#1 Strategy to Achieve Financial Success in Biz
Tuesday I was on the phone with a client, deep in conversation about their company’s financial outlook just before it happened.
At first I thought it was a subway going past. Then it got more intense.
Before I knew it my whole house was swaying. As I quickly hung up with my client, I realized this was the first earthquake I’ve felt in NY since the early ’80’s.
I immediately shifted gears to my wife who had just left to take a subway. Wondered if she was OK.
Isn’t it interesting how quick it is to shift from business to personal, and vice versa, when something like this happens?
And I’m not alone.
Over the past several years my team has worked with about 2,500 entrepreneurs in 13 countries. Of these, probably 95+% of them have brought their personal lives into our coaching.
Because our personal and business lives are so integrated.
In fact, business is a direct reflection of how we run our personal lives.
For example: finances.
Using this understanding of the relationship between personal and business finances, usually within a few seconds I can usually determine if an entrepreneur will be financially successful or not.
From how they answer “How are your personal finances?”
Their answer explains their personal relationship with money.
- My finances are a mess and I hate numbers.
- I have tons of debt, but I am organized and working through it.
- Finances are handled. I have budgets and plans for the future.
… are some sample answers. Very telling in business, yes?
Now out of these 2,500 or so entrepreneurs, probably 40-50% of them describe themselves as “not numbers people.” So they naturally avoid them.
And as a result their business struggles.
This continues until they either run out of money or they shift the one thing that will make them financially successful.
And that is your personal relationship with money.
Keep in mind, whether you have a strong relationship with money or not, you must deal with numbers and money in your business daily. And while you can have someone do your numbers, you must ultimately review and understand them regularly.
The success of any business relies on the entrepreneur building its financial stability.
Top 5 Tips to Ramping Up Your Relationship with Money NOW
1) Know Your Numbers— not a numbers person? You must understand the differences between key financial statements like your Profit and Loss (Income), Balance Sheet and Cash Flow. This is the livelihood of any business.
2) Manage Your Debt— be 110% on top of your debt. What you owe, to whom, what your interest rates are, your credit score, etc. Use a chart to measure where you are now and going to. Review how this changes over time. From this you plan how you will take care of it.
3) Be Responsible— different than being UnReasonable. Make sure your strategy doesn’t create risks that will ruin you or your stakeholders. Use your board of directors/advisors, a coach, your mastermind group, a consultant, to check your assumptions and ideas.
4) Plan Your Numbers— this requires building out forecasted financial statements, like your P&L and Cash Flow. If necessary, get someone to set this up and teach you how to maintain it. This is one of the most important things a business tools for successful small businesses.
5) Empower Your Team— one of your top assets is your team. Leverage them to help manage the finances. The more they are involved, the more likely they will want to help. OBM (Open Book Management) is a powerful system to do this.
Now, if you’re in the 40-50% that are not numbers oriented, don’t fret. You can shift this in a heartbeat.
Just like any relationship, though, it takes work. It takes focus. And it takes commitment.
Commitment to knowing your numbers and staying on top of them at all times.
The good news is that for those that make this shift, probably more than 90% of them start to enjoy seeing the progress with their finances.
And once THAT happens, you start to see dramatic shifts in the financial performance of the business, in a very short time.
Action Steps for the Week:
What is your relationship with your business finances?
Do you have it handled? How updated are you on your numbers? Do you know right now what your monthly expenses are? How profitable you are? How your cash position is?
And how is the next two months looking?
If you cannot answer these right now, you are not on top of your finances. And this will bite you in the butt if you are not careful.
So, get clear on them. Put systems and structures in place to review your numbers weekly.
When you know your cash position and if you are profitable or not, you can start to organize and plan the future of your company. You will have less surprises. As a result you have more time to focus on other important things.
Getting this handled might include running automated weekly reports to review, having a bookkeeper do it for you, or running the report yourself.
Lastly, consider finding support to get and stay on top of your numbers. For example, join a mastermind group. A group, like the one we’re putting together in a few weeks, will help you get your finances totally in order and start aggressively growing your company.