It is a safe assumption that you are in business not just for something to do, but mainly to make money.
The subject of money can get rather complicated on how to control, create and distribute it correctly in your business and in life.
Why is it some people have heaps of money and some have a little?
In this blog we cut it back to useful basics with things that you can apply immediately which will help with creating a higher profit for your lash business.
WHAT IS MONEY?
A simple question … but lets break it down a little more.
Money is something which is exchanged for goods or services. It is something which represents value.
The more valuable one considers something, the more they are willing to exchange money for that thing. Think diamonds … really when you break it down, diamonds are just shiny pieces of rock. But people (women…me!!) perceive them as valuable, so are willing to exchange absurd quantities of money for this sparkly little thing.
Have this viewpoint in your business…the more valuable that customers consider your product or service, the more they are willing to exchange money for it.
So the more valuable you make your service - examples; offering quantity products, being trained and practised in different techniques & styles, giving more than expected (aftercare packs, a drink on arrival, some chocolates to take home etc etc), being treated with respect and individuality, being sent birthday/Christmas cards, goodie bags, getting high retention in their lashes …the list goes on! The more valuable you make your service, the more customers are willing to exchange higher quantities of money for it.
So think about how you could apply this in your business. Really applying this will increase your income. I promise.
People with a lot of money CONTROL their money and this is a key point. They know exactly what comes in, they know exactly what goes out and make sure the later never exceeds the prior (create more than one spends).
Keeping Records and Financial Planning:
Not only for tax purposes, but also for your own knowledge of what is happening in your business, how you keep a record of the incomings and out-goings is going to be a huge key to your success or failure.
Very simply put, you want to know how much you get in and how much you put out = income and expenses.
There are TWO sets of records that you want to keep.
First is that for your tax purposes. You can get all fancy pants and have an accounting software that you use (which is recommend) using programs like Xero and QuickBooks for your tax purposes. However there are also economical ways to do it too (I will show you in the next blog how to do this).
The other is for your own financial planning. So YOU know what comes in, what goes out and what you need to create for a fantastic future.
Please note that ALL the data in this blog can also be applied to your own personal finances…which is HIGHLY recommended. However just make sure you seperate them for business and personal.
Financial Planning for your Business:
Go through your bank statements, past bills and memory and figure out EXACTLY how much you spend on your expenses. You want to find every single expense it costs you to run your business. Every single one.
Here are some examples of your expenses … (it will be different for everyone)…
- rent - power - internet - phone - product - training - advertising - petrol to get to work - wages - super - officeworks - printing - coffee/snacks for customers - product to sell - daycare.
Divide each of those expenses into weekly amounts.
For example if you pay your rent monthly at $2000 then to figure out how much you have to pay towards that weekly $2000 x 12 (months) and then divide by 52 (weeks) = $461.53 p/w. (This formula is a lot more accurate than dividing by 4 weeks because some months don’t have 4 weeks in them.)
It is ok to round things off to the nearest dollar by the way.
If you spend $200 on product every 3 weeks, then you would apply this formula to figure out how much that is weekly…
$200 divided by 3 (weeks) = $66.66 p/w (we will round it off to $67 p/w).
Create a spreadsheet for your financial planning by listing every single expenses you have. You need to know exactly how much it costs you to run your business.
Tax and GST.
Currently in Australia if you turn over more than $75,000 per year, you have to register & pay GST.
GST is 10% of what you receive from clients/customers.
It is calculated also that things you have to pay GST on like products, rent etc etc, you can claim that quantity back … but that equation is best left to an accountant and we are not terribly concerned with it right now.
In your financial planning record you need to set aside 10% of everything you receive.
If you receive $100 for a set of lashes, then $10 of that needs to be put aside.
Tax: You also (unfortunately) have to pay tax too. A good rule of thumb, because as discussed above there are things you can claim back in your tax (which an accountant will work out for you) is to put an additional 20% aside for tax.
So now you have a total of 30% set aside for tax and GST. It may seem a lot … BUT this is actually also your secret savings too. More than likely you won’t have to pay that much to the tax man, but you will have it set aside & then when you get your tax bill, which will hopefully be less than what you have set aside … bingo! You have some savings that will be a surprise!
The next thing you want on this spread sheet is the FUTURE. You want to know how much your future is going to cost and this is the KEY to creating wealth.
If you want to do training in the future, if you want to buy new equipment, if you want to hire staff, if you want to go on holiday & have time off, if you want to pay for more daycare hours etc etc. You must PLAN for this now.
Think of all the things that the future is going to cost you and figure out HOW much it will cost you. If you want to invest in more training and figure it will be an additional $1000 per year, then divide that by 52 weeks to figure out how much it will cost you each week for your future.
$1000 divided by 52 = $19.23 (if you want to do it sooner than 1 year, say in 3 months time, then you would divide it by 3 months instead).
Figure out all these things on a WEEKLY basis….how much do you have to put aside each week to be able to do that in a time frame you are happy with.
Add all of this to your Financial Planning Record in weekly amounts.
Unexpected things happen…your car breaks down, your kid needs to go to the doctor, a bill is more than you expected etc. How to not have these things as a problem in the future is PLAN for them. Put money aside every single week for them. I would just round it up and say, well that is $50 per week or something. You don’t need to go through the whole process. Just take an estimation.
Add this quantity to your Financial Plan. Your Financial Plan should look something like this now…
Set a day each week for 30mins when you can sit down and do your financial planning fully. Each week, you want to see how much you created (income), you want to put aside out of this money all the things you have to pay for.
A lot of internet banking these days, you can open an additional account online and connect it to your current transaction account. Put your set asides into this additional account. Keep a record each week of how much is accumulated for each expense.
When you need to spend some of it on an expense just transfer that amount back to your main transaction account. Make sure you keep your record on your Financial Plan up to date with correct amounts.
Yes the above may seem to be a bit of work…however I think we all want the same thing and that is more money and wealth. To succeed at this you have to be willing to work a little harder and be a little smarter than everyone else to achieve this goal.
NOW you know accurately exactly how much it is costing you to run your business. You are planning for a future, you are saving money and most importantly you are CONTROLLING your money.
This is all a KEY to be coming as a business and as an individual financially successful.
Stay tuned for Part II where I will go over how to keep a record for the tax man.