A Bad Month In Your Business Does Not Mean A Bad Month For You

Most entrepreneurs treat their business finances as their personal finances. This means that when their business has a ‘bad’ month it has a negative impact on their lifestyle.

If you have ever decided that you need to cut back on your expenditure as you are not confident in how your business will perform for a month? Most entrepreneurs are in this boat.

Living on pure commission from your business is a dangerous game.

It is filled with high stress and anxiety.

A mistake can stop you paying your mortgage one month, your lifestyle is highly variable, and you are unlikely to ever develop a long term wealth strategy.

Would a football player, regardless of their skill level ever accept a ‘pay per goal’ payment structure? Of course not, they will take the basic salary and they get paid a bonus on top for the wins.

The most successful entrepreneurs understand that in order to achieve the lifestyle they want and develop a long term wealth creation strategy; they cannot have shocks in their personal finances and must keep their business and personal finances separate.

Successful entrepreneurs enjoy the highs of their business through bonus payments, but their lifestyle is covered with a monthly salary that comes without fail.

This year, my lettings businesses experienced a 30% drop in revenue due to COVID 19 but my personal income remained totally unaffected.

There are three key steps you need to take to separate your personal and business finances.

STEP #1

END IN MIND BUSINESS MODEL

You need to ensure you are building a business model that will actually serve your lifestyle. Work our exactly how much you actually need / want each month and build your business model around it.

For example if you need to draw ￡4,000 per month from your business each month to have the lifestyle of your dreams then the objective for your business should be to generate profit of ￡4,000 + tax + risk.

To keep this simple, add 20% for tax and 40% for risk ￡4,000 + ￡800 + ￡1,920 = ￡6,720 PCM.

Build your business around achieving this figure as a minimum. You have factored in risk and tax and therefore your business should produce you your lifestyle income target without fail.

STEP #2

PAY YOURSELF FIRST

Too many entrepreneurs pay themselves last prioritising everyone else first. Your business is designed to serve and if it is not doing so, it is fundamentally broken.

Set up a standing order that goes out on the first of the month, EVERY MONTH, without fail.

Of course this may be lower than your desired lifestyle income first but set one up and get used to paying yourself first. This is a non negotiable payment and must be treated as if you are paying one of your best suppliers.

TOP TIP: Make sure this payment is low enough to be achievable every month. It should only go up over time. If you have money left over that is not required for the business distribute yourself a bonus quarterly.

STEP #3

BUILD WEALTH

True wealth is made from small, incremental, monthly standing orders.

Once you have started to take your monthly salary, set up some standing orders which then send small increments of this money to places that will allow you to build your wealth further, for example a pension, ISA etc.

Get into the habit of doing this while the amounts are small and be amazing at how much and quickly they grow. Once again, ensure that the values are small enough for you to complete this every month without fail.

The Payoff

Living off the bank balance and sharing the highs and lows of your business will only get you so far. Your business only truly serves you when it pays you a consistent salary, no matter how well it is performing and you are enabled to build long term wealth.

Taking the three steps you need to take to get this set up is easy; the hard part is having the discipline to stick to it. Best of luck!

BONUS CONTENT:

30 Things I Learnt By 30

Today I turned 30.

In the run-up to the big day, I spent some time considering all the things I have learned in the last 30 years and in particular the last 5 years in business.

Some of the items in this list are existing quotes and learnings from many people who’s work you may have read or you may know, and some of the learnings are my own which I have developed myself from my own experiences.

All of the learnings below fit with my current mindset, values, and accomplishments but are subject to development and change as I embark on the next decade of learning.

I hope you can find some value in this list of 30 things, whether you are in business, property, or just interested in your own personal development.

It takes 5 years

I read a number of years ago that it takes 5 years to grow a successful business. I could not see how on earth it could take this long when I started but I can say it did (almost to the day). It takes 5 years to become an ‘overnight success’.

Systemise (almost) Everything

Almost everything can be systemised! Your business, your calendar, your time, your working hours, your diet, your health, your sleep. The things that can’t (like relationships, and quality time) and shouldn’t, don’t try.

Work Less!

The true badge of honor comes from working less hours in the week, not more. Don’t get caught up in the popular ‘grind’ and ‘hustle’ entrepreneur terminology. Systemise and recruit a team. Do the jobs you love, and delegate everything else. Work smart, not hard.

Consistency Beats Clever

This applies to almost everything in your business and life! The overcomplicated ‘clever’ solution rarely works long term. For example, the best diet is a simple one with basic principles executed consistently. The best social media campaign is the simple one executed consistently.

“Success and Failure are both Very Predictable” Daniel Hill

Success is very predictable, you generally know what you need to do to achieve anything. It is your choice whether you do it or not. It comes down to discipline and doing what you say you are going to do.

Every Second Counts

Plan your time to the second! Get everything in your calendar and start with the ‘rocks’. These are non-negotiables, for me: exercise, business development, partner, family/friends. Put them in first and plan around them. If you don’t you will just end up being part of everyone else’s priorities (and they do not have big plans for you!)

We all have a ‘Stress Cup’

The body cannot tell the difference between different types of ‘stress’. Working long hours, bad sleep, intense exercise, and bad diet all fill up your ‘stress cup’. Managing how much of each stressor goes into this cup keeps us from burning out.

Finish Your Day

Finishing your day at the end of each workday is a life-changing habit. Have the tasks that you need to do each day to close everything down so you can switch off an unwind and do them religiously every day!

Every detail should be ‘Black and White’

Make all your working relationships and partnerships crystal clear. The devil is in the detail, make everything black and white from the start. Dancing around ‘in the grey’ will result in short-lived relationships and lots of difficult conversations down the line. Trust me!

Partnerships rarely work

Partnerships are easy to create but generally hard to maintain. People change, excitement withers, and one person will normally end up doing more of the work than the other. Lots of partnerships are formed due to a lack of self-confidence which is the wrong reason. Only go into business with someone you can literally not live without.

Invest in your education

I started in business and property 5 years ago, almost to the day. Since day one I have spent money every month on education, mentorship, and training (even when it was very hard to pay for it). It has been the best investment I have ever made.

The importance of sleep

Don’t underestimate the value of sleep. You NEED it more than you think. That extra hour of work in the morning or that late-night show is taking years off your life.

You can be right or you can be rich

You can be right or you can admit you are wrong and make progress. The ultimate level of personal responsibility is being able to admit when you are wrong.

The Consolidation Phase

After growth, there is always a ‘consolidation phase’, which will be rocky! When we finished the rapid scaling of our property management business over 3 years we had to consolidate for at least 2 years whilst we ironed out all of the problems we created. Dig deep and push through it, this is the hard part.

Choose people based on their values

Sometimes you do not just ‘click’ with people or new employees do not ‘click’ with your business. This is normally a values issue. Don’t try to change them, just part ways before they have a negative impact on your life or business.

Know your hourly rate

Work out the annual income you hope to achieve this year plus the equity you will add via any investments. Divide this by the number of hours you hope to work in the year. This is your hourly rate, use it to value your time and delegate lower value tasks to others.

Know your numbers

Financial clarity is the single most important tool you can have at your fingertips in your business. Get some accounting software in place and pay whatever it costs to have a professional look after it for you.

You get what you pay for

You really do get what you pay for! Don’t expect to go for the cheapest option and expect 5 Star Service.

Get to the root cause

It is easy to treat symptoms of an underlying problem, but as a leader, you need to get good at seeing through this and being decisive on what the root cause is. Tackle each issue at the root cause for long term improvements and change.

Play the long game

There is always a longer game to be played. Make long term decisions, pay for your mistakes and admit when you are wrong.

Tackle the difficult situations quickly

Difficult situations with people can easily drag on, for example, an underperforming team member or contractor. Rip the plaster off. Be clear in your expectations. Have a difficult conversation and move forward. Sleepless nights and worrying are not the answer.

Relationships are everything

The only thing that really matters is the relationships you build with like-minded people that become friends. When the money is gone this is all you’ll have so savor them, enjoy them, make time for them, and make space for new ones.

You are exactly where you need to be

Whether you are experiencing a high or a low on the entrepreneurial roller coaster, you are exactly where you need to be so take solace in this fact and learn everything you can at that point in the journey. It will all come together in the end, it is just important you stay strapped in.

Get comfortable with being uncomfortable

If you are hoping to grow as a person you will always be a little out of your comfort zone. Get comfortable with it!

Ask the Experts

If you want to see results in different areas of your life pay for professionals to advise you on each area! I have a life coach, health coach, and business mentor. Each offers a vastly different perspective which is invaluable.

Get your steps in

Simple daily habits like getting your steps in are the catalyst for long term lifestyle changes. Find a number of habits that you perform each day that put you on your best.

You can choose your friends

Acquaintances and business contacts can become friends with simple gestures, like an invite to a party or a birthday gift. You don’t have to wait to create better relationships with good people, make a gesture and fast track your friendship status.

There is a solution to EVERY problem

There is a solution to every problem that you will face and the best part is every problem you face has been faced before. Find out who has solved it successfully and learn from them.

Keep hold of your hobbies!

The entrepreneurial journey is a chaotic one. It will involve long days, late nights, weekend work (for at least a period), but make sure you do not lose sight of your hobbies or you can expect a lot of boredom and unfulfillment when you have more free time.

It is never finished

The business will never be finished, the portfolio will never be done, the team will never be fully trained. You will never get to the elusive ‘finish line’ so enjoy the journey!

If you made it to the end then thank you for taking the time to read and I hope this added some value to you. Please feel free to share with anyone who may find this useful, as this is why I wrote it.

I hope the next decade is as good as the last and look forward to learning all the new lessons that lie ahead.

Best of Luck,

Josh