A solid financial foundation is essential to health and success in every aspect of our lives. And the beginning of the year is a great time to ask yourself this question: do I have a clear plan for my personal and business finances or am I just working hard and hoping that things turn out okay?
After I asked myself this tough question, I was so fortunate to meet with Shannon Lee Simmons – an amazing fee-only financial planner – who is reinventing personal finances for a new generation. Her advice is grounded in realism, humour, and empathy and you’ll walk away feeling like a million dollars (even if you don’t have that much in the bank).
We recently had the opportunity to chat again about her top financial tips and insights for women in business:
1. Understand what you need to do to make your business financially viable
One of the biggest challenges Shannon sees among her business owning clients is understanding that their personal finances and their business finances are the same thing. Your ability to go on vacation, or put away money in a TFSA is based on how many sales you make. Your business has to be able to support your personal life. This may seem obvious but when we set our business targets it’s important to take the personal goals in to account. Says Shannon, “I think we often forget about the marriage between the two.”
2. Create your own definition of success
Do you feel pressure to hit an arbitrary revenue number? This is another common challenge that Shannon sees a lot with her clients. “I’m so sick of the whole “make six figures in six months” thing. It’s such bull because somebody might only take 40K/year to make all of their personal financial goals happen and somebody else might take 400K. It’s really specific and dependant on your own personal financial situation, there is no magic wand and there is no magic number. I like to reframe it as “okay, screw what someone else defines as success, what do you specifically need, Sally, to marry your personal finances and your business finances together?”
3. Have a plan of attack
As entrepreneurs we know it’s easy to get overwhelmed by all the things we have to do. Wouldn’t it be easier to have a clear plan with manageable sales targets that you can use to track your progress? Shannon helps her clients break things down into “very tangible goals – like how many coaching sessions you have to do or how many fitness programs you need to sell – that you can put up on a wall and check off as you go. That way you can put one foot in front of the other and it seems like a manageable plan rather than just this idea of a revenue figure that doesn’t really mean anything.”
4. Make sure you’re prepared for tax time
First time entrepreneurs often get caught off guard at tax time and Shannon suggests that the number one most important thing for a new business owner to do is to find out what they need to know so that this doesn’t happen. “Honestly, one of the most heart breaking things that I see is people not being prepared for tax time. Say you’ve made 20K and you feel like you’ve barely made money and yet somehow you still have a 3K tax bill. And if you haven’t been tracking and you haven’t been keeping receipts, there’s nothing you can do, there are no options at tax time – and it’s coming whether you like it or not. My biggest advice for new business owners is to understand how this effects your finances and how you need to structure your finances to keep organized and on top of it so you don’t end up getting blindsided.” Even if you have a great idea, and are making loads of money, “if you neglect the financial side of your business, the nitty gritty stuff, the whole thing can come undone no matter how much good there is.”
5. Track your finances
The biggest mistake Shannon sees business owners making is when they don’t pay attention or track their finances. “Tracking your revenue and expenses as you go is so important for two reasons, the first is for tax time – I’m obsessed with tax time, obviously – [tracking] makes it a breeze; you don’t end up counting receipts and it stops being this thing to be so afraid of it. But, tracking also keeps you on the pulse of your business. You can check in every month and see if you’re hitting your goals or not and adjust.”
And if your answer to the opening question tells you that you just might need a plan, tracking each month will help you be much more intentional about everything you do, “you can do your business on purpose instead of just doing things and hoping for the best.” And it gives you the opportunity to reinvent yourself as often as you need to until “you find the magic combination that works”.
Make a goal this year that financial plan is established or revisited and stick to it so you can enjoy the rest of your life and move forward with your business. It’s easy to do with Shannon’s New School of Finance DIY online courses for Sole Proprietors (I took all four modules and can attest to the greatness of her information and how easy and fun she makes it). For more information check out her website, The New School of Finance.