One of the challenges I see rental companies have is the management of financial strategy for their businesses. I’ve been working with event professionals on financial strategy consulting for 6 years now. (And 8 years before that in the finance industry and in my sales position doing forecasting.) I want to share some financial basics that you need to have in place to have longevity in this industry.
1.) Get a Handle on Bookkeeping
People think of accounting (and bookkeeping) as the most tedious thing in the world. And – let me tell you: IT IS. (HA!) It’s just data entry… and that is boring, no matter how you spin it. But, it’s important to change your relationship with this task. It’s NOT about math and numbers. It’s about getting quantifiable information that tells you whether your business is successful or not.
We recommend Quickbooks to manage your accounting. (Yes, there are other companies like Freshbooks, Outright, Go Daddy. But, you’ll grow out of these.) Quickbooks does not require an advanced degree in calculus. It is software and there is a bit of a learning curve. Hire someone to help set it up and walk you through a little training. (I can help.) You’ll wish you had done it years ago.
For the same reason you love RW Elephant (METRICS!) you’ll love Quickbooks. The power of accounting software is in the information it gives you about your company’s performance. A cozy warm feeling about the love you have for boutique event rentals isn’t going to pay the bills or feed your family. You need to know what your dollars are doing.
2.) Create a Cash Flow Plan
A cash flow plan helps you plan for the cash moving in and out of your business. As a small business owner, CASH is KING. Without it, you’re toast. (Or heavily indebted.) The basic setup is this:
STARTING CASH BALANCE on day 1
+ CASH you expect to come in (SALES GOALS)
– CASH you expect to go out (EXPENSE BUDGET)
= EXPECTED CASH BALANCE on day 30
Do this for 12 months out and you’ll be able to see how seasonality impacts your business. Make this sheet your best lover and you’ll sell better, price better, and see more profits. (Pssst: We have a template here that can help. And, this is something I can also help with.)
3.) Come up with an Asset Acquisition Plan & Budget
If you do a thorough cash flow plan, an asset acquisition plan (aka ‘inventory plan’) will be part of it. BUT – I want to make sure to devote special attention to this. Many rental company owners consider their inventory acquisition to be unrelated to the expense budgeting because it directly ties to sales results and it has long-term benefits for the company. (This is correct, by the way.) But, as a result, they don’t come up with a plan for what they should realistically be spending on rental inventory. This is where creativity can come into conflict with practicality – and creativity usually wins.
I have a different point of view. Having a thoughtful and meaningful asset acquisition budget (this is your ‘inventory spend’) actually contributes to putting together a carefully curated collection. When you go in knowing how much to spend on inventory for the year AND when you take a step further by calculating turnover/use goals for each, you not only have a practical collection that will likely sell better, but also a collection that is probably more beautiful. You see… practicality + creativity can coexist.
I could continue to share thousands of thoughts on ways to improve your finances. (You can find a lot of those on our blog here.) What are your questions for me? Share in a comment on Instagram or Facebook and I’ll help you out.
Michelle Loretta is a consultant for wedding and event professionals and writes daily for the Sage Wedding Pros’ business blog. She blends her past as an accountant for Deloitte, a sales and marketing manager for DDLA, a merchandiser for Coach, and a stationery entrepreneur to help entrepreneurs better their businesses. She spends her days creating business plans and financial strategies for professionals in the event and wedding industries (including some pretty cool rental companies). This winter, join her at The People Plan workshop to learn how to successfully hire and lead a team of superstars.