EP343 Create A Simple Plan for Financial Growth
If you want to increase the odds of survival for your jewelry business, you need to learn how to manage your business finances.
In today's episode, I interviewMelissa Houston, a Chartered Professional Accountant (CPA) of over 20 years and founder of The Fractional CFO Agency.
She helps successful business owners increase profit margins so they can increase their net worth and keep more money for themselves.
Melissa has done some training for our community, and we're excited to bring her on as a coach for our top-tier Momentum Program to help our students grow their jewelry or product-based business to $100K and beyond.
It's her passion to help entrepreneurs and business owners understand their business numbers.
So, if you want to increase your business profit and put more cash into your pocket, listen to the full episode below.
Here are some tips Melissa mentioned to help you with your jewelry or product-based business:
Start With A Solid Money Mindset
Everybody has a money story, and money is probably the most emotionally charged topic that could be holding you back in your business.
If you have reservations or issues with money, you will resist growth. This could manifest in many ways. It could be a fear of looking at the numbers, seeing it as a failure, and an overall roadblock to your goals.
Whatever your story around money may be, you won’t hit your financial goals without facing it head on.
Have a Financial Plan
A financial plan is essentially a 12-month forecast for your business, but keep it simple.
Look at your revenue from every product being sold. Break down the cost of goods sold for each product and the overhead costs of running your business. With this info, you can calculate your business's overall profit margin.
Finally, include how much you’ll pay in taxes. You don’t want to be caught off guard next tax season!
Break Down Your Profit From Each Product
Many product-based entrepreneurs have no idea what their profit margin per product is.
They think they're making money because the products are best sellers, b. But when they look at the numbers, they realize they're not making money at all.
Don’t fall into this trap. Make sure you know your numbers.
Keep your Profit Margins Tight WhileBefore Growing Your Business
Not all growth is created equal. When your jewelry business is experiencing fast growth, many expenses are on the front end, so you don't make your money back until the sale is complete.
If you get caught in sudden economic shifts like a pandemic or recessions where commodities (gold, silver, etc.) shoot up, you could go bankrupt.
Remember that expenses also come with your sales growth, so keep your profit margins consistent as you're growing your business.
Beware of Costs That Comes With Expansion
If you're growing your business and you're heading toward large numbers, chances are you're either going to have to invest in some manufacturing, get your own space or expand your team.
Bring all these factors together. Understand how much you need to sell to break even and at what point you'll reach profit. And then you'll know how much money is required to expand.
Pay Yourself First
When creating that financial plan for your business, make sure you include yourself. You cannot survive without paying yourself.
You do not make do with what's leftover, nor should you consider yourself as an hourly wage earner.
You are the CEO of your company. So, only after you've paid yourself do you get to calculate profits.
Build A Cash Reserve
You need to keep some of your profit in your business for rainy days, because whether you like it or not, business is cyclical. Your cash reserves could be your lifeline in tough situations like recessions or pandemics.
Finally, when the time comes that you've found your sweet spot and you no longer need to reinvest to grow, you need to start building your wealth.
Melissa further added, “Everybody can make a lot of money, but not everybody will be wealthy… Take the extra money… and reinvest it.“
And of course, it's important to get involved with your company numbers.
“Nobody will care about your business as much as you do, so never give that financial power away,” says Melissa.
So if you want to grow your business into a multiple 6 or 7 figure business, listen to my full interview with Melissa Houston above.
Register for Masterclass: An Inside Look at A 7+ Figure Jewelry Brand. I’ll talk about what 7-figure jewelry businesses do to grow big profit margins and how you can implement the same practices (for immediate results).