6 QUESTIONS TO ASK ABOUT YOURSELF ABOUT YOUR BUSINESS’ FINANCIAL HEALTH
Is your business financially steady?
This is a query one cannot conclusively answer without having their numbers in order and the process of getting to that conclusion is not always sexy however when you make good financial decisions, it can result in having a higher profit margin and that’s where the sexy comes in.
With profits coming into your business, it allows for you to get that manicure/pedicure or that weekend getaway with your spouse. These things as simple as they may look are extremely motivating for a business owner.
This is because having a financially steady business is not only about having money to pay your taxes which is basically surviving your way each tax season but rather about thriving which is amazing.
Regardless of how frustrating it can be to have your business’s books in order once you come to a place of thriving, it outweighs all those hard decisions you had to make.
As business owners, we often don’t have anything to compare to figure out how we are doing.
Metrics, Key Perfomance Indicators, and Ratios can often be so subjective when comparing business to business because so many factors go into where those numbers actually come from and the levels used to effect change on them.
Another major aspect is we don’t have someone asking us the hard questions and pushing us to confront how stable our businesses are. It’s really only when tragedy strikes or something like I don’t know a global pandemic that we have a great separation between healthy and unhealthy businesses.
And honestly, it’s not “BAD” business owners who lose out its good hardworking owners who just weren’t focusing on the right things and didn’t have someone to push them toward financial steadiness.
So how does one achieve financial steadiness? Well, with these six questions you can gauge the state of your business. If you can’t answer these questions with a yes you may need to sit down and look at your business’s steadiness and make some healthier decisions.
These questions are:
- Can I pay myself a livable wage?
A livable wage is a reasonable amount of money that your family needs to live a life. Whatever that number is, you should be able to pay yourself and if you have other income streams or a partner’s income that covers your family expenses, you still have to pay yourself.
You can channel your pay to a personal savings account, fund a vacation, or plan for retirement.
Once you are clear on what amount of money your business can pay you, then it’s time to find out how long it can do so.
- If money stopped coming in, how long could my business stay open?
Do you have one month, three months, or six months’ worth of expenses saved in an account to sustain a rough patch for instance a global pandemic?
In order to manage such times, you need to have cash reserves in the bank because this offers you a safety net.
- Will I be ready to pay quarterlies on the due date?
The government puts out the date when taxes are paid and it doesn’t change so if you are always caught off guard when the time is due, then you are not financially steady.
You need to be saving as much as you are receiving money from your business for taxes. If you are unaware of how much you need to contribute in taxes, speak to your Certified Public Account about it and he/she can offer you a figure for your tax quarterlies.
- Have I taken a profit distribution in the last 6 months?
This is basically offering yourself a cash reward as the owner of the business. In case you have not been able to do so, check to find out how much profit you have coming in and get a percentage for yourself.
- Can you pay short-term debt off completely on a monthly basis?
Short-term debt is any line of credit you have, as a business owner if you are unable to settle this with help of your business, then you are not financially steady.
If you have shiny object syndrome and always find yourself acquiring credit cards to purchase it, you are doing your business a disservice.
- Do you have a viable signature offer?
What is your business known for? Are you capable of offering services to your customers and getting referrals?
If you have a viable signature, you are known for one thing and this will help your business grow because it is laser-focused.
So how did you do? Do you have some work to do?
My hope is that these questions will help you find out if you have a financially steady and enable you to make tweaks to your business.
Feel free to message me about your thoughts concerning these questions on Instagram.
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