3 Money Mistakes that Keep Your Business Broke
Poor money management has been the cause of more business
failures than any other single issue. And it’s no wonder. We aren’t born
knowing how to manage money. Most of us aren’t taught how to handle it either.
We figure it out along the way, through much trial and error.
Those same mindset issues and bad habits that wreak havoc in
our personal finances can plague our businesses as well if we’re not careful.
Catching Shiny Object
Syndrome
Some things are just hard to resist—especially when your
friends and colleagues are all jumping on board! New tools, training, group
coaching programs and even business models can all have a strong pull, and if
you aren’t careful, these shiny objects can quickly distract you from your
current goals.
If you find yourself catching shiny object syndrome
frequently, try this two-step plan instead:
· For “too good to refuse” offers, make a plan for
achieving a positive ROI before you purchase. If you cannot find a (realistic)
way to make the purchase pay for itself, don’t buy it.
· For exciting new business ideas, create a
“someday” list. Jot down your idea and a basic outline, then get back to the
task at hand. Now that great idea won’t be lost, but it also won’t join the
ranks of half-finished business plans that litter the internet.
Falling for the Sunk
Costs Fallacy
If you’ve ever said to yourself, “I’m not using this
subscription, but I can’t give it up! I’m still paying the launch price and now
it’s much more expensive!” Then you’ve fallen for the sunk costs fallacy.
This common mistake is famous among economists, and we all
fall victim to it from time to time. Simply put, the sunk costs fallacy is what
makes us justify investing more money or time in something—even though we’re
not seeing results—because we’ve already spent so much. It’s what encourages us
to repair the car one more time (after all, you just put new tires on it), eat
a meal we don’t enjoy (simply because you’ve paid for it), and yes, continue to
pay for tools and resources you’re not using.
Take a few minutes and examine your current business
expenses. What are you paying for month after month that you’re not using?
Either make a plan to put them to work for you, or cancel them. Stop falling
for the sunk costs fallacy.
Too Much Penny
Pinching
You thought this was all going to be about overspending,
didn’t you? Here’s the kicker: Spending too little is just as bad for business.
When you’re constantly on the lookout for free and low-cost
tools or working 16-hour days because you “can’t afford to outsource,” you’re
not doing your business any favors. Sure, it looks like you’re bootstrapping
and working really hard to make something from nothing, but what you’re really
doing is digging yourself a rut it will be nearly impossible to climb out of.
Not only that, but you’re reinforcing a scarcity mindset that will continue to
plague you for years if you let it.
Rather than pinching pennies, learn to spend money strategically. Buy what you need, when you need it. Invest in top-quality products and programs rather than settling for the low-ticket, half-baked plans. Just like quality clothes, cars and furniture, quality services and software last longer and work better. And unlike that car, good quality business tools will pay for themselves.