If your service contracting business is pulling in a few million dollars a year, then you’ve obviously figured out at least some of the formula for running a successful business. But if you want to grow your business to the next level and find the financial and personal freedom you’re longing for, it might be time to examine your money management skills.
Money management is key to business success, no matter the size of the business. I started ServiceKey to show plumbers, electricians, and HVAC contractors how I grew my own service contracting business to more than $23 million a year and found the extra time I craved to spend with my family. I’m living proof that it can be done. But I’m here to tell you, you must learn how to manage your company’s money.
So how can good money management bring you more money, more customers, and find incredible freedom? How can it help you build a great team of employees? Let’s look at some of the basics of business money management.
First of all, you need a positive cash flow. That means you need more money coming in than going out. It requires you to keep a close eye on the finances of your business – you need to know what your overhead is and how much more than that you need to build your profits. Watching your cash flow will also help you keep track of equipment and supply costs, monitor what is owed to you, and prepare for potential lean times in the business.
Second, it’s important to keep your business and personal accounts and expenses separate. Never operate your business budget from your personal bank account. I hope you already have a commercial bank account, but if not, you’ll need all the paperwork related to your business – such as name registration and business license – to open one. Go ahead and get a credit card connected to the account as well. Make sure that account is only used for business expenses.
How do you want your customers to pay? These days you can’t limit payment options to cash and check. Many people no longer use either of these, opting instead for credit or debit cards, or electronic options such as PayPal. Make sure your business is set up to offer as many payment options as possible – you’ll need a credit card merchant account and a PayPal account of your own. If you decide to accept checks, cover yourself by getting the customer’s license number, and if it’s a big bill, consider asking for certified checks or bank drafts. You’ll also have to decide how to handle the possibility of debt collections down the road.
Finally, you’ll need to do bookkeeping, especially around tax time. You can do it yourself with software like Quickbooks, but if finances aren’t your strong suit, it might be worth hiring a bookkeeper or accountant to handle it. Your books will need to be audited quarterly, and you’ll have to do year-end business statements and tax returns.
Money management isn’t the easiest or most fun part of running a business, but I promise you, if you take the steps to do it well, you will see the payoff – and you’ll enjoy watching those profits grow!
Mike Agugliaro, “Business Ninja”
Founder of the $23 Million Dollar Service Blueprint and Service Warrior Business Mastermind