Does your business go through cycles of desperation where accounts are low and you find yourself in a panic? What is your mindset around money?
If you’re a fly-by-the-seat-of-your-pants entrepreneurial type, you may be caught in a vicious cycle of feast or famine that’s putting your business at risk – and creating unnecessary stress.
In a 2013 Forbes’ article entitled Five Reasons 8 Out of 10 Businesses Fail, Eric T. Wagner outlines the five reasons a whopping 80 percent of startups crash and burn within the first 18 months – according to Bloomberg. Wagner puts “Inability to nail a profitable business model with proven revenue streams” at number five. That makes sense. After all, how can you have a profitable business if you don’t have proven revenue streams, right?
The problem is, you can’t just stop there. While having revenue streams is absolutely important to sustaining a business, what you do with that stream of revenues once it comes in is equally important. Having a system for managing that money can ultimately be the difference between crash and burn or survival.
Many business owners are driven by something called “the Recency Effect” or “bank-balance accounting,” which means they look at what’s in the business account to determine how freely they can spend on expenses (or pay themselves) or how much they need to tighten the belt. When accounts are flush, it’s a free-for-all. But when accounts are low, desperation sets in. This type of money management creates a cycle of sell, spend, panic that brings unnecessary stress and breeds desperation.
Desperation is NOT a good place to work from! It causes us to accept clients who aren’t a good fit for our business, offer our products or services at “fire-sale” prices, and make hasty decisions that add to our debt load to stop the bleeding. It also makes us “appear” desperate. And, let’s face it, customers and clients can sense desperation a mile away. Desperation can be a client repellent at a time when we most need those sales.
Diana Ennen wrote about this very phenomenon in her article Avoid Desperation Selling. Ennen lays out strategies for maintaining consistent sales and revenue flow like planning your marketing, reviewing your pricing, getting your head in the game, and setting realistic goals – among a few other suggestions. All good advice and things I also help my clients with too! But it goes even deeper than that. Ennen left out two VERY important things in my mind… mindset and money management.
It’s all about mindset… and having a financial plan. In my last post, Does Mindset Fuel Success, I wrote about our ability to purposefully, consciously change our thinking and open ourselves up to doing things differently when what we’re doing isn’t working for us. Exploring our mindset around money and setting up a structure where the money that’s coming in is building a solid foundation for our business is something too many small business owners overlook. It’s apparently something many experts and business writers overlook too.
Ineffectively managing your revenue stream and allowing yourself to get into a desperation mindset can derail all your other efforts to grow your business. Randy Gage, in his Success and Prosperity blog titled The Only Free Cheese is in the Mousetrap, talks about people for whom prosperity comes, but they lose it all. Though he mostly refers to lottery winners and doesn’t specifically come out and use the term mindset, Gage states, “A big part of the price you pay to becoming prosperous is becoming the kind of person that handles prosperity responsibly.” He goes on to say, “If you want to become more prosperous, the first step is asking yourself how you can get better… who do you have to become, to live the life of prosperity you desire?”
That’s so relevant for business owners! If you want to become the kind of person who lives the life of prosperity and financial stability you desire, you need to have a plan for managing that revenue so it gives your business the stability it needs. You need to honestly look at your mindset around your business finances and consciously lay out a system that ends desperation cycles.
Want to explore your mindset around money and put the system in place to end desperation cycles in your business? Contact me today. I have a proven system that will get your business on track for profitability and prosperity.