Kelli Crisan’s livelihood depends on a food truck that doesn’t bring in the same amount of money year-round.
Since 2011, she’s run the Roaming Fork “Bistro on Wheels” in Charlotte. When business is booming, she can easily serve 2,000 customers a week.
When it’s not and her cash flow is lean, Crisan, 47, relies on money she’s saved to give herself a cushion. Putting away at least 15 to 20 percent of her income each week keeps her calm when lines outside her food truck dwindle due to cold weather, she said.
“When you make good money, put that money away (because) there will be a time you won’t,” she said.
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Managing inconsistent income for small-business owners is tricky, but not impossible. Here are ways entrepreneurs can get a grip on their finances when cash flow is a little slow:
1) Build an emergency fund for your business
Save at least three months’ worth of operating costs in a bank account, said Emily Fisher, president of Charlotte-based E. Fisher P.A. accounting firm.
For example, if your average business expenses are $10,000 a month, build up $30,000 in your account so you can pay your bills and rent during hard times, she said.
“Over time, you’ve saved that amount and it gives you a cushion to get you through those slow periods,” she said.
Fisher, 40, knows this firsthand. Yearly tax return deadlines in April and October mean high cash flow for her firm, she said. But in other months – especially November through January – “I don’t count on (cash) coming in.”
When you plan your yearly budget, Fisher said, “you definitely need to figure out when your lowest point is, how long it’s going to be, then add a couple of months.”
2) Pay personal bills ahead of time
May and June are the most profitable times of year for Cory Tapia, who runs Blue Motion Studio, a wedding photography business. When wedding season cools off, Tapia, 32, switches his services to focus more on corporate clients, such as companies and universities.
Bills don’t stop when business lulls, he said. Tapia said he uses the busier times of year to pay his mortgage, credit card bill and student loans six to seven months in advance.
“I pay it off till the following start of the peak season,” he said. “Pretty much everything else that’s coming in afterward is sort of profit. It’s kind of just making sure the necessities are paid off.”
3) Make a list of your important obligations
Resist the urge to splurge if your business is making good money, says financial adviser Glen Wright, CEO of Charlotte-based Worth Financial Advisory Group.
Instead, prioritize your spending by making a list of your top obligations – whether that’s saving money for a house, adding cash to your children’s college fund or adding to your own retirement fund.
After those priorities are paid off, pour any leftover cash back into the business, Wright said.
4) Don’t overstock your inventory
Each month, Jeff Lee tracks customer purchases at his hand-painted furniture and gifts shop in Mount Holly.
Then he stocks up on those hot sellers, from paint to candles. Buying exactly what he needs for his business, Vintage Nest, keeps him from wasting money on inventory that’s not in demand at certain times of the year, said Lee, 49.
In winter, the shop’s storefront windows are “chock-full of furniture” because patrons want to refresh their homes after Christmas, Lee said. In the fall, he’ll fill his shelves and stockroom with candles. And from August till October, he’ll stockpile more paint instead of ordering it in the spring and summer when customers are more interested in vacation than painting furniture.
It makes “no sense having $10,000 worth of paint inventory when you have $3,000 to $4,000 in paint sales,” he said.
5) Save 15-20 percent of your income
Crisan, the food truck owner, paid $65,000 cash to get started after a 20-year career in real estate and new home construction, she said.
For years, she saved a percentage of her income – at first 10 percent, now 15 to 20.
That discipline started early. At 21, she worked for a company that matched 50 percent of employee contributions to their retirement savings accounts, up to 15 percent of salary. Crisan got into the habit of saving aggressively.
She enjoys steady business between April and mid-July, and then again during the fall. Cold weather slows business from December to early March, she said. There’s another brief slump in the summer when blistering heat keeps people indoors, she said. That’s where having backup money comes in handy.
“No matter what, you should always put back,” Crisan said. “Just constantly save. You never know what can happen.”