9 Habits Keeping Small Business Owners Poor
Hi Friends, today we’re going to talk about 9 habits keeping small business owners poor. From paying too many taxes and chasing clients for money to having horrible spending habits, most of us are hemorrhaging money. So let’s plug the financial leaks.
Hi, my name is Lucas and welcome. Over the years I’ve noticed a pattern with my clients - they’re so focused on making more money, they don’t realize how much they’re are wasting on a daily basis. To put it simply, their financial bucket is full of holes. More money comes in and then goes right back out. So let’s look at 9 of the biggest financial leaks and what can be done to plug them. (If you prefer to watch the video, please check it out here…)
#1: A Poor Mindset
Every problem we have, starts in our head. From thinking we don’t have enough to the idea that “money makes us evil and greedy”,
The thoughts and stories we tell ourselves create poor spending habits and empty bank accounts.
School didn’t teach us anything useful and most of our ideas have been passed down from parents or borrowed from pop culture, but there’s a few things we can do to build a new financial foundation.
We can learn from our past mistakes and let them go and we can update our thoughts and ideas on money. As my mentor Peter Crone says,
“most people try to change their circumstances but when you shift YOU, your circumstances will adjust”
The fastest way to shift is through books, courses and learning from people who are good with money. If you’d like to learn from past mistakes and break through your financial blocks, check out my 4 part series here.
And if you're ready to create TRUE FREEDOM, check out Peter and his mastermind courses - they improved my life and finances, at every level and may do the same for you.
#2: Building an Unproven Business Idea
So many people screw themselves before they ever get started. They have a great idea for a business, spend a bunch of time and money building it and then nothing happens. Why? Because they don’t test the idea..
And if you borrow money to build the business, it makes things even worse. A simple solution? Identify your ideal client and ask them questions like..
What are the 3 biggest issues you face with ______?
If you were looking for a solution to your problem, what would you search on google?
Their answers are pure gold and will steer you in the right direction, ensuring that your product or service is well received. Another mentor of mine, Sunny goes deep on this subject - check out this video to get you started.
So, Test the idea first. Listen to the feedback, refine your offering and test it again. Put as little money into the idea as possible and once it starts profiting, reinvest to grow the business.
#3: Make it super easy for people to give you money.
A lot of business owners overlook this and unintentionally make things difficult for their clients.
Keep your services simple - small, medium, large - or a bronze, silver and gold package. Easy. Tell them what to expect - “I require a signed agreement and a 50% deposit to book and the remaining 50% on the first day of working together. “
And make it easy for clients to sign the contract and pay you - I use Dubsado, a client management software that emails a digital contract and invoice, plus they can pay with a credit card, paypal, or a bank transfer, whichever is best for them.
Put yourself in your client’s shoes, and create an simple on-boarding system (or use mine) that makes it easy and enjoyable for them to hire you. And if you check out dubsado, click here.
#4 and #5: No Plan For Your Money and Shitty Spending Habits
Two of the biggest financial leaks business owners struggle with is not having a plan for their money when it comes in which leads to no accountability for their spending. Luckily there’s a simple solution for both.
Some people call it a payday routine, I call The Big Split. It’s a simple plan for your money and a cure for shitty spending habits. FIRST, Identify your financial priorities and SECOND, every time you get paid, split up the money and send a little to each priority BEFORE you can spend the money on stupid shit.
For example, when I get paid, I send 25% to my savings, 25% to cover my living expenses, 25% to my business and 25% to taxes. All of my financial priorities are covered and because I have less money to waste, my spending habits improve automatically.
#6: Inconsistent and Irregular Income
One of the biggest financial pain points for small business owners is inconsistent income so they wear themselves out trying to make more money but there’s an easier solution…
Just like a squirrel that stock piles nuts for the winter, we can build a surplus of cash in our business and personal accounts and insulate ourselves from the slow times. Each time the money comes in, we put a little towards the business, savings, living expenses and taxes and before you know it, you have a surplus in each account.
Instead of trying to build one emergency fund, you now have several,. One for each area of your life. Add to your stock piles every time you get paid and irregular and inconsistent income will no longer be an issue. See how it works here
#7 Not Separating Our Business and Personal Finances
One of the silliest habits keeping us poor is not separating our business and personal finances. Because they’re a confusing mess, we often lose track of spending, bills and late paying clients.
The solution? Use one credit card and checking account for personal expenses and one credit card and checking account for business expenses. That’s it. It’s that simple. Now, All of your business income and expenses are in one place, all of your personal in another.
You’ll have a clean set of transactions, it’s easier to stay in-tune with your spending and you’re bookkeeper will love you.
As a bonus tip: have both cards with the same financial institution, earning the same reward. You’ll have one login and your benefits will get turbo charged. For example, I love earning flights so both of my cards are with the same airline. If you’d like to see the step by step process, check out this video.
#8: Not Paying Yourself First
Out of all of the habits keeping us poor, there’s one that will radically improve your finances faster than all of the others combined and that’s to pay yourself first. In the words of Warren Buffett,
“Do not save what is left after spending; instead spend what is left after saving.”
And in my words… Get the money, Keep some money, AND then spend. Every time you get paid, immediately send a percentage to your savings, or what I call, the Pay myself first account. Taking care of yourself first will grow your savings and improve your finances the very next time you get paid. Learn the 3 step process here.
#9: Paying Too Many Taxes
One of the biggest reasons small business owners stay poor is not understanding how taxes work. I cover 3 things you can do to pay less taxes in this video but for today, let’s keep it simple.
The government wants us to contribute to the economy - When we do, (as business owners and real estate investors) they reward us with less taxes.
So how do you pay less taxes legally? You can either take time to read the tax code OR, you can hire a tax professional who loves that sort of thing and pay them well. They will help you set up a proper business entity, guide you on strategies you didn’t know existed, help you take proper deductions and ultimately save you more money than anyone else on the planet over the course of our lifetime.
And there you have it.. 9 of the biggest and most destructive habits keeping you poor. When you’re ready to dive at a deeper level and take action, check out my full tutorials on YouTube.
Today’s lesson is a tiny fraction of what I share in the Big Split program so if you’d like to transform your finances in 1 week, click here to schedule a free 60 minute call with me.
Thank you for your time and energy. I’ll see you in the next one.
Lucas Z.