When an entrepreneur first starts their business, the focus is typically on making money — fast. At first, the focus is on finding the right market and selling effectively. If the small business owner figures it all out, they should be generating positive cash flow after the first year. But as the business continues to evolve, creating positive cash flow is WAY more than just making money.
There is a significant difference between knowing how to “make money” versus “grow money.”
A common blind spot in our money-focused world is the million dollar status (or for some a billion dollar business.) But here is the problem: just because you are making good money doesn’t actually mean that you are profitable. Typically this blind spot doesn’t become troublesome until the revenue slows down but the spending doesn’t.
A few years back I worked with a big name marketer who couldn’t get a handle on her cash flow. She made seven figures — but she always seemed to need more income. As I dug into her revenue projections and sorted out her business model, I quickly discovered she had a pattern of spending $1.5 M to make $1.15 M in revenues. This situation was in her blind spot, and when I illuminated for her that she was outspending her current revenue projections, she had a huge a-ha moment!
Here are three tricky money blind spots (and some helpful tips to strengthen your Money Mindset so you don’t go broke when you are ready to leap.)
Blind Spot #1. Ostrich Approach to Money Management
The first blind spot is the most common – not having a clear picture of your cash flow. Often an entrepreneur thinks, “if I just work harder I’ll make more money!” Well that could be true. But not having clarity of your financial books is just a bad business practice. When you don’t pay attention to your banking information it’s like putting your head in the sand hoping things will just work out. They never do and you’ll end up paying dearly for it later.
Be willing to have the discipline to do the right thing. Just because you have money doesn’t mean you are profitable. Having both long-term and short-term projections for income and expenses means you can plan for what’s coming while investing appropriately in your growth.
Here are five important activities to engage in monthly (or weekly.)
- Once a quarter, update your revenue projections (use a tool like Profit Explosion Toolkit or an excel spreadsheet.)
- Review your projected earnings against upcoming expenditures. Course correction is easier when done in advance.
- Make sure your monthly Profit & Loss statement and Balance Sheets make sense to you.
- Review your bank transactions against your QuickBooks ledger for discrepancies.
- Cross-check your monthly receivables against cleared transactions for bounced payments.
Blind Spot #2. Short Term Focus
Another issue that creeps up on money-making entrepreneurs is spending all their time focusing on short term cash needs or putting out recurring fires — which distracts the business owner from focusing on big-picture, consistent cash flow. Often this is a sign that the business owner isn’t spending enough time planning out their revenue producing campaigns and is focused on “how do I make enough money this month.”
But it can also be a symptom of lack of proper team support. The entrepreneur is spending way too much time micro-managing their team and feeling stuck in the weeds of running their small business — and not enough time on their real money-making activities.
The big shift is in your mindset. Recognize when you are in “I’m the do-er” and shift your thinking to “I’m the leader of a successful, $XXX business” and make decisions from that paradigm! Create a revenue roadmap that ties back to your desired monthly revenues. The Profit Explosion Toolkit has a super easy, step-by-step plan to make this step easier.
Blind Spot #3. “Broke Avoidance” Approach
When starting a new client, I often hear the all-to-common compliant that they have built their current “trap” of a business because they were afraid of being broke. Driven to create financial security they push themselves to do multiple costly product launches, hoping that the next one will be the “big win.” They start spinning into a frenzy, trying everything they’ve heard might work, looking for that magic moment when the big windfall kicks in and they get their big pay day. I call this the “broke avoidance” trap.
Broke avoidance causes us to invest in the wrong strategies at the wrong time. We keep pushing with the false hope that “just one more thing” might work. We tend to invest big dollars ‘cause we’ve been told that it worked for so-and-so, suck it up and play with the big dogs, be willing to take big risks to make big money.
It’s like gambling for entrepreneurs. It doesn’t work. It will most likely send you to the poor house – the very thing you are trying to avoid. At the least, you’ll be totally stressed out as you try to solve your cash flow slump.
A better strategy is to create a plan based what you do want to have happen – with realistic goals and expectations. Use the FREE Own Your Bold Training to clarify what your bold goal is and how to use leverage and authority factors to accelerate successful outcomes.
If you’ve been caught in one of these blind spots, then it’s time to introduce a healthier money mindset so you can level up your results. Be willing to introduce consistent healthy money habits (and beliefs) so you can keep more of the revenues coming in your door and use them profitably to grow your impact.
Need a little more help with ways to boost your cash flow quickly?
Get a copy of my FREE Revenue Rush Strategies Toolkit here.
Inside I’ll share with you ten proven ways to create an extra $5 – $50k in in the next 30 days (or less!) Each strategy is one I’ve personally used in my own business — or with a client — to create cash on demand when you need it most.
Try it out this month…and you can thank me later!