As a Financial Planner who specializes in Cash Flow, many of my clients are entrepreneurs who are passionate about what they do. Many wear multiple hats: CEO, Book Keeper, Sales manager, and HR manager.
Before we can create a personal financial plan for our clients, we must first do a cash flow analysis. Many financial plans go off the rails because the cash flow that was allocated for the financial goals (such as Emergency accounts, TFSA, Travel accounts or Life Insurance, Disability and CI premiums) is not there.
The following is Tip #1 of 6 Tips that we have gathered after working with many entrepreneurs who are successful in their area of expertise but needed a reality check when came to both personal and business cash flow.
- Know what the break-even point is for your business. You need to know on any given month, without throwing in any extra ordinary expenses, what that number is for your business (not industry standards). For example, if you are providing fee-for-services, you should know how many clients you need in a month to break-even. It is surprising how many entrepreneurs I meet who do not figure out this number until the end of the year and, in many cases, it is too late to properly plan.