Overcoming the Fear of Small Business Finances

It is a prominent reality that many entrepreneurs and owners of small businesses tend to experience fear when they must address the numbers regarding their small business finances. Thus, they experience fear when reviewing their margins, sales, and costs in detail.

This leads us to consider why they are fearful. Their fear about the numbers of their small business finances is based on the perspective that they are scared of what the facts indicate, they may not realize what steps they should implement to make things better, or they may not be adept at math.

It seems that a great number of business owners enter the world of business with some level of blindness. They have the mentality that they do not wish to be confused by the facts of their small business finances. This leads to them refusing to examine their numbers, which are essential quantitative measures. Instead, they tend only to apply the usage of qualitative information, which is based on feelings, when it comes to the management of their business.

It is normal to be somewhat apprehensive but being apprehensive can also prove to be a real detriment, which may cause people to miss out on noticing the things that really matter. Apprehension about applying numbers to manage a business is irrational.

Then there are those who may wonder why even state this. When you know the numbers, this can provide the real kind of help that will empower your business in a more positive manner. We will illustrate with an example.

Many owners of small businesses and entrepreneurs tend to use qualitative analysis when they need to make decisions to operate their businesses. These intuitive or soft judgments can grant some degree of insight and help. On the other hand, they do not reveal your business's true position in terms of failure or success.

When there is continual avoidance of using quantitative measures, the reality is that someone may make decisions that are evidently divergent from those that he or she would make if the person comprehended the way the numbers would impact their decision. When applying quantitative analysis along with qualitative analysis for making decisions, then the person is more empowered to make the optimal choices that will lead to the real success of the business.

There are methods that can be applied that will help people realize how they should make good decisions for their business. As noted, the first one involves investing the required time to study key elements, to keep on learning, and to commit to planning. Then the other method is to lose money due to failing to study, learn and plan. Thus, one must consider which method he or she prefers. When you realize that there is now the possibility of losing money, you will likely want to invest the time in doing the numbers.

It is not difficult to deal with the numbers of your small business finances. If you know how to count, add numbers, subtract, multiply, and divide, you will be able to tackle your business numbers. The process is straightforward because you do not have to undergo any math test, and you have access to a calculator to do the calculations for you. As a result, there is no solid basis for you to fear anymore. With this simple process, there is no reason for you not to examine and implement all aspects of the numbers of your business.

As an illustration, we present a scenario where a professional coach provided coaching for the founder of a school in Jersey City, NJ, regarding her small business finances. When the professional coach met with the founder, the woman had the desire to provide the most optimal experience for her students’ education. At the same time, she wanted to ensure that the cost would be reasonable. That is a noble desire, but it must be done in a manner that will allow her to remain profitable in her business.

Unfortunately, when this type of strategy is applied, it usually generates a lower level of income and results in higher costs. This can be a hazardous scenario. It was not surprising that the woman was experiencing problems with her cash flow, and she did not comprehend why this was happening. She was an educator, so it seems understandable that she offered the most optimal experience to the students for better educational opportunities. At the same time, she did not necessarily place her focus on the cost of operating the school.

To further complicate the situation, the cost of enrollment at her school was lower than other similar schools in the region. Moreover, other things that the surrounding schools charged additional fees for were included in the cost of tuition at the woman's school. Thus, she was not charging the students for organic lunches, physical education activities, karate, or Spanish language classes. These services were costing the educator a lot of money.

With this crisis revealed, the woman necessarily shifted her perspective regarding her small business finances. She shifted to being a business owner who is in charge of running the school instead of considering herself as an educator who owns a school. That is the same kind of shift that entrepreneurs must implement. Often, they find that it can be challenging for them to accomplish it by themselves.

This makes us wonder how the woman was able to make the change concerning her small business finances. The professional coach aided the woman in comprehending her business model via the usage of a perspective based on quantitative elements. When they conducted a review of the numbers, this provided evidence that the fixed costs were definitely too high in comparison to the actual number of students that attend the school. Once she realized this truth, then she was empowered to implement decisions that would permit improvements. Yet, the truth is that this would not have resulted if there had been no consideration of the numbers.

The coach helped the educator understand that if the situation persisted, the educator would have to shut down her school in just a few months. Thus, the analysis of the numbers provided help in determining how much expenses must be reduced and provided help in comprehending the exact level of increased funds that were necessary. This permitted the educator to formulate a truly viable plan, which would allow her to achieve real success and prevent her from experiencing this kind of hardship in the future.

The result was the application of the business model that was presented on a spreadsheet. This was done to permit her to conduct projections and calculations regarding the amount that her business could afford for fixed costs, which was determined by the level of enrollment. The educator further examined the various expenses to discover things that could be eliminated or that could be done for a lower price.

Furthermore, the coach and the educator discussed various strategies that would help increase the school’s enrollment.  This could potentially generate extra income to ensure that the expenses would be covered more efficiently and that her operation would remain more economically balanced. It is highly evident that this successful decision could only have been achieved with careful consideration to the numbers. It is a pleasure to state that the school remains in operation, is achieving success with double the number of students now enrolled, and is producing terrific profits.