How do you know your business is doing well? You certainly can have a gut feeling about how you’re doing or a sense of your growth and what you’re taking in. However, we’d recommend something a little more formal than that. The balance sheet is a snapshot of your business at a particular point in time, usually the end of the year. It should document everything that you own and owe with a goal of showing your net worth. As with the income statement, this can help give you a strong picture of how your business is doing. Are you worth more than you owe? Are you breaking even overall? Could you be investing more in the business to drive later increases in profits?
A balance sheet is a great way to spot trends because you can see changes in your net worth over time. Even if you’re at a negative net worth but you’re progressing towards positive you can take that as a good sign! And if you’re noticing that your liabilities are creeping up but you aren’t getting corresponding assets then you might have a cause for concern. Luckily streaming isn’t an asset or liability heavy business so this shouldn’t be that hard to make.
Assets
Your assets are everything that you own. This could be cash, computers, games, your chair, and your audio/visual setup. You want to make sure that you’re marking them at a rough resale value, not the value at which you purchased them. The reason for that is the true measure of their current worth is actually what you could sell it for on the open market. It’s unfortunate, but true.
As with other business statements, you should break out your assets by type. Are you holding mostly cash? Do you have a lot of audio/visual equipment? This can give you a sense of where you might want to do some future spending. Also, if a category hasn’t changed in a while it might be an area where you need to update the statement itself for new market values.
Liabilities
Liabilities are everything that you owe. This could be a small business loan, a loan to friends and family, and credit card statements. If you pay someone to help you, it should also include the amount of salary they’ve earned but not yet paid. There’s nothing original in why you want to do this- it helps to have good metrics to measure your business and most small businesses get killed by having to pay down liabilities or the owner’s upkeep. Maintaining a good sense of your liabilities will help you know what you need to earn to keep going.
Equity
Your equity is what’s left over after you subtract your liabilities from your assets. It’s also your net worth, or the amount that the business is worth if you were to just shut everything down and sell it for parts.
Technically you can also have your brand as a part of your equity but unless you’re a really large streamer and you’ve gone through a formal evaluation process I’d say the value for sale is nominal.
Tools
Excel has some decent balance templates. Their templates do go into more depth than you may need as a smaller streamer but it’s a good start. Otherwise, you can use software that we’ve mentioned before for your accounting like Freshbooks, Xero, or Quickbooks Online. If you do a good job in those programs they should be able to produce useful reports for you. You can also make up your own but I wouldn’t recommend that as someone starting out! It’s a little easier than an income statement but still there’s no need to recreate the wheel.
Conclusion
Putting together a well-made balance sheet will give you some important insights on your business. Spending even a little bit of time analyzing it will help you make better decisions and be more successful in the long run. Don’t neglect making a balance sheet just because you haven’t done it before! If you have any questions or need someone to double check what you’ve done, shoot me and email or leave a comment.
