Many business owners complain about financial stress. Too many bills to pay. Mounting expenses. Looming commitments. Higher prices. What’s the most important thing you can do to significantly reduce your financial stress?
It’s simple. Have more cash.
It seems obvious, but if it were, wouldn’t you have more cash?
As business owners, we spend money on marketing with the hope of increasing sales. We hire people without any guarantees that they’ll be worth the money. We invest in property and equipment, unsure of whether we’ll get an adequate return. We hope. We are optimistic. So we spend our money. We go into debt. We extend ourselves. We take on too many liabilities. We spin the wheel. We place our bets.
This is not a good way to run a business. And it’s not a good way to manage our lives. Doing these things strains our cash flow. Doing these things causes stress.
Having money in the bank, however, reduces stress. I learned this about ten years ago. Back around the last great recession, my cash reserves dwindled. I lost sleep. I was stressed. Fortunately, I turned things around. Now my cash reserves have increased. I sleep better. I make decisions based on facts, not fear. I invest with more care. I spend with more frugality. I know what it’s like not to have any cash. I don’t want that to happen again.
How did I do this? It was easier than you may think. But there was no silver bullet. It was a combination of many things. And it didn’t happen overnight.
I set a goal of having six months of cash on hand and monitored my progress towards that goal. I canceled unprofitable contracts, lost a few unproductive employees and cut my overhead. I evaluated each new deal with a very, very skeptical eye. I raised prices where I could, even if only by a few dollars. I spent money only when I was very assured that I would get that money back, and then some. I worked more hours. I took on different jobs. I sold different products. I did business with some people that I would prefer to avoid. I spent more time with my clients. I got more aggressive about open receivables. I asked more questions. I watched my numbers daily. I started a 90-day forecast. I sold products and services more aggressively. I was hungry.
Slowly, over a couple of years, I built up my cash reserves. Since then, I’ve become much more careful about my expenses. I’ve become much more diligent about my cash and receivables. I’ve learned that just because I have more money doesn’t mean I have to spend it. In fact, not spending it is oftentimes the best use of my money.
I’ve also become more profit-oriented. If a product or service isn’t going to make me money now or in the short term, then I’m not going to pretend it will someday. Until we have our cash reserves fully funded, small business owners like me can only afford short- term returns. I learned that too.
Of course, I’ve missed opportunities. I didn’t buy a piece of property that would’ve appreciated significantly. I missed out on hiring a few good people. I probably could’ve increased my sales with more marketing funds. But you know what? I’m fine. I don’t need to be the king of the world. I just need to get a good night’s sleep. Maybe you’re different. But that’s me.
Financial stress never ends. Anything can happen. My financial situation can deteriorate. But I’ve learned to be much more cognizant. I don’t ignore the numbers. I treat every dollar with care. I’m not a cheapskate. But I’ve become much less of a risk-taker. My bank balance is higher because of all this. And as a result, I have less stress.
Yes, the best antidote for lowering your financial stress is simply having more money.
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