You probably get a physical check-up every year. As a solopreneur, you need to put your business finances through the same constructive scrutiny. Ideally, you will examine the financial direction of your company at several points during the year, but an annual in-depth checkup is necessary to keep your business fit and healthy. Here are some reasons and considerations for this financial checkup.
Is Your Revenue Model Working?
One reason it is important to perform a financial inventory on your business is to ensure your revenue model is productive. Are you getting revenue mainly from a few clients? How do you get revenue from clients who are not as active? Should you develop new revenue streams, such as selling new products, hosting paid webinars, or starting a membership club based on a subscription model?
Think about your revenue goals and compare them to expenses. Keep in mind that if your expenses are high, you will need to earn more revenue to cover these expenses and still make a profit. That is why revenue analysis and looking at expenses are two steps in the same process.
Can You Eliminate Expenses?
You may be surprised when performing your annual financial check-up to realize that you are spending more than you need on unnecessary expenses. Discovering this and cutting down on these expenses is like giving yourself a present or a bonus.
Having clear expectations of expenses throughout the year is important. Otherwise, you could be tempted mentally to inflate your profits based on revenues without taking expenses into the equation. Thinking carefully about what you need and getting rid of expenses by automating tasks and eliminating subscriptions you don’t use can maximize your profits.
Are You Making the Most of Tax Savings Opportunities?
This is where having a really good accountant can be helpful. Unless you are a tax whiz, you may be missing some valuable tax benefits. Have a yearly review with your accountant and explore ways you can save on taxes, from claiming new business expenses to setting up a retirement fund that provides tax benefits.
In addition, regulations for tax breaks for small businesses are often passed without most people realizing it. An astute accountant is informed of these changes and can help you save an unexpected amount on your annual taxes.
What Are Your Financial Goals for the Year?
It is important not only to have goals in mind but to write them down and review them periodically. Check off those targets you have reached and set new ones. Raise the bar but keep your expectations reasonable. Create long-term goals you can achieve and check off in a year and short-term goals per week, month, and quarterly. These goals can be connected to revenues, profits, cutting expenses, several clients, developing new products or expanding your brand’s social media presence.
A Clean Bill of Financial Health
The more conscious you are of your businesses’ financial health, the more successful you can be as a solopreneur. Taking stock now and again, giving your revenue and expenses a thorough examination, and setting goals at least every year is essential for a healthy business.