Adjusting Your Attitude Toward Money
From E-Myth Worldwide
As a business owner, you think about money a lot. You talk about it. You worry about it. You plan for what you’ll do when you have more of it.
But how often do you actually look at it?
We’re not talking about opening up the register and staring at a pile of cash — we’re talking about looking at and analyzing your financial reports.
It’s surprising how many small business owners abdicate financial decision making to their bookkeepers because they dislike or are intimidated by “that whole finance thing.” If this is something you find yourself doing, we cannot emphasize enough how important it is for you to break the cycle and change your attitude toward money.
Hear us when we say: you will never run a successful business if you don’t regularly review your financial situation. You are the ultimate decision maker for your business. You can and should be the driving force behind the financial decisions and outcomes of your business.
It’s All in the Attitude
So how do you develop the right attitude towards money if it’s something that you’ve always felt uncomfortable with? It starts with understanding the relationship between money and your business.
Now it’s true, some business owners view their business only in financial terms. This approach can work, but it’s a very limiting way of doing business. It squeezes the joy out of being a business owner.
More often, people are intimidated by the financial side of business and, therefore, avoid financial management. “As long as the bills get paid, I don’t worry about finances,” is their casual disclaimer. This approach may work temporarily, but is also limiting because it ignores the great potential that lies within the business.
Both approaches are short sighted and diminish the chances of achieving what you want from your business.
The right attitude recognizes that your business should make your life better. You didn’t go into business just to pay the bills. You could do that with any job. You went into business to reach your Primary Aim. The money that your business makes is both the fuel that helps you get there and a gauge that measures your progress towards that goal.
Now don’t worry, you don’t need to become an accountant. But you do need to master some basic knowledge that will enable you to take control of your finances. You can’t truly be in charge of your company until you can understand and direct what happens with the money your company takes in and sends out.
If you’re a client in the E-Myth Mastery Program®, great. You’ve got the support of your coach and the E-Myth methodology to do the necessary deep dive into your financial reporting.
If you’re not a client, here are a few tips to get you started on the right path.
- Don’t burden yourself with too many figures; instead, identify your Key Financial Indicators (KFIs). You might have heard of “Key Performance Indicators” or KPIs before. KFIs are nothing more than the KPIs for your financial system. They indicate how well your financial systems — and your business as a whole — are functioning. They also point you towards areas where you might need to make changes in order to become more successful. Typical KFIs include: Gross income, Cost of Goods Sold (COGS), Gross Profit, Cash Position and so on. Identify the important KFIs for your business and monitor those on a regular basis. The more you use them, the more useful they’ll become to your decision-making processes.
- Assemble a team. For businesses large and small, accounting expertise is indispensable. Where you get that expertise will depend on the size and maturity of your business. In the beginning, your only financial advisor may be the certified public accountant (CPA) who prepares your taxes. However, as your business grows, you’ll likely hire a bookkeeper. You’ll also need someone to fill the roles of chief financial officer (CFO) and controller. Don’t forget that you as the business owner or CEO are also a very important part of the finance and accounting team. Listen carefully to your team’s advice, but don’t be afraid to ask your accountant to answer questions and explain in detail options that are available to you. Remember, your team of experts all work for you.
- Establish a reporting system that will give you the numbers you need. Every business should have an efficient accounting and financial management system to collect all the business’s financial information, classify and organize it, and summarize and present it in the form of financial statements and reports (think KFIs from above). Round up your financial team and establish the reporting you need them to prepare for you weekly, monthly, quarterly and yearly. They’ll be glad to know you’re paying attention, and you’ll learn a lot about your business.
Money Fuels your Business
Money is the indispensable fuel that powers your business. If over the long term your business uses more money than it generates, then you don’t have a business at all — at least not for long. You need money to hire employees. To purchase equipment. To buy inventory and supplies. And you need money from your business to help you achieve your Primary Aim.
Money in your business is a lot like gas in your car. The point of having a car is not to put gas in it. But if you don’t put gas in your car, you’ll never get where you want to go.
You might not like to pump gas or think about the price of gas. But you know that if you don’t pay attention to the gas in your car on a pretty regular basis, you’re going to get stranded. In the same way, you need accept the idea that you’re going to have to pay attention to the money in your business on a fairly regular basis or you’re going to have some serious trouble.
Image courtesy of Salvatore Vuono / FreeDigitalPhotos.net