#18: HOW TO MANAGE MONEY WITH FLUCTUATING REVENUE

In today’s episode, I’m discussing one of the most common challenges business owners face—fluctuating revenue. Whether you're a seasonal business, a new entrepreneur, or running an established business with variable income, having a solid financial plan is crucial for success. I’ll provide tactical steps for creating a proactive money plan (a budget), understanding your cash flow, and leveraging historical data to navigate unpredictability. I’ll also covers strategies for managing unique expenses, setting up automated payment systems, and exploring additional revenue streams to cushion against variability. Don’t miss out on these essential tips to keep your business and personal finances on track!

Resources Mentioned:

• Episode 1: Start Smart in Your Business
• The Start Smart Checklist - A free resource for new entrepreneurs
• Episode 2: DON'T FUDGE IT, JUST BUDGET

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Reach out at support@financiallyadjusted.com with any questions you’d like answered in future Q&A episodes!

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Recommended bank and the one I use in my business (affiliate link):
 RELAY BANK

QuickBooks Online is my go-to accounting software. Get the best discount possible (30% off for 12 months) when you buy with my affiliate link below, through Complete Business Group. Message me at support@financiallyadjusted.com with any questions regarding signing up.
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My favorite budgeting app w/ an amazing free version:
 EVERY DOLLAR BUDGETING APP

My preferred business credit card with cash rewards (affiliate link):
 If you have healthy behaviors around spending with a credit card, this is a great one to use and earn cash back. It also links up well with QuickBooks Online. If you have unhealthy spending habits with credit cards, please avoid using one! You need to be able to pay it off monthly and not carry a balance. I use this one for my business and it makes paying bills simple.
 CAPITAL ONE BUSINESS CREDIT CARD

Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Transcript

Well hello there my entrepreneurial friend! I am so excited that you can join me today. I'm Leslie Roth with Financially Adjusted and I'm here to answer your questions about financial topics around your business. And today's topic is one that I get a lot of questions about and have just really seen that this is a common one business owners struggle with as a majority. Now, we talk about fluctuating revenue and how do you manage your money when your revenue is unpredictable or fluctuating from month to month. Most business owners have some level of variable revenue each month. You know maybe you do have one revenue stream that recurring, but you also have one or two that are variable. Maybe you are a seasonal business and the bulk of your income comes within one season each year, but maybe it's similar each year. For those business owners who have the majority of your revenue as recurring each month or the same every month it's going to be way easier to budget and to plan things out because not that much is changing from month to month but if you're seasonal or variable, this is going to take a lot more planning throughout the because you're needing to make sure that what revenue you do have coming in is going to stretch for you to cover bills throughout the year. And planning for that can be difficult when you don't necessarily know for sure what is coming in from month to month. You can't necessarily depend on that to be consistent. Now the most extreme version of variable revenue for a business is when nothing is recurring, and maybe you're a new business, and your business exists in a volatile market where things are changing frequently. So there's just a lot more that's out of your control. 

There are so many variables to consider, really when it comes to revenue that are specific to your specific business and your industry, your location, your business needs, and your goals. You always want to first consider all your variables when you're assessing your own business. I'm going to give you some tactical steps today and some strategies that are going to help you to plan when you do have a business that is variable on some level.

If you've been following me at all the first step I'm going to suggest should not surprise you. You need to create a proactive plan for your money otherwise known as a budget. If you don't have the same recurring inflow of money each month. It becomes important to evaluate your revenue over time so you can provide the best estimate based on the season or what you have going on in the business for that specific month or time frame. The idea will be to come up with a conservative average of what your revenue could be. So, you really want to take as educated of a guess as you can, and you’re looking at a lot of different things. To do that I recommend predicting what the conservative or the low end of your revenue could be and creating your plan based on that number. If you're a new business and you don't have any past years to go on, do some research on the average income for new entrepreneurs in your industry or talk to some friends in your field that have been in business for a while and ask them to let you know what to expect. They don't necessarily have to give you specific numbers, but they could probably give you an idea of what you could expect based on your situation - your specific business, your industry, your location, all of that. If you've hired a professional like a bookkeeper or an accountant and they have niched in your industry, they might be able to give you some specific insights into what you could expect depending on your stage of business. And it can't hurt to ask them or if you have a friend or a family member that is in that industry and they may be able to give you some insight. But maybe when you're asking these questions just ask, “what do you think someone in my scenario could make within the first six months to a year”. And when you're starting out in business it'll be even more important to check in with your money plan or your budget multiple times throughout the year to see what's going on and to tweak things accordingly.

Then you're going to have a better idea for the following month of what realistic numbers look like. But if you're a new entrepreneur, be sure to go back to my first episode It's talking all about or I talk all about what decisions and actions you need to make as a new entrepreneur when it comes to your finances. I have a freebie also that goes along with that episode, and I'll link that in the show notes, but the episode is called “Start Smart”, you could just go to my website financiallyadjusted.com and you can click on “Free Resources” also to find that freebie. It’s the Start Smart checklist. And it's going to lay out all of these action items that I talk about when you're starting a new business.

Something important to focus on when it comes to your revenue as an entrepreneur is planning for the fluctuation in revenue and expenses just making sure that you're prepared for different scenarios. Episode two of my podcast will also help you with a budget. And the more tactical steps to take in creating a budget when you're new or if you've been in business for a lot of years. And that goes for everyone listening, not just the new entrepreneurs. Every business owner should have a budget no matter what stage you're at. If you are an established business, you'll have a lot more information to go on because you can look back at past revenue to get an idea of what you can expect to bring in for future months.

But if you have multiple years, you can consider what was going on that year and you can take those multiple months and do an average. So, you can average that out. Maybe like if you're doing a budget for January you can look at the past three January's. Look at what you have going on in your business and try to create an average that's realistic for what you could make in the future year. And if you're someone who hasn't had a budget in the past or doesn't have their bookkeeping in order, you can use bank statements for this if necessary. So, you can still do one, it just might take a little longer because you're going to be digging into some bank statements. But I do strongly suggest you get your bookkeeping in order because accurate bookkeeping is really the key to a successful and organized business. But I also encourage you, If you don't think you can handle this on your own, reach out to a good bookkeeper. Try to have them organize your books so that you do have accurate data on hand. It's going to be critical for you to strategically plan in your business.

As you're working on your budget and you're plugging in your expenses, it's important to consider unique expenses for specific months or quarters. For instance, let's say you're a chiropractor and you have malpractice insurance due every quarter. You can look ahead and see that coming. Put it into your budget because you've looked at past years and seen oh okay, I pay that quarterly. And then even better you can save monthly for that expense in a sinking fund, which is just a savings account where you're setting aside money for that expense and then it's ready and available for you when you need it.

And another chiropractic example would be planning ahead if you are going to let's say an educational seminar or a conference you are traveling somewhere, you're going to need to pay ahead for the event itself, the seminar, the travel and then you're going to have expenses that you incurred during that month that you're traveling. You want to take all of that into consideration. Another huge thing to consider is that if you don't have an associate doctor, or an associate practitioner that's backing you up when you leave and you're not seeing patients, you need to account for a drop in revenue due to your absence during the time you're traveling. Don't let this type of stuff be an afterthought. Because you don't want to spend the next few months after that scrambling to play catch up with bills and whatever else you have going on. You want to know ahead of time and be strategic about your cash flow during a time like that. Being proactive and planning for this is just going to set you up for success and help you be strategic, not just in your business but also in your life because your business is your livelihood. Maybe not your sole livelihood depending on situation, but it's probably a big chunk of your livelihood and that's money in your pocket so it does trickle through to your personal life. And so, you're going to bring yourself peace of mind by being proactive in your business and in your personal life. And it's just going to get you closer to meeting your goals. If you know revenue is dropping or expenses are going up for a certain period of time, maybe that's not the month that you spend extra on certain things. When you're looking ahead you can figure out strategically you know do I have to maybe make a sacrifice in another area to make this happen and make the numbers work for me. So if you would normally spend money let's say on social media ads, or maybe getting a couple of lunches for the office staff or whatever it is for you. You can look ahead of time and actually see okay maybe this will be a tough month so maybe I'll cut back on those ads or maybe I'll cut back on those meals. And just set yourself up for success ahead of time. At the end of the day planning proactively like this in your business and having that money plan will totally trickle through to your personal life. If you have a solid money plan in your business have a better idea of what you can take home which then sets you up for success when it comes to meeting your personal goals and doing your personal budget as well.

Now, I recommend you budget the same way personally, based on how you're doing it with your business and how I explained to do it. When you're planning like this with a fluctuating revenue, something else to consider is leaving a decent cushion in your budget for totally unexpected expenses that pop up and also creating those sinking funds like I talked about earlier for those quarterly annual bills. That way you're prepared and you're not caught off guard at that time. And I talk about that on a deeper level in episode 2 which is my budgeting focused podcast. 

I mentioned earlier that historical data is your friend if you've been in business long enough to have that information. I'm going to dive a little bit deeper with you when it comes to that and give you some tactical steps that you can take to help this info help you. Your P & L is definitely your friend when it comes to analyzing your revenue. And I recommend pulling up P & L’s with months broken out and comparing them from year to year. When you're looking at different months and quarters, consider what you have going on during that season. Did you run a certain promo that month? And will you be doing the same one this year? If you're a chiropractor or a health coach, for instance, it's likely that the beginning of the year is going to be pretty busy and your revenue is going to be higher because everybody is focused on their health at that time and you look for different patterns depending on your business. And you consider what you have going on in those months for the future.

Looking at your profit and loss statement while you form your money plan is going to be key in being proactive and not having anything sneak up on you. And the more you look at historical data as you move along in your business, the more realistic you're going to be able to make your budget. If you can start saving monthly for quarterly and annual bills, you'll already have that chunk of change that you need when those roll around. And it's things like that that you'll be dialed in on when you're looking back at historical data, you'll be less likely to miss costs like that in your business.

Another huge benefit of planning and being proactive like this is it can prevent you from the common pitfall that many business owners fall into which is cash flow issues, driving them towards taking out debt. In difficult times, a little bit of planning and intentionality can go a long way, especially when it comes to having a business with variable income. It doesn't matter what stage you're at in business, this is absolutely necessary. And you have to pay attention to cash flow management, the timing of when revenue is coming in when money is flowing out so that you don't find yourself in a bind and feel like you're desperate and need to take out debt.Or use a credit card.

But something else to consider is possible revenue streams that you could add down the road. The more revenue streams you have in your business, the more this cushions the blow of a variable revenue stream. So, essentially you're protecting your business more when you have multiple revenue streams, because if one doesn't do well one year or during one period of time, the other one might be able to pick up the slack.

It's a good idea to always be thinking about that in your business. Ask yourself if there's potential for another revenue stream. And what you could do to maybe ramp up the current ones that you have. Another huge thing to consider when it comes to your revenue is how you're collecting your payments. And this is a really touchy subject for some people because a lot of people, like me, are sensitive to this and they are very very uncomfortable when it comes to collecting the money in their business. It can be very uncomfortable, but not if you're clear about it upfront. Take your situation and evaluate how you're getting paid. Do patients or clients pay you at the time of service, or when they purchase goods from you? Or, are you invoicing them and they're paying you at a later date? If it's the latter and you are falling into the trap where people are getting invoiced and they're not paying you on time, or they're not paying at all and you feel like you have to chase them down and have that uncomfortable conversation, then you need to rethink how you're doing that. If you're able to I strongly encourage you to switch things up, create an automatic payment system or a point of sale payment system where it's just a requirement of business. Like, if somebody's going to work with you they have to pay you upfront or they have to get set up on recurring payments every month. This is going to do a lot for you. It's going to reduce your stress. It's going to help you with cash flow. And it's not going to put you in that uncomfortable situation or in that energy sucking situation where you have to approach people and be like “hey you haven't paid”. Who has time or energy for that? Nobody!

So, if you're able to set up automated payments in your in your business, set up a system that enables you to get paid on time with the least resistance as possible. Fluctuating revenue can be a difficult thing to deal with but being proactive in creating a plan for your money and setting your systems up like this where you're getting paid on time will make a massive difference when it comes to cash flow and handling the stress of it all. It’s stressful enough to be a business owner and make things flow and get that revenue coming in. These are things you can make better for yourself by being a little proactive and setting yourself up for success.

Remember you do not have to be perfect at this. It’s going to take some time to get good at all of this, get in the habit of it, and think about implementing the systems. But you are absolutely capable of doing this. And it just takes practice. It just takes creating that habit and being consistent with it. Progress over perfection it's what I always say and I truly truly believe that. When you set out in imperfect action you're going to gain clarity along the way of what you want things to like in your business, how you want to set things up. You just have to get started. You’ve got to set up the habits. So, this is something that can really propel you forward in your business… being proactive. Especially when you have a variable income because that can be a very stressful thing. And that really trickles through and you feel that in your personal life as well.

I'm here to help you, my friends. Email me at support@financiallyadjusted.com if you have any questions or topics that you would love addressed on this podcast. Have a good one!
Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.