“There are two ways to increase your wealth. Increase your means
or decrease your wants. The best is to do both at the same time.”
— Benjamin Franklin.
Benjamin Franklin was a wise man. He was also a wealthy man. He grew wealthy as a self-employed publisher. Let there be no doubt that he was a man who knew the numbers side of his business. He understood the essential rule of business. You increase wealth one of two ways. Either increase your revenue or decrease your expenses. And better yet, do both.
In business, that’s the only equation that matters when it comes to finances. All financial management can be distilled down to that one equation. Increase revenue plus decrease expense equals more profit. It is profit that builds wealth. A business without profit does not prosper. A business with profit that is then heavily taxed by the government does not prosper.
In recent years a lot of talk has gone on about disgustingly profitable businesses and high rates of CEO pay. This is not representative of the vast majority of businesses in the United States. We are a nation of shopkeepers, service providers, and small manufacturers. According to the Small Business Administration, there are nearly 24 million businesses with the business owner as the only “employee.” And all those businesses together generate just 4% of the total economy. That’s a lot of very small operations, with business owners all working away at making a living for themselves and their families.
As one-person business owners (and I include myself in the ranks), we have special concerns and challenges. How do we make enough to pay the bills of the business, provide a satisfactory living for ourselves, and keep the process going year after year? How do we make the best use of our most precious and limited resource…Time? How do we make the best use of every dollar that comes in to the business? How do we bring in more dollars consistently? How do we move from survival to profitability and wealth?
The way we answer those questions determines the success or failure of our businesses. That’s a whole lot of pressure, isn’t it? But, by distilling it down to Benjamin Franklin’s equation: Increase revenue AND decrease expenses, we can simplify the process. That simple equation leads to questions like this:
• What are my best opportunities to increase sales? (Untapped potential or underused assets)
• Do I have leaks in my business that drain cash and provide no benefit? (Bank fees, subscriptions)
• To increase revenue will my expenses need to increase? (Think marketing or cost of goods)
• How can I minimize my tax burden? (Better tracking of financial information, hire a CPA for taxes)
Running a successful business isn’t just about how we deliver the goods and services we provide. We have to be financially savvy, too. Once we combine talent in delivering the goods and services with the talents of business acumen, we arrive at a place that Old Ben would consider to be “healthy, wealthy, and wise.”