To run a startup business is to be engaged in a never-ending battle. A battle to keep the cash flow flowing, the costs manageable and the margins… marginal. While startups deal in a number of metrics and KPIs, their profit margin is the metric to rule them all. As long as there’s margin, there’s hope. But if you’ve ever felt like your profit margins were buffered by the winds of fate, perhaps it’s time you took greater steps to assert control over your finances.
That doesn’t just go for business finances, either. It goes just as well for the home. All too often savvy business owners struggle to apply the same rigour and scrutiny to their personal finances that they apply in business. Here we’ll drop you some practical tips for being better with money in both contexts…
Learn to calculate ROI
One way in which business and household spending differ is their reliance on investment. Of course one needs to make investments in the home which will pay dividends later such as installing double glazed windows, adding Spray Foam Insulation, getting a more secure front door or even installing a smart meter. But households don’t make investments with nearly the same frequency as businesses.
Still, in both cases, it helps to be able to calculate ROI. The basic formula for ROI is as follows;
Net Profit (how much you expect to make as a result of the investment) divided by Total Investment (how much you spend). Multiply this by 100 and you have your ROI expressed as a percentage. Sometimes ROI can be hard to quantify, especially for something that makes money in roundabout ways (like a new software app that improves productivity). Still, using this as a guiding principle can make the next step easier…
Identify causes of wasteful spending
With a good understanding of ROI you can better quantify areas of spending which aren’t paying off. In the home this might be stopping by Starbucks for your Saturday morning latte rather than investing in an espresso machine and making your own. In business this might be leaning too heavily in paid ads for marketing.
Sure, paid ads get your foot in the door, but unless you capitalise on them with organic lead gen techniques like using lead magnets or content marketing you cannot hope to capitalise on the momentum they build without throwing more money into ads.
Whatever the causes of “money leaks” in business or the home, you need to be able to quickly formulate a plan to plug them up and mitigate the damage they can do to your cash flow.
Establish goals and make sure everybody’s working towards them
And finally… Goal setting is enormously important in business and household finance. In the home, it’s fairly easy to educate the whole household on why they need to spend less time in the shower or use the heating less. In business, however, departments can inadvertently become self-contained data silos that watch their own KPIs like hawks but spare little thought for how they tie into the big picture.
Investing in Business Intelligence platforms can help you to ensure that everybody is working towards your organisational goals.