Last week I wrote about cash-flow and referenced a great blog from an accounting software website.
This week I am going to touch briefly on Part 2 of that Blog and link part 2 below for you to read.
Rhondalynn Korolak writes in part 2 about 5 symptoms of a poverty mindset around cash-flow.
- Profit, money and tax are bad
- Penny-wise, pound foolish
- Scarcity mentality
- Entrepreneurship is hard
- Not feeling worthy
Profit, Money and Tax are Bad
I have seen many business owners hold themselves back from growing because they hate, absolutely hate taxes.
The only time I advise business owners to slow down on growth is when higher tax rates from the extra profit are greater than the cost in terms of your time, health and lifestyle. If it is natural, stress-less growth, then go for it. Pay the extra tax and be proud of it. Don’t get too creative to avoid taxes.
Most tax avoidance schemes are risky, and usually mean more taxes later. If you try to defer taxes (taxes are usually always deferred, never not paid, unless it is valid income splitting to lower the overall tax rate).
It is the conflict between tax avoidance and desire for more money and profit that can make people avoid growing…
Penny-Wise, Pound Foolish
We all have done this one! Think driving across town, spending more time and money on gas than the savings on the item that was on sale that you could have bought locally!
There is, however, a flip side to this one. It is what I call “sticky costs”. The bulk of expenses in most businesses tend to be fixed in nature. We make decisions today on, perhaps a small recurring expense, like a software service. We used the software for a while, and may have stopped using it at all, or use it less. The price may have even gone up a bit.
My advice is regularly reviewing your fixed costs for sticky items that you could cut without any loss of value to your business.
Here I see business owners pricing everything according to their competitors. You may, though, have a service/product offering that none of your competitors offer.
Business owners here get so worried that if they charge more than a competitor, they will lose all their business. Do you sell a commodity? Who says people buy solely on price?
It is true that if all else is equal, people will buy solely on price.
So, work to make it unequal. Is a Mercedes equal to a Ford Fiesta? They are both cars, clearly not equal.
If you differentiate and know your value, you will not need to compete on price.
Entrepreneurship Is Hard
So many business owners never pay themselves what they are worth. They pay everyone else and suffer with a minimal wage.
Business owners need to ensure they are paying themselves first, not last, when there is nothing left.
They can take out little when starting up, however, at some point they need to get at least above a McDonald’s minimum wage! (Yes, dear reader, there are many super hard-working entrepreneurs that pay themselves that little).
Not Feeling Worthy
Again, not pricing your services in such a way to earn a basic living will not help you stay in business. Eventually the extra hours, the burn-out, the cost to your family will impact you.
If that is true for you, you are better becoming self-employed, or even employed. At least you can leave everything behind at 5pm and go home.
Here is the article in full:
Thanks for reading…