The first business I started was a restaurant. Back then, I was hard-headed and didn’t know what I didn’t know. Looking back, I wish I had a guy like me sharing the same advice I’m going to discuss here.
Whether you just started your business or you’ve owned one for decades, I hope these tips will be useful…
1. Don’t try to manage your own accounting
I was that business owner who said, “Oh, I’ll go home tonight and do my bookkeeping and accounting, and I’ll keep it up to date.”
Instead of spending time with my family, I’d try to take care of it at night. But I didn’t have a lot of horsepower.
So, I’d get behind.
And not everything would be regularly updated and reconciled, so I didn’t know if my business was doing well or not.
When I tried to do it myself, I ended up pushing it to the sidelines, because I was too focused on operating the business.
I wish I’d known sooner that I needed someone to do it for me, so I could make financial decisions based on clean data.
2. Have formal financial reviews every month
You’re not necessarily making money just because your P&L says you’re profitable.
That kind of information comes from reviewing your financial statements—your P&L, balance sheet, and cash flow statement–every month.
If I had known to do this, I wouldn’t have had to learn the hard way that I wasn’t cash-flow positive.
That’s why I say monthly financial reviews should be a mandatory practice.
3. Have a financial plan in place (and follow it).
When I started my first business, I just operated. I never sat down with my team and said, “This is our plan.”
Once my team and I started the business and began operating, we didn’t follow a budget or forecasting or modeling to know what revenue we really had.
We never really had a financial plan when we made business changes. So, we didn’t know what our revenue needed to be to support the changes we made.
I wish I’d known what my budget was before I made changes, so if I adjusted the menu or adjusted my labor, I knew I could afford it.
Not having a financial plan worked for a while, but it caught up to me.
Looking back, I needed someone who would sit down with me and say, “Look at the numbers. This is not getting better.”
I needed someone like who I am today to help me come up with a financial plan and stick to it.
4. Remember that you’re not invincible.
It’s easy to think you’re invincible. But this kind of thinking is irresponsible if you’re not looking at facts or data.
You can overcome a lot, but numbers are numbers. You can’t overcome facts. And if the facts are saying you’re not managing your finances responsibly, then no amount of posturing will fix it.
You need to keep things reconciled and updated, track real financial information, stick with a financial plan, and make smart financial moves based on facts.
Otherwise, you can be tempted to do things like get into the cycle of high-interest, short-term loans, which often lead to more problems. They give you a little relief but don’t fix cash flow. Next thing you know, you’re in a financial death spiral.
You can’t will yourself out of a bad financial situation.
5. Know when to cut your losses.
When I was 40, I had to start a new career path.
I cut my losses, took a different direction, and I now love what I do. But I wish I’d cut my losses years earlier, even though it was scary.
I was holding on because I was afraid what would happen if I wasn’t in the restaurant industry. And I made the situation worse by staying in so long.
If you’re in a business and you’re struggling, and you don’t see a path forward, don’t continue to make the situation worse by bringing on more liabilities and debt.
Just find a responsible way to exit and get a fresh start in another direction.
Bottom line
“What would your today self tell your younger self?”
That’s a question I hope to have answered in this post. If you take these tips to heart, maybe you can avoid learning these lessons the hard way like I did.
And if you have any questions about your business finances let’s talk. My team and I provide a variety of accounting services along with HR services.
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