No matter how great you believe your business is currently doing or projected to do, if you have bad financial habits, then you are setting your business up for unnecessary setbacks and failures.
The sooner you acknowledge your bad financial habits, the quicker it will be for you to start gaining momentum for success in your business.
So, let’s explore the 3 bad financial habits that I believe are seriously holding back a lot of entrepreneurs from having success in their businesses.
Bad financial habit #1 – Failing to budget
You have probably heard this before when it comes to your personal lives, but you can also have bad financial habits when it comes to your business.
If you want your business to be successful, you have to start budgeting and if you don’t know how to budget, guys, you have to LEARN!
2 reasons why you need to budget
It is so important that you drop this bad financial habit for 2 main reasons:
- Budgeting helps to reduce or prevent the likelihood of your business running into debt; and
- Budgeting helps to build up cash reserves in case of an emergency (also known as emergency funds)
Even if you started a business online with no money (yes you can do this, I will do a post on this later & give you some ideas of which ones you can start in 2021, so make sure to subscribe 😉), you still need to know how to budget because you need to understand your cash flow, ie. how much money is actually flowing in and out of your business.
If you don’t, how do you expect to know if you are making a profit or a loss? This bad financial habit of not budgeting is going to slowly sabotage your business because you won’t be able to properly analyze what is working well and what isn’t, for your business.
Ever heard that saying, if you fail to plan, you plan to fail! This is so true when it comes to budgeting for your business. Budgeting not only helps you with setting your business goals but it also helps you establish your priorities when it comes to growing your business and testing out new products/services.
Budgeting for your small business doesn’t have to be long-winded, especially if you are just starting out, however you need to be capturing the financial data for your business so you can evaluate your position and make informed business decisions.
Bad financial habit #2 – You are not using debt strategically
What I am about to say might come as a bit of shock to some, but guys, debt doesn’t necessarily need to be a bad thing and it can be used to grow your business. So, you are probably wondering what I am talking about.
Well, it’s all about analyzing and evaluating the Return On Investment (ROI). If the ROI is going to be greater than the cost of the debt, then you are essentially using the debt to generate profit for your business.
Let’s say you are trying to find new clients and you want to run a Facebook advert.
Cost of the advert is £100.00 for 1 month and let’s say you had to borrow the £100.
The advert has the potential to reach 1000 people for that month (on average 142 people per week).
The cost of the product or service you are selling is £25.00.
Let’s say you get 70 people a week clicking through to your website and only 5 people end up actually purchasing your product. That means you are making roughly £152.00 per week.
So for a debt of £100 for 1 month, your return on investment would be £400.00 based on the figures above.
£152.00 x 4 weeks = £500.00
£500 – £100 (debt) = £400.00
Think about it guys, why do you think some companies spend so much money on their advertising.
Now, this isn’t to say you just run with this and start advertising all your products and services, you will of course have to evaluate which products/services you want to run the adverts for and ensure that things like your sales page or marketing funnels (amongst other things) are optimized so that it converts the people clicking on your advert into paying customers.
Bad financial habit #3 – You are not setting financial goals
Financial goals for small businesses can come in all different shapes and sizes just like all small businesses come in all different shapes and sizes. The key is to make sure that those fianaical goals are SMART goals with the aim of determining what you want to achieve, how you are going to achieve it and when you want to achieve it by.
Accountability and progress
Setting financial goals helps you to stay accountable and most importantly, it helps to show the progress you are making within your business. Even if you are set up as a not-for-profit charity, you would still have financial goals you want to set and monitor in order to ensure that you are able to carry on operating as a business.
So, make no mistake, just because you are just starting off or you are in your 2nd, 3rd, or even 4th year of operating your business, you should not allow this bad financial habit to slowly threaten the success of your business. If you want your business to grow, then you need to set targets against which you can help measure that growth.
Financial goals are for all business sizes
This is why it still amazes me that some entrepreneurs still don’t have financial goals for their businesses. Yes, it can be a little scary to think of financial goals, especially if you have just started, but even if you are a seasoned entrepreneur and you haven’t ever set solid financial goals because it can seem a little daunting, the truth is that you need to stop this bad financial habit and start setting your financial goals for your business.
I do hope this post on the 3 bad financial habits that is sabotaging your business has been helpful.
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In the meantime, make sure to comment below and let me know what your biggest takeaway has been from this post and I look forward to reading your feedback and hopefully answering some of your questions.