Do Your Expenses Go Up With Your Income?
There’s something financially self-defeating that I see happen to many small business owners. They increase their sales – WOOOOHOOO! And, simultaneously, they begin to spend more money – BOOOOOO! (This can happen with your personal finances too.)
Here’s an example…
Wedding Planner Gwen typically has a very slow January. But, this year, she was able to book 5 new clients and she is feeling flush. When approached with an opportunity to buy some new office decor, she jumps at the chance with the thought, “I’ve just gotten 5 new clients! I can afford this now!”
Ever find yourself doing this?
We all have.
When this happens we feel that we are ‘in the money’ and often end up cancelling out any added income as quickly as it got into the bank. So, even when we have a banner year, we aren’t quite sure where the money went. We never do get ahead financially.
The danger in doing this is that the spending is NOT intentional. You’re flying by the seat of your pants. Is there a better use for that cash? Will you need it later in the year? Should it being going into something else for your business? Should you be drawing it for your own use (as salary)?
THINK before you spend. Take a look at your cash flow plan and make decisions accordingly.
Such a great reminder! A fellow business owner I’m friends with told me the rule they use. It’s not hard and fast but it has helped!
“Will this purchase help MAKE money/Will this purchase directly affect my revenue.”
This is great advice– I eat up your posts daily!
Awesome advice!!!
Just what I needed to hear! Did some financial planning tonight and need to find ways to boost the revenue .. but also need to be careful not to spend that boost! Taking this one to heart;)