3 Financial Hurdles Every Entrepreneur Faces
Running our best race…despite the obstacles in our way.
Track and field is just about to start for my kids. It’s a short, easy season of just four weeks, because, being in elementary school, we want them to have fun and start to enjoy the sport. So for a few evenings in June, my daughter and son will practice running and jumping at the local high school. Growing a business is a lot like a track & field event. We spend a loads of time training, getting our qualifications up to snuff, and practicing our craft until we’re confident enough to anchor our toe on that starting line, ready to leap our financial hurdles. When the gun goes off, we’re off and running. It’s exhilarating! The wind is in our face, our legs are pumping, and we’re running flat out, hell bent on reaching that finish line at all costs. If you’re anything like my daughter, you’re 110% committed to the win and you’ll expend all your energy to stay up front in the lead.
But what if instead of the 400, we find ourselves running hurdles instead, with unexpected obstacles in our way? How we manage and maneuver when that happens will determine our success or failure in the world of business.
Three Financial Hurdles
There are a lot of things thrown at us in this entrepreneurial game. Fear, doubt, competition (real and perceived), ability to scale effectively…the list goes on and on. We could talk about the challenges for days (and sometimes we do, in a sort of catharsis of dark before the dawn). For now, let’s just focus on three main things I see coming up for a lot of people as they work on building a business they love.
Those three hurdles are:
- Setting your pricing
- Getting good information
- Building your bridge
These can be an insurmountable wall or a simple step over a gate, depending on how we approach these challenges.
Setting Your Pricing
Deciding how much you can charge a client for your work is a sticky wicket for many of us, particularly if you’re like my clients who are deeply committed to helping others. So much of our value is caught up around serving and it can negatively impact our ability to set pricing that will drive our business successfully.
Your offerings – and the fees that go along with them – are the gateway to your business’s financial flow. The water spigot, if you will. We can set pricing that has money trickling in or we can have a full stream of cash flowing in. Either way, this is where the money magic begins. And if we’re not clear on how much to charge (and the subsequent value of our services), we’re likely to have a hard time getting the most out of our hard work and our business won’t grow as quickly as we’d like.
This doesn’t mean overcharging, but it certainly doesn’t mean limiting ourselves either. It can be a hard thing, putting a number on our self-worth. And when we’re the main driver of the boat in our business, it’s doubly hard to firmly believe in our value, as related in our pricing. So how do we determine our price points? We do two things: market research and play.
What are other people who offer similar services charging? Do they have more or less experience than you? Is it clear what the market will bear? It’s good to know what’s going on around you when you put your fee structure in place.
That being said, there’s nothing to say that you can’t play a little with things. Too often, I see entrepreneurs establishing intricate plans and budgets, without room for trying things out. Perhaps you’d like to set your next coaching program at $5,000/person. It’s pretty hard to make that happen right out of the gate. You may need to work up to it over the course of several months. You might find that while you can sell it for $5,000, your closing rate drops and that with a little bit of analysis, it’s clear that $4,000 is actually your sweet spot.
We could talk forever about pricing strategy and different ways to train our brains to not be afraid of bigger income, for now just remember these two things: we have to start somewhere so just start…and we can always adjust as we go along.
Getting Good Information
As business owners, we’re required to keep an accurate record of our financial transactions. And if you’re like a lot of entrepreneurs I know, you might be wondering why it’s so dang important. The bookkeeper needs your data, and then the tax accountant uses it to prepare your taxes, right? Most of us want to do right by ourselves and our businesses, so we hire the bookkeeper and the CPA and hope for the best.
Except…gathering data for data’s sake is not the point of accounting, and getting your taxes done is only one part of your money puzzle. The main reason for collecting all this information into useful reports is so we can analyze what’s going on in your business – in a timely manner – and make strategic decisions based on what we find. That’s at the
heart of your financial management. Just like we need good running shoes to achieve our best times, having accurate data at our fingertips is a major key to our success.
Are you getting good information from your financial team? Is it showing up when it should? I have a friend who has a successful seven-figure consulting business and she recently told me that her bookkeeping team wasn’t sending her financial reports until several months later. I was shocked. She’s paying good money, and trusting this company to help her take care of her business, and yet they weren’t getting her the financial statements in a meaningful time frame. And it was making it extremely hard for her to make important and strategic decisions – like whether she could afford to open a new office.
Stories like this piss me off, because in reality, it’s easy to be a great bookkeeper. You have to be pretty distracted to not be able to tie out a client’s books and get them month-end reports regularly. And yet I keep hearing stories about entrepreneurs who think it’s normal to only hear from their bookkeeper every few months. That it’s okay to say “I assume everything’s okay, but I’m not really sure.” Or that it’s fine to not understand the reports when they do show up. You’re the one responsible for the health and well-being of your business, and if you can’t make heads or tails of your financial information, it’s going to be hard to do that analysis we talked about.
If you’re paying someone to take care of your books, you should be getting your financial statements (that means your Profit & Loss Statement, your Balance Sheet and your Statement of Cash Flows, plus whatever specific reports you’ve agreed upon) within the first couple of weeks of the next month, depending on when your band and credit card statements close. If you’re not getting that regularly, or are getting reports that don’t mean anything to you when you look at them, then it’s time to consider shopping for a new bookkeeping team.
Getting solid, clean information is critical to your success as an entrepreneur. Let’s make sure you’re getting it in a timely manner from a bookkeeping team that will answer questions and provide your data in a meaningful way so you can pivot and shift quickly.
Building Your Bridge
The third hurdle many entrepreneurs I talk with face is figuring out how much to take out of the business. In the midst of business building, it can be easy to lose track of this piece of our financial puzzle. While our big picture goal is to put food on our table and save for retirement and whatever other dreams we have percolating at the back of our mind, if we don’t have a specific plan to pay ourselves, our business will readily eat up whatever cash that comes in.
Money likes to have a job to do, and if one of those jobs isn’t specifically labeled “put money in my pocket,” your cash will find another home. That being said, we want to build your business with a firm foundation, so we want to build a bridge to your personal life in a strategic way. What does that mean? Making a plan to pay yourself, if the cash to do so isn’t quite there yet (if you’re still in early days), and adjusting as you go along.
When we have “pay myself” as a line item in our budget (at least in our minds, if not on paper), then we’re staking a claim to recoup funds in exchange for our long hours and hard work in business business. Funding a life we love is why the majority of us got into this entrepreneurial game in the first place, so let’s not lose sight of that in the flurry of daily fires and new opportunities and everything else that takes a piece of our financial pie every month.
In an ideal world, money flows through our business and into our personal lives, allowing us to meet our immediate needs and then some. Many of you have big personal dreams and goals of giving back to your communities. If that’s part of why you started your business in the first place, let’s make sure your financial plan includes paying yourself enough to make that happen. Sometimes we can do that from within our business itself in the form of charitable giving, but often it will come through your personal checkbook, and it feels so much better to fund that part of your life consistently and securely. Let’s make that happen by setting a plan in place rather than relying on a sporadic influx here and there.
The Bottom Line
There are lots of places we can get hung up around our finances as entrepreneurs. Too many to count. Between the realities of cash flow and the mental gymnastics of doubt and self-criticism, we can twist ourselves up and our financial well-being can suffer. Having a clear handle on our pricing strategies is one financial hurdle many of us face. Getting solid information in a timely manner is another. And consciously and consistently building a financial bridge to our personal lives is a third.
So what’s your path to clearing these financial hurdles with grace and ease? How do we build your Zen Money Map?
To be successful and to feel great about the money coming into – and flowing out of – your business, you’ll need to clear all three hurdles. When you do, it’ll be as exhilarating as digging deep for the last few yards before the finish line. There will be more hurdles, and other parts of the track to run, but getting clear on these obstacles as soon as possible will make the next ones easier to jump.
You’ve got this. It doesn’t have to be hard, and it can be lots of fun if we let it. I promise!
Ready, set, go for it!