Being in business for yourself can be a real rollercoaster ride, and one of the biggest issues is money. In a job, at least you knew you’d have a particular amount coming into the bank every month. In your business, your income can vary massively. If you tend to freak out about money like me, this is the post for you (and it includes some pretty specific ways in which I’ve dealt with this over the last 8 years).
1) Work Out the Numbers
When I first got started I’d simply get as much work as I could to make ends meet. When I had a bit of time to stop and reflect on my business journey, though, I realised I needed to be a little more strategic.
One of the best pieces of advice I read back then in the early days was to really work out how much I wanted to earn. Here’s how to do it:
- Add up all of your living expenses (rent, bills, food, basic needs etc.) – this is the absolute minimum you need to get by each month
- Add up luxury expenses you’d like to meet but don’t necessarily NEED – things like travel etc.
- Now add on savings, whether that’s for a house deposit, a big trip, a wedding or just an emergency fund. How much do you ideally want to save a month towards those goals?
- (And don’t forget to add on a percentage for tax too!)
Now you have three different levels of income to work towards in your business, it’s time to figure out how you’re going to make it happen:
- Divide each number by the price of your product or service to figure out how many you need to sell to make the ideal amount
- Next, figure out how many days you’ll want to work a week/ month/ year. NOBODY should be planning on working 365 days a year! You’ll want to take a couple of days off a week, plus a few weeks or more for holiday.
- You can now figure out how many of your product or service you need to sell per day or per month to meet your goals
Have the results shocked you and freaked you out even more? Don’t worry! If you’re not making enough, or feel like you’d have to work so hard you’d get burnt out, then this is a sign you need to raise your prices or change what you’re doing a little. Sometimes it’s hard, but everyone will eventually get to that point. I had to do it with my freelance writing and I lived to tell the tale!
2) Plan Revenue-Boosting Sales
It helps to have a few tricks up your sleeve for when you need a fast cash injection. This means special offers and sales. You can run sales at any time, but it’s great when you have a reason or something to celebrate like your birthday, your anniversary, a public holiday etc.
Early in my business I used to run regular discounts, but I soon realised that this wasn’t the best idea – it devalued my product when I did it too often, and it lead to burnout when I took on too many freelance orders at CHEAPER than my normal rates. If you have a product, rather than a service, then running discounts can be useful, as long as they’re few and far between.
Even better, though, is to run a special offer that doesn’t reduce the price, but simply increases the value for your customer. For example, you could bundle up multiple services (like a full blog branding package, or a writing package where you write a tweet for each blog post delivered) and put a new price tag on the bundle. If you sell products, you could add a time-limited bonus.
3) Implement Funnels and Passive Income
As your business grows it’s a great idea to start thinking about passive income and sales funnels, so that your income doesn’t directly rely on your time spent working. For example, if you sell a service, like web design, you may find a way to turn this into a product, like pre-made website templates, that can be sold over and over again.
To help you make as many sales as possible, you’ll want to set up an email list with automated sequences that build trust with your audience and then sell them your product. This also works well if you have multiple products and can sell them in a funnel. The idea is that you start with the free opt-in gift and emails before moving onto a low cost product, then using another automated email sequence to sell them your next product up etc.
You don’t have to have it all planned put from the beginning! Start by growing your list with a free opt-in gift and work your way from there!
4) Pay Yourself Regularly and Consistently
When I first started my business as a sole trader I would transfer absolutely everything I earned into my personal account. I didn’t even set aside the money for tax, I just worried about it after it was already due (please don’t do the same!)
If I were to start again, I would do things totally differently. I would open a separate account just for my business earnings (this isn’t a legal requirement here in the UK as a sole trader, but I think it’s a good idea!), and I would pay myself a regular, fixed amount from that account to my personal account.
For example, even if my income fluctuated, but I figured out I made an average of £3000 per month after tax, I’d set up a regular transfer for around that amount. That way, I’d let the money build up during the good periods to cover the bad (and I’d leave all my tax money in my business account to avoid any surprises at the end of the year).
It may take a little time to work out a good average, but the benefit will be in knowing you have a fixed amount of money available to you every month, much like a regular pay check!
5) Don’t Forget to Work On Your Mindset
Before I get to this point I want to say that I am not discounting the feelings of anyone who is genuinely struggling financially. There is a time when worry is more difficult to shake, and may even be necessary to spur you into action.
However, for many of us, worrying about money is a mindset issue. Don’t get me wrong, I’ve had months where I have earnt very little. However, looking back I never had a month where I couldn’t pay the rent and bills, one way or another. That thought provided me a lot of comfort when things got tough.
Even now that I’m earning more, and I am building savings to cover any potential lean periods, the money worries still haven’t gone away. But I am much better at focusing on my mindset and realising that things tend to work out when I believe in myself.
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