What will your business look like in 12 months?

Do you know what your business will look like in 12 months' time? A lot of people will say forecasting isn’t worth bothering with. After all, why would you forecast and look back at the last couple of years and what happened in that time? I firmly believe that you should always be looking to know where you’re going. Because if you don’t know where your business is headed, you’re just going to keep drifting around and missing potential opportunities and growth.

A plan gives you direction

When you have a plan for the next 12 months, you have a good direction of travel. You know what you want to do, where you make your money and how you want to make money in the future. Now you might want to carry on the way you are, or you may wish to change what you’re doing every three months, and that’s ok. But do you want to create lots of done-for-you products? Do you want just to have five clients and spend a day each week delivering for them? And if you do,...

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How not to be surprised by your tax bill!

Your tax bill is probably one of the most unexciting things to talk about. But it’s something that can often keep business owners up at night. There’s a real fear and lack of understanding around taxes and if that’s something that worries you, know you’re not alone! After all, you don't want to suddenly be surprised on January 25th by a £5,000 tax bill and have no idea where you will get the money to pay for it.

So it does pay to understand your tax and educate yourself on how tax works because that’s the best way not to be surprised by your tax bill when it arrives! 

Your tax bill as a sole trader

There are several different types of tax, depending on the type of business you have. So if you are a sole trader, all of your income is taxable as income tax and National Insurance. Remind yourself that you should be putting aside 30% of your income less costs if you can. Put that money into another account at the end of each month. 

I think...

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Feast and Famine

How do you deal with feast and famine in your business?
 
All businesses have feast and famine periods, some months where you are making loads of money, and some where you make none. Maybe you do a big launch so you get everyone paying up front, but then you have to deliver the course. Or you have the summer holidays off, or your business is seasonal.
 
Often costs are much more consistent, as your website etc are charged monthly. Do you know how to plan for this fluctuation in revenue in your business? Or does the yoyo income make you feel ill with worry? And then do you think you might not be able to pay the bills?
 
You need to have a plan in your business for the times when there isn't work. It is a fact in a freelance business, there is no getting away from it. Some months are just leaner than others. But you need to make sure this isn't a surprise to you and that you can manage to cover your costs.
 
So get clear on what your outgoings in your business are,...
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Why you should have a cash flow forecast

Cash flow forecasting is critical in any business but lots of people neglect this area.
 
Imagine for a moment that you are wanting to buy a new car but you don’t have the cash for it.  You look at the options – you could lease, which would be more expensive but would only mean a monthly outlay, or you could save up to buy the car outright.  For each option, you would look at how you would save the money, or whether you could afford the monthly lease repayments.
 
You might look at your household budget, if you have one, or make a guess based on your bank balance, or just decide without looking and say you will put any shortage on your credit card.
 
Without planning, this could lead to significant debt.  You might choose a car that is more expensive than you can afford, or have monthly payments you can’t meet. 
 
It’s the same with having a cash flow forecast in your business.  How do you know whether you can...
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Getting the basics sorted out

Last week, I had some interesting questions with two of my clients. One said that they were putting me on hold as they didn't have enough work for me due to coronavirus and another said they were so glad they were working with me as they need to plan for the lost of income due to the events side of their business.

Now is the time to know your numbers. Look at the following:-

  • Expenses - annual or monthly ones. Can you stop any of these if needed?
    Revenue - talk to your clients about what their expectations are and work with them as much as possible to find a good solution, rather than waiting for them to cancel.
  • Cash - do you know how long your cash will last for?
  • Get a breakeven number (where revenue equals costs) so you know what income you need to run your business.
  • Invoice promptly at all times, but especially at the moment, and shorten your payment terms where you can. Chase those debts soon after they are due as the financial position of companies is changing all the time.
  • ...
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