10 Financial Habits of Successful Entrepreneurs

Have you ever wondered why that delicious new restaurant that you loved and all your friends loved, that seemed busy ended up closed by the beginning of the next year?

The automatic assumption is that there is a lot of competition out there, so the restaurant just didn’t have a chance. Usually, there is a lot more to it than that. If you have a good business idea, and have done your due diligence there is no reason you can’t be successful no matter how much competition there is.

It all starts with having good financial habits. There are some habits that successful entrepreneurs have in common.

Write a Business Plan

Every business, no matter how small or what kind of shoe string budget you’re starting with needs a business plan. Even if you just write a one or two page business plan you need to go through the motions of writing the plan because it forces you to study your industry, the competition, and evaluate your own skill level.

Keep Accurate Records

Saving receipts along with using a financial accounting or bookkeeping software to help keep track of your records will help you evaluate your financial position on any given day. You should easily be able to look at what expenses you had for any given project, without understanding that, you can’t know if your prices are right. In addition, you should know exactly what you need to earn to keep your business running, otherwise known as your break-even point.

Have an Appropriate System

No business can run properly without a system, or even multiple systems. This is true whether you are working alone in a sole proprietorship or whether you have 500 employees. Without systems in place that you can perfect over time you’ll just be running in circles repeating mistakes. This can cost a lot of time and money.

Develop a Realistic Budget

Start with understanding your break-even point then around that create a realistic budget for all the different areas of your business so that you can run your business appropriately. A lot of business owners go out of business due to not understanding budgeting, the cost of doing business, and the idea of keeping their own hands out of the cash drawer until they make enough to pay themselves. Don’t be that person.

Track Expenses

I’ve already mentioned that tracking expenses is important but it’s amazing how fast little expenses here and there can ruin a business. A five dollar a month expense here and there seems small, but if you’re not getting the most out of each of these small expenses, it’s better to eliminate them when you can. Running lean and mean will get you further in your business and avoiding pennies leaking out of your business can ultimately save thousands.

Manage Cash Flow

Another issue that successful entrepreneurs understand is cash flow. If you have a service based business, no matter how big or small, you’re going to have varied levels of income over each week and month. You’re also potentially going to have issues with clients paying you on time unless you get the money up front. Even if you sell tangible goods the income of an entrepreneur isn’t exact so it makes budgeting ore of a challenge. If you find creative ways to manage cash flow you’ll find that you’re less stressed and more successful.

Understand Tax Law

One of the things that get a lot of businesses in trouble is the owners not understanding fully tax laws. If you live in the USA a great book to get is Small Business Taxes Made Easy – but do remember that tax laws change and that you’ll need to find out what’s changed and updated since the last publication. Business owners, even small business owners who work from home have found themselves in financial trouble due to not paying their quarterly taxes or self-employment tax. This needs to be part of your education and budget.

Save Money for the Future

Part of your budget should include saving money for the future of your business, as well as the future of your family and the two should be separate. You need to have a business account where you shoot to have six to eight months’ worth of money equal to your break-even point in the account. Plus, you should do the same for your personal savings account with liquid cash that is available for six to eight months of living expenses covered.

Understand the Value of Each Dollar

This might seem silly when you first read it. Of course, you understand the value of each and every dollar you spend and bring in. But do you really?  Are you spending time on your business doing things that someone else could do faster, and less expensively than the hourly rate you command? If you can do work that brings in $150 an hour and you’re dealing with customer service email you’re wasting about $130 an hour.

Get Professional Help

After you’ve educated yourself on the tax laws of your country, and understand basic financial vocabulary it’s important to seek out professionals that can help you. Hiring a bookkeeper or a CPA isn’t as expensive or as hard as you might thing and typically their value is made up in your savings and the business advice they can give you based on their knowledge of not just your business but the others they serve. One caution here is to ensure that you do understand everything you sign, like any profession, there are unscrupulous people. Get references, and check them.

Finally, even if you already have a successful business without doing any of these things, if you want a long-term business that can be passed down to your children or sold when you are ready to retire, you need to back track and get started getting your financial plans in motion and developing financial habits of successful entrepreneurs so that you’re able to stay successful today and well into the future.