If you’re anything like me, you didn’t get into this creative business to crunch those numbers, am I right? It’s the thing I leave for last on my list of to-dos . . . but it’s a necessary evil and can’t be avoided.
As an entrepreneur, we wear ALL the hats. And that means that if we want to be profitable, then we’ve got to be prepared and knowledgeable about our finances. For most of us, that means becoming our own financial advisors.
Of course, if you can consult a financial advisor or check in with one regularly, DO THAT. We say “YES!” to all the help and support we can get! But that doesn’t take away from the fact that we need to have a handle on and be aware of our finances as creative entrepreneurs.
And here’s how you do that . . .
Forecast, Plan, and Set Your Expectations
I’ve found that it’s easiest to forecast my finances for the annual year (January 1st to December 31st). It keeps me thinking long-term while also setting me up for ease when it comes time for taxes.
If you start your business in the middle of the year—no worries! All you need to do is create a financial plan for those upcoming months and then do a new forecast for the new calendar year.
To create business forecast for the year, here is what you need to do and ask yourself:
1. What do you want to accomplish during the year?
Before you dive into what kind of money you want to make, take the time to think about what it is you want to accomplish. Do you want to increase the number of cakes you bake and sell by 30%? Do you want to find a greener way to ship your products? Do you want to create and post an updated video on your website that better explains who you are and what you offer?
All these things will impact your bottom line. So make note of them. Yes, be realistic, but also don’t be afraid to dream! We’ll get in to the nitty-gritty details about what you’ll need to be aware of to turn those dreams into a reality below.
2. How much money will those accomplishments/goals bring in?
By increasing the cost of your services, how much more will you make quarterly, annually? Are you planning on upping the cost of each individual cake you bake? Or will you be offering an increased package price that includes the cake as well as a tasting? If you go green and switch up your product shipping process, will you take a hit for now but eventually make more money? Or will it be a dent in your finances that’s worth it because of your values? How much will it cost to hire a professional videographer to record your website video? Could you do a trade off?
Do the math here and figure out what your cash flow will be by achieving the goals and accomplishments you’ve set for the year.
3. What’s your plan to make your goals ACTUALLY happen?
It’s ALL about the details here! And I mean every. single. little. thing.
When are you going to make it happen?
Who needs to involved?
How long will each step take?
It’s essential to map these steps into your schedule to foresee whether what you’re looking to accomplish this year is actually possible. (Here’s where we start to get realistic—I’m sorry, but it’s worth it!) You can only work with what’s in front of you. It’s time to get really honest about what’s possible for your year.
4. Estimate what each of the steps in your plan will cost.
You need to list out the costs of making all of your plans happen. That’s anything and everything that counts as “output.”
Here are some ideas of what to include:
5. Consider all possible outcomes.
What will it look like if you miss the mark? Will you be okay with not hitting each of your accomplishments in totality? What’s your backup plan?
What does it look like hitting your mark? How will you feel? What will that enable you to do?
What would it look like to exceed your plan? How would that make you feel, and how will that propel you and your business forward?
Now that you’ve got a financial forecast in hand (or honestly, on your computer probably), it’s time to start tracking your expenses.
I know, I know. It’s probably not your favorite thing to do, but again, it’s necessary. Tracking your expenses enables you to make responsible decisions and prioritize costs responsibly. Remember, you’re the boss!
There are a lot of different ways to keep track of what you’re spending. You can create your own spreadsheet that has different categories for each type of expense. Or you can utilize applications like QuickBooks and HoneyBook that do it for you—I’m all about this because it makes things so much easier on me!
The important thing is to regularly monitor your spending and how that lines up with your forecast for the year. You do not want to be spending more than what is coming in. That would push you backward.
After tracking your expenses and noting where you’re getting sales, you may have to pivot or change some of your goals through the year. You’ve only got so much time. That means that you’ve got to ask yourself what you’re doing really well. See where your money is coming in. Then double down on those actions and seek out more sales like that!