The biggest challenge that most people share with me is:
“I can’t seem to figure out my business finances.
I’m not where I want to be financially in my business.”
I’ve been working with wedding professionals on financial strategy consulting for 6 years now. (And 8 years before that in the finance industry and in my sales position doing forecasting.)
These are the 5 biggest areas where I see people struggling. (I’m going to be TOUGH here… but this is the TRUTH.)
Your Margins are too Low
Your margins are too low. This is something that I tend to see most with floral designers. Here’s what I’m talking about using a floral designer as an example:
You sell services/product for $10,000
Your cost of flowers is $6000
Your profit for this event is $4000
So… while it seems that you have a $10k sale. (HURRAH!) You’re netting $4k… which then has to go towards overhead expenses. If anything is left, you may see some personal profits.
Margins are everything, especially where product is concerned or if you have staffing and high labor costs. Low margins mean you’ll just have to work a lot harder to be profitable.
Your Expenses are too High
You spend too much on overhead. You buy ads that you can’t afford. You’re paying rent you can’t afford. You take on too many styled shoots and agree to too many favors. You’re paying bank fees for no reason. You attend too many conferences that don’t pay off. And, you likely don’t have a budget.
Your personal finances aren’t so hot
So – this is a bit of a weird one for me to discover. I do NOT do any personal financial coaching. (I leave that to the Fiscal Femme.) But, when some business owners don’t have a handle on their personal finances, I see it come out on the business.
In a nutshell: you use your business like a piggy bank. Personal charges that run through your business aren’t a no-no, as long as they are properly classified as an equity draw (and not a business expense.) But, the danger I see sometimes is when a business owner draws more than the business can afford. The business, at times, goes into business debt because the owner is over-drawing. And, yet the owner doesn’t know why the business is losing money when it seems to be doing so well.
You Can’t Unbury Yourself from Business Debt
This is a tough industry to have any type of business debt. In order to get out of debt, you need to have the ability to squirrel away cash. The trouble with having business debt is that you will be paying the bank before you pay yourself. And, that starts to become exhausting when you aren’t paying yourself enough. (Psssttt… it IS possible to get out of business debt. But, you have to be prudent with your cash flow planning.)
You have Past Years’ 1040 Taxes that you Owe
This is similar to business debt. (And, in reality, your taxes are a personal obligation NOT a business obligation.) BUT – it’s a major factor that makes many wedding pros feel overwhelmed. A $30k tax bill can hang on your neck like an albatross for a long time. (I talk a little bit about how to do this better here.)
pssttt… Sales rarely have anything to do with the money problems business owners have. Yet that’s what people want to focus on most: “If I couldn’t only sell more.” Get a hold on these 5 factors and you’ll be in good shape financially.
So – what do you think? Have you experienced this? (Share in a comment below.) Need help? Email me.