How to organize your finances if you work in a personal business?
When you start a full-time personal business in the cloud based on a blog to sell professional products or services, you should not forget how to organize your finances, or how to manage the money generated by your business. Moving from a traditional job to a business of this style will force you to make a series of adjustments in your day to day and even deeper control of your finances. At the beginning of the article, I will focus on personal finances and then on the finances of your business. For more information you can check at Zoetalentsolutions
I think it is essential that as soon as you can, you put on a personal salary. And that this salary must be part of the income generated by your business.
This salary is managed just as if it were the money you earned before in the company where you worked.
To properly manage the money generated by your business, be able to make investments in it, pay with what generates the expenses you have, you must have a salary. Separate your money from your business money. Never mix them.
The money your business earns in the cloud must be completely separate from personal money and vice versa. Have a separate account, a different card, etc.
If you need to borrow from the “other party”, write it down and mark the same return conditions that you would require from other people in the same circumstances. Personal expenses are paid with personal money. The business expenses with the money generated by the business.
You must save an important part of your salary. Even more so because the income of your business is very possible that they look like a roller coaster and sometimes you can pay what you marked and sometimes much less.
The more unstable your income, the more you should save. If from your traditional salary, you saved 10% -15%, now you should increase to a minimum of 25% -30%. If not more.
Why so much? Well, because now you have to pay a series of things that you didn’t have to worry about (or not so much) before, and also, previous worries don’t disappear.
Previous financial problems
Unforeseen. You still need to save to cover those unforeseen expenses that will appear when you least expect it, and especially, at the worst time.
New financial problems
Vacations: Paid vacations are over. Until you have your business running like a machine, generating passive income, the day you don’t work, the day you don’t earn money.
Taxes: If you have income, you must pay taxes for your new working condition. If you are earning more than 3,000 euros a year, I would start hiring an advisor or manager who will bring me the issue.
Retirement: You will have to save for your retirement. As also happens to the self-employed, you will have to dedicate a part of your salary monthly to save it to prepare for retirement. It is possible that by that time your business is already fully automated and is generating money while you are lying on a beach paradise, but also may not. Better be cautious.
Revenue from your business in the cloud
There are two key points about the income generated by your business:
For a few months, you will not have any income.
The income, when you have them, will be very variable every month.
To solve these two problems, it is essential that:
Have an emergency fund to survive during the months that you have no income.
At least this emergency fund must be one year of expenses. And if it’s something else, pulling a year and a half, the better. You will work more calmly and with less pressure.
Focus on creating a minimum income that is generated each month.
In the beginning, your goal should be to achieve a minimum viable audience because you will win little if you don’t have it. Once achieved, route your steps to create an info product or a service that reports a fixed income every month. However small is.
That will give you financial stability and over time it is in this fixed income that you must work to increase as much as possible.
Creating new products and services, improving existing ones, etc. Extra income, welcome, but don’t count on them. Organize your finances around recurring income.
What conclusion do we draw from all this?
Well, don’t leave your current job and start a 100% personal business in the cloud, until you have completed your emergency fund and created your minimum viable audience.
And if you can, ideally, make the leap when your cloud business is already paying you a decent salary.
There is no need to do it the other way around and you will save yourself many headaches.
Your business expenses in the cloud
You should start thinking about expenses as a company. That is, it thoroughly attacks these two types of expenses:
Fixed expenses: Eliminate all these expenses to the maximum. At the beginning you should only have the cost of the domain, hosting and derivatives of your mailing list. Nothing more until you see that your business works and some money starts to come in. Then your main fixed expense should be your salary.
Variable expenses: Avoid them, except if more than one expense is an investment. If you buy a plugin like OptinSkin to start monetizing your mailing list, fine. If you spend 200 euros because you feel like changing the logo of your blog, wrong.
About expenses, other aspects that you should consider are:
Avoid borrowing. Avoid borrowing and borrowing as much as possible. In this type of business, which starts with a small investment and can grow and make improvements with the income they generate, it is unnecessary to go into debt and have financial problems.
Learn. Read everything you can about how to manage a company’s finances. Although “your company” is only you alone, many of the tips are valid.
If the money is not in your pocket, you don’t have that money yet. If the client X owes you some money, until he has paid you, do not count on him. On the contrary, if you have to pay for a service or a freelance that you have hired for a certain task, for example, eliminate that amount of money as soon as possible even if you do not have to pay immediately.
Except for the initial money to set up the blog and the expenses derived from starting to generate income, no more money should come out of your pocket towards your business.
Investment in your business in the cloud
If you want your business to grow you must invest in it. Personal business in the cloud has 3 types of expenses:
Domain, hosting and expenses to generate the first income: They will be the first expenses you have and your first investment in your business. They are low expenses, between 100-150 euros per year.
In addition to these expenses, it is possible that for the first income to start entering, you must put some more money, for example, in aspects related to your mailing list or the elaboration of a quality info product that you will then market.
People to help you: Once you start to have a recurring income, to improve the quality of your content, products, and services you should hire people to help you or dedicate yourself completely to the tasks that you least like and especially to that less weight on the profits of the business have.
For example, everything related to managing WordPress (plugins, backups, updates, etc.), hosting, design, etc. But keep in mind that you always try to pay someone for a certain task and that if you turn them into a more fixed expense, it’s worth it.
You focus on working your content, your products, and your services. You can find very good freelancers on Elance and Odesk.
New tools and paid services: As your blog grows certain services or plugins that you use will no longer be free or to make a quality leap you must start using paid versions. For example, if you use MailChimp to manage your mailing list from a certain number of subscribers, it is no longer free.
Or if you want to start monetizing it further you will need payment plugins like OptinSkin. If you make videos, your brother’s camera and a free editor at the beginning are fine to break the ice and see how it works, but if you are serious (and you are because your income depends on it) you will need a good camera and a good editor.
And so with many things. Do not be afraid to invest in this aspect, as long as of course, you know that spending will have a higher quality and therefore higher income. If not, it is not an investment.
To have a personal business in the cloud and at the same time your finances well controlled, these steps are essential:
Pay you a salary as soon as the business generates enough money.
Completely separate your money from the money created by the business.
That is basically what you have to do.
As you can see, these are two basic tips that are also valid for any entrepreneur who starts his project, and that is how you should take your business in the cloud. As a company but one person.