An essential requirement for hitting a target is knowing where (and what) it is. As we have mentioned many times before, if you have not yet worked out your “magic number” (your expenses + tax payments + payroll + your pay +10% for the war chest + money to pay down debt) or the amount you need to earn each month, you are doing your business and yourself a huge disservice. Knowing your target is essential to achieving your target and you cannot do that unless you know your numbers.
But what if you do know your numbers and you have arrived at a “magic number” of say $30k per month? What then? How can you increase your chances of hitting that number consistently? Let’s get into a little Q&A. Here goes:
How do I get paid quicker if I can’t work any faster?
This is a common situation. You might be selling a product or service that falls outside the fast moving consumer goods (FMCG) realm where chewing gum, milk and food are paid for immediately, no questions asked. If you are a web developer, consultant or have a trade you may not have this luxury. At the very least, you need to collect full payment or at least a deposit before you commence work to alleviate potential cash flow issues. As we’ve said before, you’re not a bank, don’t act like one.
I keep getting blindsided by BAS or tax bills. How do I turn this around?
Most online banking services offer the facility to set up different accounts. The best way to ensure you’re not inadvertently spending the government’s money is to go ahead and set up an account called GST or something similar. Get in the habit of directing your taxes to a separate account and forget it’s there… until your BAS is due. It’s a discipline, but it will save you – again and again.
How many of my eggs can I put in the one basket?
This is an interesting one about how to future-proof your earnings as much as possible. One of the biggest threats to your business’s ongoing viability is relying on just a handful of customers to keep you going. If you are depending on one client for 20% or more of your revenue, you may find yourself exposed if you lose them, if only for a while. Work hard to get a good spread of clients to share the load. Achieving your magic number on an ongoing basis could depend on it.
How much money should my business put away for the inevitable rainy day?
Unfortunately, there will be a rainy day here and there. It’s the nature of business. In some instances however, it won’t be just one rainy day, you may have to face a month or two before the sun comes out again. As a rule of thumb, aim to have enough funds on hand to cover three months of operational costs. Now, you may never need your war chest or rainy day fund, but you will definitely sleep easier knowing it’s there.
Our upcoming Cash Rich Business workshops (June 2 and 15) are your opportunity to get all the answers to all your questions as well as important tips and guides to securing all the benefits of a cash rich business. Hope to see you there.