I used to hear the term wasteful corporate spending all the time on TV when I was a kid. I had no idea what that meant. Up until recently, I still had no idea what it really meant.
This is a lesson for all of you entrepreneurs out there reading this in how to manage your money properly. A true to life case study of my mistakes. Read it, learn from and use it.
The Back Story
These past two years have been really good to me. In fact, these past two years have actually been my best and most profitable years as an entrepreneur. The problem is, without proper mentorship and guidance this has also been my most turbulent years in business.
I think it’s best that we start at the beginning. A year ago my web development business really took off. I was making a shit-ton of money and I didn’t know what to do with it. As the funds would come in I would allocate them accordingly. A portion would go to operating expenses, a portion would go to savings and a portion would go to me just having stupid fun.
The Culmination of Dummy
As 2016 started I really stopped paying attention to where all of my money was going. I just saw money coming in with the expectation that as it was going out I would still be in the green. I was spending money on unnecessary office expenses, new oddball projects, bonuses for employees and most importantly on freebie work for clients. By August of this year I had racked up over $60k in negative cash flow.
The funny thing about negative cash flow is it’s just a really fancy corporate term for , “I fucked up and I’m in debt.”
I got hit real hard with this when I realized how negligent I had become. The penis punch/dick slap to the face really woke me up. It took a few days but I had to break down where all of my income was coming from and where I’ve been blowing loads of cash like an idiot.
Here are some awesome words of wisdom. You can be a DJ, web developer, Realtor, nurse, store owner, etc., but if you don’t understand basic cash flow your assed out.
I was finally able to figure out where I was hemorrhaging money and closed the leak. I’m nowhere near getting back on track but at least I’m not negative month to month in the profit-loss columns.
Life Lesson Learned
My advice to you is breakdown your shit. Figure out how much and when money is coming in then figure it out what you’re spending it on. Also, just like your parents used to say, “learn how to fucking budget your money!” If you didn’t know, the best practice is to look at your previous years income to create your following year’s budget. If you don’t have a previous year to look at, then look at your previous month and go from there. Never try to go over the budget.
I know it looks nice to have all that money coming in but the last place thing you want to see is all that money going out with the quickness. Remember, most business don’t succeed past the 2nd year because of bad money management. Don’t be another statistic. I hope you find this helpful. Drop the message below and let me know your thoughts. Till next time, have a good one and stay on the grind!