One of the hardest things for us to do as entrepreneurs is to make financial plans and commitments when we have no idea how much we'll actually earn.
Doing your books, also known as bookkeeping, is not a boring task that we have to do for taxes. It's also a way for us to plan for the future and design our dream life.
Want to buy a new tablet or invest in a new marketing campaign?
Or what about that photoshoot that you've been dying to have to showcase your new line of products?
Or that brand new wardrobe you want to buy for your upcoming conferences?
When the money comes in, there are so many things we could spend it on. A bookkeeper, a new website, makeup, a conference ticket, a marketing consultant, a website designer, clothes, an attorney...
Goodness. How do we know which expenses make sense for our business now versus ones that we can table for later?
This is where doing your books comes into play. Whether you have a bookkeeper, or you're doing it yourself, doing your books allows you to create a plan for your revenue.
While there isn't a one size fits all for businesses, I like to use the 60/20/20 rule when determining how much of my clients' revenues should be dedicated to which expenses.
- 60% of your revenue is dedicated to fixed costs, taxes, consultants and other related expenses.
- 20% of your revenue is dedicated to growing your business and related marketing efforts.
- 20% of your revenue is dedicated to your salary and "play" account. This account allows you to try new things and experiment with different offerings.
When you want to have a successful business, you have to know how you will spend or save the money that comes in before it does. We all know the saying, failing to plan is planning to fail.
Of course, you're the boss and if you need to tweak these percentages because you're doing a major hiring push or marketing campaign, then you make the call.
How often should you create a spending plan for your business?
I believe a plan should be created at the beginning of every year and reviewed at the beginning of each month.
If you need a little guidance in this area, here's a free worksheet to help you plan out your happy hour business dates and how much you should spend working with a financial strategist. (I'm half-kidding about the happy hour dates).
I want to hear from you! What is one upcoming expense that you need to plan for in your business? Leave a comment below.
Want more weekly tips that I only share with my newsletter community? Sign up for Money and Mimosas below.
Danetha Doe is a business strategist and product launch expert. Her consulting helps businesses launch new apps, services and products and has worked with companies like Google and Audi. You can view her services, here.