Your business is your baby – your pride and joy. It’s an extension of you.
The bottom line is this – if you’re making money you’re doing something right, because if you’re not making money – or on the way to getting those sales, it’s a hobby.
There are three ways of assessing the health of your business; your turnover, your profit and the amount of cash you have in the bank.
Let’s say two cars pull into the petrol station to fill up. The first is a brand spanking new Porsche 4x4 with all the kit. The driver gets out, immaculate in her designer gear (it’s got to be a female driver so I can be jealous as I write!). She goes into the kiosk to pay for the fuel with her platinum–uber-gold whatever card and then goes to the cash point in the kiosk.
Pulling up behind the Porsche is a 10 yr old Ford focus. A smartly dressed woman fills up and goes in to pay with her debit card, then goes to the cash point. The Porsche chick has left behind her printed statement, which is dangling like a loose tooth about to drop from the slot.
It would be natural to assume the designer Porsche lady is wealthy, enjoys a privileged lifestyle, and sleeps well at night. But no – her account shows she is £30,000 in the red. Ford focus lady has a few thousand in her account.
My point? It’s lovely having a turnover to boast about (i.e. the Porsche), but it means nothing if you can’t afford the petrol to run it – the turnover ends up being a smokescreen to the realistic health of the business. Regardless of how many zero’s the turnover figure has, the amount of money coming in has to be the bigger then the number going out. There has to be some profit.
So once you have the scales tilting in the right direction give yourself an almighty pat on the back. You did £1000 of billable work/sales and it only cost you £600. Fabulous – you made a 400 quid profit. UNTIL THAT £400 IS IN YOUR ACCOUNT IT DOESN’T EXIST. So don’t rely on it. Get your mitts on it quickly. You earned the money, so your client needs to pay up! Bottom line – the cash is the reality because it is the cash that will buy you the bubbles to celebrate your success, not the numbers.
Simply Balanced Solutions are here to help get you to the bubbly!