Ah the wonderful world of small business! Many of us do it for the opportunity of ‘freedom’ and whilst there is freedom of thought, there can be one giant handbreak to this... cashflow.

Right now, small business land is doing it tough. It’s a reminder to all of us to shop small and local where we can. We then put money into wonderful people who are very passionate about what they do... Let’s be honest, Kmart is never going to care when you buy from them like a small business owner will.

And sure, it will likely cost more – because local hands and brains have probably spent hours working and crafting to make or provide the thing... I would rather spend more on something quality less often, than put more money into ‘consumptionrus’ style businesses. Obvs you do you.

So, what do you need to think about if you run a small business (or have/thinking about starting a side hustle) when it comes to cashflow:

Know your numbers

Calculate Gross Income: Add up all your earnings from your business. Make sure you have forecasts that you can review in line with your past revenue and look for trends and seasonality within your business.

This will help you understand how much of a float is optimal to get you through regular down periods or low seasons. Get software that can help you and/or a great Bookkeeper and Accountant.

Deduct Business Expenses: How much are your business expenses? Are you profitable when you factor everything in? You would be surprised at how many business owners don’t know this. If you grow based on your targets (you need targets!), what will that do to your expenses? Factor that in and have different estimates.

Tax & Super: Determine how much tax you need to pay based on your net income. In an ideal world you would be able to contribute the full amount to Super, in my experience that hurdle is big if you’re not currently contributing anything, so I would start with something.

Then your goal could be to move that percentage up every year and if you have a massive year, then you could have a strategy where you backfill for the years where you didn’t reach your contribution caps (there are additional rules here so make sure you do your research ahead of time). So many small business owners wait for the perfect time to contribute to Super or assume their business is a highly saleable asset and that is their ‘retirement’ fund. A crazy strategy that I would never recommend and very often comes off.

Split your business and personal accounts: Washing them together is messy and manual. We want streamlined and simple. You have enough on your plate, so try and create clear separation between the two. I would also recommend separate accounts for tax/super/leave and your working business account. Awesome you’ve got subaccounts (I am a huge fan), just replicate this once for personal and once for business expenses.

Building up a float: There is no magic trick here (boo!)... You either bring more money in (remembering that more revenue doesn’t always mean more profit – so give that some thought), or you rip out expenses. Can you see more clients? Can you charge more for what you do/sell? Can you upsell or generate more referrals from existing people that love you? That is practically what you’re going to need to consider, because if nothing changes... nothing changes.

When you’re in a service-based business (I have met the person who submitted this question, and she is), it is tough because you are swapping your time for money... And whilst I think hustle culture is crap... My honest answer, noting I have had traditional service-based businesses before, is maybe you need a period of time where you decide you are going to work more. Isn’t that a delightful, inspo #worklifebalance answer?

In the first year of my financial advice business I worked like a dog. Isn’t that such a strange saying when I watch my dog lounge about and nap for 80% of the day? Anyway, you get my point.

I saw my first client at 7am and my last at 8pm and I worked Saturday from 8am – 2pm. It was grueling and I was tired, real tired... But I had done my numbers and knew from a revenue perspective, it’s what we needed to do to grow and be able to afford additional staff.

So I sucked it up and did it. It meant huge personal sacrifices (and the office! cleaner once questioning me if I actually had a home to go to!)... but we made almost 7 figures of revenue within our first twelve months.

If you aren’t keen for a year of hard graft (I get that!)... consider a ‘Mega Month’, a business sprint if you will. Do your numbers and work out how many people you would need to see to be able to generate enough revenue to build your float. I like sprints like this because the light is easy to spot in the tunnel. Saying no to watching TV or things on the weekend for a month is much smoother for the soul than a year like I did.

Ideally, your float has funds to get you through any of those seasonal lows and a couple of months of business expenses (including income), stashed up your business sleeve to get you through any tough times.

Once you have that, you can look to get it bolstered (maybe another Mega Month?) to cover additional nice-to-have things, like annual leave/sick leave, more income, whatever you want...etc. If you’re in employment land this may seem like a farfetched comment, but most small business owners only get paid when they work. No work, no income.

Most employed people get 4 weeks a year paid annual leave, sick leave and other leave. They also get 11.5% Super contributions... Now when you do your numbers on those, it may feel really out of reach. So, maybe you start with having one-week paid leave planned for and a certain percentage of Super and then you work on building that up over time.

Pay yourself into your personal ‘master’ account at regular intervals means you won't fall into the feast and famine trap many small business owners do – What I see often is personal goals fall out the window the second there isn’t enough cash to pay yourself your anticipated income.

And you work too damn hard to not achieve your big life dreams.

You have so much more responsibility and gruel to endure when you are spinning all the damn plates to not then be rewarded with being able to do the big things you want to in your life.

You need to factor in ‘danger money’... because SME land has far more potholes and landmines to navigate than most employed people will ever understand.

So, it’s a journey. Know your numbers, separate your accounts, and set business goals that have clear personal financial outcomes (if we reach this level of revenue/profit I can have X amount of leave or can contribute this % of money to Super, or can increase my annual salary to $_____).

Next time you go to buy or get help with something, this is your reminder to find a wonderful small business owner.

Write that Google Review for them! Post and share their awesome stuff on your socials to spread the word... You have no idea how much that is needed right now, and how grateful that business owner will be.

With love from a fellow Small business owner. X 

Have a money dilemma?

Money dilemmas can be a nightmare! They can leave you up all night ruminating about what to do, have you feeling alone and isolated or just plain ol' stuck. So, we are here to help. I am going to tackle one a week and give you my unbiased, no BS general thoughts on how to tackle your conundrum. We would love for you to send yours (or someone you know) in. 

Obvs all of this is general advice only... especially important to note any and all of the comments above do not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs.