from going over.

Consider investing in cloud-based storage rather than physical storage solutions. Cloud storage is effective and can be accessed from anywhere. If you’re worried about security, consider adding a layer of two-factor authentication (2FA) or multi-factor authentication (MFA) to your sign-in process.

Keep Up with Matcha Design for Tips

Would you like more tips on how to use your finances wisely as a business owner? It’s a tough road to navigate, but as a company that’s had to operate on a shoestring budget before too, we know what you’re going through and are ready to help.

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