After you’ve been in business for a few years you start to see a pattern, you have a busy season where the cash is flowing and an off/slow season when you’re wondering how you’re going to afford to pay yourself or even if you’re going to be able to buy computer paper. (Okay, maybe not that bad, but maybe) This is a vicious cycle and it leaves many in debt and it could even be the reason why your business doesn’t succeed.
But there is something you can do about it! And as an entrepreneur you don’t see obstacles, you see solutions and opportunities.
First, list how many months are in your busy season and the lowest estimation of revenue for those months. Now list how many months are in your off/slow season and the highest expected expenses for those months combined.
- How many months is your busy season?
- Lowest estimated revenue for those months
- How many slow months?
- Highest expected expenses for slow months
$________ (Highest estimated total expenses for slow months)
______Number of months in the busy season
Equals the amount each month in the busy season that you need to save for the slow times.
So, here’s an example. Let’s say the lowest estimation of revenue for your 8 months of busy season is $150,000. And your highest estimated expenses for your 4 slow months is $4,500 per month with a total of $18,000.
$18,000 / 8 = $2,250
So, in the busy season you will need to save $2,250 each month to cover the expenses of the off/slow season. If you can set aside more, great!
A little planning, especially when it comes to your money, goes such a long way and gives you so much peace of mind!
Take action! Open a checking account this week and do a little calculating. The numbers don’t have to be perfect, remember they are just an estimation.