Establishing a sustainable business linked to your practice greatly involves making the right financial decisions. While some of you may have already been in the industry for years, venturing out into new businesses has become a viable way to increase earnings to scale your current practice.
Branching out into a new niche is similar to building a startup business. This route is undeniably challenging, given the fact that according to Small Biz Trends, 90% of startups fail. According to the same study, the education & health industry has a 44% failure rate.1
However, with information available about which pitfalls to avoid, you’re now more equipped to troubleshoot and manage the ins and outs of running a business – particularly with your finances.
Here are a few financial tips for practitioners who are planning to explore new industry landscapes:
1. Keep a close eye on your cash flow.
Mismanagement of cash flow is the most common reasons why businesses fail. The beginning phase of business requires expenditures for operations, marketing, research & development, and more. You have to know where every dollar is spent to manage cash flow properly. Track your receivables and payables to anticipate how much budget you will have on-hand at the end of each month/quarter/year.
If you’re working with a small team or if you’re going solo, it may be worth investing in online tools to lighten your load. Here are a few cash flow management apps you can try.
2. Automate accounting and invoicing.
Avoid over-extending your bandwidth by taking on admin work that can be automated or outsourced. Focus on developing your idea and ironing out your overall business plan. Taking your mind off of tasks such as accounting and invoicing also helps you stay present with clients or business associates, and in doing so, establishes you as a reliable service provider/professional partner.
Part of Thersmart’s features is to help practitioners streamline accounting and invoicing. Talk to us to learn more.
3. Stay within budget – especially in the beginning.
Keeping a conservative expense budget is the key to longevity. Weigh which aspects of the business need the most budget and stick to them. Cut costs on vanity expenses such as office interior decoration if possible.
Operate light so you can allocate the bulk of your capital to product development and growth, which will enable you to one day implement better perks for yourself or your team. Keep revenue generation your top priority.
4. Hope for the best. Expect the worst.
This mindset keeps you grounded yet hopeful. Too much positive outlook or overestimation of your idea’s success might give you the idea that you can quit all other sources of income to focus on your new business. Don’t!
If the plan is to eventually put 100% of your time and resources in a new business, check to see if it can replace that current income with added profits.
Keep personal and business reserves in two separate emergency savings accounts. You can never be too cautious even when it seems like the numbers are looking up.
5. Put a price on your time.
As practitioners, your time and energy are two of your biggest resources. You cost your services by the hour and even while your not with a client, it’s critical that you are aware of the resources you spend while networking or collaborating with others. If it’s keeping you away from generating revenue, do your best to allocate less time on that particular project.
If you find yourself spending three hours with someone who has very little potential in contributing to your businesses, cut it short and move on to the next task.
6. Pay yourself.
What this means is that on top of your current earnings from your practice, be sure you set a salary for yourself when you start a new business venture. While you don’t need to compensate yourself with a big fat salary, in the beginning, make sure you pay yourself enough to get a sense of accomplishment from your hard work. Small rewards go a long way.
7. Prepare measurable financial goals.
Be specific and break it down into smaller goals. Monthly, weekly or even daily income goals keep you on track so you can calculate for necessary adjustments in your budget. Set milestones to target based on realistic projections. Achieving little goals can give you the confidence needed to keep you resilient during your entrepreneurial journey.
What other financial strategies can you share? Let’s grow by sharing our experiences and knowledge with the community.