Setting goals and keeping track of expenses sounds so simple, yet many of us come up short in this area. Doing this right could be the difference between ramen profitability and leapfrogging your breakeven point. Keep in mind that what you need to earn to hit your financial goals will be offset by your expenses.
Is your goal to take home a million dollars or generate a million dollars in revenue?
It’s hard to believe, but you can earn $1 million a year and still show a loss.
“The amount of money you have has got nothing to do with what you earn. People earning a million dollars a year can have no money. People earning $35,000 a year can be quite well off. It’s not what you earn, it’s what you spend.”
― Paul Clitheroe, financial guru
Think about your expense management strategy this way:
Cost control is paramount for entrepreneurs and startups alike.
If you want to make a profit of a million dollars a year or a hundred, minimize fixed costs to keep your overhead low. And always evaluate your fixed costs to see whether you’re getting the most out of your dollar. You can negotiate better terms instead of considering all fixed costs to be sunk costs. They aren’t. In some instances, fixed costs like employee salaries can be mitigated by outsourcing talent you don’t need full time depending on the stage of your business.
Tracking your spending can also reveal much about where your money is going. You might find frivolous expenses or discover ways to cut costs on things like office supplies, coffee, or phone/utility bills.
Make a plan so you know exactly where your money is spent every month, then keep track of it. This will inevitably increase revenue, decrease costs, and improve margins.
How you manage your money is the difference between making a million and keeping a million.