Best Business Advice

It is amazing how a business owner will gain a sense of confidence when there is unallocated cash in the business bank account. As business owners, very often if the business has money, we will try to find a way to spend it, whether we take more money for ourselves or spend it on the ‘must-haves’ for our business.

People who can easily abstain from spending frivolously on themselves often cannot seem to say no when it comes to spending money on their business. I am not suggesting that it is inappropriate to spend money on the business, what I suggest is spending money by using an organized and simple system of allocations.

The best advice I can give to business owners is to create a savings plan within your business budget. Treat the allocation of money into this savings plan as you would any expense. Pay it every month no matter what. Consider it as if your were paying rent to yourself. Whether you allocate $50 or $500 or $5000 per month; within a very small period, your business will have a ‘war chest’.

I highly suggest having very clear rules around withdrawing money from this account and exactly what type of things money can be withdrawn for. Having strict rules will keep the money from being spent thoughtlessly and when true emergencies and critical events occur, there will be funds available to assist.

I did this very well in a business that I owned until recently. We had an allocation of money into savings every week. Even when we were not profitable and were scrimping by, we continue to fund the savings account. When there were emergencies, or when we needed to make a rapid decision on a purchase that met certain guidelines, we could spend without it affecting our ability to make payroll. This gave us an immense sense of confidence.

This type of asset allocation is something that you can easily implement into your business. I know it might hurt, but if you lived on just $10,000 less a year in your business and redirected that towards a business savings account, that would give you $10,000 of buying power.

The most dangerous person in the system is the business owner. Not creating an allocation, or not having very defined rules about withdrawing can cause it to fail. Create a cash management program for your business that protects the money from you