Whether it’s a pandemic, inflation, or military invasions overseas, there’s a lot of chaos in the world these days. That’s why it’s so important to have a plan for mitigating your risks in the coming years and set your business up for success.
There are a lot of risks and liabilities associated with the global unrest we’ve been experiencing for the past few years. We know that the pandemic closed our doors for a few months. For some of us, the pandemic closed our doors permanently. 2021 brought close to 7-8% inflation, and now at the beginning of 2022 we’ve seen the invasion of Ukraine and other things that are causing a lot of harm.
What can you do to safeguard your business for these kinds of risks?
Build an Emergency Fund
The very first thing you can do is open a separate bank account for emergency savings. If another global catastrophe forces you to close down for a few months, you need to make sure you’re covered.
I recommend having about three to six months of operating expenses saved up, both for your business and your personal life. Three to six months is the right amount because that gives you enough time to make changes and get back on track. That way, you know you can be in a better financial position in the long term.
Try starting to save just 1% of what comes into your bank account. 1% is not going to make or break your business, but it is going to get you in the habit of setting aside money for savings and other emergency purposes.
Implement Profit First
Next, you need to make sure you have Profit First set up. Make sure you have the tax account, the owner’s compensation account, the operating account, and then customize those accounts to your needs.
This is really important. We know that cash is key to both our personal lives and our business lives. If we don’t have enough cash on hand to keep our businesses going, that means we have to close our doors. And no one wants that.
In order to make sure you can keep your business thriving long term, no matter what happens around the world, you need to set up Profit First.
Get Your Personal Finances in Order
We know that Profit First is important because it helps us manage cash flow and set up that emergency fund. Having that cash on hand allows us to take bumps in stride. It’s kind of like a cushion that we take care of and replenish. That cushion provides us with the stability to pivot if we need to.
So after having that emergency fund and Profit First in action, the last thing you need to do is make sure your personal finances are also sorted out.
We know that a lot of the habits we have in our personal lives carry over to our business lives. So, if our personal finances are a wreck, our business finances aren’t going to be any better.
The very first thing I would say is to make sure you understand where your money is coming from and where it’s going. That means setting up Profit First in your personal life, too. Divide your income into different accounts based on different categories where you need to spend it, like your mortgage, groceries, and utility bills.
Be Ready for Anything
We’re bombarded with awful news every day. Even if you’ve been lucky enough to stay relatively stable during the pandemic, you’re probably connected to somebody facing extreme hardship and fear these days. Keep your business and personal finances in order with Profit First, and you’ll feel secure that you can handle whatever comes.
Join Money Made Simple Academy at curtisaccountingsolutions.com. Money Made Simple Academy is a series of simple on-demand courses, tools, and live coaching that wipes away financial overwhelm in your quilt shop and life!