Avoiding the Feast-or-Famine Cycle in Your Checkbook
If you are busy with revenue-producing activities, you’re probably cutting back on your marketing time. And when your calendar clears, so does your bank account! Here are five tactics for avoiding the feast-or-famine cash cycle common to speaking and consulting businesses.
1. Require a deposit.
Many speakers require a 50 percent deposit when the booking is finalized. This has the benefit of smoothing out your cash flow. You’ll know the client is serious before you remove that date from your calendar, and you’ll have upfront money to cover expenses for travel and printing. And you’ll get paid for all of your prep work.
2. Set and track booking goals.
Set a monthly goal that will result in achieving your revenue goals. If you consistently do the work to hit it, adequate revenue will follow. By having a monthly booking goal, you’ll immediately see a problem if you’re speaking, but not marketing. You will not have to wait for the money to stop flowing to remember your marketing efforts.
3. Open a separate checking account.
Treat your business as a separate entity. Do not use personal checking accounts or charge cards for business. Conversely, do not use business checking accounts or charge cards for personal use. This is not just about making it easy to do your accounting at year-end. It is about clarity. You see the financial results more clearly by keeping your business activities separate.
4. Set aside savings.
I put aside a percentage of my top-line revenue for taxes as the money rolls in. Get a quick calculation based on last year’s tax return to decide how much you should put aside. By using top-line revenue, I do not have to get the accounting done before I can move this money out of the flow and have it ready when the check needs to be cut to the state and federal governments. If you have withholding out of your paycheck, take that into consideration when you do your calculation so that you are saving the extra that will be due when you have that break-through year. Consider a savings account for large expenditures that are not monthly. Add up what you spend each year on insurance, continuing education (fees and travel), equipment purchases and dues. Divide by 12 and put that amount aside. When the big bills come due, you will the money to pay them. If your cash flow fluctuates wildly, set aside 10 percent of every deposit for your liquidity pool. If there’s a slow month, you’ll have available funds at your fingertips.
5. Pay yourself a salary.
Whether you are a sole proprietor, an LLC owner or a corporate shareholder, pay yourself the same amount each month. Pick a low enough amount that you can pay it every month. When a windfall comes in, don’t immediately think about taking it out as a bonus. Let it ride and consider what investment you need to make in your business, your Web presence, your marketing, or your professional development with that windfall.
Speakers who pay themselves varying amounts each month often short themselves on the personal or the business side. It is easy to disguise a business that is not compensating you well for the effort, risk and talent you invest when you are not taking a regular paycheck.