Tens of thousands of small businesses enter and leave our economy each year. And while every business is different, there are some common attitudes towards money that underpin success.
Left unchecked, poor financial decision making can quickly derail your business. So what are some of the mindset traps that put small business at risk? Could improving your financial literacy help you reign in these limiting beliefs?
Mindset trap 1: Your passion drives your business
Why did you start a business? Did you have an amazing idea? A thirst for change? It’s great when business owners are passionate about their area of business. But reality can bite hard during the early years when cashflow and capacity issues tend to take hold and passion takes a back seat.
There is a direct correlation between financial literacy and business success. So while your heart may have started the business, the sooner your head takes over your financial strategy, the better off you’ll be.
Mindset trap 2: You make decisions not spreadsheets
Small business owners tend to be action-oriented people. You like making things happen. Your ability to think and make decisions quickly – often based on your gut – may be what led you to start your own business in the first place. While the speed of decision making is important, it’s the quality of information that counts.
Most business owners would prefer to talk about their products and services than their profit and loss statement or balance sheet. However, being financially literate is about more than understanding financial terminology, spreadsheets and reports. It’s about knowing where you’re at now, where you want to go, and having a financial strategy to get there.
Mindset trap 3: Your bank account rules
For many small business owners, there’s nothing more satisfying than seeing a healthy bank balance. (And nothing more stressful than seeing the opposite!) While cash may be the oxygen your business needs to operate, it’s important to understand that your account balance may be lying to you.
What it won’t show you is what your cash position is likely to be in two weeks’ or two months’ time and it won’t tell you how much of that money is GST you’ve collected for the Government.
If money in the bank still means everything to you, a lesson in understanding how to accurately forecast and manage cashflow may be just what you need.
Mindset trap 4: Your accountant manages the finances
Most successful entrepreneurs don’t have an accounting degree (nor do they need one of course) but they do know how to make money, how to spend it and how to invest it.
Outsourcing some of your business functions, like bookkeeping and accounting, is a smart way to ensure you can focus entirely on your strengths. However, it doesn’t mean you can wash your hands of the critical decisions that go along with them.
Making financial decisions is part of your job. If you don’t know the difference between gross and net profit, where expenses should be allocated or the power in your balance sheet, it might be time to invest in your financial literacy.
The right money mindset for business success
Being financially literate is key to understanding how money works in your business. The Business Growth Program is a financial education and business coaching program designed to help you with practical skills to take your businesses to the next level. This is a hands-on program that will take you on a journey to:
- Set strategic goals for your business
- Build a 12-month financial strategy
- Implement a 52-week cash management plan
- Create an effective digital marketing strategy tailored to your business
- Develop your leadership style and build a high-performance team
- Find greater operational efficiencies through technology solutions
It takes all kinds of business owners to fuel our dynamic small business sector. By increasing your financial literacy, you will give your business the longevity and resilience it needs to adapt to every change.
To find out more about this exclusive program:
Download the curriculum for details about each workshop topic and learn what you can do for your business.