I recently read an article by Jari Roomer about daily habits by people who have their personal finances well in order. As I read the article, I thought how these habits would also be applicable to a business.
What are the habits?
- They put their money to work
- They resist lifestyle creep
- They save
- They continuously upgrade their financial IQ
- Put Your Money to Work. Roomer was referring to a person investing their savings into income producing assets such as stock, bonds, or real estate. For a business owner, this would be the equivalent of seeking out complimentary revenue streams and products that would not only increase their sales but also diversify their revenue. By having more than one way to earn money, a business provides a hedge against having only a single product or service line to depend upon.
- Lifestyle Creep. You may have experienced this yourself whereas your income grew, so did your expenses. For some, the expenses might even exceed their increased income. For a business this can also happen. A business owner may see opportunities (I refer to these as “shiny objects”) to invest their newfound income. Later, they find out that it didn’t work, and they failed to have enough saved to cause potential life-threatening damage to the survival of the business.
- Saving. Personal finance experts will often recommend that you save 3 to 6 months of expenses as your “emergency fund” for when unforeseen circumstances such as a large medical bill or repairs to your automobile. The same holds true for a business. Saving 3 to 6 months of expenses can give the cushion that a business needs to weather similar unforeseen circumstances. Who would have thought in our lifetime that a pandemic would come along and shut down our economy for months? Many companies found themselves in dire situations and unable to pay their employees to keep them onboard. Be sure to build in a cushion to protect your business.
- Continuously Upgrade Your Financial IQ. This is where the business owner and their leadership team have a desire to continue understanding what their numbers mean. These business owners seek out the education and resources that ensure they can equip themselves to understand the financial results of their business. The numbers are the way a business keeps score, just like a professional sports team keeps score so they know who has won the game. Here at The Numbers Coach, this is exactly what we work with clients on doing: Owning your numbers.
Build these four keystone financial habits for your business and your leadership team. It can be the difference between success or failure.