3 Financial Tips Every Small Business Owner Should Know

Welcome to the "Starting a Small-Business Series!"

Check out the full series below:

1) 3 Things to Consider Before Starting A Small Business

2) How to Find the Right Time to Start A Small Business

3) 3 Financial Tips every Small-Business Owner Should Know

4) 5 Important Steps to Sustain Your Small-Business

You may remember from my first post in this series, I mentioned that Dave Ramsey highly supports stay at home moms creating a small business from home.  Why is that?  Because Dave Ramsey highly supports moms being home in the first place.  In today's society, mothers typically need a very well paying job in order to make it worth their while to work outside of the home.  They often find after their children come along, that a vast majority of their income goes to childcare, gas for commute, dining out, new clothes for work, etc.  So it makes sense to stay home.  And if a mom wants to be at home to begin with, why not?  

Three financial tips every small business owner should know


So what do you do if you are a stay at home mom, and you have considered starting a small business?  You already cut your finances - where does the start up money come from?  Unless you have money already set aside, or you have a guaranteed means to quickly repay a small start-up loan - now is not the time to start.  

Let's go back to last week again, I mentioned that I started my business because "the stars aligned."  And they did, in so many ways.  Another of those ways was that my husband and I had just received a small year end bonus from our employer, and we applied that money toward my camera and two lenses.  I did finance a small portion of this start up cost on a 12 month zero interest card ONLY because I knew I had a guarantee it would be gone prior to the end of the 12 months.  I knew that if my sales from my business were not enough to cover the total cost of my equipment, I would be able to work a few extra shifts at my nursing job to quickly pay off the debt, or worst case scenario pull money from our savings.

With most any business, you can assume there will be start up costs.  You can also assume, you may not make much of a profit your first year, if any.  If  you are without an income or have an already tight budget this is a difficult road to take.  I am not discouraging you from ever starting, maybe just not right now.  Start watching your friends kids a couple days a week, sell things around your house you don't need, give up DirectTV for a year or cut down on your phone bill.  Save, save, save until you have those start up costs - and then by all means dream big my dear! 


So you saved for several months, you have practiced your skills and you are beyond excited to start your dream of becoming an entrepreneur.  You created your Facebook Business Page, e-mailed and called everyone you know, shouted it from the rooftops, and low and behold only two short weeks later, you have a paying customer.  Someone actually wants to pay you!  Money!  To hire you!  It is exciting, be excited!  Just remember you worked so hard to get here, and it will take a lot more hard work to keep moving forward.  

But from here on out you want to work smarter, not harder.  So as soon as that money enters your hands, know exactly where it is going to go.  Did you open a business account?  If you are just getting started, most likely not yet.  Then open an additional savings account where you can deposit your first paycheck and set aside those funds for taxes, business costs, and marketing.  I am not going to get too in depth with all of the financial aspects associated with starting a business, but check with your state on requirements regarding taxes and insurance, meet with a local accountant if necessary, and start tracking your cash flow from day one.  Here are my top five tips for maintaining a strict cash flow and maximizing profits for your business!


As a photographer, I could have easily hopped online and ordered $20,000 worth of gear and started up an elaborate wedding photography business.  But I didn't.  Why not?  Because the gear does not make the photographer.  When first starting out, chances are your experience is going to be very low.  Yes, you have been practicing for months on end, but you have limited experience with actually running a business, managing finances, and providing excellent customer service.  You also have a very limited client base.  With limited experience and minimal clients, your profits are obviously lower.  Build your business as you go.  If you are not shooting elaborate weddings, in grand halls that require three off camera flash set-ups, then you simply do not need three $600 speed-lights and stands.  Build your business with time, and you will get where you want to be before you know it.  


This one sounds simple, but it can be easier said than done.  Your business will have fixed expenses, one time expenses, and flexible expenses.  Fixed expenses recur, month after month and are often the foundation of keeping your business running smoothly.  While these expenses are often necessary, it is important to minimize them as much as possible.  I pay several fees a month - this includes my studio management program and my editing software.  I used to pay a monthly fee for my client galleries, but have since moved to using PASS to deliver client galleries.  It is an amazing option for digital galleries and the perfect way to reduce my fixed expenses!


The best thing you can do to maximize profits for your business, is to maintain a strict budget.  Did you borrow money to start your business?  Then work out from the very beginning what you will need to repay each month to eliminate that debt as quickly as possible.  What are your fixed business expenses?  What are your one time expenses?  Do you need business insurance?  Are you paying an accountant to file your taxes?  Do you need to studio samples for your photography albums?  When I first started my business, I used a bonus I received from my day job and a small loan to purchase my camera body and two lenses.  From that point on, I only paid for business expenses with designated profits from my business.  Then when I wanted to purchase a new lens, I sold one of my first lenses to help cover the cost.  

Track your income and expenses at least weekly to make sure you are staying within your budget to remain profitable.  Also, don't forget about hidden expenses!  There will be times in your business, unexpected expenses may pop up that you were not aware of.  Set a little extra money aside for these days!  When my monthly income stabilizes a bit more and my expenses grow, I will move all of my finances over to Quickbooks.  For now, I use an excel spreadsheet - easy and affordable!


This one is hard, really hard.  It is something I still struggle with in the beginning of my business.  If you budget correctly and maintain a strict cash flow - then you should be able to correctly determine how to price your business for profit.  All of your hard work needs to count for something, and that something is the additional income you are providing for your family.  You are worth it, your talent is worth it, and your time is worth it.  Make sure you are pricing your business so you are getting paid!


It may sound silly but most important, don't forget to have fun.  Being an entrepreneur can be stressful.  You have a brand new business you have worked so hard for, with an un-steady income you are praying will pick up, and your biggest fear is failing hard.  In front of everyone.  It is scary, I get it.  But if you set your self up to succeed from day one and you do it with a smile you will get there.  You started this business because of your passion, let that be your guide.  And when you stumble, stumble with grace, learn from it, laugh it off, and keep going!