I think I probably knew it too, at some level.
But when you’re just getting started with your own business, there’s a lot to worry about and bookkeeping can quickly drop to the bottom of your to-do list (particularly if you don’t wake up in the morning salivating over spreadsheets).
Overcoming this laziness or lack of enthusiasm about my business’ books led to some real clarity and major success. Let me share how.
From side-hustle to full-time business
Before I was a full-time solopreneur, I was a side-hustler. I started a blog as an experiment in college and immediately fell in love with it as both a fulfilling activity and a good way to make some extra money on the side.
The money was slow—as it is for many beginning bloggers.
Not more than a thousand bucks in an entire year. It’s pretty easy to see now that I wasn’t running an actual business at that point.
But after a few years, I got better, smarter. And the money started to follow. I created a few ebooks and sold a few hundred copies. I started finding some sponsors and bigger advertisers.
Finally, things started to hum along.
Then I hit a major plateau
Eventually, everything seemed to slow down and I just couldn’t seem to grow my business any further.
I was lost. I started spending money on social media ad campaigns that went nowhere. I started hunting for work on freelance job sites to see if I could build my income that way.
But none of it really worked.
I rode the plateau for about a year before I realized I needed to make some major changes in my business.
The only trouble?
I had no clue what those major changes were.
As I saw it, I had two options
To me, it seemed obvious that I only had a couple of really good options if I wanted to continue to run my side-business:
I could either continue with the status quo, taking money from whoever and whatever opportunities just happened to come my way. Wondering every month if I had been lucky or if my business was actually financially healthy.
Or, I could be proactive about where my business was headed. I could use data to decide where to invest my time and the few resources I had built up.
I chose to take action
Step one? Get the right information about my business.
At the top of my list of important data to look at was gross revenue.
But if I wanted to get all caught up on my books, I knew it would take some serious work. Work that, at the time, I didn’t have the personal bandwidth for.
Since I was working only about two hours a day on my growing side-business, I had hired subcontractors to help me with everything from writing to blog management to social media.
So I decided to hire someone to do my bookkeeping too.
That “someone” was Bench.
After Bench assigned me to a small team of bookkeepers and gave me access to the web app, we got started. I gave them private access to my accounts and they started tallying up all of my revenue and expenses for the previous year.
My first breakthrough
What they delivered back was incredible! Finally, and for the first time since starting my side-business, I could see exactly how I was making money, where I was losing money, and where I should invest my efforts next.
For example, it didn’t take me long after opening the Bench app and seeing the chart below to realize my business revenue was very inconsistent.
But more importantly, could I identify what I had done in May, July, and November which I had failed to do in June, October, or December?
After further review, I eventually connected the dots that all of my major cold-pitching had happened in months previous to the spikes in my Bench report.
The simple solution? Develop a cold-pitching outreach strategy that was more consistent.
But because the months seemed to blend together when I was (what feels like) constantly searching for new business, I didn’t realize just how much my revenue resembled a roller-coaster until it was simply and effectively laid out in front of me.
Aligning efforts with results
The other thing Bench’s reports allowed me to do was align all of my business-building efforts with the results I was getting the best return on.
As a blogger, I had a few key sources of revenue: sponsorship, affiliate revenue and product sales.
Here’s what my revenue looked like after Bench dissected it over the previous year:
It doesn’t take a genius to figure out how I was making most of my money. But because this was our first year of pitching and landing sponsorships, I didn’t realize just how much we depended on sponsorships for our growth.
The scariest part? My expenses were not mapping to my revenue at all. Like, not even close. Here’s what my expenses looked like for the same time period:
Just like the revenue report, it didn’t take a rocket scientist to figure out where most of our expenses were coming from.
The only problem was: I was paying independent contractors to write for my blog, manage a group of bloggers, set up affiliate deals, and other activities that were not helping our sponsorships grow.
I had to make a change
That’s when I knew I had to adjust—and quickly.
I immediately reduced my small team of three content managers to just two. Since then, one of those content managers has become my “sponsor success manager” and works almost exclusively with our sponsors to ensure their campaigns are successful.
I immediately took contractors off email creation and social media management too.
Slowly but surely over the next few months, I began to re-align our small team with the revenue potential for our small company.
And success soon followed
The following year, my Bench reports revealed I had grown top-line revenue by 28%.
Because I invested in our largest revenue-generating segment, sponsorship revenue also grew by 22% that year.
And, while I had to increase the amount I paid in independent contractor expenses by over 60%, by putting the right people in the right places, we still increased net profit for the year by 38%.
Bookkeeping keeps me on track
I still use bookkeeping to keep me and my business on track today. Every month and year, I review the books and make decisions about my business, my team, our strategies, and our goals.
It can be really easy to think that managing your books is just for your accountant. Or that it’s only helpful at tax time.
The truth is, for me, my entire ability to effectively run my business changed when I started taking bookkeeping seriously.
If you ever feel stuck
If you’re unsure of where to go next in your business, I’d suggest you consult the numbers.
While I’ll be the first to admit doing business isn’t all about making the most money possible, actually staying in business is a critical part of being a business.
So you don’t have to get caught up in counting every little penny that crosses your desk (let your bookkeeping team do that for you). But you should take note of larger trends and make strategic decisions based on where you see opportunities.
I can tell you from experience, it’s worth it.
Preston Lee is the founder of Millo, where he and his team help freelancers find better freelance jobs and build a business doing work they’re truly excited about. You can join a thriving community of freelancers and solopreneurs in their Facebook group.