Let’s talk about a subject that might make you a little uneasy: Money. There, I said it. As entrepreneurs, many of us start businesses to turn our hobbies, passions and interests into full-time jobs. We listen to advice like “Do what you love, and the money will follow.” We enjoy our work so much we’d do it even if we didn’t get paid. But the problem is, sometimes we don’t.
If you’re not getting paid—or not getting paid enough—then the hard truth is, you’re not running a business, you’re supporting a hobby. But for many of us, numbers aren’t something that comes naturally. Often entrepreneurs are creative, seat-of-the-pants types with short attention spans. (That’s why we start our own companies.) But that approach to life doesn’t always mesh with the “sit-down-and-crunch-the-numbers” approach that’s needed to make a business succeed.
With the end of the year just past and your 2011 taxes fresh in your mind, now is the time to take some steps to make 2012 a more profitable year for your business. Here are three steps I suggest:
- Face reality. If you avoid looking at your financials because you’re afraid of what you might find, it’s time to face the music. Who knows? The truth might be better than you think. Or it might be worse. Either way, you can’t improve the situation until you know what you’re facing.
- Learn accounting basics. I’m not saying you need to spend your life in a green eyeshade with a calculator strapped to your hip. But you do need to know what the key business financial statements are and how to read them. The good news is it’s easier than ever to do so, thanks to simplified accounting software that can show you your cash situation with the click of a mouse. You’ll also discover how to assess your profit margins and keep costs in check so you keep more of what you earn.
- Get tough on slow-paying (or no-paying) customers. Small businesses are based on relationships and I know it can be awkward to be honest with a customer you have a long-term relationship is about why he or she isn’t paying on time. But if you don’t have that conversation, you might never get paid at all. As soon as a payment is late, follow up in a friendly way. Most likely, the problem is a simple oversight, but if it’s something more dire, take the steps to work out a realistic solution for getting what is owed you.
There are many more steps you can take to make your business more profitable in the coming year. If you’re still uncertain what to do, get matched with a SCORE mentor who can guide you through the ins and outs of small business finances. Who knows? You may just find you enjoy crunching numbers—and watching the figures in your business bank account add up.