Is your writing business struggling? Maybe you’ve just started out and you find yourself wondering how to keep your writing business on the track financially. It’s a tough situation, I know.
That juggling act I’m always talking about – finding time to write and edit your work, keeping your promotion efforts going, and making sure you have enough money to pay your business bills and still have some left over for yourself personally.
In the years I taught financial management, I found three super financial sayings to help you remember some important financial principles that will keep your business on the right track, financially speaking:
Overestimate expenses and underestimate income
Most businesses get into trouble in planning because they over-estimate the income they will bring in (revenue, profit, however you want to say it), and they under-estimate their expenses.
We all do it, especially on the expense side. In any project or purchase, you figure up the costs. Then, I always double the cost and the time, and I might be somewhat close to the actual.
Under-estimating the cost of starting your writing business or self-publishing a book can mean you won’t be able to pay the bills for the designer, proofreader, editor, etc. Or it will mean you must dip into your personal funds for the project. Having a good book marketing plan, and following these two principles, will keep you on track.
DSATM Don’t Spend All The Money!
If I have money, I spend it. But not all of it. It’s difficult sometimes, when you have committed to things and you feel you must spend money to back up your commitment.
For example, let’s say you decided to hire a virtual assistant. You go along a couple of weeks with him or her and then you realize you don’t have enough work and you don’t have enough money. You feel bad, so you continue to pay the assistant even though paying your VA means not paying other bills.
DSATM means careful budgeting of business expenses and not taking on financial obligations until you are sure you have the continuing income to support these obligations.
Cash is King
This saying has been attributed to various people, mostly former GE Chairman Jack Welch. Continuing this quote, it’s been said: “Without cash, they take you out of the game.”
When we say, “cash is king,” we mean that, no matter how well you think your business is doing, if at the end of the month you have more bills to pay than you have cash to pay them, you are in trouble. So you scramble a little, borrow from your personal bank account. The next month, same thing. At the end of the day, at some point, your business will fail, because you have run out of cash.
Many businesses look profitable on paper, but they don’t have the cash flow (more cash coming in than going out) to keep paying the bills. It’s a strange phenomenon, but it happens all the time. It’s why so many new businesses fail.
“Cash is King” is also directly related to DSATM and under/over estimating. Managing your writing business financial life is as tricky as trying to figure out how to get your characters to cooperate.