4 Keystone Habits For Financially Savvy Business Owners

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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?

  1. They put their money to work
  2. They resist lifestyle creep
  3. They save
  4. They continuously upgrade their financial IQ
  1. 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.
  2. 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.
  3. 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.
  4. 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.

Are Successful People Just Lucky?

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Have you ever heard of the “Marshmallow Experiment?”  This famous research experiment from the early 1970s involved children who were offered a deal:  The child was given a marshmallow and told that if they didn’t eat the marshmallow while the researcher was away, the child would be rewarded with a second marshmallow.  Some children ate the marshmallow right away while others waited for the second one.  What’s the significance of this experiment, you may ask?

The researchers tracked down the participants as adults and noticed something interesting.  The children who delayed gratification of eating the first marshmallow did better with SAT scores, stress responses, avoided substance abuse, and had better social skills, as reported by their parents.  The researchers then followed the participants for 40 years and continually noticed that the ability to delay gratification was one key aspect for their success in life.

This behavior plays out in business as well.  The decisions we make today impact what we can do in the future.  Delaying gratification with purchases and initiatives could be the difference between success and failure. 

Researchers at the University of Rochester duplicated the experiment years later with a twist:  They split the children into two groups. One group was exposed to unreliable experiences; hence these children were offered a small box of crayons with the incentive of getting a bigger box later that would never come.  The second group was given reliable experiences, and when offered a bigger box of crayons they got one.

Well, you could expect what would happen with the children with unreliable experiences when they ran the Marshmallow Experiment on them:  They ate the marshmallow right away because they didn’t trust the researcher.  Does that sound like a situation you may have had at your company?  Promise something, but you didn’t deliver?

If you can delay gratification and build a discipline for this into running your business, then one of the keys to success is already in your toolbox.  No luck is required.

Cheers to your ability to succeed with delayed gratification!

Mike

Should You Ever Stop Learning?

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As kids are heading back to school (at least here in Georgia), it brings to mind the question of “Are you ever too old to stop learning?”  The answer, of course, is no.  The notion that the CEO of a business should “know all” is a relic of the past.  Given the rapid pace of change in today’s digital world, the CEO needs to be a person who embraces the ideal of lifelong learning and realizes that they “don’t know what they don’t know.” 

Some of the best leaders consider themselves constantly learning and they never want to stop learning.  This should not just resonate at the top level of leadership but also throughout an organization.  Creating this type of environment is one of the qualities that sets “great” companies apart from “good” companies, according to Jim Collins’ classic Good to Great.

How do you set up an environment to model lifelong learning?  One method I have seen successfully implemented is the CEO who models the behavior of self-improvement.  I have met leaders who are at the pinnacle of their careers, and they have engaged with seeking out mentors and coaches to improve themselves.  In 2015, Harvard Business Review did a study of 45 CEOs with formal mentoring relationships and found that through these relationships their company performed better financially.  They also made better decisions and an demonstrated an improved ability to meet the needs of its stakeholders.

The mentor or coach is not necessarily senior to you and can run across generational divides for the person to gain insights from a wide range of perspectives.  I have been a part of a business roundtable, Vistage, for over 15 years and engage monthly with other local peers who are both senior and junior to me.  I learn from all of them because they help me understand issues from many different perspectives.  I have also recently engaged a personal business coach to help me better understand my blind spots and where I need to focus to improve my skills.

These relationships helps facilitate the exchange of ideas and information that I may not otherwise get exposed to.  I know of companies who hold regular offsite learning meetings with the sole purpose of providing their teams with information that helps them improve their leadership.

There is also no substitute for accountability.  Meeting on a regular basis with a coach, mentor, or mastermind group that holds you accountable can make the difference between success or failure both professionally and personally.

Cheers to a lifetime of learning!
Mike