Ready to wrap 2020 up in a pretty little bow and send it on its way?
I totally hear you, I am too.
As we prepare to move into a New Year, I am taking this opportunity to step back and put on my strategery glasses and map out where I want to take my business in the year ahead. No, I didn’t make a typo there, “strategery” is my fun way of talking about a concept near and dear to me, business STRATEGY!
I think we’ve all heard this word more than a few times, but do we really know what it means? Do we know why financial strategy is so important for our business?
Today, we’re going to dive into what creating a financial plan really looks like, how you can get a little more strategic in your financial decisions this year, and how you can start mapping out where you want your business to go in a way that doesn’t feel overwhelming.
Perhaps you have a number in your mind of how much you want to be making… It could be something nebulous like, “I want six figures, seven figures, Nirvana, the moon, etc.” Or it could be more concrete: “I want to earn $150,000, I want to pay myself $100,000 out of my revenue, and bring on a new VA for $20,000.” You may even tell yourself, “I don’t need a bunch of money… I just want to be successful.”
Often, we have a sense of what we'd like to achieve, but we don't have a clear idea of how to actively made it happen.
I hear these kinds of phrases tossed around by a lot of entrepreneurs and business owners, and this is exactly where strategery comes into play. Strategic planning is all about giving you a granular view of where you want to be in the next six months, one year, six years, and mapping out how to get there from where you are right now. With the proper strategy in place, magic can start to happen for you in your business!
I like to break this kind of analysis into three pillars.
Pillar One in building your financial house’s strategy is the day-to-day work.
Now, bear with me because I know this doesn’t seem highly glamorous or exciting. Take a minute to review your current bookkeeping setup, how you handle your taxes, and all of those record-keeping things that we need to do as businesses by law. These tasks are vital in building a strategy around your business. A regular review of your recording and reporting efforts will help keep your finger on the pulse of your business and will help you gather more data to help in mapping out your strategy.
Which brings me to Pillar Two: Data.
Having the right information on hand allows you to make decisions with your head vs. your gut, or on a whim. You’ll be able to take a look at what’s been working and what’s not, what your margins are, where there are leaks, gaps, low-hanging fruit, and how much you’re truly walking away with at the end of the day. It’s the data that helps us to leverage our hard work into a full-fledged strategy.
Pillar Three is Mindset.
If you spend a lot of time in the online entrepreneurial space, you probably see a lot of conversation about money mindset. To me, that means being comfortable digging into and knowing our numbers. It means envisioning your ideal day-to-day financial reality and knowing how that correlates to the dollars flowing into your business. And it means taking an honest look at what’s driving your spending decisions. Mindset is a little more than just sitting around thinking about money, it’s about getting close and cozy with it, developing a relationship with it, and using it in a friendly (not adversarial) way!
Once we have all of these three pillars in place, we can start developing our strategy and map out where we are going next.
To get started, ask yourself these questions:
1) How much revenue do I want to earn next year? You probably have a number in mind. That’s easy. Now back in your offers and how many people you want to work with or products you want to sell. Does the math work? Will you have the time for your family you want or will you be overloaded? This is where you can start playing with your pricing and think through what your ideal year looks like to lock down your income goals.
2) What do I expect for expenses? Take what you’ve spent this year, mark it up by 3-5% to allow for inflation, add in any additional spending projects you have in mind for the next year and subtract anything you’re cutting out of your business. Are we spending more or less than this year? Knowing this number will give you a good sense of how much cash you’ll need on hand to cover your basics (just divide the total by 12)! And who doesn’t want to feel better about your spending?
3) How much can you take home? Subtract your expected expenses from your projected revenue. This shows you how much you can pay yourself if you meet your targets. Dividing by 12 will show your average monthly draw you might take to fund your personal life. Keep in mind that number includes your taxes, so you might want to also calculate how much you’ll set aside every month to put into a savings account so you have it available to pay your quarterly estimates without having to scramble.
Once you’ve locked down your initial plan, it’s important to set up checkpoints to ensure that you’re on track and headed in the right direction. We need to regularly ask ourselves, “Is this strategy still working?”
The Bottom Line
Sometimes our financial plan needs a little tweaking along the way, and that is completely normal and ok! The key to feeling good about it all is to have an understanding and awareness of where you want to go, rather than letting your business run the show and taking you down a path road you didn’t want.
This is what Zen Money is all about! Having these pillars of your financial house in place, being in a partnership and in flow with your money.
So, how strategic are YOU being in terms of your financial decisions?
If you need a starting point, grab time for your Zen Money Audit. We'll dig in together to see what's working well and what could use a few tweaks to help you earn more money and take more of it home!
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Liz Lajoie, Zen Money Strategist & CFO
Liz Lajoie, the “Zen Money CFO”, helps entrepreneurs master their finances and grow thriving businesses that support their passions and advance their big missions.