How to Maintain Cash Flow in your Home BusinessBy
When you own a Home Business cash flow is the key to keeping a successful business successful. It’s the same with any business brick and mortar or home business. If you don’t believe me just look at our economy and the 100’s of billions of dollars our government has thrown out to improve cash flow.
Moving forward we have to agree on one principle. It takes money to make money right? Let’s face it, is it “FREE” to start any business? Was it “FREE” to advertise? There are smart ways of doing business and some are less expensive ways. But at the end of the day it takes money or time and your time should have a value on it as well so that means money. The hardest thing anyone has to learn in a home business is to start making money.
What kills most people is when their cash flow does not flow properly. Here’s what I mean. Some how when we first start working from home we forget that the money we make needs to be applied to business at all. Let’s face it you have to always re-invest money monthly if you are going to develop and grow your business. Plus, you gotta pay taxes we can’t avoid that one legally.
Most people do fine in business once they start making money until there is a financial shift. At that point most people go out of business. Here is what I mean, let’s assume you are making 10,000 dollars a month and you are spending 1,000 a month in business development maybe it’s advertising? 10% overhead is dang good and you probably only have that in a home business vs a traditional business. You are left over with 9,000 a month and maybe you are living off of that. What happens if your company changes the compensation structure or you get sick or have an emergency in your family and you can’t work one month? If you don’t make the 10,000 dollars you don’t have the 1,000 to keep things going with. What if you owe taxes and did not have enough put back. I had one friend who made so much money in one year in Coastal she owed $52,000 and had been paying off debt and was not expecting that bill.
Your home business must always have liquidity, heck for that matter every business needs it. Look at our current banking system. IF you lose your cash flow and are not expecting it then you will be in a jam and could be forced to walk away from all the benefits of being your own boss and in charge of your own schedule. So how do you avoid it? Because change will come and challenge will always happen?
Here is a solution that Jackie O’Quinn gave me a long time ago and it works no matter what type of business you are in. First take all of your profit after business expenses for the month and divided it by 3. Apply those funds in the following way.
1/3-enhanced lifestyle, paying of debt, create financial flexibility, build security blanket, go on vacation or what ever you wish.
1/3-put back for taxes, will your taxes be this high? You will not know until the end of the year but you have the money put back regardless. If you pay your taxes and you have money left over you can then spend it freely. It basically becomes tax free income because it was designated to be spent on taxes but taxes are paid.
1/3-reserve for future business expenses. This is an account that should grow continually for quite some time. As long as this account grows then you will always be in business. Does it eventually max out? Maybe, but I would not max it out until at least a year’s worth of business expenses are put back and here’s why. Your current expenses may change? You may work part time and be forced to go full time then would your advertising go up or down if you worked more? In business as you grow opportunity presents itself, you always want enough cash on hand to develop any opportunity as well as to plan for the unexpected.
Owning a home business is absolutely incredible! It’s the best thing you could ever do. My kids don’t understand why other dad’s have to leave home to work. They are blessed! Together we can go farther. If you have any financial tips please share them with us and leave a comment.
To Our Success,
P.S. To get more tips about owning your on Home Business join the 6 Figure Income Club