Last Updated on October 9, 2024 by Hanson Cheng
As a small business owner, one of your main goals should be to achieve the kind of financial freedom that enables you to live the lifestyle you want.
Typically, this involves having enough cash flow, savings and investments to make your business sustainable and profitable – which, of course, is easier said than done.
So, how do you go about achieving this?
The key is to optimize your business through meticulous planning and strong execution.
Here are some ways you can make this happen.
1. Define Your Financial Goals
Financial independence is different for everyone, so it is important to take the time to clearly define what that means for you.
Your goals must be SMART (specific, measurable, achievable, relevant, and time-bound) and should address the questions of how much you are currently earning now and how much you would like to earn at a particular junction in time.
It is important that the goals are realistic. So, if you currently earn $5000 a month in sales for your bookstore, a SMART goal would be $6000 per month. You are unlikely to immediately jump to $25,000 a month immediately.
That said, if that is what you want to do, then you will need to put together a strong marketing and promotional plan that will help you reach this level.
2. Track and Analyze Your Spending
It is much harder to enjoy financial freedom if you are spending money left, right and centre. For this reason, it is important to monitor both your business-related and personal expenditures, to know exactly where your money is going.
There are several apps or accounting software programs such as Xero, Quickbooks and Netsuite that allow you to easily keep track of all of your incomings and outgoings, categorize your expenses and provide you with a detailed analysis of your spending patterns.
The more detail in which you can understand your expenditure, the easier it will be to improve your bottom line by identifying areas for cost savings.Â
3. Implement Cost Saving Measures
Once you have identified areas where you can save money, you should implement strategies to do so.
For instance, cancelling subscriptions for professional memberships, streaming services and software programmes you no longer use, can save you a lot of money throughout the year.
Additionally, switching to Smartpay EFTPOS machines can streamline the cost of processing sales, while buying stock in bulk can help you enjoy economies of scale.
You might even consider going fully online or moving to a cheaper premises to save yourself thousands of dollars a year in rent.
It is important to recognise that implementing cost-saving measures should not just be an ongoing process. So, you always need to keep aware of any opportunities for doing so that might arise.
4. Create a Tight Budget and Stick To It
One of the main things stopping businesses and individuals from achieving financial freedom is that they do not have a budget that they stick to.
As a small business owner, it is important that you create a very detailed budget that covers all of your expenses on a weekly or monthly basis – both relating to your company and personal life.
By doing this, you will be able to maintain a better hold on your spending, improve your overall cash flow and ensure you are not sliding towards debt by consistently outlying more money than you are generating in revenue.Â
5. Reduce debt
While carrying some level of debt is something many small businesses do, owing money can be very debilitating, not least due to the sums of interest that often accrue from it. Therefore, it is important to reduce your levels of debt as quickly as possible.
If you have a credit card, you should make a priority of paying the outstanding balance off in full on the due date. Likewise, try to overpay on any loans you have such as a car loan or mortgage.
At the end of the day, the longer you are saddled with these debts the more it will constrict your ability to save money and ultimately achieve financial freedom.
6. Create a Savings and Investment Plan
You will struggle to generate any kind of long-term wealth if you don’t have a plan to save and invest money.
Subsequently, try to devote as much money as you can every month to these activities – most financial experts recommend between 10-20% of your total wage.
Some of the things you can do include saving in high-interest bank accounts, investing in stocks and shares, commodities like gold, assets like real estate or even cryptocurrency.
Never invest more than you can afford to lose, and keep a regular tab on your investments to maximize the opportunity for profitability. Additionally, automate regular fund transfers to your various investments so they can grow without you having to do anything.
7. Generate More Business Sales
Lastly, the way to expedite financial freedom is to increase the number of sales and, thus, the overall profitability and value of your business.
There are several ways you can do this, including through SEO and content marketing for your website, sales promotions, advertising, PR activities and direct marketing.
Just make sure each of the campaigns you run are cost-effective ways of generating extra revenue.