4 Ways to Thrive On a Variable Income
MONEY MANAGEMENT
If you’re a small business owner, you already know that running a small business can feel like feast or famine.
And it’s especially true if you’re used to having a regular, consistent paycheck.
While it’s something many of us experience, I don’t see many people talking about it in the business world, so I wanted to share the actions I’ve put in place in order to thrive in my decade-plus of living on a variable income.
The most important thing you can do is to learn how to plan for the future. Some months you may be rolling in extra cash, while others, nothing is coming in. Because income can be inconsistent in many fields and for many small businesses, it’s crucial to manage the money that comes in with an eye on the future.
Follow the 4 steps below and you’ll be prepared to navigate the ups and downs of running a small business and managing your variable income!
#1 - Start a budget
Before you roll your eyes and close this window, STOP! Budgets don’t have the best reputation, but I promise they aren’t as terrible as you think… and I have the perfect tool to get you started.
I have been using You Need a Budget in both my business and personal life for a few years now, and it’s been a game changer!! What makes it different from other budgeting tools is that you can enter all your large recurring expenses (think: website hosting, CRM software, business insurance, quickbooks, etc.) and it will tell you exactly how much you need to save each month to cover those costs when they come up. Because you’re tracking all of your significant expenses, you won’t get hit with these larger budget items unexpectedly!
Knowing exactly how much cash flow you need to run every aspect of your business (and when these expenses are due) is key to riding out your dry spells when less money is coming in.
#2 - Identify your seasons
The next step is to identify your busy and slow seasons. If you don’t know when money will be coming in or when to expect a slow down, it’s hard to make a plan!
Your seasons will vary greatly based on your industry, location, and clientele. For example, if you create handmade goods, the holidays might be your busiest time or year, while spring may be slow. The easiest way to determine your business’s pattern is by checking your profit and loss sheet from the previous year and marking the months when you brought in the most income.
Don’t have a profit and loss sheet? No worries! Review your online sales reports and bank statements to look for trends. It doesn’t have to be complicated or overly detailed, but you need to have a ballpark idea of the flow of your business in each season.
#3 - Create offers for slow times
Once you’ve identified the ebb and flow of your business, it’s time to start focusing on the slow seasons. Take some time to brainstorm ideas that will bring in extra cash during these months, in order to even out your income a bit. It could be a sale on an existing product or service or it might be a completely new offering that you can focus on promoting during the slower months. I’m a big fan of digital products that you can create once but sell again and again. Get creative and don’t be afraid to try something new!
#4 - Save for the slow season
If you know that there are dramatic differences in your income during your high and low seasons, I’d recommend creating a slow season fund. By intentionally putting aside money each month, you will still be able to pay yourself in the slower months. So simple, right? The concept is easy, it just takes some planning ahead and a little bit of discipline.
This could mean putting away as little as 5% of your income or as much as 25% or even more, depending on your specific financial needs. I’d recommend starting with saving 5% of your income each month and then adjusting as needed. The key here is to start now and commit to doing it monthly. Don’t wait until your busy season to make a plan and start saving… You’ll likely be swamped with work and forget to implement a new habit.
Yes, living with a variable income requires some additional planning, but making the plan isn’t very complicated! Sticking to it is what will bring you success. With these tips in mind, you’ll be able to confidently sustain yourself and your business for the long haul!
Want to chat more about business and budgets? You can reach out to me here anytime!