Welcome to another episode of "Starting a Business Simplified." In this episode, our host, Suzy, sits down with Carla Titus,of Wealth and Worth Within a fractional CFO who shares valuable insights on simplifying business finances. As an expert in her field, Carla provides practical advice on managing finances, setting goals, and achieving profitability.
From understanding the importance of cash runways to distinguishing between personal and business finances, Carla offers actionable tips to help entrepreneurs thrive. So, if you're ready to gain clarity on your business's financial health and simplify your approach to finances, keep listening!
Making Your Employer Your First Investor
Carla's advice? Make your employer or paycheck your first investor in your business. By allocating a percentage of your paycheck to invest in your venture, you ensure financial stability while building your business. This strategy allows you to retain consistency in your personal finances and mitigate the risks associated with relying solely on business income.
Differentiating Between Needs and Wants
Carla highlights the importance of being critical about what your business actually needs versus what is nice to have. Starting small and scaling up gradually helps you assess the viability of your business model and avoid investing in unnecessary expenses.
By prioritizing revenue-generating activities and focusing on proving your concept, you can allocate your resources effectively and build a solid foundation for growth.
Creating a Cash Runway and Mimicking Total Compensation
Carla stresses the need to create a cash runway and cushion when starting a business. By mapping out your total compensation as a business owner, including benefits and taxes, you can set realistic monthly and yearly goals.
Understanding the true costs of running your business allows you to allocate funds strategically, ensuring sustainable growth. Carla reminds us that merely making the same amount as your day job is not enough, as you must factor in taxes, profit, and reinvestments to build a financially thriving business.
Backward Engineering Your Goals
To achieve your financial goals, Carla advises backward engineering. By determining the number of clients or customers needed to reach your targets, you can develop actionable strategies to acquire and retain customers.
Setting clear actions, measuring progress, and adjusting accordingly is crucial for success in entrepreneurship. Avoid basing your growth on guesswork and hope; instead, focus on tangible actions that drive results.
Paying Yourself as a Business Owner
Carla emphasizes the importance of distinguishing between the company and the individual business owner. Many entrepreneurs neglect to pay themselves, which can lead to long-term issues and resentment. As a business owner, it is essential to prioritize yourself by allocating a reasonable salary from your business profits.
Developing a habit of paying yourself regularly, regardless of the amount, and gradually increasing your salary as the business grows ensures that you are appropriately compensated for your efforts. The goal is to reach a point where you receive a reasonable market rate salary for the job you are doing in your business.
Buying Time Back by Delegating
In the early stages of a business, time often seems more abundant than money. Entrepreneurs tend to DIY various tasks to save money. However, as your business grows, time becomes more scarce and valuable.
Carla suggests using money to buy time back by hiring and delegating tasks to others. By focusing on revenue-generating activities first and outsourcing non-essential tasks, you free up time to allocate towards strategic decision-making and expanding your business.
Avoiding Unnecessary Debt
When starting a business, it is crucial to avoid taking on unnecessary debt. Testing and validating your product or service before heavily investing in infrastructure allows you to establish proof of concept and make informed decisions. By prioritizing revenue generation and avoiding excessive debt, you can ensure a sustainable and financially healthy business.
Conclusion
In this episode, Carla Titus shared invaluable insights on simplifying business finances for success. From making your employer your first investor to differentiating between needs and wants, the key takeaway is to prioritize financial stability and sustainable growth.
By creating a cash runway, paying yourself as a business owner, and delegating tasks to buy back time, you can streamline your financial approach and focus on revenue-generating activities.
Remember, profitability and understanding key financial metrics are crucial for long-term success. So, start implementing these tips today and take control of your business's financial future.
Be sure to tune in to "Starting a Business Simplified" for more expert advice and inspiration on your entrepreneurial journey.
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