Are you a Donald Trump or Mother Teresa?
Is your relationship with money sabotaging your business success? Lynda Moore offers some insightful advice. Managing your business and personal finances should be easy, shouldn’t it? Spend less than you earn, pay yourself first and don’t forget the taxman; easy peasy. But if it’s so easy why do so many businesses struggle? Many small businesses are started […]
Is your relationship with money sabotaging your business success? Lynda Moore offers some insightful advice.
Managing your business and personal finances should be easy, shouldn’t it? Spend less than you earn, pay yourself first and don’t forget the taxman; easy peasy.
But if it’s so easy why do so many businesses struggle?
Many small businesses are started by ‘doers’. The amazing architect, plumber, doctor or personal trainer goes ‘out on their own’. They are fantastic at their profession but they don’t know how to run a business.
The customers get the blame; “they don’t pay me on time”, or it’s the IRD; “I’m paying too much tax” or “I hate doing the paperwork.”
Business owners haven’t been taught financial management, so that must be why they strug-gle. Is it?
You can find solutions to all these problems by hiring or outsourcing to find the skills that you need but don’t have in your business. But even if you get the best team in place, with the best advisors, many businesses still struggle financially. Why?
Maybe we need to look a little closer to home. Who’s that person we see every morning in the mirror when we brush our teeth? No, I don’t mean your partner or the family cat. It’s you!
There, it’s out in the open. Maybe the reason your business isn’t doing well financially is you!
There are two clear aspects to being financially successful:
- The practical side of money management which accounts for 20 percent and is a learned skill.
- Your mindset, or money psychology accounts for the other 80 percent. This is the part that doesn’t get talked about very often in the financial world. Sports people know only too well this rule.
Many of my clients are SME owners. Very often someone will come to me because they’ve reached a milestone – their 40th birthday or ten years in business perhaps. And they realise they’re not quite where they thought they’d be.
On paper, they’re following the rules and doing everything right, and yet there’s this niggle that stuff just isn’t working as well as it should. My job is to get into their money psychology (money mindset) and help them to understand their money beliefs and how this impacts their behavior, both in business and their private life.
I start by asking a couple of questions:
1. What is your relationship with money?
Before you answer that question, let me make it clear. Whether you like it or not you have a relationship with money. That relationship is the longest relationship you will have. It’s with you for life, so you may as well make it an enjoyable one.
The good news is, like any relationship you can improve it; you just need to have a starting point to work from.
Let me give you a couple of examples of answers I have had to that question to give you an idea of what I mean.
- “I hate money! I hate that I continually worry about it, I can’t manage it and there is never enough of it. Money controls my life, it is all I think about!”
- “I love money. I love having money, being able to choose what I spend my money on and how I invest it. Money gives me control and power over my life”
These relationships with money are poles apart. Both statements are from business owners. The second business is flourishing and in expansion mode, whilst the first lurches from one financial crisis to another.
2. What does money mean to you?
What’s the first word that pops into your head when you read that question? Write it down and remember it, as it is the primary association you have with money and will impact every financial decision you make.
Let’s look at an example.
What do you think money means to Donald Trump? Power, control, status, are words that probably come readily to mind. Now let’s contrast that to Mother Teresa. Giving, non-materialistic comes to mind. Money gave her the ability to help others; to give it away, not keep it for herself.
If you associate power and status with money, you are more likely to want a new expensive car as your business vehicle, often regardless of whether the business can afford it or not.
There is no right or wrong when it comes to either your relationship or meaning that you give money. But imagine what might happen if Donald Trump and Mother Teresa went into business together, or were in a relationship together. It could get quite stormy.
When it comes to money 1+1 doesn’t always = 2.
Economic theory assumes we always behave rationally, whereas in real life, we don’t. Why? Because we attach emotion to money.
So how do our emotions affect our decision making? Let’s go back to our car example. Your emotions will dictate the type of car you drive; how your clients and competitors will see you. You couldn’t possibly show up to a client meeting in that old bomb!
Your relationship with money not only impacts your business but your personal life as well. Your business may be thriving and your personal financial situation can be in chaos. In your business you are surrounded by a team of people to help you, from the person who does your books, to your banker, accountant and business coach. But once the money leaves the business you are on your own. The support network isn’t there and you can find yourself in strife.
It isn’t only your relationship with money you have to think about, it is also those that are closest to you. For example, your bookkeeper or internal accountant should have the 20 percent practical skills nailed, but what about their own relationship with money? That is going to impact on how well they do their job and manage your business funds.
Being ‘instructed’ on how to handle money is never going to work in the long run. To make ‘better’ financial decisions, you need to change your behaviour and challenge the emotions which prompted that behaviour in the first place. Then, align your core values and your beliefs with your financial goals and you really are on your way to achieving financial satisfaction and independence.