Master Your Money: Advice from Your Business Coach

business coach, money, business advice“Your money is a quantifiable analog for your life force – the aggregate of your time skills, experience, persistence, and relationships.”  - Rabbi Daniel Lapin I believe the purpose of business is to create value and thus create wealth. As a business coach that is my objective with each of my clients. Now while every good worker creates value, not everyone creates wealth. Why? They don’t understand money. Every owner of a small business must gain the skills of money mastery. Money must be managed wisely in order to create wealth. First, it is important for business owners to realize that there are 4 types of money:
  • Cash
  • Income
  • Profit
  • Equity
All 4 are very important and our goal should be to grow all 4 types of money. We all know what cash is, and of course, cash is king. But the ability to produce income is also vitally important. The more income we can produce and the more ease with which we can produce it, the better! But income does not tell the whole story. We must also produce a profit. We go through cycles where we grow our income but sometimes our profits shrink temporarily. This is not unusual. However, if owners do not pay attention, they can grow their income and shrink their profits to great peril. So it’s important that profit continues to grow over the long-term. Finally there’s equity. This is the value of your business. There are many different ways that businesses are valuated. It is wise to know the standard way your industry valuates businesses like yours, and then track the equity value of your business. The goal for most of us is to one day sell our business and realize a bountiful return on our toil, creativity, and persistence. Every business owner needs to master all 4 types of money! But how? It begins by learning how to read financial statements. I regularly review 3 key financial reports in my business. They are:
  • Cash Flow Report (I review weekly)
  • Balance Sheet (I review monthly)
  • Profit & Loss Statement (I review monthly)
Some businesses that are project based will also need to produce a daily or weekly project report to assure that expenses are controlled and margins are adequately maintained. Every business owner should devote some time for review of your financials, analysis, and financial planning. Part of your annual business plan should be a monthly budget. By projecting your income and expenses, and then tracking actual financial performance you will have confidence, wisdom, and mastery of your money.

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