Living Paycheck to Paycheck when Running a Successful Small Business?
The segment “Still Living Paycheck to Paycheck Despite Having a Successful Business? Here’s How to Stop”, by Small Business Radio, covers some great material about how to manage your personal finances better. But, it is missing a few topics. For instance, why isn’t your paycheck bigger?
Why isn’t your paycheck bigger?
When living paycheck to paycheck, especially if the business is successful, it’s certainly worth asking why isn’t it bigger? While having bad spending habits should be avoided, for instance, it’s not the only solution. A successful small business owner, most certainly, would not have to live paycheck to paycheck if it were bigger.
First, check your business model
It’s not surprising. After all, the majority of successful small business owners went into business because they love what they do. It’s that love that keeps a successful small business going, even when living paycheck to paycheck.
Unfortunately, it’s the mechanics of the business which is the cause for a successful small business to have to live paycheck to paycheck, more often than not.
Next, try to optimize it
Clearly, this isn’t the most exciting part of the business. But, even if you hate it, here are couple of relatively simple hacks to help optimize your business model. Why bother? Because, after some fine tuning, the successful small business owner can usually stop living paycheck to paycheck.
Key steps to increasing your paycheck
Are you spending the most effort serving the right customers?
Who are your best customers? How might you find more like them? If it costs you the same to serve everyone, how might you change that?
Are you creating enough value?
Why do your customer’s value you? What makes you special to them? How might you enhance that so they might be willing to spend more, or come back more frequently?
What are all the necessary steps to service your customers?
Can you list them all? Are there any steps missing? What does it cost you to complete those steps?
Know how you are converting sales to cash
Admittedly, this is probably the least interesting of the hacks, but one of the most important. This is where many of our clients turn for help. If you like spreadsheets, or you want to challenge yourselves, this simple analysis might help.
- Is Revenue/Customer (item) > Cost/Customer (item)? For successful small businesses, this is usually true.
- Can you use numbers 1-2 to increase the Revenue/Customer without increasing Cost/Customer?
- Can you reduce the number of steps in number 3 to reduce the Cost/Customer?
If this isn’t where your passion lies, we get it. Luckily, it is ours. If you are a successful small business, who is living from paycheck to paycheck, Contact us, and we help you stop it.