Financial fitness is a common expression to refer to how you are doing financially. Are you financially fit in that you have little to no debt and have accumulated massive savings, or do you need some financial training to get you fit?
Money management should be of paramount concern to the business owner. You need to look at your business in terms of how much income it produces for you and the profit your business generates.
If you are running a business but not generating profit, consider that a red flag for your business. This is your wake-up call to get the financial training that you need.
Define financial fitness
Financial fitness can be thought of as how you manage your money. Financial fitness is determined by how much debt you are carrying, if you have a solid understanding of financial literacy, and if you are taking the necessary steps to protect yourself financially.
How financially fit are you?
Now that you understand financial fitness, it’s important to know how financially fit you are as a business owner. Financial fitness is not only important for your business finances but also just as important for your personal finances.
Steps to take in your financial fitness journey
Having a well-rounded financial plan for your business and your personal finances is important to ensure financial stability in your life. When you have a financial plan that protects you from economic downturns or unexpected life events such as illness, you will feel more financially confident and at peace should weather any storms.
Being proactive about your finances and protecting yourself financially is beneficial.
Here are the steps you need to take as a business owner to get financially fit:
1. Money mindset
You need to be in a positive mindset with room for growth to take your business and personal finances to a place of health. You must let go of old money stories and make space for financial peace and confidence. Old money stories that no longer serve you need to be let go and reframed to a positive money mindset that will help you be the best and most financially fit business owner.
2. Understand financial reports
Reading and understanding your financial reports is valuable because you need to use the feedback you receive from the financial reports to make improvements in your business. You need to focus on profitability in your business, and your financial reports tell you how profitable the business is.
3. Create a business financial plan
You can create a business financial plan to increase the profitability of your business. The business financial plan serves as a roadmap that helps you plan out your revenue goals and how you plan to achieve them; it considers the business expenses. By tweaking and using financial strategies, you can focus on increasing your net profit margins to increase the profit in your business.
4. Monitor your results
Once you have your plan in place, you can be accountable for your goals by monitoring your progress against your goals each month. Having your business financial plan is important, but if you are not monitoring the results of your progress each month, then having that plan is pointless. Monitoring each month allows you to see what’s working in your business and what isn’t. If there are money leaks, you can plug them and correct them to ensure the business will meet its targets.
5. Have a cash management system in place
Cash is the lifeline in your business, and having a cash management system in place makes you proactive and plan against cash shortages. Building up cash reserves to help you get your business through economic downturns and market fluctuations is a good business strategy.
6. Insure against risks
You need to insure against financial risks in your business that could destroy you. Make sure you have mitigated risks in your business by securing business insurance and that you have protected yourself legally in your business.
Not only do you need to mitigate business risk, but you also need to reduce financial risks for yourself. You are the largest financial asset because you generate an income, so insure and protect yourself with the proper personal insurance such as critical illness and life insurance.
7. Have a retirement plan
Business owners also need to take care to plan their retirement. Set up an investment portfolio with your financial assets that will carry you through retirement. Work with a certified financial planner to take advantage of tax-saving strategies.
8. Plan your exit strategy
When you are building a business, you are not just receiving a source of income from your business, you are also building a financial asset that you can sell when you decide it’s time to move on. Make sure you are setting up your business in a way that will get top dollar when it’s time to sell.
The bottom line is it is important for business owners to be financially fit in their business and personal finances.
I invite you to grab your free copy of the 5-Step Roadmap to a Profitable Biz to get your business finances in top shape and increase that profitability.
Grab your FREE 5-Step Roadmap to a Profitable Biz!
