The most common way to accumulate wealth is by making good money choices and recognising bad ones quickly, setting financial goals, being financially disciplined, and managing your finances well. Importantly, you need to develop habits that ensure you’re able to accumulate assets and generate more money, year after year.
Being an entrepreneur often means that you’re so wrapped up in the day-to-day operations of your business that you may lose focus on managing your business’s profits. By adopting smart money habits, you can build wealth and financial success.
The early bird catches the worm
Most successful business owners will tell you they begin their workdays early. The hours before the phones start ringing, the office fills up, and customers start contacting you are the most productive and creative.
By working when it’s quiet, you’ll have time for strategic planning, goal setting, and dreaming up new or better ways of creating wealth and being more productive.
Keep costs under control
Spend less than you earn. In other words, keep as much of the money you earn and invest it to make sure it grows. Get rich first and spend later.
Good financial discipline means:
- Avoiding expensive holidays
- Not splashing out on the latest model of your favourite vehicle
- Not buying or renting the most expensive home in your neighbourhood
- Saving for special occasions and not splurging on eating out every night
Change your mindset
Your company isn’t your job, it’s a tool for building wealth.
If you run a healthy business, you have a long-term strategy and know your end goal. You think about the business as a whole, rather than focusing just on firefighting the day-to-day tasks.
By working ON and not IN your business you’ll have time to build systems and your team to take over the daily tasks you’ve been doing.
Use the early morning hours when the phone and email are quiet to consider what you want from your life and business. Consider your return on investment and what you want from your business, and then work to create that value.
Run a tight ship
Systems produce predictable results while a lack of structure and no clearly defined processes will inevitably produce inconsistency in workmanship, products, and services.
For a dynamic, efficient, quality-driven business, structure and systems are essential. By creating processes, you create predictability and ensure nothing’s left to chance.
By paying attention to the details, your business will become a lean, mean, profit-generating machine. This means happy, loyal customers, a great reputation, dependable equipment and services, and significantly reduced costs and repeat work.
Budget, and then stick to it
Create a budget and then stick to it. Understand your numbers and know how many sales you need to cover additional expenses.
When you think of expenses offset by sales, as well as seeing your numbers listed in your budget, you may think twice about non-essential recurring costs and unwanted subscriptions. Every item on your budget should be weighed up as a need versus a cost.
With a good budget in place, you’ll be able to make decisions when you want to pay for the big items but you’ll also ensure you stay on top of the little things that drain your financial resources.
Look after your team
Poor morale leads to low productivity, high staff turnover, and poor customer service. Pay your staff as much as you can, and no less than your industry’s standard, to ensure you’re able to keep the best talent to help you grow your business.
As your company grows, your wealth will accumulate and so will that of your team.
Avoid the cashflow killer
Poor cash flow management is cited as the number one reason why businesses fail.
Here’s how to avoid running into trouble:
- Find an accountant or bookkeeper – don’t try to cut costs by doing your books yourself (unless this is your expertise). A qualified accountant or bookkeeper will ensure your business is optimally structured and tax compliant. They will also manage your cash flow and point out dangers, and report on your financial situation.
- Forecast your cash flow – by forecasting your future bank balance you’ll highlight when you may have a cash shortage or surplus so that you can plan accordingly.
- Automatically collect payments – and if this isn’t possible, employ someone to follow up with debtors. By setting up debit orders, you’ll know exactly when you’ll receive payment and how much to expect.
- Use credit control software – this automatically monitors your accounts receivable for late payers and sends a series of increasingly urgent payment reminders.
Know your taxes
Find an accountant who understands how to structure your business to ensure it’s as tax efficient as possible. Employ smart tax and financing strategies so that your money works for you. A professional accountant will understand how to legally take advantage of tax reduction strategies for your business.
By adopting smart financial planning and mindset shifts, your business can be the vehicle you need to build wealth and get you on the path to business and personal success.
For advice about using your business to create wealth, contact us today.