stylist. food. creative

stylist. food. creative

let's get financially serious

Jette Virdi1 Comment

so, yes. financial planning. serious, down to business kinda stuff. but for those of us who work for ourselves, especially in the creative world, i strongly believe that getting our shit together in this area is going to make us better entrepreneurs. i met paco when i went to LA for the unique camp. blew my mind kind of inspiring lady and so when thinking about guest posts for the new year, i knew that so many people could benefit from her expertise in this area. i certainly have! so without further ado, here are pacos 6 top tips for financial planning.

1. GET PREPARED FOR TAX TIME

a pretty practical and actionable piece of advice! ireland you just had yours in october but here in the us we have ours in april so now is the time to go have that year-end tax review {plain speak: what your tax picture is going to look like come tax day}. what you need for this is your profit and loss statement + balance sheet....and as good creative entrepreneurs you're all bookkeeping right? that's how you'll generate your profit + loss statement so if you're not already keeping books...make that a thing of 2016. keeping books is going to help you with time, effort, headaches plus, it'll allow you to make well informed decisions about your business.

 

2. FIND THE STORY IN YOUR FINANCIAL STATEMENTS

after you've gone through what your tax picture will look like with your accountant, the next thing you should do to get geared up for a stellar 2016 is review your financial statements...namely your profit + loss and your balance sheet. lay this out month by month and by year!

in reviewing your profit + loss statements, use your creative powers and your memory of last year to look beyond the flat numbers on the page...look past the generic income and expenses list + find out what story the numbers tell....ask yourself things like:

-can i see a natural cycle of my business?

-which months are busier than others?

-which months do i spend significantly more?

-is there runaway spending in a certain category that i need to address?

DIG DEEPER + SPEND SOME TIME REFLECTING ON THESE TOO:

-how did the year go...did you make a profit or do you have a loss?

-if you've been in business for more than a year, how do your numbers compare to last year?

-did you set goals {revenue, learning etc} + did you reach them?

 

3. REFLECT ON HOW YOU SPENT YOUR TIME LAST YEAR

not everything should be viewed through the lens of economics. it's important to zoom out of your day-to-day + look at how you spent your most precious resource -TIME- in the last 12 months. i've learned it's hard to know where you want to go without looking at where you've been...you can learn a lot about yourself + your business through reflection.

here are some specific qu's that can help you reflect:

-was last year a blur of 60-hr work weeks, tirelessly grinding out work?

-were you haphazardly sprinkling your energy across various projects?

-were you able to continue to feed + foster your friendships/relationships?

-did you have time to enjoy the things  you like outside of work?

write it down. all of it. 

 

4. CREATE YOUR 2016 MISSION STATEMENT

creating a mission statement is like writing down your goals and I'm a huge believer in goals. they can be great benchmarks and it's important to have goals based on external factors like paying rent. by achieving these you can then set goals more intrinsically driven.

ask yourself: 

-what do you want to keep moving towards in your business + life?

-what do you want to move away from in both?

-what are some ideas that can get you moving in the right direction?

-can you break them down into steps to make these easier to achieve?

 

5. HOW MUCH DO YOUR GOALS COST?

alright, let's get down to the nitty gritty. how much are your goals gonna cost you and will it be time/money or both? spend some time thinking about the steps you broke down above. if your goal is increasing monthly revenue/income, take a look at your financials first.

-what is the currency amount you want to be earning?

-based on your current pricing structure + offerings, how can you achieve your goals?

NOW, IS IT REALISTIC???

the only way to truly find out is to go to the market and see what it will bear. if you want to invest in a product/service/line of business to grow your company in 2016, how much is it going to cost you? do you need to conduct market research? do you need to hire someone with experience to help you and how much time do you plan to invest in this + can you still cover your overhead expenses while doing this?

for ex, if you want to spend 3months developing a new product, what's a realistic structure to support this? Can you take time off + still pay the bills?

 

6. CREATE A MONTHLY INCOME GOAL

after you find out the total cost of your goals, break them down into monthly income goal figures. use last year's financial statements as a baseline for you monthly income goal. what were your total expenses for the year? if you divide that by 12, you get your average monthly expenses! if you figured out the total cost of your goals for the year, do the same thing you did with your expenses, divide it by 12 to get the average cost of your goals. ADD this to your monthly expenses + voila...you have your monthly income goal.

i'm a huge, huge, huge proponent of monthly income goals. it's simplified, quantitative way to help you understand where you at with your business. it's not the whole picture because expenses are important too + you can earn a shit ton (that's a technical term) of cash, but spend it like it's your job and you'll fail to thrive. BUT it is still a valuable figure for business owners to focus on because cash flow is oxygen.

here's the hard parrt. after you know your monthly number, you have to stay engaged with your finances and monitor your progress. you should run your profit + loss statement each month in 2015 + compare that to your monthly income goal. every month you hit it, you're on track to hit your goals. every month you don't, you fall behind or your income goal must increase for future months to make up for it. every month you can decide if you can work less or invest in other areas of the business.

remember, if you're running a business, being engaged with your finances is important. YOU HAVE TO GIVE A SHIT ABOUT THIS. if you don't watch your numbers, you could run your business at a loss which, is not sustainable.

have a killer 2016.

paco.x