You are a business. You need to provide value in order to make a profit. When you are an employee, the value that you are selling is your time and skills. You are a business and your customer is one, your employer.
In order to a business to grow at a steady rate, they often need to create a financial projection. Your business, ie (You) isn’t one dimensional. Because we don’t have to spend any money to obtain new customers, most of our money is spent on other things. (“Normal” everyday spending) and keeping the business running. Where that be the fuel it needs to survive, (food) or the strategic networking (or marketing) it does such as going out with friends.
You are a business, and the goal of almost all business is to create more value to earn more profit.
How do I scale my business?
Well, assuming you are only working for one client, (ie, your boss) the only way to scale is by creating more value in the workplace to ensure there is more demand or desire for what you are selling, which is your time.
Another thing you can do is have more than one customer, this could be by starting a side hustle, although, your current client might contractually say you can only use your current skills to work for them, so while a side hustle is a great idea. This won’t be the focus today.
Making more money as a business comes down to 3 main aspects
- Selling more product
- Increase the value of the product
- Reducing the costs to produce the product
More Product
Besides overtime, selling more of your product, ie, your time, is often not possible. We have a limited number of hours per day, we can only work for so long. This is why as your business expands you start paying other people for their time, so you can use their time in a strategic way. For where your business is currently at, this is often not an option. Your boss is paying for your time.
Higher Value
This is how most of us try and level-up our lifestyle. While this works, working for a company, ie your boss, it likely takes a longer time to prove to him that the service that your business offers, your time, is worth more. That being said, it is always wise to invest in your business, so your product becomes more valuable, by means of courses, extra reading and investing in mentorships.
Reducing Cost
While none of us want to skip the extra 6 pack when going to that upcoming social event, reducing costs is the best way to increase the amount of profit a business makes.
“What’s the point of making point of having more money if I can’t enjoy it?” some people may question.
The goal isn’t reducing all your costs. It’s simply reducing operating costs to deliver your product. Let’s break this down.
Your product is your time at work. What do you “need” to get to work every day. Do you need to have a drive through coffee daily? Do you Uber your lunch to work every day? Do you need to have a beer every night to unwind? Every weekend you go on a “networking” event to take your mind of the intense work schedule?
While none of these things are inherently wrong. It raises the question, do you work to live, or live to work?
Go out with your friends, enjoy yourself, but have a few financial things in order to ensure that your business is secure and on the right track.
The first step to getting on the right track:
While there are many money habits you can implement, such as investing into a Retirement Annuities, Tax free saving accounts, or investing in general, if you don’t have this one foundational element in place, there will never be an opportunity to develop the other aspects.
That one aspect is creating a financial projection for your business.
What is a Financial Projection?
In short, a financial project is a snapshot of the future expenses and revenue of a business. In plain English, it is how much money you plan on making, and where you are going to spend it. Being employed, makes this a much easier endeavour, as your contract states how much you are going to get paid.
How does this differ from a budget?
In short, the difference between a budget and a financial projection is a matter of time. A budget is your specific money allocation for the month. A Financial projection looks at the big picture. A financial projection does not discredit the value of budgeting, in fact without being able to budget correctly your financial projection would never work. The reason you should do both is to see the big picture. “If I skip the extra 6 – pack every weekend. I can actually get that big purchase item that would increase my lifestyle dramatically”
While financial projections don’t save money for you, it motivates you to actually stick to your budget, in the end of the day, you already making the money, it’s now just a matter of prioritizing where it goes.