Are you stressed or scared about your business finances? Business finances are a consistent point of stress for entrepreneurs. Sleepless nights. Panic attacks. Ignoring voicemails and emails. Fear produces action and there are only two: failure or profit. There is nothing in between. As an entrepreneur, you have the choice of taking actions that can produce either result.
Fear comes from not knowing the outcome of circumstances or situations. Every business has moments and periods of time where certainty is nowhere to be found. The most stressful and anxious moments tend to come when finances are tight, non-existent, or dire.
Let’s step back and create a context for fear.
A business can only survive if it is profitable. Profit is what remains when you have sold products/services to customers and have paid all of your expenses:
💰Profit = Sales – Expenses
Profit is used to purchase assets, pay down liabilities or pay for expenses. Examples of assets include inventory or equipment and examples of expenses can include software, hiring, etc.
When a business doesn’t have profit it means sales are not enough to cover expenses. An entrepreneur has two (2) options:
⬆️ Increase sales
⬇️ Lower expenses
That’s it. If this seems simple – it is.
As an entrepreneur there are many different tasks, problems and, issues that we are constantly dealing with. When it comes to finances, all of our stress and anxiety (along with sleepless nights) generally comes from running our business at a loss. Sometimes the losses are our fault and reflect our inexperience. Other times we find ourselves in circumstances beyond our control like market changes and supply chain issues. Whether it’s our fault or not, there comes a point at which we need to make decisions that address the underlying math of our business. Even not taking action is a decision.
Here is a simple formula to help you move forward if you are stressed or scared about your business finances.
Being scared or stressed is a feedback loop that only goes away when you make a decision to do something about it. The most success I have ever had when faced with financial challenges is to:
- Acknowledge why I am stressed or why I am scared
- Talk through the worst case scenarios
- Plan my next steps that address the reasons I am stressed or scared
Acknowledge why I am stressed or why I am scared
I have learned that half the battle I face is with myself and my own thoughts. I instantly feel better when I talk out loud with someone or write down the reasons I am scared or stressed. Fear is an emotion which means it is something I am feeling. It’s not tangible or something I can hold. Feelings are unreliable and subject to change so my job is to figure out how I change my feelings and the best way I have found to do that is to talk or write down what I am thinking.
Talk through the worst case scenarios
Like the boogeyman in the closet that doesn’t exist, oftentimes I have discovered that the worst-case outcomes are not quite as bad as they seem. It doesn’t mean they are ideal but once I come to terms with the worst-case scenarios I find I can manage my emotions better and begin thinking through my next steps.
Plan my next steps that address the reasons I am scared or stressed
Knowing that every financial issue, challenge and, difficulty in business come from the lack of profitability, planning my next steps becomes an easy exercise. How am I going to increase my revenue and/or decrease my expenses?
You may try to convince yourself that your business finances are unique and fixing them is not as simple as increasing sales or lowering expenses. You may think you need an investor or that you need to find financing, but if that is where you are focused then you might not find yourself working towards a productive outcome.
Establishing profitability provides every entrepreneur with enormous opportunity. Remember: profitability is used to purchase assets, pay down liabilities or pay for expenses. Every aspect of your business finances revolves around these points. You can reduce how stressed you are if you can face the outcomes you are scared of by figuring out how to get back to profitability. It’s going to require work. It’s going to be frustrating. It’s going to be hard. If you have gotten your business to this point it means you have spent time, effort and, money and owe it to yourself to get through this moment.
There is no shortcut to not being stressed or scared of your business finances. If fear comes from not knowing the outcome of circumstances or situations then it would follow that experience is the antidote for fear. Experience comes by taking action and producing an outcome. Do this enough times and you’ll find yourself well on your way to building the successful business you desire.
One final note
Sometimes things simply don’t work out. Some businesses simply can’t be profitable. If you find yourself in this position you the sooner you make the inevitable decision the better off you will be for it.
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