That’s right, you are in business and you better be good! You can be in denial because you work for someone or you are a stay at home spouse, but you are fooling yourself. You are in business and you need good skills or you will go bankrupt. Before you panic, you do not need a degree in accounting, business or special skills. A little knowledge and common sense will help you succeed.
Where Do You Start?
Someone needs to be in charge of your business. Can you imagine a business without a leader? Every business has managers or owners. They have job descriptions and goals. The company or business has a vision of what they want to do and how they will do it. They even spend time forming a strategy and a strategic plan. I know that is a mouthful of terms, but why should you not do those things? No plans, vision or purpose sounds like a business that will drift and wander aimlessly. Someone needs to be in charge and lead to reach your goals.
You need a plan! How will you achieve your financial goals? It doesn’t stop there! You need a form of a business and/or strategic plan too. A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. You should apply this to your career, business (now or future) and personal life. Whether you work for someone, have a business or some other source of income, you need to know where you are going. Business plans are decision-making tools. I see it as an opportunity to ask all the questions to lay out a plan for your future.
Strategic planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It is a longer range form of a business plan. It makes you think about your future in different terms. What is your vision, sometimes as long as twenty (20) years into the future? It is also an opportunity to define your purpose, mission, values and strategy. It is a long range view of what you are trying to achieve as goals. You can evaluate the present, set goals, develop an action plan and determine the necessary resources to reach your goals.
Setting goals, asking questions and establishing plans are just some of the things you need to do to start your journey. More importantly, you need to know how you will get there. An action plan is may be the difference between achieving success and just going through the motions. The planning process triggers discussion and stimulates questions that may never come up. The more detail in the beginning the better and more defined goals. Ultimately, you will create a better plan to reach your goals. If you are single or married, you need a plan! A plan is best when all participants establish goals and plans together.
Your plan should take into account your career, personal finances and personal goals too. You need a long range plan which is five (5) years or more into the future. It should be part of your strategic plan that should go out even further. What do you want to achieve in the long run. It may include retirement planning, career, starting a business, investments or personal goals. When you plan, it does not mean you cannot change it, but it helps you work toward a goal. Looking twenty (20) years out, it will change and you should adjust your plans.
Often plans do not include career or starting a business. Setting milestones for your career or making plans for starting a business should not be left to happenstance! My career was filled with experiences to get me ready to start a business. Even if you are not interested in starting a business, you should always gain experience so you are ready for that next step or promotion. If your career is not moving along the way you want, you probably did not do much planning! Without a plan, you cannot measure your progress.
You Got Your Plan, Now What?
Once, you have a plan, start executing it. If you are married, you need to understand your role in helping the partnership reach your goals. Who does what? Outlining your responsibilities and monitoring your efforts will help you see your progress. Your personal life is no different from a business. Does it lessen the desire to reach your goals? Of course, not! Whether it is getting control of your expenses or saving for a home, you determined it was important. Goals are goals and you are just using business tools to help you achieve your goals.
Businesses plan because they want to prepare for the future. Individuals are no different! Monitor your progress and adjusting your efforts is equally important. What kind of system will you use for controlling your expenses? It can range from no system to a spreadsheet budget. Controlling your expenses and having reserves for expenses that are difficult to predict is essential. Many people call these reserves, emergency funds in personal finance. Set up reserves for equipment replacement, repairs and maintenance to name just a few.
Typically in personal finance, we focus on expenses or income. Business is measured on profitability. It is what is left over after all the expenses are deducted from income. Individuals should have something left over when you deduct all the expenses too. It is such a simple concept, but not that common. I usually put that “profit” into savings for the future! Do you make a profit? Unprofitable businesses are not sustainable and usually go bankrupt. The ideal is to put aside at least 10% in savings!
In business, we measure performance using ratios. How much do you spend on housing, food, entertainment etc. Remember, you cannot exceed 100%. My secret is I start with savings or “profit” and adjust everything else to achieve it. Since housing is generally your biggest expense it is important to keep it reasonable. Housing should never exceed one third (33 1/3%) of income. If you exceed this percentage, you should reduce your housing expense. You could move or take in a roommate! Your other expenses are more discretionary and you can make less drastic changes.
You should approach your career, business and personal life as if it were a business. You make many decisions all the time and you need to plan your future. Without a plan you will make mistakes and have difficulty achieving your financial and other goals. The planning process prompts questions and develops milestones to help you measure your performance. A well thought out plan keeps you on track to reach your goals. After all, everyone is in business.
Photo by: IvanWalsh.com
After all, everyone is in business.