Thinking About Finances

One phrase that is often quoted by experienced business people is: turnover is vanity; profit is sanity. The long-term objective of any small business is to be successful, otherwise why do it? In the context of this article, I’m going to define success as profitability.  (I know that’s not by any means the only measure of success, but it’s the one I’m dealing with today.)

So, in all businesses, and writing is no different to other businesses, there is one important equation:  income minus costs equals profit. 

The financial advice most appropriate for us as small business owners will often depend on the stage we have reached on the life-cycle of our business. If we are just starting out then our financial priorities and expectations will be different from when we have an established or mature business. 

Today we’ll look at the start-up situation. Starting out is a difficult period. 

·       We have to identify an aspect of our writing that is saleable and which we can deliver.  We may have to experiment or do some development before we get it right.

·       We have to identify our potential customers and get the message out to them that we are around.

·       We need systems in place to make sure we get paid for our writing.

These activities may take some time to get through and need to be completed before we can expect any income.  Therefore we need to think about interim funding options. 

·       Do we have savings or investments we can rely on? 

·       Do we have other members of the family who can help? 

·       Are there any grants or other types of financial support available?

·       Do we need to take out a bank loan? 

The bank loan option should be the one of last resort.  It’s a mistake to take on an additional financial commitment, such as an interest payment, before we know whether our business will succeed or not.

At this stage, our own wage is the last thing on the list.  Although, if we have any staff associated with this business, we have to make sure their wages are paid — even if ours aren’t. (This would include the support team like child-minders or cleaners that we use to clear our own time for writing.)

Despite my opening comments about profitability, at this early stage, just being able to pay the bills and keep the business open can be considered a measure of success.  [Unless we are very lucky this is certainly not the time to be thinking about company cars, health insurance or membership of the local golf club.]
By Elizabeth Ducie

Elizabeth Ducie was a successful international manufacturing consultant, when she decided to give it all up and start telling lies for a living instead.

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