At the time of writing this How To Guide, the costs of living, and therefore, the cost of running a micro business, are rising daily. We are surrounded by negative press that can leave us feeling fearful, helpless and perhaps even hopeless.
I always find that in times of stress or worry, it’s useful to sit down and work with your reality rather that perhaps a perceived, mental calculation or listening to what the top line figures are on the news. This way, I can stay calmer and more focussed on solutions rather than swimming in worry soup.
So, I thought I would share some tips or reminders about what we can all do to help reduce our costs, control our costs and manage our micro business finances super efficiently.
The first and principle tip is the most obvious, and that is to monitor your costs and finances all the time! How many of us have rushed through a month and not actually checked the basics like how much income there is in total or if our invoices have been paid on time? There are lots of tools out there to help - it could be your banking app, some bookkeeping software like Xero (my favourite) or simply a spreadsheet or notebook. Make a mini pact to check your financial overview at least once or twice a week. What's been paid, what you need to pay, how the income is looking and any unexpected costs.
Related to number 1, get into the habit of using a cashflow forecast regularly. This might be available in the way you check your financial status but is a great way to predict how things are going and how they might go for the next 6 months. For example, if you have some fixed costs each month that are creeping up, it can help you understand how much additional income you need to create or what costs reductions you might need to make elsewhere. There are lots of free spreadsheet templates online to help you do this.
Re assess your variable costs in the business to see if you can make some savings. These might include packaging, raw materials, your internet provider, payment gateway provider etc. Make a list of all the costs that you could potentially move, change or alter in some way. To pinch the strapline of a well known supermarket, every little helps. You will feel more in control and better able to manage the bumps along the way.
Build a business budget. This is really a bringing together of all your information to help you see the big picture and stay on top. You will want to include things like how much profit or loss there is in the business and how much you're actually spending on elements like marketing, rent, Digital software etc. You will also want to include some financial goals into your budget too. Are you planning to grow your business or a part of your business over a period of time? Your budget will also include how much you need to save each month for tax or savings for other investments.
Remember that time is money. Think about ways that you can digitalise elements of your business to save time and money. If you're not sure where to focus, start by working out how you spend your time to spot areas that suck time from the week. For example, you could be spending hours on invoicing activities or stock control. You might be able to use an online bookkeeping software or adopt an automatic stock management element to your website. This type of analysis may reduce the time you spend on some things to focus on activities that help your business make more money for example, but it may also unearth where you may be under charging. If you charge £x for a 1 hour client call or for a made product, check how much time it's really taken to set that up, make, source, package, invoice for etc. You may be surprised!