Running a successful business takes more than a good idea.
Entrepreneurs must also have good money management skills in order to make
their business a true success.
Understand your relationship with money
I advise you to analyze your behavior and unique characteristics to
understand what your strengths and weaknesses are when it comes to managing
money. I once read that many rich people remain rich by behaving like the poor,
while many poor people remain poor by behaving like the rich, and I think there
is a lot of truth in that statement. When it comes to managing money as an entrepreneur you have to separate your personal
finances from you’re business finances, and run your business as a completely separate
pocketbook. Understanding how to capitalize on your own strengths and manage your
weaknesses when it comes to daily money management will be critical to your
business success.
Have a daily target and an action plan
You probably wouldn’t get in your car, start it up, and just start driving without
a predetermined destination in mind. Golf wouldn’t be much of a game without
the hole to shoot for. Even a driving range has yardage markers to provide a
reference point. So why is it then that most small business owners show up at
their business each day with no real measurable financial objective for the day?
Every day that you start out with no clear
goals to work toward is a day that you are getting into your car and taking a
trip to nowhere. The most successful entrepreneurs establish simple, clear and
measurable goals, and manage company activities to those goals. Developing a
financially healthy business does not happen by accident. The two most fundamental
financial bench marks for a small business CEO to target and manage to is a
break-even point and a pre-targeted profit goal. You might be taking in money
each day, but are you really making money?
Run a financially healthy company
I’ve read plenty of articles and books that advise people to pay themselves
first as a mean of getting ahead financially. When it comes to the daily money
management of a small business, that advice doesn’t hold true. The #1 reason
that the failure rate of small businesses is so high is because most
entrepreneurs are under capitalized and they take too much money out of their
businesses too quickly. Constantly taking all the money out of the company will
sooner or later take you down.
If you
want to run a healthy company, know your break-even point, set daily, weekly
and monthly profit goals and manage company activity toward achieving those
goals. Once you start having financial success remember to keep your eye on the
target and your nose to the grind stone.
Remember, rich people remain rich by behaving
like the poor. Build company reserves and then gradually start rewarding
yourself for the hard work you’ve done by taking more and more profits out of
the company while maintaining a healthy reserve.
