Understanding What Your Business Needs vs. What You Think It Needs
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Understanding Your Business Needs vs. What You Think It Needs by Alyssa Lang, Magnetic Bookkeeping & Consulting
When starting and running a business, it’s easy to blur the lines between personal desires and the actual needs of the business. In this week’s blog, we want to shed light on the importance of distinguishing between what you think your business needs and what it actually requires to thrive and scale beyond your wildest dreams. We’ll explore the critical distinction between what you think your business needs and what it actually requires to succeed while offering practical insights and strategies to ensure your business stays on the right path through all the highs and lows of your entrepreneurial journey.
We cover:
Understanding your business as a separate entity
Recognizing the different stages of growth
The importance of budgeting and cash flow projections
The Early Stages Of Your Business
In the early days of your business, it often feels like a part of you and your identity. It’s born from your ideas, fueled by your passion, and grows through your efforts. During this phase, it’s common to treat your business as part of your personal life, especially if you’re operating as a sole proprietor or a single-member LLC. You can probably relate to feeling like your business was an extension of you as a person in the really early stages when you first started... We all started somewhere!
However, as your business grows, it’s crucial to recognize that it is a separate entity with its own unique requirements. Your business is like a baby and maybe you’re even one of those creatives who has thought of your biz as one of your babies. (guilty!) It could be at any different stage of life depending on how many years you’ve been doing it, what you have changed, and what has evolved to allow it to become what it is now. While the legal and tax structures may vary—such as a sole proprietorship versus an LLC taxed as an S Corp—the underlying principle remains the same: your business needs its own resources, systems, and care to flourish. What you need to understand is that your business is a separate entity from you with it’s own separate needs.
Just like a living organism, your business goes through various stages of growth. It might start as a “baby,” needing constant attention and nurturing, and progress to a “teenager” or “adult,” where its needs evolve and become more complex. The growth trajectory of a business isn’t necessarily tied to time but rather to how effectively it scales and adapts. For instance, a business can experience rapid growth within a year, outpacing another that has been around for five years. It’s not about the duration but the strategic moves and decisions that drive the growth of the business.
Treating Your Business as a Living Entity
One of the most common mistakes business owners make is not treating their business as a separate living, breathing organism. Your business needs specific resources—just like a person needs food, water, and shelter to survive and thrive, your business has it’s own set of unique and specific needs.
What Does Your Business Really Need?
Cash Flow Projections and Budgeting:
Cash flow is the lifeblood of your business. Without proper cash flow management, your business can quickly run into financial trouble. Regularly updating cash flow projections and maintaining a budget ensures that your business has the resources it needs to operate smoothly.
Necessary Expenses:
It’s essential to identify and prioritize the necessary expenses for your business, such as software, marketing, and other operational costs. Skimping on these can lead to inefficiencies and hinder growth but it is also important to distinguish what expenses are truly necessary and which are not.
Systems and Processes:
Implementing robust systems and processes is vital for scalability. Just like you might have a morning routine, your business needs consistent routines for checking emails, managing finances, and other daily operations.
Understanding the distinction between your personal needs and your business needs is a MUST. While you might need to pay rent or buy groceries, your business has its own set of requirements. It doesn’t need to pay for your personal expenses but instead needs to invest in growth-oriented activities and resources. By treating your business as a separate entity, you can make more strategic decisions that support its growth and sustainability. This includes regularly reviewing budgets, tracking expenses, and ensuring that all necessary resources are allocated appropriately.
The Importance of Cash Flow Projections and Budgeting
Budgeting and cash flow projections are not just financial tasks to be completed—they are essential tools for business survival and growth. These are needs for your business that are critical to meet if you are scaling. Proper budgeting helps you allocate resources effectively, while cash flow projections allow you to anticipate and plan for future financial needs. Without these tools, it’s like driving your business blindfolded. You need to know where you’re going and how to get there, and these financial tools provide the necessary guidance.
Establishing Effective Systems
Just as you might have a personal routine to start your day, your business needs its own set of routines and systems. This could involve:
Daily Email Checks: Ensuring communication is consistent and timely.
Financial Reviews: Regularly updating and reviewing financial statements to stay on top of the business’s financial health.
Operational Processes: Streamlining operations to improve efficiency and reduce costs.
Recognizing and addressing the actual needs of your business, separate from your personal desires, is crucial for its success. By treating your business as its own entity with distinct needs, you can make more informed and strategic decisions that drive growth and sustainability.
If you’re unsure about what your business truly needs, sometimes the best thing you can do is talk about it. Lean on your support system and find the right professionals who can help you with the needs of your business like cash flow projections, budgeting, and setting up the right systems to ensure your business thrives. If you’re ready to talk this out with someone who gets it and truly cares, you can grab a free consultation with us here.
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