When you’re driving somewhere, you have to know where you’re starting from, where you’re going, and what you want to avoid (think traffic jams or closed roads.) The best way to do that is to plug your destination into your GPS and let it handle the details. The same is true for your entrepreneurial advisor business. Are you wasting time tracking your transactions and then not doing anything with that information? Do you muddle ahead in reactive mode, responding to whatever gets thrown your way, instead of being proactive? If so, you need to set your business GPS and let it do the work for you. When you put your GPS on autopilot you can continually grow your business, even if times are bad.
Setting Up Your Business GPS
To experience all the perks of being an independent advisor, you need to set up a process that releases you from the daily hassles of running your business. Your GPS is that process. While you’ll invest a little more time upfront getting it set up properly, you’ll save a lot of time once you’ve plugged in the right information and put it in motion. Yes, you will still need to check in and tweak some things, but for the most part, you’ll free yourself up to work on the business instead of in it. To put it simply, you need to build a process to run the business end of your business.
There are three components to the GPS that every business owner needs to know. The three components are income statement, balance sheet, and statement of cash flow.
An income statement, also known as a profit/loss statement, tells you if your expenses are greater than your revenues. Income statements are important because they indicate whether or not you are profitable, they give you timely updates on operations, and they clarify the different revenues and expenses of your company.
A balance sheet tells you how leveraged your business is and gives an overall indication of your financial condition. Basically, it tells you what you own and what you owe, better known as your assets and liabilities. If you owe more than you currently have, you’re upside down in your business. On the other hand, if your assets far outweigh your liabilities, it’s a good indication you’re on the right track.
Statement of Cash Flow
Having cash puts you in a more stable position and gives you better buying power. Your statement of cash flow shows where your money is really going. For example, you may have high revenues, but if your clients aren’t paying on time (or at all) or if you have money tied up in other expenses, you won’t have any liquidity (cash flow.)
Now I know most of you don’t look at these things unless your CPA requests it, but checking in with these reports on a regular basis will help you stay on track and will help identify problems before you hit them. Are you ready to learn more about putting your GPS on autopilot and growing your entrepreneurial advisor practice? Take our Evolved Advisor course to learn more.