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EP2: The Crucial Relationship Between Your Business And Personal Finances
“Your ability to support your family, lifestyle, and to achieve your goals, comes directly from how much you can earn from your business.” - Adam Rundle (5:36 - 5:46)
Adam Rundle
ABR Consulting
Why you need financial clarity as an entrepreneur.
For an entrepreneur, a business is more than just a way to earn an income. It involves your dreams and desires, the relationships with your clients and your team, and it’s the vehicle that you’ve chosen to make an impact in this world. However, to be sustainable in the long run, your business has to be profitable, and it has to provide you with a consistent income. For this reason, it’s vital to have clarity regarding your business' relationship with your personal finances.
There are some main components of a business’ finances that are especially important. You should know how much to pay yourself, how frequently you get paid, the structure of the company, and how it all affects your tax liabilities. Having a proper structure in place will allow you to plan your personal finances, and allow for the business to be free from constant financial worry, making room for a positive and rewarding experience.
“How you earn money from your business is the primary function of the relationship between you and your business” - Adam Rundle (9:08 - 9:15)
There are three types of relationships between entrepreneurs and their finances.
In general, there are three categories of relationships business owners have with their finances.
The healthy category. This is the category where most entrepreneurs would like to be, but only a handful actually find themselves here. Business owners in this category earn a consistent income from their companies. They might also draw a profit periodically, depending on the company’s performance.
In order to have the freedom to consistently draw an income, as well as a profit, an entrepreneur has to have a solid understanding of how the business operates financially. That level of clarity is usually present in other aspects of the company as well. The healthy business owner feels rewarded, confident, and in control.
“In order to consistently earn a reasonable amount of money, you need to have a high level of clarity about how your business is operating”
- Adam Rundle (11:42 - 11:59)
The on-the-fence category. The majority of entrepreneurs fall into this category. Entrepreneurs in this category generally experience a lot of caution and apprehension around the topic of money. They are never sure how much to pay themselves and generally withdraw small amounts sporadically. Business owners in this category usually don’t draw a profit.
Operating this way is an ineffective way to measure the efficiency of a business. The numbers are distorted, and the income doesn’t reflect the effort of the business owner, resulting in frustration. The lack of financial clarity might also affect various other decisions, like how much to spend on marketing or whether to grow the team.
The danger zone. The relatively small group of entrepreneurs that fall in this category use their businesses as their personal bank account. There is very little consistency in how much or when they withdraw money, and there is almost no way to measure the efficiency of the business. The business owner has an inconsistent relationship with the company. This relationship state results in nervousness in personal finances as well.
The good news for entrepreneurs in the danger zone category is that many times a little bit planning and analysis can solve the problem. An excellent place to begin is to stop making inconsistent withdrawals, implement some structures and policies regarding payments, and decide on fixed amounts to be paid out consistently.
The sustainability of your business is dependent on the relationship you have with your finances. Take some time this week to assess which category you fall into. Regardless of your current state, there is room for growth. There are many reasons that led you to start your business, but making a consistent income and a profit are the factors that will keep it running long into the future.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
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By Adam Rundle“Your ability to support your family, lifestyle, and to achieve your goals, comes directly from how much you can earn from your business.” - Adam Rundle (5:36 - 5:46)
Adam Rundle
ABR Consulting
Why you need financial clarity as an entrepreneur.
For an entrepreneur, a business is more than just a way to earn an income. It involves your dreams and desires, the relationships with your clients and your team, and it’s the vehicle that you’ve chosen to make an impact in this world. However, to be sustainable in the long run, your business has to be profitable, and it has to provide you with a consistent income. For this reason, it’s vital to have clarity regarding your business' relationship with your personal finances.
There are some main components of a business’ finances that are especially important. You should know how much to pay yourself, how frequently you get paid, the structure of the company, and how it all affects your tax liabilities. Having a proper structure in place will allow you to plan your personal finances, and allow for the business to be free from constant financial worry, making room for a positive and rewarding experience.
“How you earn money from your business is the primary function of the relationship between you and your business” - Adam Rundle (9:08 - 9:15)
There are three types of relationships between entrepreneurs and their finances.
In general, there are three categories of relationships business owners have with their finances.
The healthy category. This is the category where most entrepreneurs would like to be, but only a handful actually find themselves here. Business owners in this category earn a consistent income from their companies. They might also draw a profit periodically, depending on the company’s performance.
In order to have the freedom to consistently draw an income, as well as a profit, an entrepreneur has to have a solid understanding of how the business operates financially. That level of clarity is usually present in other aspects of the company as well. The healthy business owner feels rewarded, confident, and in control.
“In order to consistently earn a reasonable amount of money, you need to have a high level of clarity about how your business is operating”
- Adam Rundle (11:42 - 11:59)
The on-the-fence category. The majority of entrepreneurs fall into this category. Entrepreneurs in this category generally experience a lot of caution and apprehension around the topic of money. They are never sure how much to pay themselves and generally withdraw small amounts sporadically. Business owners in this category usually don’t draw a profit.
Operating this way is an ineffective way to measure the efficiency of a business. The numbers are distorted, and the income doesn’t reflect the effort of the business owner, resulting in frustration. The lack of financial clarity might also affect various other decisions, like how much to spend on marketing or whether to grow the team.
The danger zone. The relatively small group of entrepreneurs that fall in this category use their businesses as their personal bank account. There is very little consistency in how much or when they withdraw money, and there is almost no way to measure the efficiency of the business. The business owner has an inconsistent relationship with the company. This relationship state results in nervousness in personal finances as well.
The good news for entrepreneurs in the danger zone category is that many times a little bit planning and analysis can solve the problem. An excellent place to begin is to stop making inconsistent withdrawals, implement some structures and policies regarding payments, and decide on fixed amounts to be paid out consistently.
The sustainability of your business is dependent on the relationship you have with your finances. Take some time this week to assess which category you fall into. Regardless of your current state, there is room for growth. There are many reasons that led you to start your business, but making a consistent income and a profit are the factors that will keep it running long into the future.
How to get involved
If you would like more information about ABR, and the success businesses have gained through their work with the firm, visit their website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!