I should have been a banker.
Well – not really, but it truly amazes me how much money they charge to do what most would consider self-service. As I think about the evolution of banking over the past 15 years or so, one thing that stood out to me is that we are doing more of our own account management ourselves (via online banking, etc.) yet we are paying more for these services than we did when we actually interacted with that dying breed of bank employees called “tellers.”
So you are probably wondering what has awaken this awareness of banks and banking fees within me? Why, of course! I have been tallying up my numbers in order to do my taxes!
While I am not what you call a big fan of numbers, over the years I have come to come to terms with them and dare I say even appreciate their worth. When I began my business over 15 years ago, the numbers part of things was the last thing that I wanted to be concerned with. It was more important for me to be able to do what I loved to do and I would look at the numbers from a somewhat slanted view. (In other words, I didn’t want to look at the entire picture.)
The only number that I really thought about was the income, or how much selling a particular item brought in. It made it much easier to think that I was being successful when only looking at that side of the equation. And at the time, it justified myself doing what I was doing – selling my finished items as a “job.”
But something was wrong. For back then, it seemed that even though I worked harder and harder, we never seemed to get ahead at all. In fact – it seemed that even though I was up until all hours in the morning, working all day, and had more orders for products than I could handle, things for us financially were getting worse. I began to wonder what was wrong with this picture.
The answer, as it turned out, was simple. I was not accurately calculating my costs associated with running my business. While I looked at the “sales” column as a guideline, I barely glanced at the “expenses” column (which included things like materials, advertising, bank fees to run credit cards, etc.) By doing that, I was kidding myself into being a successful business when in actuality I was not only failing, but sucking resources out of our family’s working income. No wonder I felt so frazzled!
Looking at things that way is like baking a cake and using only half of the ingredients. If you used only flour and butter, but decided to leave out the eggs and sugar, you would certainly have a disaster on your hands. Running a business is pretty much the same way.
While we all want our businesses to succeed, it is imperative to be fully aware of all the associated costs that go with running it. Leaving out even one element could skew the figures and fool us into believing that we are doing better or worse than we actually are. And how can we make intelligent decisions for our businesses based on these incomplete figures?
Over the years, I have learned that keeping good records and looking at things realistically has given me the best chance to make my business the success that I hoped it would be. While I used to not care for looking at the numbers side of the business, I have learned to not only accept them as a useful tool in decision making, but count on them. If the numbers don’t add up in my favor, then I cannot in good consciousness make certain decisions or take on certain jobs. It is as simple as that.
The past few years, I have been very careful and meticulous with keeping track of my numbers. While I probably could improve on the monthly tallies of everything, I do have everything organized and it wasn’t much of an issue to put everything in order to get it ready for my accountant later in the week. Just a bit time consuming. To me, that used to be the worst part of the business and a time of year that I simply dreaded. But I am finding more and more that I actually enjoy seeing the bottom line and analyzing what the numbers are telling me. As I said earlier – it helps me make better decisions for my future.
I suppose the point of this blog is to remind all of my followers with their own businesses just how important it is to keep good records and to really LOOK at what the numbers are telling you. Creative people tend to not always look at things practically (I am very guilty of that!) and prefer to ignore some of the important indicators which can tell us if our businesses are truly successful and able to support us or not. Eventually though, by doing this you will reach a breaking point and you may have to stop doing your business altogether.
Being creative means that you are probably an emotional person. While that is good for when you are creating, it isn’t always good for running a business. When looking at the business side of things and making decisions that affect your business, you need to try to look at things with as little emotion as possible and focus on what is practical to sustain your existence. This is where those dreaded numbers are essential.
Over the years I have learned the value of numbers. By looking at them realistically and respecting what they are showing me, I am able to make decisions for my business based on facts instead of doing something because I ‘like’ to do it. Some things pay and some things don’t. No matter how much I enjoy doing a certain aspect of my job, if it doesn’t make a profit (and worse yet – if I lose money doing it!) I simply cannot continue to take on those jobs and not expect my business to fail. While this seems to be a given, I see it happen all the time with my many friends who are trying to build their own businesses. They are so eager to get any kind of work that they can, that they neglect to really consider if it will make them money or not. And I see it happen more often than not that they will take on ‘jobs’ that they will lose money on just for the sake of working. Besides the obvious loss or lack of income, they also are setting a precedent with their clients of low costs that many find difficult to raise in the future – even though at that time they may have realized that it doesn’t make them money. That leaves them to continue the losing cycle and do the work feeling their own time is worthless or confronting the customer with price increases. Neither scenario is pleasant.
So my advice to you is to not only keep good records of your costs and expenses, as well as your income, but more importantly USE that information to help you make the best decisions you can to help advance your business. Try to look at things as unemotionally as you can, and base your actions on actual figures rather than what you hope things will be. It will make your business healthier in the long run and allow it to grow much more quickly.
Numbers are our friends. Those little black figures that stare back at us from our spreadsheets are very valuable tools for us to use if we choose to do so. Keeping on top of things and listening to our numbers is a great way to choose the road to our success. All we need to do is to be open to the information that they provide.
Happy bookkeeping! (And have a great day!)
-- Contributing Editor, Creative Woodworks and Crafts, Sheila Landry Designs http://www.sheilalandrydesigns.com "Knowledge is Power"