At my business, iBuild, cashflow management is more than a financial task – it’s a key driver of our strategy, ensuring sustainable growth and informed decision-making, even amidst competition and economic uncertainty.

1. Plan and project cashflow
   We have taken a proactive approach to forecasting cashflow on a project-by-project basis. This helps us anticipate shortfalls before they arise. Using historical data, market trends, and cost projections for materials and labour, we review forecasts monthly. This allows us to quickly respond to fluctuations, like renegotiating terms with suppliers or clients, without compromising the business’s financial health,
2. Track every dollar to a cost centre
   Effective cashflow management requires meticulous tracking of both income and expenditure. Digital tools like MYOB and Workbench allow us to track every transaction down to the cost centre and activity level. This detailed visibility minimises the risk of overspending and ensures better resource allocation, supporting sound financial decision-making at the project level.
3. Invoice promptly by milestones
   Timely invoicing is crucial to maintaining cash inflow. We structure invoices around key project milestones – such as preliminary work, design, approvals, and material delivery. This spreads payments evenly throughout the project lifecycle. To help clients manage payments, we offer flexible options, including credit cards, improving customer satisfaction and mitigating payment delays for smoother cashflow.
4. Negotiate supplier terms
   Strong supplier relationships are key to our cashflow strategy. We’ve secured favourable 30-day trade accounts with suppliers like Bunnings and Bluescope, by demonstrating our growth and reliability. These extended terms provide flexibility in managing cash outflows, aligning payments with incoming client cash, reducing the risk of cash shortages, and supporting smooth operations even during long projects.
5. Build a cash reserve
   A robust cash reserve is essential to our financial planning. By setting aside profits from each project, we create a buffer to handle unexpected costs in materials or labour without passing them on to customers. This financial cushion aligns with our commitment to “standing strong to deliver your dream home, no matter whatever storm.” It not only boosts customer confidence but ensures we can continue delivering, regardless of market fluctuations. 
6. Offer customer financing
   To offer more flexibility for clients, we’ve partnered with financial institutions to provide “build now, pay later” options. We receive payment upfront, ensuring steady cashflow, while clients repay the institution over time. This approach reduces our financial risk and makes our services accessible to a broader customer base, strengthening our competitive position.

The post Six cashflow strategies my business uses to stay resilient appeared first on Inside Small Business.

1. Not looking at the numbers regularly

One of the most critical mistakes small-business owners make is not reviewing their financial numbers regularly. It’s essential to keep a close eye on your financial statements, including the profit-and-loss statement, balance sheet and cashflow statement. Many business owners say, “I’m not good with numbers,” and put their heads in the sand, which is ultimately the biggest financial mistake of all.

Why this matters

Regularly reviewing your financial statements helps you understand your business’ financial health, identify trends, and make informed decisions. It allows you to spot issues early, such as declining profits or increasing expenses, and take corrective action before they become big problems.

How to avoid it

● Schedule regular reviews, making it a monthly routine to review your numbers and understand what they mean for your business.

● Invest in reliable accounting software that can generate detailed reports and provide insights into your financial performance.

● Educate yourself about the basic financial principles and how to interpret your financial statements – this will empower you to make better business decisions.

2. Looking only at their bank account as a means to understand their cash flow

Many small-business owners make the financial mistake of relying solely on their bank account balance to gauge their cash flow. This doesn’t provide a complete picture of your financial situation. It gives you just one angle and can get you in hot water quickly, especially if you don’t have a separate account for tax provisions.

Why this matters

Your bank balance doesn’t account for outstanding invoices, upcoming expenses or other liabilities. Relying on it can give you a false sense of security and lead to cashflow problems.

How to avoid it

● Regularly review your cashflow statement to get a comprehensive view of your cash inflows and outflows. This will help you understand your liquidity and manage your finances better.

● Create cashflow forecasts to predict future cash needs and identify potential shortfalls so you can plan ahead and avoid cash crunches.

● Keep a close eye on your accounts receivable and payable to ensure timely collections and payments. This will help you maintain healthy cash flow.

3. Not seeking advice from an accountant when needed

Small-business owners often try to manage their finances independently, avoiding professional help until it’s too late. While managing your finances in-house can save money, it can also lead to costly mistakes. Don’t be scared to pick up the phone for fear of getting a big bill. Finding yourself an accountant you have rapport with can save you thousands in poor decisions.

Why this matters

Accountants have the expertise to provide valuable insights and advice on complex financial matters. They can help you with tax planning, financial analysis and strategic planning, ensuring your business stays on the right track.

How to avoid it

● Don’t wait until you’re facing financial difficulties to seek professional help. Engaging an accountant early can help you avoid problems and make better financial decisions.

● Establish a relationship with an accountant and schedule regular consultations to review your financial situation.

● Take advantage of your accountant’s expertise to optimise your financial processes, plan for taxes and develop strategies for growth.

4. Failing to separate personal and business finances

Mixing personal and business finances is a common financial mistake that makes it difficult to track business expenses, manage cash flow and prepare accurate financial statements. It might seem like extra work upfront, but it will save you time, money and stress down the line.

Why this matters

Keeping your personal and business finances separate is crucial for maintaining clear financial records and ensuring your business’ financial health.

How to avoid it

● Set up separate, dedicated bank accounts and credit cards for your business to keep personal and business transactions separate.

● Ensure all business transactions are recorded accurately and consistently, using accounting software to streamline this process.

● Instead of withdrawing money from your business account as needed, pay yourself a regular salary to maintain separation between personal and business finances.

5. Neglecting tax planning and compliance

Many small-business owners underestimate the importance of tax planning and compliance, leading to unexpected liabilities, penalties and cashflow problems. Ensure you put money aside for tax regularly so you’re clear about what’s yours to keep and what belongs to the ATO.

Why this matters

Proper tax planning helps you minimise your tax liability and avoid surprises, and complying with tax regulations is essential to avoid penalties and legal issues.

How to avoid it

● Work with an accountant to develop a tax plan that aligns with your business goals. Estimate your tax liabilities and set aside funds to cover them.

● Keep up-to-date with tax laws and regulations, ensuring you comply with all filing requirements and deadlines.

● Take advantage of all available deductions and credits to reduce your tax liability – your accountant can help you identify and claim these benefits.

6. Overlooking the importance of financial forecasting

Many small-business owners fail to create and update financial forecasts regularly, but “if you don’t plan, you plan to fail”. Every bulletproof business has a strategy, and this includes a financial strategy, too.

Why this matters

Financial forecasts provide insights into future revenue, expenses and cash flow, helping you plan for growth, manage risks, and make informed decisions.

How to avoid it

● Develop detailed financial forecasts that cover different scenarios, including projections for revenue, expenses and cash flow.

● Update your forecasts regularly to reflect changes in your business environment and performance.

● Use your financial forecasts to guide your business planning and decision-making, adjusting your strategies based on forecasted outcomes.

7. Ignoring the importance of financial metrics

Financial metrics provide valuable insights into your business’ performance and health – a fact many small-business owners overlook. Having four-to-six key metrics that you understand and can guide your decision-making can be a total gamechanger. You don’t need to be a financial pro, but you do need to understand what good and bad looks like in order to make the best decisions for your business.

Why This Matters

Tracking key financial metrics helps you understand your business’ strengths and weaknesses, identify trends, and make data-driven decisions.

How to Avoid It

● Determine the financial metrics that are most relevant to your business, such as gross margin, net profit margin, return on investment, and liquidity ratios.

● Regularly monitor and analyse these metrics to stay informed about your business’ performance.

● Use the insights gained from financial metrics to guide your strategic planning and operational decisions.

In conclusion

Avoiding these common financial mistakes can be the difference between thriving and becoming another small-business failure. Regularly reviewing your numbers, maintaining accurate records, seeking professional advice, and planning for the future are not just important – they’re essential practices for any business owner determined to build a bulletproof business. Don’t leave your success to chance. By being proactive and informed, you can build a strong financial foundation and ensure your business not only survives but thrives for years to come.

This article first appeared in issue 45 of the Inside Small Business quarterly magazine

The post Seven common financial mistakes to avoid appeared first on Inside Small Business.

When I started my business in 2015 as a ‘side hustle’, I had a full-time job that paid the bills. That was both a blessing and a curse because I didn’t depend on it for survival so I told myself the numbers weren’t that important. But what I did have from the very beginning was an amazing small-business accountant who helped me to understand my position, and what my numbers meant. And that full-time job I had was in state government where I was responsible for budgets and deadlines, accountable by processes and procedures, where everything had to be planned out to a T before it could be executed. This was a long way from the wedding floristry business I created, but definitely gave me a heads-up as a business owner. 

If you’re running a business on your own or with limited resources, the whole concept of ‘knowing your numbers’ might feel ridiculously overwhelming, but I assure you, it actually gets to be really simple, and sometimes it’s more about getting out of your head and getting it all on paper, making it crystal clear. Starting with understanding your baseline.

The first step is working out what it actually costs to run your business per year, alot of small and micro business owners understand what their product or service costs, but don’t consider the actual running costs of their business. The things like rent, power, water, insurance, phone, internet, vehicle registration, fuel and servicing, software and systems subscriptions, wages and superannuation, networking and marketing/advertising and any other expenses you have each year running your business. Once you’re clear on that you can assess what you need to bring in each month to cover your costs and what making a profit actually looks like for your business.

Another key piece of the puzzle is moving to an online accounting system like Xero or Myob where you can see the numbers in real time, reconcile expenses on the go and easily create and access reports. And even frolimitedm your dashboard you can see where you’re at for the month and how that track against previous months.

Reviewing your numbers regularly is what gives you the best handle on your finances and helps you to start identifying the trends in the income and expenses. Some people allocate this as a ‘Money Monday’ or a ‘Finance Friday’; a dedicated time each week to review the financial situation because where focus goes, energy flows. The more you understand what’s going in and out and why, the more power you have to do something about it. It’s not uncommon in the start-up stage of business to have losses, and it’s also not uncommon to have periods even as you grow in business where there are losses. However, frequently looking at your profit and loss statements in Xero or Myob helps you to understand why there’s a loss so that it’s not a shock when it ‘appears’. You might have invested in a new software or some new office equipment, you might have taken on a new software, you might have stopped production of a particular item. Loss is not the end of the world in business if you understand why, it’s there and have a plan to bring more profits long term.  Business is a long game, not a quick win. 

The post How to get your head out of the sand and use your numbers as your superpower appeared first on Inside Small Business.

It’s all in the foundations!

However, the reality is that one in five small businesses will fail within the first year, mainly because small business owners forget a vital part of starting a business – the importance of creating strong business foundations. To build a sustainable business with long-term growth,you need to be on top of the fundamental elements such as operations and people management, marketing and finances. They’re the key to long-term growth.

When it comes to achieving sustainable results, creating solid financial foundations means you’ll be more likely to set financial goals and make informed decisions about your business allowing you to weather challenges and adapt to changing circumstances.

But let’s be honest, the numbers aren’t sexy.

And once you’re at the coal face and time and resources are limited, it’s tempting to focus on the ‘fun’ stuff and forget the numbers altogether.

Simple steps to build solid foundations

Whether you’ve been in business for five minutes or five years, and no matter how big or small your team is, improving your financial foundations is easier than you think. Here are some practical ways to get started.

It’s all about success

Define what success means to you right now in this season of life and business. Once you know where you’re headed, create financial goals to help you reach your destination.

Get organised

To get your financial foundations in order, try these tips for getting organised:

• Set up business-only bank accounts. Start with three: an operating account, a tax and super savings account and a rainy-day account.
• Embrace tech to help you manage your money and save time – consider cloud accounting, budgeting apps or the humble spreadsheet.
• Create systems and processes for repetitive or regular tasks – from invoicing to running the payroll – get the information out of your head and on paper, especially if you want to outsource or scale.
• Incorporate a Money Monday or Finance Friday. Set aside an hour a week to focus on the finances – put it in the calendar and make it non-negotiable.

Get educated

Increase your money muscle and boost your confidence by increasing your financial literacy. Even if you ‘don’t do numbers’ or outsource, understanding the money-basics is key. Look for workshops, books, online courses or call in the experts for guidance.

The basics

Good cashflow is vital for good business, so create a cashflow forecast to help anticipate the business peaks and troughs – you’ll know when you can spend and when you need to save.

Create a budget to help allocate resources, track income and expenses and progress towards business goals. Know what taxes and other regulatory requirements apply to your business and make a note of reporting dates. While you’re at it, add a tax-saving line to your budget and save for compliance.

Regular pricing reviews are vital to increasing profit – consider the cost of doing business, wages and super in every review and always add profit. Make the profit and loss (P&L) statement your business BFF. Your P&L provides a business snapshot and can help you determine the next steps.

Solid financial foundations can help you create a profitable, sustainable and successful business and are vital for business owners who want to scale, sell or reach their potential. And, it’s never too late to get started!

The post Want to reach your business potential? Start with the financial foundations appeared first on Inside Small Business.

And as we know, hope has never been a very good strategy. 

It doesn’t help that there’s this common misunderstanding that business financial planning has to be super complicated. And to make matters worse, the traditional accounting world hasn’t always been the most welcoming to small businesses. They’ve often made it seem like you need a PhD in finance just to balance your books!

Effective business planning for small businesses doesn’t have to be rocket science. In fact, it’s often the simple, strategic steps that make the biggest impact. 

Talk to your accountant regularly 

I wish I was stating the obvious here, but it appears many small business owners could benefit from a gentle reminder: talk to your accountant more than once a year. 

Not just at tax time or when BAS (Business Activity Statement) is due, but consistently throughout the year.

People often underestimate just how much value an accountant can bring to the table. By keeping communication open and frequent with your accountant, small businesses can create a solid financial roadmap tailored to their unique needs and goals. This includes developing a comprehensive budget, setting aside funds for tax and BAS, implementing strategies to manage cash flow effectively, and sidestepping potential headaches. 

It’s crucial to find an accountant who not only has the expertise but also resonates with the vision and values of the small business owner. If they can’t align with your vision, find someone else. 

Surround yourself with the right people 

Not all advice is created equal. While input from others can be valuable, it’s essential to discern between constructive feedback and opinions that may undermine progress.

In other words, don’t be put off by comments made by your friend who has never been in business; instead, build a strong, supportive network of mentors, industry experts, and peers who are walking the path too or have been where you are now.

I truly believe who you surround yourself with can change your business. Don’t shave down your big hairy audacious goals to fit someone else’s smaller ambitions.

Set up separate bank accounts to put aside money for tax and BAS 

Let’s talk about bank accounts. Yes, accounts, plural, all small businesses should have more than one. 

Maintaining separate bank accounts for various purposes, such as taxes, operating expenses, and savings, can help streamline financial management and ensure that funds are allocated appropriately. 

This practice not only facilitates better budgeting but also minimises the risk of overspending or encountering cash flow issues. 

Find an outlet outside of business 

What does rest and rejuvenation have to do with financial management? Well, quite a bit as it turns out. Running a business can be mentally and emotionally taxing, and without taking time for yourself, you risk burnout. 

I have seen time and time again that the best business decisions are made with a clear mind. 

So go ahead, give yourself permission to rest and recharge. Your business—and your future self—will thank you for it.

See? Financial management doesn’t have to be overly complex or rocket science, does it?

Financial management is all about understanding your numbers, making informed decisions, and having the right support system in place. 

By talking to your accountant regularly (book a meeting with them now, ok?), surrounding yourself with the right people, setting up separate bank accounts, and finding time for rest and rejuvenation, you’re setting yourself and your small business up for financial success.

The post Small business with big dreams? Here’s how to plan your finances effectively appeared first on Inside Small Business.

1. Customer service is everything: If there’s one thing I’ve learned, it’s that outstanding customer service isn’t just a part of the business; it is the business. It’s about more than just being friendly and helpful; it’s about creating a seamless, frictionless journey for your customer. Every step, from the initial contact to the final transaction, should be smooth and effortless. Every interaction is a chance to showcase your business’s values and mission, and turn your customers into raving fans. 

2. Embrace the seasons of business and life: Running a small business often means wearing multiple hats and sometimes having a superhuman workload. It’s crucial to recognise that there are seasons in business, times when you need to hustle hard and times when you can ease off the gas a little. Maintaining a balance is essential. Work hard, but don’t let your personal life fall by the wayside. Your business is important, but so is your wellbeing.

3. Surround yourself with like-minded individuals:  I have an amazing close circle of friends. I often get great advice from certain parts of my life from them…but…they’re not business owners, who never really got my business problems! When I expanded my horizons and joined some business mentoring and networking groups my business went to another level! I had a whole new network of people who understood my challenges and shared my passion and challenged me along the way.

4. Get friendly with your finances: Initially, I underestimated how crucial it is to really get your head around the numbers. You can’t possibly gauge your growth if you’re not up close and personal with your financials. Make it a habit to dive into those statements, make ‘Financial Fridays’ a part of your week. Trust me, once you start understanding what those numbers are telling you, you’re equipped to make smarter choices. It’s like having a roadmap to profitability. 

5. Your team is your powerhouse: Here’s the deal, your team isn’t just a part of your business, they are your business. Investing in their growth is non-negotiable. I’ve learned that when you truly value their ideas and create an environment where they feel like they’re a critical part of the journey, magic happens. It’s not just about having skilled people; it’s about nurturing a vibe where innovation, commitment, and joy in what they do comes naturally. A team that’s buzzing with positivity and passion? That’s your real secret weapon for success. 

Bonus insights

• Hard work is the shortcut: There are no magic formulas for instant success: its all about Hard work, dedication, and consistency. Embrace the grind and stay committed to your vision.

• Celebrate your wins It’s easy to get caught up in the pursuit of the next big goal. However, take time to celebrate your victories, no matter how small. These moments of acknowledgment fuel your motivation and remind you of how far you’ve come.

• Dream big and aim high:  What could you achieve if failure wasn’t an option? Let that guide your business journey.

Starting a small business is a learning curve, and it’s okay not to have all the answers from day one. What matters is your willingness to learn, adapt, and grow.

Embrace the journey!

The post Five things I wish I knew before I opened my small business appeared first on Inside Small Business.

It encompasses all revenue generation, operational expenses and investment activities. Businesses that manage their cashflow efficiently ensure more cash is entering the business than leaving it which enables them to grow.

Get a cashflow plan

With the start of 2024, it’s important SME owners have a plan in place for their cashflow so they can invest in new growth opportunities, expand operations, acquire assets and explore strategic developments. Cashflow allows owners to realise their business goals but it’s important to have an accurate forecast.

Accurate cashflow forecasting is the foundation of sound and comprehensive management. It involves predicting future cash inflows and outflows so owners know when to expect periods of surplus and shortfalls and can implement strategies to navigate the challenging times.

Where it goes wrong

It’s a tough time for SMEs at the moment. Rising overheads, supply chain issues, high staff turnover and rising interest rates – it’s no wonder many are struggling with the day-to-day running costs.

Some of the top mistakes small businesses make when it comes to cashflow include

• Failing to manage payment delays.
• Expanding too quickly without enough working capital.
• Poor inventory management.
• Failing to generate new sales leads.

Get help

Whilst many businesses strive to reduce the time between invoicing customers and receiving payments to ensure positive cashflow this can become tough when some customers take up to 60 days to settle accounts.

Invoice financing, which is widely used by business owners in the US, UK and Europe is becoming more popular here in Australia and allows a business owner to unlock the cash that’s tied up in their unpaid invoices, providing a line of credit secured by the Accounts Receivables ledger. The financier gets paid when the debtor makes payment so there are no repayments to be made. Typically, businesses can access up to 90 per cent of the sale value of an invoice whilst continuing to offer credit terms to customers.

It’s an option worth looking into if you are a B2B business.

Have a back-up plan

Lastly it’s important to have a contingency plan in place. Know what resources are available to you if unexpected challenges come your way. Some businesses have an emergency cash reserve to cope with economic downturns or supply chain disruptions, others have assets they can quickly convert to cash, and others feel secure having an invoice financing facility in place.

Whatever challenges lie ahead for your business in 2024 going into the new year with a focus on maintaining positive cashflow puts you in the best position for growth and achieving your goals.

The post Accurately forecasting your cashflow for the year ahead appeared first on Inside Small Business.

Even as customers relish their holiday break, it’s a prime time for business management to actively engage in crucial behind-the-scenes tasks, such as meticulously planning and establishing a solid foundation for a year marked by growth and stability. Besides ensuring there’s enough cash for next months expenses, it’s important to review the past year, identify successful strategies, and address any shortcomings to boost revenue.

By planning now, businesses can avoid financial stress later.

As autumn looms, here are five tips to help small trade businesses prepare for the quiet period and gear up for a successful rest of 2024:

Tip 1: Consider requesting upfront payments, ideally 50 per cent of the job cost. This way, the business is cushioned against the quieter months and ready for whatever the year brings. It’s smart, practical, and keeps the business ticking along nicely.

Tip 2: With the holiday season’s high expenses, flexibility in payment methods—like cards, direct transfers, or instalments—can be a relief for clients. This approach caters to client convenience and can enhance a business’s reputation as a customer-centric company, potentially increasing customer loyalty and expanding the clientele.

Tip 3: Prompt invoicing is vital for maintaining a healthy business cashflow. This ensures small businesses are at the top of their clients’ payment lists before the holiday expenses hit their budget. Quick invoicing reflects a business’s efficiency and professionalism, and, more importantly, helps in securing timely payments.

Tip 4: Leveraging an automated platform that matches invoices and costs with jobs can save significant time and minimise the likelihood of errors. It also streamlines the process of managing job costs and invoicing, letting tradies focus more on their work and less on paperwork.

Tip 5: Digitise your business with tools to help you get a healthy work-life balance in 2024. Too many business owners spend their free time at the computer in order to keep up with the large amount of paperwork each job generates. Software can help to create efficiencies to reduce the amount of paperwork and free owners up to spend that time with family instead.

Dealing with the new year swing is always a challenging time for small trade businesses. Often, they get too caught up in the hands-on work during this time that, sometimes, the admin side of things doesn’t get the attention it needs. By adopting comprehensive job management software, tradies can simplify their payment processes and daily tasks, letting them devote more energy to the jobs they’re passionate about.

This software, complete with tools for quoting, scheduling, job tracking, invoicing, and reporting, streamlines business operations and keeps tradies at the forefront of efficiency. This way, they’re perfectly positioned to embrace new challenges and opportunities as soon as business picks up, ensuring a smoother transition into busier times.

The post <strong>Gear up your small trade business for a booming 2024</strong> appeared first on Inside Small Business.

Every aspiring entrepreneur holds a gleaming image of success, painted with vibrant strokes of independence, financial prosperity and personal fulfillment. But within the ever-changing landscape of business, there lies an often-overlooked chasm between entrepreneurial dreams and reality. A mere slip can lead to freefall, not only affecting the business but also impacting personal wealth.

In the world of small businesses, where failure rates are high and the potential sale of the business is no sure bet, the subject of personal wealth management takes on a critical urgency. Many small-business owners pour their lives into their ventures, often overlooking essential financial strategies that safeguard their personal wealth. The illusion that business success will automatically translate to personal financial success can be a perilous misconception, leading to missed opportunities.

Small-business owners need a well-considered Plan B for their personal wealth, emphasising not only the creation of a financial safety net, but also the necessity of educating themselves in the intricacies of managing and growing that wealth. 

“Many small-business owners pour their lives into their ventures, often overlooking essential financial strategies that safeguard their personal wealth.”

The entrepreneurial dream is not complete without a financially secure future, and the path to that future must be mapped with knowledge, foresight and prudence.

Risks to personal wealth from small-business ownership

ABS data shows that there are more than 2.3 million small businesses in Australia. An estimated 20 per cent of new small businesses will fail in their first year, and up to 60 per cent of start-up businesses will not survive beyond five years of launching.

Moreover, despite the blood, sweat and tears invested in building a business, not every venture is saleable. There is information to suggest that in Australia, less than four per cent of businesses sell. So, if business owners neglect things like superannuation and proactive wealth building in the hopes of a big payout come sale day, they might have to think again.

Sadly, many business owners realise this only when it’s too late to change their personal wealth circumstances. It’s like dreaming of winning the lottery, only to find out your ticket is from last week’s draw.

Imagine investing years into nurturing your business, sacrificing vacations and delaying gratifications, only to discover your golden goose isn’t as golden as you thought.

This sobering reality underscores the importance of a Plan B. A well-crafted, foolproof plan that ensures your personal wealth isn’t left at the mercy of business winds. It’s about recognising the vulnerability of your enterprise and taking measures to cushion your personal wealth from the aftershock of potential business setbacks.

But there’s another often-overlooked factor that plays a pivotal role in securing your financial future: financial literacy.

Sure, most business owners can navigate their way through their P&Ls, but without understanding how to manage and grow personal wealth, even the best-laid plans can go awry. Unfortunately, too many small-business owners, while experts in their business domain, are novices when it comes to personal finance.

That’s the outcome of us not having any financial literacy education while at school. Unless you were fortunate to have parents or other people in your life who could teach you about managing and growing your money, you have had to learn as you go. And you’re busy building your business, right? 

Common missteps by small-business owners

Let’s address the commonly overlooked wealth strategies that could make or break a small-business owner’s future.

Superannuation contributions: 

A surprising number of small-business owners fail to make consistent contributions to their superannuation funds, either out of oversight or a misguided belief that their business success (and subsequent sale) will adequately cover their golden years. 

This approach is like running a marathon with a shoelace untied – it might not trip you up immediately, but it could lead to a spectacular fall later. 

Investing in your superannuation fund is like planting a tree; it may seem insignificant at first, but over time it grows, providing shade and fruit. Not making regular superannuation payments reflects a short-term view that can lead to long-term financial instability.

The power of time: 

In the same vein, small-business owners often overlook the power of time and the magic of compounding returns. Albert Einstein said, “Compound interest is the eighth wonder of the world.” Money needs time to grow, and by delaying investments, business owners are not just leaving money on the table, they are practically giving it away. Understanding and using the power of compound interest requires patience and wisdom, qualities that are vital, not only in business but in personal financial management.

The risk of discretionary spending: 

Many small-business owners, engrossed in their business pursuits, often overlook the flow of personal expenditures, leading to a trickle that can become a flood. It’s essential to recognise that not all spending leads to growth, and frivolous expenditure can eat away at the core of financial stability. The neglect of a structured financial plan, incorporating both business and personal spending, can be a silent destroyer of wealth. It’s akin to a slow leak in a ship; unnoticed, it can eventually sink the entire vessel. 

These missteps remind us that business success and personal financial security are not automatically intertwined. They require careful planning, a clear understanding of financial principles, and the wisdom to recognise and avoid pitfalls. Like a well-navigated journey, the path to financial success requires a map, a compass,and the wisdom to use them effectively.

Balancing business goals with personal wealth management

This is akin to a trapeze act. On one hand, you’re striving for your business to flourish, while on the other, you must ensure your personal finances are not left neglected on the sidelines. It’s about running a successful business and simultaneously securing your financial future. You can’t win a soccer game merely by defending your goal; you must also make offensive moves to score goals.

One crucial offensive move is diversification. Placing all your eggs in one business basket is a risky venture. Instead, spread your wings and invest in different asset classes, recognising that your business is just one investment. It is crucial that you put some of the income you are paying yourself from your business to work for you.

This strategy ensures that even if your business faces turbulence, your personal wealth remains secure and continues to grow.

Conclusion

As a small-business owner, you are the captain of your ship in the unpredictable seas of entrepreneurship. While sailing towards the horizon of business success, ensure you have a sturdy lifeboat for your personal wealth. Never let your personal financial future sink with your business.

It’s time to invest in a financial education, and it can be as easy as picking up that personal finance book gathering dust on your shelf. It’s time to realise that while you might be a business owner, you’re also an individual with retirement needs and financial aspirations for you and your family, independent of your business.

Plan A may be your business, but a solid Plan B ensures you’re financially secure. It’s not just about having a backup plan, it’s about creating a future-proof strategy that guarantees financial freedom and peace of mind. 

After all, the ultimate aim of the entrepreneurial dream is not just to succeed in business, but also to secure a comfortable and worry-free future.

This article first appeared in issue 42of the Inside Small Business quarterly magazine

The post Dream big – but have a back up plan appeared first on Inside Small Business.

Having over a decade of experience in the eCommerce industry, I’ve had the privilege of working with businesses of all sizes. Lately, I’ve been closely engaging with smaller female brand owners, and while their dedication and unwavering belief are inspiring, they aren’t without their challenges. Let’s explore what these are and how they can be managed.

Keeping expenses in check

Running an eCommerce business involves various expenses, and rising living costs make managing them even more challenging for female entrepreneurs. From website maintenance to marketing campaigns and inventory management, costs can quickly add up. Keeping these expenses in check while striving for profitability is a tough task, however, there are ways to overcome this.

While various eCommerce platform providers offer straightforward store setup procedures, they may not enable the look and feel, or experience you dreamed of. As a first step, look at partnering with providers that offer a more comprehensive range of features and functionalities.

It’s also important to analyse expenses to identify areas for cost reduction without compromising quality. An effective e-commerce platform will enable you to do this quite easily, while also helping you automate repetitive tasks.

Getting noticed in a sea of businesses

Building an exceptional website and offering quality products is just half the battle. The other half is getting noticed. Entrepreneurs often struggle to gain visibility in the crowded eCommerce landscape, and attracting a steady stream of potential customers to their websites can be an uphill climb – regardless of whether you’re a female-owned business or not.

Developing a robust digital marketing strategy is crucial, but it’s essential to assess your current efforts and understand what works and what doesn’t. Highly accurate and real-time tracking and analytics tools provide these valuable insights. Having absolute clarity around return on ad spend (ROAS) is another game-changer, allowing you to allocate your marketing budget more effectively. Consistency and creativity are key to standing out.

Converting sales and customers

Generating sales and achieving high conversion rates are the lifeblood for eCommerce success. However, this remained a persistent challenge for many female entrepreneurs. Competition is fierce, and standing out in a crowded market requires innovative strategies and marketing finesse.

One of the most crucial elements in increasing conversion rates is ensuring that your website performs optimally. A sluggish website can turn potential customers away before they even get a chance to explore your offerings. Invest in a high-speed, user-friendly website, with clear descriptions and easily visible buttons.

Maintaining a work-life balance

Running an eCommerce business demands significant time and effort, juggling various aspects from product sourcing to customer service and marketing. Finding a work-life balance is a constant challenge, especially for female entrepreneurs who often have multiple roles to fulfil.

Set clear boundaries with yourself and employees, and prioritise tasks based on urgency. Delegating responsibilities, when possible, also frees up time for strategic decision-making. It’s also important to recognise the importance of self-care, an essential but overlooked part of sustaining your entrepreneurial journey.

Despite these challenges, female eCommerce owners in Australia are making remarkable strides in a competitive industry. While these obstacles may seem insurmountable, they serve as opportunities for growth and innovation. Collaboration within the community is also essential to support and mentor each other, bridging the gap between male and female-owned businesses.

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