Owning a small business is rewarding, but it can also be extremely stressful. You need the skills and expertise to deliver a great product or service, but you also need the financial skills and money mindset to grow and sustain a profitable business.
If your business seems successful to the outsider, but you are struggling to pay bills and are not making a profit, the stress of cash flow will impact your mental health, physical health, and business success.
What are signs that finances are impacting your personal health and business?
- Avoidance – You avoid looking at your bank account balance, bills, and financial statements. Money is a taboo subject, and you hide the truth of your money struggles from family, friends, and colleagues.
- Negative emotions – You experience shame, guilt, or anger when thinking about your finances. You may get into more arguments with your significant other due to the financial stress.
- Lack of focus – You have a hard time concentrating on tasks and making critical business decisions. You make short-term decisions like discounting, adding products that do not fit your long-term strategy, or taking on clients who are not your ideal customers.
- Unhealthy coping mechanisms – You deal with stress by overeating or drinking alcohol, which can lead to weight gain and poor quality of sleep. Or, if you tend to lose your appetite when stressed, you are skipping meals and may be experiencing weight loss.
What are recommended steps to maximize your health and business profitability?
1. Debt – While debt may seem normal when starting a business, create a plan to pay off debt.
The best way to tackle debt is to list all the debts and outstanding balances, and focus on paying off one at a time, starting with the lowest balance regardless of interest rate. While this seems counterintuitive, once the first debt is paid off, you will feel a sense of accomplishment and gain the momentum to put extra income toward the next debt.
2. Emergency fund – Create an emergency fund covering three to six months of expenses for both your business and personal life. Having the cash to handle unforeseen emergencies can be a huge weight off your mind, enabling you to make sound business decisions while protecting personal assets.
3. Budget – Create a budget and review your spending habits on a monthly, quarterly, and yearly basis to see where all the money is going.
Look for recurring bills with subscriptions or services that you are no longer using or are not seeing the return on investment. Pause or eliminate expenses until you pay off debt and build up an emergency fund.
4. Automation – Enable automatic credit card payments to pay bills on time, eliminate late fees, and avoid interest penalties. Set up recurring bank transfers to a savings account to create a cash cushion for emergencies and taxes.
5. Financial resources – Work with a team of professionals to help build money skills and gain a better understanding of your finances.
- Accountants prepare and file taxes. A certified public accountant (CPA) can represent you in the event of an IRS audit, appeal, or collection issue.
- Bookkeepers manage monthly financial transactions and create financial statements such as income statements, balance sheets, and profit and loss statements.
- Financial advisors provide investment advice and retirement planning.
- Financial coaches can help create a budget, plan to pay off debt, analyze financial statements, and review pricing to maximize profit.
When you combine your expertise with the right financial skills and team, you will increase the chances for improving mental health, physical health, and long-term business success.
Sylvia inks is a financial coach, speaker, and author of the book Small Business Finance for the Busy Entrepreneur.
SMI Financial Coaching: smifinancialcoaching.com
Small Business Finance for the Busy Entrepreneur: smallbusinessfinancebook.com