As an entrepreneur, it’s easy to become so focused on the product or service you’re offering that you develop tunnel vision. When this happens, you neglect the business end of your business, resulting in a lack of sales or growth, finances that aren’t in order, and a whole host of other problems. Entrepreneurs always need to wear two hats: that of a specialist in their field and that of a businessperson. If you’re relatively new to the entrepreneurial world, it might be tough to know what to pay attention to and to realize when you go off track. Here are three signs that you’re not running your business like a business and that changes need to be made.
1. Your Business is Running You
One of the perks of owning your own business is your ability to create the career of your dreams. You get to choose the way to run your business according to your lifestyle, preferences, and your strengths. Unfortunately, too many entrepreneurs let their business run them instead of the other way around. If your business is controlling your life, it means you’re working all hours of the day and night and never get to truly enjoy life. Putting strategies, automation, and measurements in place will help you regain control of both your business and your life. If these are not enough, you may need to look into outsourcing certain tasks, working with a professional such as a financial advisor, or hiring an assistant.
2. You Haven’t Separated Funds
One of the biggest mistakes entrepreneurs make is co-mingling personal and business funds. I remind those I work with that they need to keep the mantra ‘separate to dominate’ in their heads at all times. This means keeping your business and personal funds completely separate. Have separate checking and savings accounts for business and personal use and store receipts for each in different places. When you separate funds, you take advantage of all the possible tax savings and make tax day a lot easier on yourself (and your accountant.) It also helps you track business expenses and determine profits and losses for your company.
3. Cash is Not King
There are a lot of ways to look at the value of your business, but there’s only one way that’s accurate. You can look at your revenues, which is a vanity measure, or you can look at the profits, which is a sanity measure. But to really get a sense of the value of your company, you need to focus on the amount of free cash flow. You calculate the amount of free cash flow by taking the amount of operating cash flow minus your capital expenditures. When you keep an eye on that number, you’ll know exactly where your business stands. It will alert you when you need to cut back on expenses or when you can spend a little more on marketing or other business growth strategies. If you want to learn more about handling your finances as an entrepreneur, consider our informative course on the subject.
Having the right mindset as an entrepreneur is crucial to your success. When you think of your business as a business and act accordingly, you increase your chances of building a sustainable and profitable company. Have questions or comments about running your business? Leave them below!