by Melanie Benson Strick
An entrepreneur typically starts their business with one really big project at the forefront – figure out how to make money. From launching their product to understanding their client’s real needs, the money-making process requires a lot of time and effort.
But what many entrepreneurs don’t realize is that learning to MAKE money is a small part of being financially successful. And…just because you know how to make money doesn’t make you an expert at keeping the money you work so hard to generate.
Most of small business owners are never taught how to be good financial stewards and it’s not uncommon to generate high six or seven figures – and be cash poor.
Here are four of the biggest money mistakes entrepreneurs make (and how to overcome them so you don’t fall into a cash-flow pit!)
Mistake #1: Mental Cash Flow Planning
Mistake #1 is the act of planning for your financial goals in your mind – instead of putting them on paper. Nine out of the ten entrepreneurial clients I coach don’t have a process to map out their potential revenues. Without this step, the entrepreneur will almost always waste time and money on low payoff products or set themselves up for a dreaded cash flow crunch.
When you muse over your potential revenue in your head you will often make the picture look far better (or far worse) than it really is. When you learn how to map out your revenue potential you can see your situation for exactly what is realistic based on your current offerings and time availability. Then you can make smart decisions for which of your offerings you should put the most time and attention into first.
Take time to map out at least six months’ worth of revenue projections from your current offerings. This eye-opening experience will help you make better decisions for your time and resources.
Mistake #2: Avoiding Reconciliation
When I teach entrepreneurs how to upgrade their money patterns, a big part of the process is understanding what their main money blueprint is. Interestingly enough, over 50% of my clients discover they had an “Avoider” Blueprint – avoiding the practice of reconciling their books for months (if not years.) When you avoid looking at your financial cash flow picture you will have no idea how much money you are spending to make the money you have right now. I’ve coached millionaires who were actually broke because they spent more running the business than they could make with their offerings.
Avoidance is only going to make your financial prowess weak. Most Avoiders simply need an easy-to-use system to stay on top of their cash flow so they can make better decisions. But it’s also about making the commitment to be a good financial steward and have ongoing reviews of your books.
Take time to develop a regular practice of tracking your cash flow. It’s a muscle that will make you a better business owner!
Mistake #3: Over (or Under) Delegating Bookkeeping
The third mistake made around money is not having a good bookkeeping process. Many entrepreneurs are fearful of letting go and hiring a good bookkeeper to keep them on track (which in turn leads to avoidance issues.) But I’ve also discovered that once you do have a good bookkeeper that some small business owners will over-delegate (which often leads to corruption or costly mistakes.)
Delegating the routine bookkeeping activities like reconciling your transactions against your bank statement can free up valuable time. But you have to stay in control of your financials with regular reviews of your financial statements. Be sure to always have at least two people who touch your books – a bookkeeper and an accountant – to avoid mismanagement.
Be sure to have a monthly or weekly review with your bookkeeping team. Reviewing your financial dashboard is a job you can’t afford to avoid.
Mistake #4: Cutting Back During Growth
The last mistake is more of a mindset issue – cutting back on growth investments. One of the signs that you have limiting beliefs or conflicts in the way of playing a bigger success game is HOW you make decisions to grow your business. If you hold back from investing in a strategy, resource or support that you know could help but due to fear you just don’t pull the trigger, your mindset needs a tune-up.
It’s normal to not know how everything will turn out in your business – that’s the name of the game as an entrepreneur. If you want to grow your impact and income, you need to elevate your internal success blueprint so that the clarity and courage to make investment decisions is easier.
When you suspect you require a mindset tune-up and better habits to grow financially, hire a coach or get the right resources to strengthen your financial practices. Whatever you do though, don’t stay in your old patterns and expect to expand your success!
Melanie Benson is known as America’s Leading Small Business Optimizer because she knows how to boost profits and results with her secret weapon — LEVERAGE. With over 12 years in corporate project management, Melanie works exclusively with thought leaders and visionary entrepreneurs who want proven strategies to monetize their big ideas and catapult their success without giving up their life.
Melanie is host of the Amplify Your Success Podcast, author of Rewired for Wealth, serves on the Executive Leadership Team for Women Speakers Association, is co-author of Entrepreneur.com’s Start Up Guide to Starting an Information Marketing Business and has her success tips featured in magazines such as Bloomberg BusinessWeek, Parenting Magazine, Woman’s Day and American Express FORUM. Melanie is a proud lifestyle enthusiast and spends her free time in search of the best spas and beaches in the world.