#7: Get Lean! Mastering Financial Management for Business Owners

You are responsible for the financial health of your business, so you must have a good handle on your business's finances. This includes understanding basic business metrics that matters, using leading indicators, and ensuring a profitable business. We walk you through mastering financial management for business owners.  

Have a Good Handle on Your Business's Finances  

You must understand, in real time, where money is going in and out of your business. You cannot delegate this to someone else (and early on, you cannot afford to have someone else manage this any way).

What is your top line revenue? What is your net profit, gross profit, etc. Matt discusses these business metrics that mattered here.

If you do not understand what is going on in your business financially, you will get surprised.

The metrics you assess need to be leading indicators, not lagging indicators. For example, Matt used an accountant for Barbell  Logic that would give the financial numbers for the previous month two weeks after the end of the month. This is too late to course correct.

Mastering Financial Management for Business Owners: Profit First

Matt and Chris love the approach outlined in the book Profit First, which helps you better understand your business's finance and helps you ensure your business creates profit.

You organize the money in your account, either using a bank account that lets you create sub-accounts or using something like YNAB where you can assign purposes to the money.

You must assign money to profit. Start with 1%. The point is it helps you build the habit of assigning money to profit. You need to increase this percentage over time.

You can end up paying yourself the profit or strategically reinvesting it into the business.

The other areas to assign money toward include:

• Revenue
• Payroll
• Operating Expenses
• Taxes (don't let this one surprise you)

How to Get Your Business Lean

A key action in mastering financial management for business owners is getting lean.

You almost certainly want to increase your revenue, but this takes time, usually comes with cost, and takes time.

The fastest way to get profitable, the MED way, is to cut costs, specifically in operating expenses (as opposed to cost of goods or payroll).

You have to keep your business from burning cash and keep it there.

Negotiate costs for subscriptions. Most of the time you can email a business that you plan to cancel something, and they will offer you a discount.

If you have not been using a service, you also can often cancel it effectively some time in the past.

Using 1099 contractors can help reduce costs as well.

You have to master financial management of your business. It may be hard, but it is crucial and worth the time and effort.

PS -  Coach Smarter, Earn More: https://bit.ly/3X4ixOX Matt's Links Website: https://ryanmattreynolds.com/ Instagram: https://www.instagram.com/reynoldsstrong/?hl=en Chris's Links: LinkedIn: https://www.linkedin.com/in/chrismreynolds/  

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