A significant monetary amount can transform within a single year.
After achieving a six-figure income for my business in 2023, I faced a downturn in 2024. My revenue took a hit while my expenses escalated.
How was it possible that as a writer focusing on personal finance, I struggled so much with the financial management of my own venture? In brief, I discovered that handling finances as a small business proprietor introduces distinctive challenges that go well beyond basic personal finance. I’ve since rectified my course and finished 2018 on a path to surpass a quarter million dollars in revenue.
Here are some vital insights I’ve gained throughout this journey.
1. Revenue is not the same as profit.
It’s tempting to see revenue figures like $250,000 and assume that you can indulge in spending without worry; however, keep in mind that business revenue doesn’t equal personal income.
As your enterprise expands, it’s wise to consider establishing a regular salary for yourself—one that allows you to maintain your lifestyle while also securing your financial future. By reserving that amount and accounting for your taxes, you’ll clearly understand how much you can genuinely invest back into your business.
2. You’re handling your own HR functions.
Managing your own enterprise means responsibilities that extend well beyond just providing the services you offer. You must also handle and manage all the varying facets of business operations, from accounting to human resources. Recognizing these essential responsibilities will be critical if you wish to establish and sustain your business over the long term.
3. Your business requires its own safety net.
If you’re acquainted with personal finance fundamentals, you understand that having an emergency fund covering three to six months of expenses is crucial. Creating a similar savings cushion for your business can provide invaluable support for unexpected costs and safeguard against delays in client or customer payments.
4. Cash flow reigns supreme.
The amount invoiced may be impressive, but it means little if those funds aren’t available in your account when payment is due.
To alleviate some of the tension while awaiting larger payments, I’ve found it beneficial to establish some smaller and more reliable revenue streams that create a base for cash flow. Predicting a consistent income allows me the financial security to confidently pursue larger opportunities.
5. There’s always potential for higher earnings.
Regarding those larger income opportunities, never undervalue your business’s revenue-generating potential. Sometimes increasing earnings doesn’t require extra work; it’s about adjusting what you offer or targeting a different market.
Make it a habit to review your revenue options regularly and be willing to pivot as needed, ensuring you’re tapping into all available earning opportunities.
