Gretchen Figge’s Bio
In 2001, Gretchen started working with her husband at a company he’d recently joined. Soon after, that company was being acquired and Gretchen didn’t want to live through a buy-out. She decided to just start working for herself, you know, to try it out. Take the leap. Over the next two years she consulted for several companies. Turns out, she loved it. It’s now been 20 years. Together, Gretchen and David have started multiple companies. Some were short-lived. Right now, they have 3 they’re running. They’ve helped a lot of people, though it’s hard work. And that’s how Gretchen gained a passion for knowing your numbers.
Know Your Numbers From Day One
In the beginning, it doesn’t have to be complicated. But it does have to be accurate. Knowing your expenses versus your income is the most important. But even before you bring in a dollar, Gretchen recommends you sit down and estimate your expenses and income over the coming months and year. This will give you an opportunity to calculate how long it will take until you’re profitable. Even if it’s rough. The exercise alone is valuable. You’ll find yourself extrapolating.
“What can I make with this one product/offering?”
“How can I refine my processes to make more money from this one product/offering?”
“At what point will I begin to invest in employees or better equipment?”
“What are the financial milestones I’m aiming for?”
“What are the hurdles that come with those milestones?”
“What needs to be true in order for me to hit those milestones?”
“At what point to I start making money?”
“How do I remain in the black?”
“What recurring business can I plan for?”
Think about how much you’d like to make. What’s your time worth? How many hours in a week are you willing to dedicate to your business? And what can you physically get done in those hours? And how long can you maintain that kind of a work load? It’s a common concept that 1) you have to spend money to make money and 2) you may not be profitable for some time. But what are your thresholds in each of those areas? What do you have to work with and what are you willing to risk?
These questions and more will help you dig into the financial concepts and plans that need to be true in order for you and your business to be successful. Because, let’s face it, in those early days, you are your business. And you may not want it to remain that way. Spending an afternoon thinking about these things will help you set the goals necessary to distinguish yourself from your business.
Think of all of your costs
Gretchen is all about keeping things simple. This can be done in a Google sheet. Start listing out all of your costs.
- Future employees
Use this to make a finely detailed budget. Lunches out with mentors, new HDMI cords, etc. Mark those that are recurring and those that are not. Give yourself an allowance for each area. Whether you’re using Quickbooks or You Need A Budget or your Google sheet, doesn’t matter. Whatever is the most effective for you.
You need to figure out early on if there’s profit and how much there is. But not just within a month’s time. Include all of your start up expenses and track to see how long it takes you to recover them. Then start to monitor the daily, weekly, and monthly health of your company. Again, if you can estimate these things before even starting, it’ll give you a leg up mentally and emotionally to be able to handle what may be coming, even if your estimates were off.
Ultimately, it’s important to understand your gross and net profit. What are you bringing in as a business and where is your worth?
TRACK TRACK TRACK
You need to see how your numbers are changing on a daily basis. Data, financial data, is one of your biggest assets in your first few years. It can help you stay alive long past the average life of a small business.
If you haven’t read the E-Myth Revisited, it’s one of the best books on entrepreneurship. And it will help provide you with a new perspective you may have never considered. One that will help you be kinder to yourself, make the changes you need to make, and remain happy as a business owner.
It’s all about understanding the three roles or personalities you have as a business owner.
Many people start a business because they’re great technicians and don’t want the life of a corporate job anymore. That skill as a technician is valuable, but it isn’t what’s going to sustain you, help you grow, or even keep you alive as a business. You need to consider the other two very crucial roles. The one that concerns us most today is the manager.
Understanding your finances, building these muscles, and refining your business model are all big portions of the role of a manager. There’s more to that role, like hiring, building systems, etc. But those come as you grow. Getting your finances right from day one is what will allow you to grow in that role and then will lead to what feeds the entrepreneur’s role of dreaming and planning. It’s all baby steps.
- Know your estimated gross income and have a plan to get there
- Think about your costs to find your net income
- Get a good accounting software and CPA
BONUS: Set up checks and balances for you and your partner