Working from home (WF) can be a real boon if you’re a disciplined, hard-working business owner. Being able to roll out of bed and get straight to work can meaningfully improve your productivity and working from a home office can cut down on distractions like workplace chatter.
Regarding financial strategies, running a business from home can help you build wealth, too. You don’t have to spend cash on gas and car maintenance when you work remotely and can use your newfound free time to improve your financial standing by making strategic investments.
However, you will need to invest in your home office setup if you want to hit the ground running when WFH. This will help you manage your expenses, increase your productivity, and build sustainable wealth over a number of years.
Long-Term Investments
Data from the Pew Research Center shows that 14% of working-age Americans now WFH. Those who do work from home say that have an increased ability to balance their work and home life and find it easier to meet deadlines when working remotely. Remote work is particularly beneficial if you work for yourself, as you’ll be able to save on overheads like office rental, equipment costs, and heating or electricity.
However, before you start running a home business, you’ll need to invest in your current home office setup. You can’t expect to be productive when working from your kitchen counter and should have a dedicated space for operations like shipping, crafting, packaging, or administrative tasks. At a minimum, you’ll need to account for some initial outlays like:
- Essential Hardware: PC monitors, signal boosters, high-quality conferencing cameras, printers, and external hard drives are all but essential in modern business. Investing in quality upfront will help you achieve your long-term financial goals, as you are far more likely to land contracts and clients when you have a quality camera and reliable connections.
- Furniture: Do yourself a favor and buy a top-of-the-line chair and desk. This will support your health, improve your posture, and help you stay productive when working from home for long hours.
- Quality of Life Accessories: You’re far more likely to be productive when you’re feeling healthy and happy. Rather than forgoing a few luxuries, budget for purchases like coffee machines, smoothie makers, standing desks, and high-quality headphones.
Responsibly investing in your business will boost your productivity and help you achieve peak productivity. Even luxuries like espresso machines can give you a much-needed pick-me-up between calls with clients and may meaningfully improve your ability to meet demanding deadlines.
Financial Sustainability
If you work in an industry like content creation or crafting, you may struggle to stay on top of your finances. This can be unnerving when trying to make long-term financial strategies, as you need a clear understanding of your costs, income, and debts if you want to plan for the future.
Get on top of your finances by working with an accountant who can help you compile essential financial reports. Every business should have essential financial statements like:
- Balance Sheets: A balance sheet tells you how much your business is worth. It weighs earnings against liabilities and provides a snapshot of your firm’s profitability.
- Cash Flow: Knowing how much cash is entering or leaving your firm on a monthly basis is crucial for the long-term success of your business. Keeping your cash flow up to date will ensure funds don’t dry up and can help you budget for upcoming expenses.
- Accounts Receivable: An accounts receivable statement tells you how much you’re owed by clients. This helps you stay on top of your earnings and ensures that folks don’t take too long to pay you.
- Budget Variance Reports: This assesses the difference between estimated and actual reports. A variance report is key if you’re planning some major investments and need to know how accurate your estimations are or have been.
A qualified accountant can compile these reports in as little as a few days and will be able to keep your financial statements up to date. This is key when planning a period of growth, as you can’t afford to suddenly run out of cash midway through a major renovation or purchase.
Measuring Your Performance
Keeping up-to-date financial statements is key for your long-term growth and good financial strategies. However, you’ll still need to assess your performance using non-financial metrics like turnover rate if you want to achieve your long-term financial goals. As a business owner, you can start measuring your performance with KPIs like:
- Customer acquisition costs (CAC): How much do you spend to land one client or customer? If this number is astronomical, chances are you won’t be around in a few years time. Get your CAC lower by investing in marketing and refining the way you approach new leads.
- Supply Chain Waste: As a home business owner, you may overlook your firm’s waste. This is a major misstep, as the government looks set to increase fines and penalties for businesses that fail to dispose of waste properly. Start tracking your waste today to get ahead of the game and protect your long-term future.
- Inventory Turnover: How quickly does inventory leave your storage facility? If you’re failing to shift new stock, you’ll likely need to look into more efficient ordering methods to reduce costs associated with storage.
Keeping track of these metrics will help you avoid major missteps like overstocking or fines for waste mismanagement. Be sure to track industry-specific metrics, too, as this will help you manage your finances.
Conclusion
Building wealth when running a home business can be tricky if you’re used to working for someone else. Get ahead of potential issues by hiring an accountant who can compile key financial reports. This will deepen your understanding of metrics like turnover rate and will ensure your firm’s long-term viability.
