Let's Talk Money

You must gain control over your money or the lack of it will forever control you.

 --Dave Ramsey

Managing money is a significant source of anxiety for entrepreneurs. In 2019, the Canadian Mental Health Association published a report on the mental health and well-being of Canada’s entrepreneurs. The primary stressor reported by entrepreneurs was cash flow, at 67%. In contrast, financial stress was the main source of stress for only 23 % of adult Canadians in the general population (StatsCan 2016).  

Every entrepreneur needs to manage cash flow—not your bookkeeper, not your accountant, and not a software platform. You. Understand that cash flow is about making smarter business decisions.

For many first-time entrepreneurs, the term “cash flow” evokes images of complex accounting systems and confusing terminology. Many dread handling cash flow because it reminds them of doing taxes, which it is not.

Over the years, I’ve come to understand the real source of unease when it comes to managing the “numbers”:

1. Never Budgeted Before

   
   

Cash flow is essentially another term for budgeting, specifically on a monthly basis. What revenue do you expect to come in, and what expenses do you anticipate each month? Consider this: how many of us actually budget our personal lives? If you struggle with budgeting personally, it will likely feel just as foreign when applied to your business. The good news is that starting to budget for your business can prompt you to reflect on your personal finances. Yes, that might be intimidating, but who said being an entrepreneur would be comfortable?

2. Uncomfortable with Projecting

   
   

Speaking of discomfort, many of us feel uneasy about estimating future outcomes. Cash flow management is precisely about that—projecting sales and expenses. Yet, we regularly plan our days, make shopping lists, and schedule meetings. We anticipate certain outcomes. The importance of sales projections is to encourage you to think about and commit to activities that will drive sales each month. The more specific the activity, the better (e.g., networking twice a week, posting daily on Instagram). The same principle applies to estimating expenses. It may never be perfect, but the more you practice, the better you will become.

3. Beliefs About Money

   
   

The biggest source of discomfort in managing cash flow often stems from your relationship with money. Do you monitor your spending? Do you spend easily? Are you poor at saving? I devoted two blog posts to exploring the significance of our beliefs (read them here and here).

4. Personal and Business Finances Are Separate, Right?

   
   

There’s a reason why obtaining a business loan from any lending institution is nearly impossible if you have a poor credit score. Statistics show that a low credit score severely hampers your chances of success. Do everything you can to improve your credit score; this is foundational for your business. Even if you choose to incorporate, you are personally liable for repaying the loan. Once you establish a proven track record of financial sustainability, lenders may consider providing loans against the company—but not before.

5. Just Borrow Money – It Will Solve Everything

   
   

There may come a time when you need to borrow money to finance your business. However, throwing money at your business challenges too early will only exacerbate the issues—you’ll end up in debt with nothing to show for it. Keep in mind that this applies primarily to businesses in the early stages. My advice is always contextual.

Here are red flags, I often see, when entrepreneurs want to borrow money:

• Borrowing to pay themselves. Yikes! The purpose of borrowing is to advance the business—not to cushion your personal finances.

• Hiring others for sales, marketing, administration, or even cash flow management. In the beginning, you are the Chief Operating/Sales/Marketing/Finance Officer. And don’t forget to take out the trash.

• Rushing to protect an idea by paying for a trademark, patent, copyright, or incorporating too soon when there are no customers. Remember, an idea is not a business—execution is everything.

• Seeking money for research and development or prototyping. It’s still merely an idea, no matter how confident you are about its potential.

• Creating lavish websites and marketing campaigns. Focus on sales first. There will be plenty of time for marketing later; if you spend all your money upfront, you may not have funds to continue.

This is not to say you shouldn’t borrow money to start a business. Timing is crucial, as is ensuring that the money is used wisely. Check out Futurpreneur’s cash flow template here (which includes a video tutorial).  

Entrepreneurial vs. Employee Mindset

Here's the undeniable truth: when you work for someone else, you automatically receive a paycheque. You can count on a steady income. As a business owner, you lack that luxury. No sales means no income, and you’ll have monthly operational expenses. This requires a fundamental shift in thinking. Monitoring your finances becomes essential. Get comfortable discussing money; with patience and practice, it’s a skill you can develop.

The lifeline of your business depends on it.