I tried to keep my eyes straight ahead.
I could feel the strain behind my eyes as they tried to move to the right.
Suddenly, before I could catch myself, my arm reached out to the right, without hesitation, and grabbed the last super-sized bag of chips on the shelf…
My eyes never saw it coming…
Let’s face it, I don’t need another super-sized bag of chips. I live alone and clearly don’t need super-sized anything!
But the draw of those chips, the magnetic force, just couldn’t be resisted by my meager allowance of willpower for the afternoon.
You get it.
You’ve been there.
And, yes, it’s just a bag of chips… a big beautiful yellow bag of crispy delicious chips…
The real problem is when it’s not just a bag of chips.
We’ve all been at the intersection of “absolutely not” and “but this could be really helpful”. We are eyeballing the latest iPad Air and wondering how we could possibly justify it. It’s so much lighter, it’s so much faster, I’ll be able to do more, my clients will revel in my speed and efficiency, they will love me, I will be a rockstar…
Yeah, it’s just an iPad. Well, it’s an iPad Airrrrrr.
This inability to control ourselves around “stuff” can be a serious detriment to your business. And, “stuff” could mean just about anything you happen to lose control over: gadgets, office supplies, pens, post-its, electronic devises, apps, software… stuff.
Maybe It’s Time To Go On A Diet
One of the fastest ways to erode profits is to give into the stuffitis monster. It will run you dry.
The allure of having the latest stuff and the best stuff and a lot of stuff is great, I get it, I might have been there… no one can confirm for sure.
But just because there’s space on your credit card, or money in the bank, it doesn’t mean “go shopping”.
I may not be frugal in every area of my life but when it comes to business expenses… I’m FRUUUUgal. I really like to see the numbers on my P/L statement going up, not down.
The idea of profitability is one of the biggest reasons I practice the art of separating business and personal. I’m not talking about keeping the printer paper purchase separate from the yogurt purchase, I’m talking about going much deeper.
The Difference Between Business and Personal
Here’s what I mean about keeping things separate… business money and personal money should be separated not just by a second bank account but also with a mental divider.
Let’s look at it this way…
You’ve got 2 booked clients for the week. Each pays $250. You work from home. How do you see the $500?
Is it rent money, grocery money, bill money?
Or is it revenue for business expenses and payroll?
Most of the time when I chat with people, I hear them saying things like: I just want to make $3,000 dollars which will pay my rent, groceries, and cell phone bill.
What about business expenses? Like gas for driving to networking events or client meetings? What about dry cleaning for events and meetings? What about fees for conferences and events? What about money for taking clients to coffee or lunch? Oh, and how about the printer paper?
Most folks calculate expenses as their personal bills and I get that, but that’s why a shift is needed.
If you want a $3,000 paycheck, then how much will that cost your business? Taxes need to be paid on the paycheck and beyond that money is required to run your business. You’ll want to bank a little for unexpected business expenses and for things like business insurance. That means you will want to make $6,000 a month in order to earn that $3,000 paycheck.
So this is just a general hypothetical, to give you an idea of how different business money is from personal money.
The biggest reason for separating business from personal, to me, is the mental switch. When you make the switch from earning money to pay rent, to earning money to run your business, something more happens.
Suddenly your perception of setting prices, taking money, charging for extras isn’t quite as personal as it was. Generating revenue for your business and earning money to pay for groceries really does become a very different way of seeing your work.
And, once you add an employee… whoooo-boy! Watch out! Because suddenly you are generating revenue to support two people not just you, you can’t let that person down by thinking you’ve got enough to pay the rent.
Putting Systems In Place
The best way to handle all of this is to actually handle it… yourself.
Before you start outsourcing your bookkeeping work, learn to do it, and do it for yourself consistently for at least a year. When it comes to money, don’t depend on someone else to mind your dollars.
Take Oprah’s advice and sign every check. You need to know where your money is going and when you take responsibility for tracking it, you learn to hold onto it.
Taking time, every month, to review expenses, can help you catch patterns which can lead to finding ways to cut costs. Cutting costs can mean more profit.
Once you’ve got a good handle on where the money is going, start to create budgets based on historical expenditures. Budgets help keep you on track for raising profit and budgets allow you to “save” for new purchases… like an iPad Air.
Diets Don’t Have to be Hard
I certainly don’t advocate depravation… ever!
But taking a six-month hiatus from spending on “stuff” is a good way to start trimming the fat.
Getting lean in your business means a lot less stress. If you save on those needless “stuff” expenses, you’ll find that at the end of the six months, you’ve got a cushion of cash to have on hand when you need it.
Growing your business doesn’t happen without money. Often times, growing means more advertising expenses, marketing help, VA help, and, sometimes, additional equipment.
So, the next time you have a urgent desire to drop your credit card on the counter in exchange for the super-sized bag of chips, try to remember what it can mean to your business to go on a little diet.
Photo credit: Frito-Lay North America