Bookkeeping for Crafters

Lesson 32 of 33

When to Reinvest or Take Money Out

 

Bookkeeping for Crafters

Lesson 32 of 33

When to Reinvest or Take Money Out

 

Lesson Info

When to Reinvest or Take Money Out

When is it time to re invest in your business versus time to take money out? So we looked at that cash flow forecast, for example, and we saw okay, this is the point in which I have time to you work on something, and I also have I'm also anticipating having this cash in the bank, you know, I'm looking ahead and april it seems like april is going to be a really good down time to work on a website I'll probably also be able to afford it so you know january or february is when I'll start interviewing potential web designer so that I can pick one by march and then get the process rolling by april, right um s o in determining the difference between, uh, whether it's time to re invest versus take money out for yourself, um, I would look at a few things first, evaluate your own skills if there's an area of your business um and this is assuming you have the cash available to either take out or to reinvest rate, evaluate your own skills, what is it that you're not super great at that you could ...

use the most help with right now? Is it upgrading the professionalism of your brand and your website? If so, maybe the first item on your list should be hiring that web designer um maybe it's bookkeeping maybe it's time to start hiring a bookkeeper or an accountant if you have enough work for them tio for them to stay busy and you know you've taken this class and you feel like I either don't want to be spending my time this way or I'm just really not that great at it still perfectly fine to outsource that as long as you can afford it um next evaluate your time so where are the areas where it would cost less for someone else to do this rather than yourself again with that book keeping example if you can hire a bookkeeper to do this either in less time than you can um or at a lower hourly rate than you charge you can make money there right? If you're not spending your ten hours a week doing the bookkeeping and you can spend that ten hours doing the marketing or creating the products ultimately that's a positive return on your investment ultimately that's profitable for you to do that? Um I wouldn't necessarily recommend hiring a bookkeeper before you understand what it is that they're doing with your books so it's still important to like get familiar with all of the things that we've been talking about in all of these past sessions um but then for sure when you are able to spot a mistake if they make it um hire a bookkeeper great next evaluate your return on investment um where could you get a really big return on just a little investment so like that capital equipment um would it cost you a thousand dollars to get that die cutting machine but then save you over the course of the year eight thousand dollars if that's the case then absolutely invested that again if you have the cash um evaluate your own fulfillment right? What do you want to be doing as part of your business and what do you not want to be doing? Um doesn't either get you a little bit of profit or not cost you very much to outsource some or all of, um some aspect of your business whether it's the marketing, whether it's some part of the production that you just absolutely hate you know, maybe there's some like really tedious part of what you make that you just hate doing but you know, it's always part of everything that you make if you could get someone to do just that piece and it didn't cost you very much um or it benefited you in some way that's a really great time to invest in that um and then to, uh, evaluate your security so how likely is it that your business is going to stay on track where it is right now and continue to grow slowly? Um if you're seeing a lot of volatility maybe it's not really the time to take stuff out. Maybe it's still really early, right in the first two to three years of your business? Um, you're probably gonna want to reinvest in your business a lot to make sure that you've got everything in place the way that it should be in the way that you wanted to be, rather than taking money out to pay personal expenses. Um, once you because you're going to a lot of testing in the beginning, right, it will probably be kind of volatile for the first couple of years. You don't know if those marketing efforts are gonna work out or not, you have to do a bunch of them and then evaluate them before you can figure out which one's air effective and then put those into place more consistently. Um, you don't know which products are going to be popular when you first start out, you don't know which ones are going to be the most profitable when you first start out. So for the first couple of years, you're gonna have a lot of volatility in your business. And so it's probably going to make sense when you do have periods of extra cash and extra profit to reinvest back into the business in order to get things more settled, more predictable and more stable. Um once you're a few years in and that cash will forecast doesn't do this anymore or at least it does this in a very predictable way and never really dips below a certain level that's the time when you can start taking disbursements to yourself and taking that that owners draw which is not to say that you know you can't before that point once in a while um you know, take some money out for yourself to pay certain bills or whatever um but in general, I would say that any any extra that you're walking away with in the beginning you'll want to reinvest until things are stable and you've been able to evaluate these other things um doesn't make sense I mean, it also kind of depends on what your business is right if you're in the business of leg writing books for example, writing craft books, um you'll get these huge advances up front and then these royalties that air totally unpredictable so that's not a stable business there. So in that case you're going to need teo, I mean, you may not be able to re invest in your business um in the sort of traditional sense because presumably you're just going to write that next book or market the current book um there aren't like products that you need to be tweaking a ce faras profitability but um, it may be time to look at other income streams, to supplement that, to make things even out a little more, and be more predictable. Um, because, ideally, you want as much of your income as possible to come from predictable sources, rather than sources, you know, at the mercy of the market or other outside forces. Um, you know, maybe you could write a sort of like supplemental e book that goes along with that book, and then you have something that you can control. You can market you, khun. See, ifyou're marketing efforts are paying off because you khun, you know, check that link exactly, um, and link it back to your block posts, or twitter, post your newsletters, etcetera.

Class Description

It is common to be intimidated by math and money, but managing your business’s finances doesn’t have to feel overwhelming. Bookkeeping for Crafters with Lauren Venell will give you the confidence and skills you need to start and maintain your own small business ledger.

Lauren is an artist and educator committed to making financial solvency accessible to independent entrepreneurs. In Bookkeeping for Crafters you’ll learn the basics of managing your money and how doing it yourself can reveal important opportunities for your business.

You’ll learn about managing different types of income and expense accounts and how to painlessly prepare for tax time. Lauren will make predicting fluctuations in your cash flow straightforward and easy while helping you develop a system that is right for you – even if you prefer pen and paper over spreadsheets.

If you are ready to change your relationship to money and manage a ledger that is customized to the way you do business – this is the class for you.

Be sure to check out Lauren's other course Bookkeeping for Etsy Sellers.

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