5 Cash Flow Tips and Business Insights for Self-Employed Millennials from Justin Green CFP

Small Business
someone turning the knob on a faucet as gold coins flow out of the spicket

Justin Green, CFP®, MSPFP is a fiduciary financial planner who helps business owners and self-employed professionals manage their money. But it wasn’t always that way.

After four years of working at a traditional retirement planning firm, Justin decided he wanted to work with his peers rather than retirement-age clients. He enjoyed engaging with Millennials, Gen Xers, and Gen Z savers, and he knew there was a huge financial planning gap for those younger generations.

In late 2020, he decided it was time to go out on his own and start Assist FP, a virtual financial planning firm. In starting his own business, Justin doesn’t just talk about cash flow and business finances, he’s experienced all the ups and downs himself.

We had the chance to speak to Justin about the decisions he made when starting his business, as well as his advice for small business owners, entrepreneurs, and independent contractors.

5 Cash Flow Tips for the Self-Employed

Justin helps families in traditional full-time jobs and self-employed individuals plan their financial futures. As a result, he understands the temptation to overlap personal and business expenses and the challenges associated with keeping business finances separate. Once you begin using personal accounts for business or vice versa, it becomes very difficult to effectively manage business finances.

“With self-employment, personal cash flow and business cash flow sometimes are commingled and so it's very important to get them to separate those,” says Justin.

"A lot of people avoid the numbers because they're scared of what it's going to tell them"

Commingling is just one of the problems that Justin has frequently come across in his work. Here are five more actional tips business owners and contractors can implement today for better cash flow:

1. Focus on the numbers

    Surprisingly, the most common issue that Justin notices is that most entrepreneurs don’t want to look at the numbers at all.

    “A lot of people avoid the numbers because they're scared of what it's going to tell them, so they might feel that tension that something isn't making sense with the cash flow or things are super tight or their expenses are clearly higher than their income.”

    However, the only way to find a businesses’ pain points is to get an overview of the cash flow. That’s where Justin starts when organizing business finances. Once an owner sees the numbers, it’s much easier to make data-driven business decisions.

    2. Don’t make plans based on assumptions

      Whether you are planning for retirement or estimating where your business will be in five years, it’s easy to make assumptions based on your current consumer base. Instead, Justin suggests keeping projections more current and short-term.

      “For example, I try not to do a lot of retirement projections for Millennials, because so many assumptions would go into a projection and it just wouldn't be accurate.”

      Instead of looking too far into the future, it’s more beneficial if individuals focus on meeting short-term goals around long-term business processes. The important thing is to be continually moving towards your goal.

      3. Be aware of expense creep

        As a business grows, it’s easy to take on more expenses. Often called “lifestyle creep” in personal finance, the same principle applies to business spending. Spending can rapidly become a problem if left unchecked.

        Justin usually directs his clients to the business model in Profit First by Mike Michalowicz to help with cash flow. Business owners need to have a system that allows them to “take profit first” to ensure proper cash flow.

        Normally, a business subtracts its expenses from its income to find the profit. In the “profit first” method, businesses should account for profit before adding in expenses. What is leftover after your profit can be used for business operations.

        “Of course, if your cash flow situation is not very great, then it's going to be a very small profit at the beginning. But once you get in the habit, that profit will grow,” comments Justin.

        4. Have an effective accounting system

          Keeping personal and business finances separate is critical for efficient accounting. Justin recommends having multiple bank accounts, one each for taxes, expenses, and profit. This type of virtual envelope system makes it easy to track expenses and income while also ensuring that the business sticks to its budget.

          5. Save for taxes ahead of time

            Planning for taxes ahead of time can help you accurately plan your cash flow and lower your stress. Simply keeping that money aside in a separate account can give you peace of mind every quarter.

            “It’s best to save 15-20% per month from their income for taxes and set it aside,” says Justin. “So when their tax bill does come quarterly, there’s no stress about where to pull it from.”

            The simpler and more streamlined the process is, the easier it is to pay the IRS and handle any potential audits. At the same time, you can rest easy knowing that your taxes are taken care of.

            Organizing Your Cash Flow Efficiently

            As Justin has pointed out, business success begins with cash flow. Whether you are a solopreneur, the founder of a startup, or a small business owner, tracking your financial health can fuel informed business decisions that grow your company.

            Easy-to-read reports and cash flow projects can help you keep your business sustainable in good times and bad. Pulse helps self-employed professionals and business owners manage money without stress or complex formulas. Get Pulse free for 30 days and see how cash flow management can make a difference in your business.

            More Insight From Justin On How He Built His Business

            Justin doesn’t just offer advice to other business owners and entrepreneurs—he shares in the hardships of creating a business from scratch.

            Justian explained that there were two essential points he needed to focus on to create a solid financial base for his business:

            • Pricing for the Millennial market

            • Factoring compliance expenses

            Pricing for Millennials

              Justin chose from two business models to set his pricing. The first and more common model was a brokerage practice, which is commission-based. While the advice is free for the client, the advisor is paid by a third-party to push their products.

              The second option was to act as a fiduciary and bill the client directly. A fiduciary financial planner is someone who is legally bound to put the client’s best interest above all else. This type of advisor is not allowed to work on commission and is paid directly by the client with a fee. Most traditional fiduciaries take a flat 1-2% percentage fee for assets under management (AUM), which is the total value of your individual investments.

              Rather than model his pricing structure entirely on the traditional percentage fee, Justin added one-time advising packages and a subscription as his primary offering.

              To meet the needs of Millennials and Gen Z, Justin has three core offerings:

              • a 2-session financial planning offer with a single fee

              • a subscription for ongoing financial planning and advice

              • a percentage fee add-on for investment management

              This pricing structure allows him to provide tailored services to younger clientele no matter where they are in their saving journey. It also helps Justin better serve self-employed individuals.

              For example, with the subscription model, Justin can help advise with cash flow analysis, debt management, and tax planning, along with their personal savings needs. But a young couple looking to buy their first house won’t need such a robust plan. So they may choose to invest in his two-session package instead.

              “Because I’m working with younger clients, there are definitely different stages of life when we are working together and sometimes they need some basic advice,” says Justin. “Different subscriptions allow me to help younger clients.”

              Keeping Track of Expenses

                While Justin is able to keep his expenses fairly lean, being a fiduciary comes with compliance requirements, such as keeping permanent client files with all communication and planning materials, making backups and copies of all marketing materials in case of an audit, and ensuring that clients are given written policy documentation. Most of his business expenses go towards essential compliance or planning software such as Advice Pay, a payment processor that allows him to stay compliant with his billing practices and review his projected revenue.

                Cash flow projection has been an important piece of the puzzle from the very beginning. With a clear window into his finances, Justin can better track his income and expenses. The most useful feature for him is to be able to toggle different dates in the future and forecast his potential earnings.

                “That's extremely helpful for me because, as I continue to grow, that projected income is based on ongoing subscriptions that I already have set up,” notes Justin. “That allows me to see when I can start to outsource some tasks to other professionals.”

                Justin tends to stick with three-month or six-month projections, and then use that information to plan potential business investments, such as hiring contractors for marketing.

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