How Money Affects Your Business Decisions (Psychology of Money). Entrepreneur MBA Podcast 4.35
In today’s podcast, Vince Shorb from National Financial Educators Council and Stephen Halasnik from Financing Solutions discuss how money affects business decisions. Sound financial management is highly indispensable for running a thriving business. However, many businesses failed due to the inability of their owners to make an informed financial decision. As a business owner, you should cultivate a good money habit by learning how to save for a rainy day, keep good credit and make a long-term financial plan. Plus, you need to strike a balance between your lifestyle and money.
How Money Affects Your Business Decisions
There is no denying the Importance of money in running a business. Finances affect virtually every aspect of your business decision, including employee recruitment, expansion, advertising, growth, and so forth. Prudent financial management is at the heart of every business, no matter how big or small. A bad financial decision can make your viable and potentially profitable business fail.
The survival of every business is hugely based on financing. In a study by US Bank, 82% of small businesses failed in the US not because of a lack of customers or poor-quality products or services but due to poor cash flow management.
Sound financial decisions are critical in running a business and must be made right from the start. However, many business owners lack the requisite financial literacy to help them pilot their businesses’ affairs and make informed decisions. Having resources to turn to while running your business will help guide the growth and development of your business.
Hence, we provide you with invaluable insights that help you learn how to manage your money while running your business.
How Business Owners Can Make A Good Financing Decision
Proper financial management can be challenging for small business owners, but it becomes so easy once you make it part and parcel of your lifestyle. The reason most businesses fail is not because of the products or services they provide but lack of experience in managing business finances. If you don’t have sufficient experience managing business finances, it can feel like a chore, and you can slip into bad financial habits, including living paycheck to paycheck. And this may hamper the growth of your business.
However, prudent financial management can save your business from collapsing during a time of difficulty or emergency. As a business owner that craves success, you should have a monthly or yearly working financial plan and stick to it to avoid random expenses. Below are some guidelines that will help you in spending your money.
Create a budget for your business financing.
Every business owner must have a working budget to be successful. Budgeting is one of the most important financial habits you must develop. It offers numerous benefits when you rigorous implement it. Budgeting helps you control your spending, track your expenses, and save more money for your business in case of emergence or opportunity. In addition, it can help you make informed financial decisions, get you out of debt, and focus on your long-term financial goals.
Put simply, having a working budget helps you monitor your daily spending habits, understand the impact of trivial expenses and take charge of your spending.
Set financial goals.
Establishing financial goals is important for setting up your business for success. When you decide how you will manage your money to achieve your business objective, you begin to align your actions with goals. In other words, your expenditure should be tailored to specific outcomes. Having defined financial targets keeps you on track and makes your spending be targeted toward a result.
Financial goals benefit your business by creating focus, motivation, and confidence. Therefore, you should define your financial objectives and live by them daily.
Create an emergency fund
Running a business can quite be a rollercoaster, especially at the initial stage. However, savvy business owners always have backup cash for emergencies or opportunities. Putting away some money can help you during financial distress or when an opportunity comes calling: this includes economic crisis, cash flow issues, business expansion, and more.
You should be able to save up to help you weather any financial challenge you might face down the line. It’s recommended that you have enough savings to cover anywhere from three to six months’ worth of expenses.
The Importance of Managing Business Financing
To be successful in business, you must take your business finances seriously. Financial management is a critical aspect of every business and should not be neglected by any business owner. You should consider the potential consequences of your management decision on profits, cash flow, and the overall financial condition of your business. In other words, you should not toil with the financial performance of your business. Plus, you should periodically evaluate your company’s financial outlook.
For your business to survive, you must have enough cash on hand to pay your employees and cater to other business needs. In addition, as your business scales and grows, it will need more money for financing. In other words, making adequate planning and budgeting for your business expansion will help you to readily fund your business growth internally instead of borrowing from outside lenders.
More so, sound financial management helps you control your business’s cost of capital and not let your balance sheet become too highly leveraged with debt.
Not having a financial plan can negatively affect the growth of your business. To manage your business finance, try to address how you overspend by ensuring that you only expend on what you truly need. Additionally, stick to your budget and keep a good credit score card. A good way to start is to monitor your spending habit to identify areas you’re consistently spending on to know whether it’s something you can feel comfortable cutting back. The bottom line: Good financing decisions help you build a successful business.
Learn About Our Guest
Vince Shorb is one of the country’s leading advocates for promoting financial literacy and a thought leader in teaching and scaling financial education programming. Shorb has led the NFEC in the development of 2,500 literacy programs and the development of over 80 financial literacy assets. He has been featured in publications on USA Today, CNBC, Yahoo Finance, Forbes, CNN Money, MarketWatch, Fox Business, Huffington Post, NASDAQ, and Business Insider. After spending fifteen years in financial services working one-on-one with more than 20,000 people, he founded the National Financial Educators Council – an organization dedicated to combating the financial illiteracy epidemic.
Learn About More Financing Solutions
Financing Solutions is an A+ and 5 stars rated BBB company since 2002 that provides an easy-to-setup unsecured business line of credit to small businesses and nonprofits alike. The credit line we provide costs nothing to set up, nothing until used, and when used, is inexpensive.
Our small business financing product is an excellent alternative to a traditional bank line of credit. In addition, the business line of credit with instant approval requires no collateral and personal guarantees, making it a great backup cash plan.
Small businesses use their line of credit to help with emergencies or opportunities when their small business’s cash flow is temporarily down (i.e., Payroll funding)
Please fill out the no-obligation, 2-minute business line of credit application here. The time to set up a credit line is when you don’t need it so that it is ready to be used, just in case.
Note: Financing Solutions donates 10% of its profits to various nonprofit charities.