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.
And…it worked.
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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View Comments (9)
This is so true, and I appreciate you sharing such valuable information. After being in the same biz for 30 years, we've learned that cash is king.
We're glad you liked it! Thanks for commenting!
Great information and article, much appreciated!
We're so glad you liked the article, Brian! Thank you for the nice feedback.
This is a great article that really hit home for me as I continue to recover from the financial impact of the pandemic on my consulting business. I had nine months of emergency savings; however, it was depleted quickly by merely trying to survive. Moreover, we had unanticipated expenses that were necessary to pivot the business to a complete virtual model which further put us in the hole. The stress and anxiety were unbearable at times, but we remained hopeful. Lesson learned... save more and keep money in the bank. Thanks for this wonderful reminder to apply common sense business practices.
Thank you for the comment and for sharing your experiences, Cindy!
Thank you for the practical advice. However, the problem is that often people discount the most practical and possible solutions. If you can get past that, the key point from this article is to simply get started and remain patient and diligent. My wife and I own, run, and work at a medium-sized outpatient mental health practice. Starting out it was us and three other clinicians as 1099 contractors of our LLC. After only two years in business we were able to purchase a building with a SBA mortgage. We currently have seven other clinicians as 1099 contractors in the group, as more space allowed us to grow, which also means more expenses despite more revenue. Right before COVID began we were able to start the process to refinance our mortgage on the building and get out of the SBA mortgage, which reduced overhead by several hundred dollars a month. That didn’t necessarily mean we began working less or buying frivolous things, it meant we were able to expand upon the thing that put us in this position in the first place. Once the business started rolling, we decided to put aside 5% of each of our weekly earnings. At times we increased that amount when possible, but never went below 5%. Once we refinanced; and fortunately we’re able to never really miss a beat throughout COVID due to telehealth and peoples’ increased awareness of taking care of their mental health; our new mark to not go below has been 7%. To be clear, we’re not putting aside giant sums of money and creating a massive safety net, but we are able to reduce our “owning and depending on a business-related anxiety” because we know there are funds available if absolutely necessary. The author of the article expressed it well in saying that it’s easier to sleep at night knowing there is money in the bank. Money is great at both solving and creating problems, but if you think practically, have patience, and remain diligent, money can be something you erase from your list of stressors, as there certainly are plenty of others associated with owning and running a business!
Thanks for your advice Chris and for the information in this article. I am an NP who owns, operates, and works as the only provider in my very small primary care practice. It has been open 3 years as of the 13th of this month and it’s brought almost unbearable levels of financial stress to me and my family. I’m determined not to give up, though, especially since I have a solid and loyal patient base that is continuously growing. I do desperately need sound advice from knowledgeable peers, though, since it was a confluence of bad decisions in the beginning that led to the financial crisis I’m currently struggling with. I so needed to hear from someone who has been there done that and not just survived but thrived! I’ve learned a lot since I first started this practice and I’ve implemented the strategies offered in the article, but still struggling to overcome the financial difficulties. I need to take out a loan but how do you find someone willing to take a chance on a struggling practice? Any further advice would be greatly appreciated. Thank you again.
Great comment, Chris! Thank you for sharing your experiences and advice with our readers!