Track This Small Business Metric Today for a Happier Tomorrow
It’s safe to say that small business owners have to keep track of a lot of numbers. Profit and loss reports. Invoices due. Discounts from vendors. Shipping charges. Tax deductions. Sometimes you just don’t want to see a single other number!
But if I told you there was one small business number that could put your mind at ease, avoid a dipping bank account, and even allow you to take a vacation once in awhile?
There is. And it’s your “time wealth.”
Time wealth tells you how long you can sustain your business at your current rate of income and expenses. Knowing your time wealth is valuable – it gives you peace of mind when it comes to your business.
How to Measure Your Time Wealth
I created my cash flow forecasting app Wisecash because I saw too many small business owners working too hard, charging too little and in general not living the life they thought they could create when they struck out on their own. And often this happens simply because of a lack of cash flow forecasting.
What’s that? Cash flow forecasting is simply measuring how much cash you will have in a given period of time (i.e. that time wealth I’ve been talking about). With a little calculating, you can probably measure this number for next month. But how about for next year? At such a distant date, your cash flow starts to become abstract, and that makes it difficult to make other important financial decisions.
But with cash flow forecasting, you can simply enter your upcoming income and expenses along with the amount currently in your bank account, and see what your financial picture will look like in the future. This is your “time wealth.”
And knowing your time wealth helps you determine:
Are you charging enough? – If you discover that your time wealth is very healthy, that’s great news! That means you’re in demand. You may be able to charge more and regain some of your work/life balance!
Should you take on a new client? – Simply enter the income from the new client into your cash flow forecast. Will the amount the client is willing to pay be worth the time and effort you spend working with her? If she doesn’t make a big dent in your time wealth, you may want to pass.
Can you fire a troublesome client? – The same goes for a client who takes a lot of your time. Is he really worth the effort? Find out by removing him from your cash flow forecast. You may find you’re better off without him!
Can you afford to take a break? – What if you didn’t work for a month? How about two months? For many small business owners, this prospect sounds crazy, but try creating a hypothetical situation where you don’t receive any income for two months next summer. Does it work? Then you have more time wealth than you thought. Enjoy your vacation!
Are you heading for disaster? – On the other hand, if your time wealth runway is short, you now have a heads up that something has to change. You may need to focus more on marketing your services, raise rates or cut unnecessary expenses until your time wealth increases. Thankfully, with cash flow forecasting, you can catch the problem early.
Chances are you started your business because you wanted to create a different kind of life for yourself. Knowing your time wealth can help you live that life, and decrease worry and stress over money.
Try a 2-week free trial of Wisecash today, and find your own financial peace of mind.
Want to know more about cash flow management? Check out our free email course on mastering your business cash flow.