#28: 5 TIPS FOR BUILDING YOUR BUSINESS SAVINGS

In this episode of the Financially Adjusted podcast, I share some tips & strategies for building a 6 month business savings fund—an often-overlooked lifeline for business owners. With inflation on the rise and cash flow unpredictability affecting many small businesses, having an emergency savings cushion is more crucial than ever. It’s not always an easy or quick task, but it’s such an important part of building a healthy thriving business.

Key Takeaways:

1. Create Margin: Start by knowing your budget and regularly analyzing expenses to find savings opportunities.
2. Think Creatively: Consider temporary revenue streams or cutting unnecessary costs to reach savings goals faster.
3. Utilize High-Yield Accounts: Place your savings in high-yield accounts for better returns.
4. Frequent Financial Check-ins: Monitor progress regularly to stay on track and make necessary adjustments.
5. Make Sacrifices: Evaluate personal and business expenses and consider reducing them temporarily to achieve your savings goal.

Resources Mentioned:

·       Budgeting podcast: Episode 2: Don’t Fudge it, Just Budget

·       Budgeting YouTube Tutorial

·       Savings podcast: Episode 6: Save So You Don’t Cave

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Transcript

Hello there and thank you for joining me today for the Financially Adjusted podcast.

Today's podcast topic is such an important one and one that I think most business owners struggle with, especially with inflation hitting businesses so hard. Today I am going to talk about five tips for building your business savings.

Building a business savings is one of the most crucial things you can do to guard against any kind of craziness that the world throws at you, any kind of cash flow issues you run into. I mean just thinking about COVID alone makes me want to have an emergency savings. I don't know about you but I think it's vital for a business to have an emergency savings. And my recommendation is that you shoot for six months. And I know that's hard. I'm not going to pretend that that is an easy thing.

Some business owners have a lot of margin and they can do that easily but most of us don't really have the kind of margin that allows us to save six months of operational expenses in a quick amount of time. So, that being said, I wanted to create this episode today so I could help you get the wheels turning on some outside the box, maybe some creative ways you could save and just some things to focus on that maybe you're not already that could move the needle for you in order to build up that savings.

So, here goes. 

The first tip of how to build your savings is to first create margin. Any time that we want to do anything additional with our money other than pay bills with it in our business we need to have margin. So, if you want to pay yourself additional draws in your business, or if you want to buy that piece of equipment without going to debt, or if you want to just save and reinvest in your business you need margin. So really the first step of being able to save and planning out that savings or to even know if you can save or have the margin to do it is to dial in your budget and take a look your budget. You have to know your numbers and know what you have coming in the future months as far as money coming in and money going out. You need to know what is happening realistically in your business and if you have margin that will be available for you to save in the first place.

So, that would be the first hurdle that we'd have to overcome is just knowing our numbers. And knowing whether or not we have the margin. So, sit down create a budget if you haven't already have lots of resources for you. Go back and listen to my budgeting episodes. I have a budgeting tutorial on YouTube and I will link those two references in the show notes so that you can easily access them.

But sit down, create a budget, create a personal budget and a business budget that flow together and recognize first whether or not you have margin. If so how much do you have and how much would you be able to allocate on a monthly basis to savings? So, that'll give you an idea of how long it would take you to save a six month emergency fund. And give you a realistic picture of the gap that you need to bridge.

And another action that is going to fall under this first tip is going to be cutting costs. If you are looking at your budget on a monthly basis and you're being proactive like you should be. And then you're analyzing your profit and loss statement each month to see really what happened in your business, what tweaks can you make, you are going to be really analyzing your expenses while you're doing this. I have lots of other episodes where I talk about this but it super important to be able to create margin in your life to do the things you want to do with that money and that really involves heavily analyzing your expenses on a regular basis. Now if your expenses don't change that much and you're pretty dialed in to what they are you don't have to do this multiple times a month. If you have a lot of variable expenses and you aren't quite sure from month to month what going on and you really need to check-in more so that you can keep your finger on the pulse of your expenses. And you won't know if you can cut costs unless you're paying attention to it.

So, between the revenue that comes in and then your bottom line, which is your profit, a lot happens in those expense categories throughout the month. And so regular check ins are pretty important because you might not recognize that you're overspending until after the fact. So, the idea is to get ahead of it with budgeting. Get ahead of it with expense analysis. And by doing that, all these little expenses that maybe you don't need that month that aren't necessary right now, you can really think about “okay is that more important than me saving this emergency fund?”. So, you can look through that lens of wanting to save and having that be your top priority. And then analyze your expenses accordingly and things that you thought were a priority when you set up that monthly subscription on auto payment. It might have seemed to be important at the time but now that you are dialed into saving money, and you look back at those expenses they might not seem necessary. So, there's a lot of costs that you can cut if you pay attention. And you make priority, you make saving a priority.

And then another thing that falls under creating margin tip is increasing your revenue. Can you increase your fees? That would be a very quick hit to increase your revenue. Can you create a new revenue stream? Is there some way that you can get that revenue up in your business?

Without taking on new debt and without killing yourself, think about some ways that you could do that.

And that leads me into the second which is just getting creative. In order to meet our savings goals sometimes it takes a little bit of outside the box thinking and getting creative. And that really is the case with trying to create new revenue streams or trying to get your revenue up. There could be temporary things you could do. It doesn't have to be forever and I don't want you to kill yourself or take on debt but there could be things that you could do for a period of time just until you build up your revenue. Maybe you don't necessarily like doing consulting or one-on-one coaching depending on what your business is but you just do that for a period of time just until you can make the money you need to.

IF you are a chiropractor, have you thought about a new revenue stream like getting your certification to do the Department of Transportation physicals. We have some clients that really do well providing that as a service and really, other than some minimal certification fees and education, doesn't cost a whole lot of money to be able to offer that service. 

Could you maybe offer another therapeutic service that doesn't involve getting new equipment? Or bring in maybe a massage therapist that could bring in more revenue, have some margin there between your what you're paying them and what are bringing in. I don't know what that looks like for you or what you want to do in your business but I'm just asking you to think outside of the box and think of how you could increase your revenue stream even just temporarily just to get you over that hump of getting to your emergency savings.

Do you have any old equipment that's just been sitting around and you're not quite sure what to do with it? Maybe you have like a used adjusting table and you could sell that on Facebook Marketplace or you know some other chiropractors who need one or somebody who's starting out. I don't know. Just think outside the box. Think of what you could sell, revenue streams you could add.

Another really outside of the box kind of thing is if you are good with credit card habits, if you have good debt habits-like if you're somebody who you can use a credit card and you'll pay it off right away. You're only using it for stuff you were going to purchase anyways through the business. You can find a credit card out there that offers like two percent cashback rewards or maybe even better. And you can put all of your expenses onto that credit card switch everything to the to being paid on the credit card and then you have some rewards that you can just take that cash reward each month, just throw that into your savings account.

And I do say that with caution because I do not want to encourage you to start using a bunch of credit cards to rack up the points when you know you're purchasing things you wouldn't purchase normally or you're not paying down that balance and then you're getting hit with interest rates Then that's going to defeat the entire purpose.

So, definitely assess your behavior. You need to get real with yourself. If you're not good with credit cards, don't use them. Just steer clear. But if you have really healthy habits and you're willing to pay it off frequently and set that healthy habit  of having a zero balance, then you could reap those rewards. It'll really benefit you I know.

I don't have very many expenses in my business but for me, I kind of have been operating that way where I will put most of my expenses on a credit card it helps with cash flow management throughout the month and then I get some rewards. And every couple of months I might get like a hundred and fifty dollars in rewards and I put that right into my savings account.

So, It's just a little bit of money. It's not like tons of money you're going to be able to save but it’s something and a little bit adds up over time.

So, the next tip (number three) is get a high yield savings account. I will say there are more high yield savings account options for personal versus business but I have looked up high yield savings accounts for business and I have seen a couple out there. So there are options. So, definitely look into getting high yield savings account for your business because once you do start to build up that savings, you're going to earn a lot more interest on your savings than you normally would.

I want to just also say that when I'm talking about six months of operational expenses, you are looking at what it would cost bare bones to run your business in an emergency situation. Like what would you have to cover as bills, what's the minimal amount that you would have to pay to yourself to get by. We're talking minimal amounts to stay afloat in an emergency situation. So it's not necessarily going to be a number monthly you're putting out right now in like a regular operational month. So it could very well be that, you know maybe you have ten thousand dollars’ worth of expenses in a regular operational month but during an emergency period of time, you could cut certain costs, you could live minimally, you know as far as what you're taking from the business, and you could cut that down to like, six thousand dollars is what you might need to keep your business afloat in an emergency situation. And in that case, you're not saving ten thousand dollars for each month of that emergency fund. You're saving six thousand dollars.

So really think about that and think about what your emergency situation might be and then what that would look like for you as far as revenue and as far expenses. So yeah, the high yield savings account will definitely help your savings to earn more and every little bit counts So that would be another little tip that could propel you a little bit further ahead. Tip number four is frequent financial check ins. And this is super important I touched on that in the beginning of this podcast episode. But you have to be willing to check-in at least like every week every other week especially when you're in that mode of saving, and you're not yet sitting in a comfortable position of having like a cash backup reserve, you want to always be looking and analyzing your expenses looking at your budget, checking out your financial reports every month. Checking out your savings to see the progress that you made and tracking your progress.

These frequent financial check ins I think are always important in a business but especially when you are in that zone of saving up for an emergency fund and ramping up to being in that more comfortable position and it just allows you keep your finger on the pulse of your business health by regularly looking at all of your numbers and being clear on them. Because then if you have a goal of saving, you are tracking that in real time versus just letting some months go by and then glancing to see like what's been done. You are in real time making decisions, you are tweaking what you're doing, seeing if it's working, and you're staying active in the management of your money.

Alright, the fifth and last tip today for building up your savings is making sacrifices. This is a very important one and is more of a mindset shift that you have to adopt in order to make these savings happen.

Really nothing in life happens without sacrifice. There's just this ebb and flow to the decisions we make in life and in business and sometimes we just have to make sacrifices in order to gain what we want and meet our goals.

When you're trying to save up an emergency fund this is very important. It's crucial that you don't stay in this mindset but it's important to be willing to make sacrifices while you're building up your savings account and recognizing what's more important - buying the thing, buying the new piece of equipment before you really need it, or going on that trip. What's more important - that or having financial security that could keep your business literally open or surviving during a difficult time. So, if you are someone who you like to go on trips and educational conferences., that is awesome I am all for that but can you evaluate whether or not that's necessary. So, if it's something that has to do with like a certification that you absolutely need then that's a little bit more important. But many times we can put off these trips and conferences for one year or a short period of time like maybe months while you're building up your savings account. And that could really propel you pretty far into your savings.

If you are paying for the travel, paying for the flight, the hotel, paying for the educational seminar itself, that could be thousands of dollars that you could put into your savings account that you wouldn't have otherwise. So really consider if you're planning a trip like that, how important is it. Is it something that could wait until the following year?

You're probably going to be just fine if you skip one year up conference you've always gone to. I think that's worth it to have that piece of and your business, but you have to decide. I can't decide that for you. You have be the one to decide what's more important and be willing to make sacrifices like that in order to build up that savings.

Another thing to consider when it comes to making sacrifices is when you are in a time of trying to save money and meet this goal, can you take less from the business personally? You really have to look closely under microscope what your personal situation is and what your lifestyle is. So, if you're taking a certain amount from the business so that you can live a lifestyle that you have a lot of extras - you're doing vacations and you're spending a lot in your personal life - it may be a time where you have to sacrifice what you're doing in your personal life a little more for the business so that you can become more secure in your business.

If your business is your sole livelihood, I will say that it's even more important to make this sacrifice and to have the savings in your business because you are fully dependent, and your family is dependent on the business for your livelihood so it's that much more important to make sure you have that backup of a six month emergency fund.

So can you live a little bit more minimal in your personal life so that you can take less from the business for a period of time? Just keep that money in the business so you can save and after that period of time is up and you've saved your months of business savings, you can go back to taking a little bit more. But it's important to definitely consider that as an option and talk to your spouse. Talk to them about the business stuff. Make sure that you're both on board with that sacrifice because it won't happen if you are but you don't communicate out with your spouse. 

And if they're used to pulling in a certain amount from the business, that is really going to you know create a conflict there. So, you just want to make sure that you get on the same page, and it's just going to aid you in reaching your goal and making sure that savings happens.

So, I hope all of these tips spark some ideas for how you can level up your savings game and find some creative and scrappy ways to save. Having a healthy emergency fund for your business can be your savior in tough times and it can really be what pulls you through.

Many businesses shut their doors during covid because they didn't have any cash set aside. Cash flow issues and lack of savings is a very common reason why businesses often fail. I do not want that to be you so I want you to start strategizing. How can you reach a six-month savings goal with these tips?

I know you can do this, and I am cheering you on. I have another episode that I will link in the show notes about saving and why it's so important so I will link that as well as budgeting episode, and the tutorial.

Remember: action brings clarity, and imperfect action is better than none at all.

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