Dealing with the unpredictable

09/08/2017
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It’s a sad fact of life that you can’t pay your mortgage, utility bills or the local supermarket with magic beans or ‘valid for one back rub’ vouchers. They tend to want money. Money is not necessarily hard to come by once you start your own business, but its arrival can be a lot more unpredictable. Are you comfortable not having a predictable salary?

If you are, let’s take a look at ways you can manage the situation. If you’re not, perhaps looking at strategies for dealing with an unpredictable income will make you feel more comfortable about it. A good first step when dealing with an unpredictable salary is to pay yourself a predictable salary.

That may sound obtuse, but paying yourself is crucial for getting to grips with your finances. You need to escape the situation where all your money arrives in the same account and you take what you need at the end of each month – not just to ensure that your company’s value is not skewed by your salary’s absence if and when you come to grow or sell but to give yourself a starting point.

It doesn’t matter (initially) if you’re not paying yourself competitively with regards to what you would be making in a large business or organisation, just that you’re paying yourself something. In terms of your personal finances, it’s easier to work with a very small but predictable income than a fluctuating mess.

Separate your personal finances from those of your business. Work out your own bare bones personal survival budget if need be. Use this budget to set your wages, not what someone you’re your skills and experience would be earning right now in a City job. Factor yourself into your business budget as an employee who must be payed and you’ll ensure that you are.

Taking from a kitty as and when makes an unpredictable situation even more so. Inject a sense of stability into your finances, even if it means you’re paying yourself less than you might have allocated to yourself in (some) months gone by. Add some stability to your business budget too by getting an accountant.

Firstly, you might not be good at accounting. Most people aren’t. Getting it wrong can seriously cost you – far more than an accountant’s fees. Secondly, think of the psychological aspect. Most people find accounting difficult, many find it downright unpleasant. Whether you’re sick through worry or hacked off at the inconvenience – you’re not in a good place and your business will suffer.

Thirdly, (which is where we draw in those who could do it themselves) every second spent on your books is one second less getting out there and doing the thing you do. It’s universally agreed that time is the most precious resource for a new business. Doing things yourself is very often a false economy as it takes you away from your own role.

It’s a plan that can evolve. Eventually, if you feel you’re earning enough you can give yourself a raise. Your personal budget can then begin to include emergency savings and priority savings. At some point you can supplement an accountant with a bookkeeper to provide year round support and free up more billable hours for you.

Nobody knows precisely how many iPhones will be sold each year or how many eBooks will be sold, but Apple and Amazon do okay. At the highest level, every business has an unpredictable income. By the time it filters down to staff the differences are less obvious. You just happen to be at the highest level of your business. Take pride in that, introduce some stability and predictability will filter down.

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