Do Your Personal and Business Finances Mix?
Updated: May 13, 2019
Many of you reading this newsletter are Entrepreneurs, Freelancers or Business Owners.
I’m giving a seminar “Develop a Winning Pitch Deck” on June 15th in NYC. Even if you aren’t ready to raise money, it’s a great opportunity to articulate the key concepts of your startup in just one day.
When I first started working with clients years ago, many of them entrepreneurs and business owners, they usually had one checking account and all their personal and professional money matters were in one account. Immediately, I advised them to get separate checking account and cards. I advised to setup a legal business structure, even if only DBA (by the way- big fan of legalzoom.com). Fast forward to present. I still present my personal finance seminars and work with clients on an individual basis but as many of you know, I have been working with Entrepreneurs and Startups through It Will Bloom and Angel investing. Recently I gave a seminar on “Finances for Freelancers” and compared profit and loss statements for personal and professional purposes. They were more alike than you would think! It is a great way to think about your business and not forget your personal finances at the same time. To see an image of how your personal finances and professional finances match up, check out image below.
- Personal Finances. Be clear about the income you are earning, pre and post tax, where it’s coming from and forecasting for the future. I’m always surprised how many freelancers don’t have a handle on their income! Own it! You’ve worked hard to earn that money.
- Business Finances. What is the revenue source? Are there multi-channels? Is it service or product based? What assumptions have you made for forecasting revenue - specifically for your profit and loss statements?
- Personal Finances. Do you know exactly your fixed expenses? Even though you are an entrepreneur or freelancer, this number doesn’t change! It’s especially important to have a handle on your monthly and annual fixed expenses. Then when you are analyzing your variable expenses, you can create a plan around it.
- Business Finances. If it is a product based business, get a strong handle on your COGS (cost of goods sold) and focus on getting that number as low as possible - especially if you want to scale and accelerate growth. You should separate your COGS out from your general expenses. Understanding your general expenses and where you can continuously cut back.
- Personal Finances. Knowing your gross profit tells you how much you can spend for variable expenses and how much you can save.
- Business Finances. This is a very important number to know as a percentage - especially for investors and if you are raising money. This tells you how profitable you are before you start spending money for general expenses.
- Personal Finances. This is the end result. Living within your income and still able to save. The savings can then be split up among rainy day, retirement and vacation!
- Business Finances. This number tells you how profitable (or not) you are. Also the end result. It can also determine when you will breakeven from a cashflow perspective.
If you want to do more on your business or startup, please check out It Will Bloom. If your personal finances needs a checkup - please send us an email and we’ll give you an independent tune up!
Don't forget to check out “Develop a Winning Pitch Deck” You can't afford to wait....
Can't make the live seminars? Check out recorded seminar "PERSONAL FINANCE FOR ARTISTS AND ENTREPRENEURS" by Creative Live: