This is the fourth article in a series detailing the process of successfully engaging with a freelancer. The first article is here, the second here, and the third here. My previous series talked about the opportunity and the fears of small business owners when thinking about dealing with freelancers. This series builds on that one, and goes into more detail.
If you are doing a thorough analysis of your business, one dimension that needs to be studied is the flow of money. Since I am a data integration consultant, I see money as a data point, and as a signifier of value. In the end, you need to exchange enough value with your customers to stay in business. Your success at that task is signified by the flow of money into and out of your business.
Learning to understand the language of money is not optional for small business people. I am in no way an expert at this. However, if money is treated as information, I am all over it.
Your business needs a flow of money through it in order to be successful. Money travels in the opposite direction of value creation, so in some ways, you need to work backwards.
A customer buys a widget from you. That money enters your system. It is stored in a bank account, and information about its source is stored in your accounting system.
That money has taxes taken out of it.
Some of the money goes to employees.
Some goes to pay for equipment, rental costs, and utilities.
Some pays down capital costs.
Some pays for raw materials for the widget.
Some goes into marketing and sales.
Some goes into research and development of the next widget.
Finally, some may be distributed to shareholders as a dividend.
Each of those categories has a relative value, signified by the amount of money spent in it. Each place that money is spent should have some expectation of a return on that investment. There should be an expectation of future income and expense. Each of those pieces of information will change over time. Just knowing the flow of money through your business shows you what you value, what your business is based on, what your hopes for the future are, and maybe what your customers are telling you about your offering.
Combining the flow of money with the flow of information through your business should present you with some places where small changes will make outsized impacts on the size of your money flows. Listen to your money, and notice where it gets tied down, where it moves at a different pace than the rest of your business, and where it communicates directly about your success or possible failure.
Money is important for immediate survival. But understanding what money is saying is crucial for long-term growth.