There are many finance concepts to grasp when running a business.
There’s the difference between skills needed to make money and manage money.
We also need to work on our financial toolkit which involves the physical or visible tasks which are the calculations and processes, practical systems and tools.
As well as the invisible aspects such as our stories, beliefs, societal constructs, cultural norms, personal experiences and mindset. It’s your own inner terrain that has to be explored here.
So today I want to introduce an important concept which I call your Financial Capacity. Think of it as our comfort level when it comes to money in our business and life. It is the by-product of your inner and outer financial world.
It acts, a bit like an invisible ceiling.
(This concept of a Financial Capacity is not related to how good you are as a person, or how worthy your work is in the world. It has to do with our relationship to money. Our relationship to what money represents to us, what we’ve taken on from our parents and society and including aspects of power, leadership, choice, responsibility and stewardship in this world that underpins how we circulate money.)
As an example, have a think about people in your life that may always be facing a financial situation where they 'just get by'. It could be someone you know well, or not. Can you notice how they act around money, splitting the bill to the exact cent? Or the friend that’s always waiting till payday to make a purchase or go out for a cuppa?
They may have the financial capacity of say… an espresso cup.
What about people we see that have the financial capacity of a pint glass! You see them easily and frequently navigating large volumes of income and outgoings, they are comfortable with large purchases or speaking freely about their situation. There are not-so-great people with large financial capacities. This happens, remember it’s not related to being a good person or not.
And then there’s those who are okay with dealing with money, financial decisions and cash that is somewhere in between. This is a range of behaviours and feelings around money. And there is no right or wrong, there is just what is the best-fit for you, in this stage of your life and business.
A lot of the work I do individually with clients relates directly or indirectly back to helping them use practical and grounding tools to expand their Financial Capacity.
Have you been sensing that your business is preparing to expand and your focus is on your relationship with money, leadership and power?
Whether it is simply in the direction of offering much better products in your industry, or by developing services that move parts of society that aren’t functioning well forward in a better way?
Then here are some suggestions around how do we can expand our Financial Capacity?
By looking at our history with money.
Starting to speak about money with peers in a non-judgemental environment.
Looking for contradictory thoughts we have about money.
Seeking out mentors that align with the way we want to work with money.
Bringing awareness to our most emotional elements about money.
Moving out of comfort zone when it comes to managing financials, but in an intentional considered way.
By making money a really pleasurable, true-to-self aspect of our lives. Making and managing it- your own way.
Un-shaming ourselves of any past decisions or actions.
By re-writing the rules to how money is used in our communities and society.
One way I help with group of these items above is by supporting business owners through setting up a Money Plan.
You can see with clarity your comfort level around money when you finally put pen to paper, or numbers to a simple spreadsheet to see where your business is at.
Not a fan of reviewing your business financials, but you've been getting the tap on the should to do it? I find avoidance of any type of financial work, one of the signals that someone is getting ready to expand their financial capacity.
Interestingly, one reasons I hear frequently for not planning out the year is that they (the business owners) keeps track of it all in their head. Unfortunately ‘mental accounting’ doesn’t work. Our brains like to filter the information we receive, telling us the story that it wants to keep on repeat. Positive or negative. Many times, I've discovered from looking at the figures, that what a business owner believes to be true, unfortunately isn't. Our brains are made for innovation, not memorising.
So putting together a money plan is a way to bypass where ‘mental accounting’ doesn’t work. Instead, it’s like telling an intentional story but with numbers instead of words.
If you're feeling the nudge to see what a Money Plan is all about, head this way.
If you're still pondering about your own financial capacity and how it impacts your business as well as your life, here are some ways you may understand it more fully.
You may use different words to describe it, but I want to be clear, it's not just your 'mindset'.
It could show up as:
** A feeling of really understanding your business' potential and impact in the world, but struggling to reach the point where you can handle the economic power and responsibility it is going to take to get there.
** It may be shifting or pivoting your business to be more inline with your values, but doing so means you can no longer run your business at the revenue level it is at today.
** You could be feeling out how you can afford the support you need, to respect your health and relationships. Yet, your current income streams are not at the level required to make it sustainable.
** Some business owners may have experienced burnout, and are keeping their businesses small for fear it occurring again. Yet, not matter what you do, you sense that you deserve more remuneration for what you're doing.
** In some cases, your family may be implying that they feel they are playing tug-o-war with your business. You're trying to constantly balance your business, finances, time and relationships.
** Your finances could also be feeling like the most overwhelming or heavy task in your business, an absolute drag. And you're observing others who seem to find it a pretty expansive, empowering and pleasurable experience and you're thinking, what have I missed here? What do they know that I don't?
Acknowledging your financial capacity, re-reading the points above on how to expand it and setting up a Money Plan helps with all of these. As well as conducting a monthly Money Review. If you missed my explanation email last week about it, head here.
That's all from me, it's apertivo time (a perk of living currently in Italy), have a great week and if you have a friend that needs to hear this, please forward this email on.
Lynda James, CPA
Accountant and Business Analyst @
Helping business owners design sustainable and profitable businesses, that improve their lives and others.