5 Best Budgeting Tips for Entrepreneurs
Terri Levine
Helping ❤️ Heart-Centered Coaches & Consultants ❤️ Finally Find Freedom and Fulfillment (...By Building a Business That Aligns with Your Values & Virtues!)
Starting or owning a business means freedom, a chance to develop your niche, and having more control over the money you earn. With this freedom comes the obligation to deal with budgeting issues without the luxury of an accounting department. Here are five useful tips that can help any entrepreneur or solopreneur manage their budget and make it work effectively.
Encourage Subscriptions or Retainers
It can be tough not knowing whether that star client from last month is going to propose another project this month. This uncertainty can put a strain on budgetary planning. Reduce this uncertainty by encouraging your clients to subscribe to your services or put them on a retainer. That way, you will have a clearer idea of how much money you will earn.
Incentivize subscriptions or retainers by offering discounts to clients who opt for this method or giving bonuses like eBooks, free webinars, and discounts for services provided by partners. Many consumers are more interested in a subscription if it carries a discount or offers something of value.
Separate Business and Personal Expenses
One way to avoid a budgetary mess is to separate business and personal expenses. This will make tax time much easier and will eliminate the need to search for papers or documents at the last minute. Have an account strictly for business purposes and use a business credit card for professional expenses only to keep things neat and orderly all year round and especially at tax time.
Keep an Extra Fund for Large Expenses
Many opportunities only come along once. It is important to have the funds available to take advantage of these opportunities, especially if they are potentially game-changing for your business. It could be a conference where you can drum up more clients and raise brand awareness or software that will improve communication with your clients. Putting a little money aside regularly for this fund will ensure you can make the investment when it comes along.
Automate Your Budgeting Tasks
If you are still figuring out your budget and expenses with a pencil and paper, it’s time to get automated. Entering income and expenses into a software accounting program on a daily basis will make budgeting easier and will provide metrics that will help you monitor your business’ growth daily. Getting rid of those notebooks and slips of paper will also make your bookkeeping more efficient.
Schedule a Monthly Budgeting Review
Every month schedule a time for a full review of your budget. If you have followed the steps above to automate and calculate your expenses and revenue as you go, these reviews will be as easy as looking at what you have earned, and what you have spent and deciding what areas of your business can be run more efficiently and with fewer expenses. Being pre-emptive and solving issues before they arise is much easier than solving problems later on.
Taking charge of your budget is one of the main elements of entrepreneur or solopreneur success. Automating tasks, keeping personal and business expenses separate, and taking stock of your business finances every month can make your business more productive and successful.
Are You Making Some Common Money Mistakes? We can review this together…
Now that you’ve got your business budget under control, what other money mistakes might you be making?
Why You Need a Financial Checkup Every Year
You probably get a physical check-up every year. As a solopreneur, you need to put your business finances through the same constructive scrutiny. Ideally, you will examine the financial direction of your company at several points during the year, but an annual in-depth checkup is necessary to keep your business fit and healthy. Here are some reasons and considerations for this financial checkup.
Is Your Revenue Model Working?
One reason it is important to perform a financial inventory on your business is to ensure your revenue model is productive. Are you getting revenue mainly from a few clients? How do you get revenue from clients who are not as active? Should you develop new revenue streams, such as selling new products, hosting paid webinars, or starting a membership club based on a subscription model?
Think about your revenue goals and compare them to expenses. Keep in mind that if your expenses are high, you will need to earn more revenue to cover these expenses and still make a profit. That is why revenue analysis and looking at expenses are two steps in the same process.
Can You Eliminate Expenses?
You may be surprised when performing your annual financial check-up to realize that you are spending more than you need on unnecessary expenses. Discovering this and cutting down on these expenses is like giving yourself a present or a bonus.
Having clear expectations of expenses throughout the year is important. Otherwise, you could be tempted mentally to inflate your profits based on revenues without taking expenses into the equation. Thinking carefully about what you need and getting rid of expenses by automating tasks and eliminating subscriptions you don’t use can maximize your profits.
Are You Making the Most of Tax Savings Opportunities?
This is where having a really good accountant can be helpful. Unless you are a tax whiz, you may be missing some valuable tax benefits. Have a yearly review with your accountant and explore ways you can save on taxes, from claiming new business expenses to setting up a retirement fund that provides tax benefits.
In addition, regulations for tax breaks for small businesses are often passed without most people realizing it. An astute accountant is informed of these changes and can help you save an unexpected amount on your annual taxes.
What Are Your Financial Goals for the Year?
It is important not only to have goals in mind but to write them down and review them periodically. Check off those targets you have reached and set new ones. Raise the bar but keep your expectations reasonable. Create long-term goals you can achieve and check off in a year and short-term goals per week, month, and quarterly. These goals can be connected to revenues, profits, cutting expenses, several clients, developing new products, or expanding your brand’s social media presence.
A Clean Bill of Financial Health
The more conscious you are of your business’s financial health, the more successful you can be as a solopreneur. Taking stock now and again, giving your revenue and expenses a thorough examination, and setting goals at least every year is essential for a healthy business.
Are Money Mistakes Costing You Revenue?
I’ve discovered that there are 4 common money mistakes that can halt a solopreneur in their tracks. They can work 80-hour weeks but seem to never make enough money in their business.
How Solopreneurs Can Use the Law of Attraction to Grow Their Business
We have heard the expression, “You can have it all.” This may seem like a bit of a hyperbole, but according to the Law of Attraction or the Law of Abundance, it is not too far from the truth. We may be quick to identify external challenges as the reason we have not reached our targets, but the real obstacle may be within. Discovering these obstacles and lifting them is a significant first step toward success as a solopreneur.
What are the Laws of Attraction and Abundance?
The Law of Attraction and the Law of Abundance are not identical, but they are related. The Law of Attraction states that people tend to attract results that are in keeping with their expectations. It includes the notion that we tend to attract positive people, for instance, if we have a positive attitude, and the inverse is also true, according to this theory.
The Law of Abundance takes the principles of the Law of Attraction and applies them to concepts of wealth. The notion of the Law of Abundance is that there is enough money for everyone who wants to seek it. Not everyone is highly motivated to seek abundance, but people can become motivated by examining their way of thinking and removing inner limitations.
What Steps Can You Take to Incorporate the Law of Abundance in Your Business?
You may be operating under the assumption that not everyone can have abundance by reasoning that there is only so much to go around, but remove that thought, and at least for the moment, suppose that wealth is under your control. Ask yourself, sincerely, why you aren’t rich. There may be a flood of reasons or just a few, mainly related to external circumstances. You may be surprised to realize that many of these are in essence not really external but are self-limiting beliefs.
Examine the reasons you came up with as answers to the question above. If you cite external causes, “Because I don’t have the right software” or “Because I don’t have the time.” You may find that you can trace each one of these to an internal self-limiting belief. Can you think of ways to free up more time? Could you take a small loan to buy software that will transform your business? Do you need the software to generate more revenue? Analyze each of these reasons carefully.
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Think of failures as lessons. Some failures seem out of our control, but if we look carefully, we can find things we could have done to prevent a hard impact. For instance, a financial crash may seem like it is outside of our control, but the lesson could be it is always important to have a few months of income put away in case of emergencies. Perhaps the loss of a client was due to communication skills that can be improved or maybe the loss of that client could have paved the way for a higher-paying one if we had just kept looking for opportunities.
Through this examination, you may have noticed one theme that keeps coming up. There may be one internal obstacle that is the biggest roadblock. It may be that you are worried about failure or you aren’t sure you can do it or maybe you don’t like having to deal with new technology. Be honest about what is holding you back and find ways to resolve these limitations so you can go forward and grow your business.
Are Your Money Mistakes Keeping You from Abundance?
Some of my smartest clients with the best business ideas still have a difficult time embracing abundance and wealth. I’ve discovered from working with them that there are 4 money mistakes that cause solopreneurs to get stuck in their tracks.
3 Popular Retirement Savings Options for Solopreneurs
As a solopreneur, you value the ability to work for yourself and may have to do some investigation into options for retirement savings. Self-employed people do not qualify for regular retirement plans, such as a company-sponsored 401(K), but there are still plenty of choices. The following are three categories of retirement options for solopreneurs.
Solo 401(k)s
Although the traditional 401(k) option is not available to an entrepreneur, there are solo versions of the 401(k) model. With the traditional 401(k) plan the employer matches employee contributions to retirement plans. Under this framework, you are in the category of both the employer and the employee.
Discuss with a reliable broker how to set up a 401(k) and which plan is best suited for your needs. Like IRAs, you can choose a Roth version which you contribute with income that is already taxed and eliminates the need to pay taxes when the money is withdrawn. A regular 401 (k) is set up with pre-tax contributions and taxes will need to be paid when the money is withdrawn.
For a solo 401(k) plan, you first set it up and make contributions as an employee of up to $19,500 and then add to this as an employer for a combined maximum of $57,000. If you are over 50, you may be allowed to contribute more annually.
Individual Pensions
Usually, you have to be employed by a company to be paid a pension, since pensions are paid at a set amount per year after your retirement. Pensions have the advantage over 401(k) plans because they do not depend on the performance of investments.
Your broker can help you set up a pension that will enable you to set aside money every year for retirement. Contributing money to this pension can reduce your tax burden. Once you have retired, you can then purchase an annuity set up by an insurance company that will establish a pension for you with monthly payments.
However, be careful with annuities. There are unfortunately many scam annuity programs and dodgy brokers who make large commissions on them. Talk with a trusted financial advisor before taking this option.
A Selection of IRAs
There are several different IRAs you can choose from Regular IRA, Roth IRA, SIMPLE IRA, and SEP IRA. A traditional IRA is tax-deferred and can reduce your tax burden for the year, but you will have to pay taxes when you withdraw the money. The maximum is $6,000 for people under 50 and withdrawals before the age of 59 carry a 10% penalty fee.
A Roth IRA is the right choice if you do not want to be taxed at the time of withdrawal. The Roth IRA is set up with income that is already taxed. To open or contribute to a Roth IRA, your gross income must be less than $124,000 or $196,000 for married people filing jointly.
A SIMPLE IRA is like a regular IRA with much higher contribution limits, up to $16,500 for people over 50. For a SEP IRA, you must be a sole proprietor or business owner in a partnership or a limited liability company. The maximum contribution for a SEP is 25% of your income or $57,000 whichever is the lowest amount.
Seeking Guidance on Setting Up and Choosing a Retirement Option
When you are exploring your options for retirement as a solopreneur, it is worthwhile to seek guidance from a trusted financial advisor or broker. Research the broker well and ensure they are regulated and have a solid reputation. The advisor can guide you on which choice is right for you and can assist you in setting up a retirement fund.
Want to Earn More Money for Retirement?
Perhaps you have an established career as a solopreneur and you have attracted many satisfied clients who are benefiting from your services. However, you may have examined your budget and realized you need some extra money. Instead of simply trying to attract additional clients for the same type of service, why not branch out your offerings and create additional streams of income?
The advantage of these new income streams is that they will help you and your clients re-imagine your brand in different forms. Creating a lifestyle brand begins with offering variations on your theme. This is branding savvy and also will help you generate wealth. The following are 6 winning tips for creating additional income streams.
If you are accustomed to working one-on-one with clients who are willing to invest a bit more for personalized attention, why not also offer group sessions to those who may not need that degree of personalization and are budget-conscious? Offering lower-cost group versions of your regular service will enable you to reach more clients who ultimately may invest in one-to-one sessions.
Is there a specific product, app, or tool that will make it easier for your clients to apply what they learn in your coaching sessions? Consider creating a product line to create an additional wealth stream and expand brand awareness. Think of what is lacking in typical products your clients buy in the store and develop something that is uniquely yours.
The subscription model provides steady and reliable revenues. People can book individual classes or sessions and cancel or not sign up the following week. However, membership programs provide a regular source of revenue from individual clients.
Develop a membership program that gives clients a discount over a range of your classes, sessions, products, webinars, and other offerings. A membership program that provides value will encourage subscribers.
You can promote your service while also generating an additional source of income with affiliate marketing. Find a field related to yours and promote the products and services of other companies by encouraging your clients to click on affiliate links. Choose a business that is related to your field but not a direct competitor so you can combine promotions. Also, consider cross-promotion deals with other solopreneurs or coaches.
Your clients value your insights. Provide them in a form they can use even when they are not in one of your classes or coaching sessions. Create an eBook or a Webinar that you can sell on your online store or provide as part of your membership program.
Not all of your wealth streams need to come directly from your business. If you have some extra property, rent it out, whether to a regular tenant or an Airbnb visitor. Consider investing in stocks or a fund. You can trade yourself or find a reliable fund manager with modest fees. Perhaps your passion is to write a book not related to your field. Go ahead and write and publish it on Amazon Kindle under a pen name or make handicrafts and sell them on Etsy. Focus on what you enjoy, and the money is likely to follow.
Being a solopreneur is fulfilling, but it may take some time before the money starts rolling in. You can encourage the revenues to come by creating additional income streams that can expand your brand and grow your wealth.
Are You Afraid of Wealth?
You might laugh at the idea of being afraid of making more money, yet the money stories and beliefs that we’ve grown up with our whole lives play a definite role in how successful you are in business.
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