What to Do With a Windfall

How to Leverage Unplanned Revenue

Every business has ups and downs, and the downs can take up an awful lot of headspace.

The opposite scenario – the month you beat your revenue projections or finally land a major contract, for example – offers a huge morale boost. You’re on fire! You’ve leveled up!

But unexpected revenue can also create issues for your business. A great month or quarter can lead to unplanned spending and reactionary decisions.

“Let’s finally upgrade the truck.”
“We’ve earned a bonus!”
“We can handle a new hire now… right?”

As a business owner, your most valuable resources are finite – your time, money, energy, and people. For the next few weeks, I’ll dig into how you can put each one to work intentionally, starting with your revenue.

Every Dollar Needs a Job

If you’re just starting a business or running close to break even, you probably have a pretty good idea what’s in the bank and where each dollar is going. You have to! But once your overheads are comfortably accounted for, the purse strings might loosen up.

Before you spend that extra cash, here are four questions you need to ask:

1. Have we planned for taxes?

Nothing takes the wind out of your sails faster than an unexpected bill from the CRA. Talk to your accountant to make sure you’ve got an appropriate tax plan in place for your new earnings.

2. Have we planned for resilience?

You’ve had a great month, but that doesn’t mean you’ll never have a bad one. Depending on your industry and business model, having 1-6-months’ worth of overhead expenses stashed in a break-glass-in-case-of-emergency savings account will save you from many sleepless nights. If you have depreciating assets that will need to be replaced, map out a savings plan that will allow you to do so when the time comes.

3. Have we planned for profit?

A rock-solid quarterly plan includes a profit target. By mentally setting your new break-even point at a level that includes a healthy profit margin, you can create an action plan to hit that mark. You can decide what you want to pull from the business and what will be re-directed to debt repayments, investing in growth, or building your cash reserve. Having a plan for your profit keeps you accountable to your long-term goals instead of getting pulled off course.

4. Have we planned for growth?

Investing in growth sucks cash from a business. Investing in things like marketing, new hires or promotions, equipment, and system upgrades are all necessary to grow sustainably, but the future increase in revenue can lag your investment by several months (or even years). You want to spend carefully to avoid a negative cashflow situation while you wait for your return.

If you’re in the fortunate position of having more revenue coming in than you expected, it can be a real test of your discipline. Deciding in advance how you’ll allocate that cash doesn’t have to be complicated. It might be a simple percentage assigned to each of these categories.

This Week’s Takeaway

On the heels of a great month or quarter, don’t spend until you’ve assigned each dollar of revenue a job, split between operations, taxes, savings, profit, and growth.

Being disciplined in your resource allocation in seasons of abundance – just as much (or even more) than in seasons of scarcity – will keep you safely off the feast-and-famine rollercoaster that sinks too many small businesses.

Your success as a business leader reflects how well you allocate your resources. This article is part of a 3-part series about getting the most from what you’ve got:

Your money ← You are here.
Your team
And your time

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Understanding of key metrics & how to track against your targets
Networking / peer connections
Mindset frameworks for successful execution

Time Commitment:

Over the weeks of Aug 11th through 25th
2 lunchtime group calls (August 13th & 27th at 12pm EST)
2-4 hrs per week, for 3 weeks
Flexible learning schedule

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