Your money mindset is your unique set of beliefs and your attitude about money. It drives the decisions you make about saving, spending and handling money. When it comes to running a business your money mindset is critical to its success.
According to Marc Pearlman of the Entrepreneur Europe, the latest statistics from the Small Business Administration (2020) show that new businesses have a 50 percent chance of surviving five years or more. While this dispels some longstanding beliefs that 95 percent of businesses fail within five years, the odds of success are still the toss of a coin.
Common factors contributing to business failures include insufficient capital, poor cashflow management and lack of planning and credit control, to name but a few…
For this blog post we will focus on the money elements, namely:
Why is Cashflow Important?
Cash is the lifeblood of any business
Run out of cash – run yourself out of business
Insufficient cash – no money for reinvestment and growth
Everything becomes stagnant and difficult
Why do business owners get it wrong?
Think hard work equals Profit – it doesn’t
Fear of the numbers – it’s not their strength
Think it’ll be too difficult and complicated
Failing to plan and forecast
Go into too much detail too soon
Don’t look at their numbers – often enough – or with insight
Poor invoicing and credit control
Every business – including yours – needs a budget – a Plan for Profit
If you don’t have a plan – success is far less likely - it rarely happens by accident
Simple sales targets + simple expense budget = plan for profit
You need a Cashflow Forecast:
On a spreadsheet - Identify where in the year your cash will be in surplus or at risk
If you don’t know how – ask a friend or expert for help
Start – and keep it – Simple!
Keep the numbers simple and approximate
Make it no more complicated than you can follow and understand
You can make it more detailed over time.
You need Credit Control:
Whatever your forecasts, if you don’t get paid, you’ll have no money in your bank. – Simple!
Agree preferable payment terms in advance - the shorter the better
Remind politely and swiftly when payments are overdue