In today’s small business ecosystem, sole practitioners or solopreneurs are on the rise. This is evident in the pivots companies and individuals have made, as well as the gig economy. My passion for the entrepreneurial journey led me to a wonderful opportunity to present a financial management workshop to Public Relations Society of America (PRSA) membership solo practitioners. It is exciting to hear many are thriving during these trying times! SMEs and sole practitioners have a nimble mindset and ability that truly inspires DCC Accounting.
Yet, one of the challenges for sole practitioners, which are already wearing many hats, is balancing the company mission with long term financial planning. So how do we start bridging the planning side and tools to get your business financially organized?. Here are some tips, resources and an exercise to sharpen those innate skills.
Aligning business goals and individual goals
It is so important to align your business with your individual purpose. It makes for a successful business and happier lifestyle.Part of it, is understanding the relationship between what you do (input) and the financial benefit (output) it produces. For example, if you have a desired income level then build out your strategy setting out clear goals for both your input and output. An easy formula is:
Time you are willing and/or able to put in X Billable Rate = Desired Income Level.
If you need to change the equation, then you adjust one of the variables. It can be as simple as adjusting the billable rate, always aligned with value. Or it can be adding team members working under you for more volume, arriving to desired income level.
Making room for savings in your budget
In addition to paying yourself, consider saving before spending. There are two areas to saving. First is maximizing tax savings. This includes money tucked away into an IRA or other retirement plan, health savings account and other pre-tax contributions. In essence, you are planning a benefit package for yourself.
Second, and just as important, is emergency money that is easily accessible. Its your personal and business ‘piggy bank’. Many times, income for solo practitioners fluctuates and this ensures a steady stream of income.
Setting yourself up for growth with KPIs
Basically, this all about setting up your goals and incorporating systems for how you are going to track your progress. Set your KPIs (Key Performance Indicators). This can be anything that you perceive makes a change. It could mean connecting with five current and/or potential customers during a specific time frame; increasing your website traffic by a certain percentage; building your social media audience by your measure. It can also mean receiving a certain number of endorsement and referrals/leads. The main point is that your KPIs should align with small measures for your overall business planning goal.
Then, you should align your bookkeeping with financial goals and review reports, draw lessons and adapt, as necessary. Depending on findings, this may entail adjusting the business strategy you have already developed!
Incorporating some tools
The best tools are the ones that you actually use! For solo practitioners, you have options that take you from general engagement to billing and getting paid. A personal favorite that came up during our PRSA talk is 17 hats. Not only is it perfectly named, but truly helps process.
Bringing it all together
To bring this all to life, download our simplified financial plan for sole proprietors
Free Excel Template: Simplified Financial Plan for Sole Practioners
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DCC Accounting shares in the entrepreneurial spirit and reinvention of sole proprietors. Get in touch to learn more.