Most of us are familiar with the typical habits of successful people -- wake up early, eat breakfast, build a network. But what about the financial habits behind successful entrepreneurs? What are they doing on a daily basis that is making their business successful? Here are six frequently mentioned financial habits of successful entrepreneurs.
1. Build your network by cutting great deals.
Network, network, network. You're probably familiar with the constant refrain, but today's successful entrepreneur doesn't just network by going to cocktail parties and business retreats. They use implied networking. Effectively, you're taking a slight financial hit in order to secure future business. This is especially relevant when forming business relationships with partners who can help you grow. Favorably crafted partnerships can lead to long-term loyalty and sustainability. Successful entrepreneurs understand that financial success is not a short-term proposition.
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2. Spend small before you spend big.
Particularly when you're just starting out, you need to be careful how you spend your money. Only purchase what is absolutely essential to perform business. Do you really need new office chairs, or will the old chairs work? Do you need a brand new, top of the line computer, or will your two-year-old laptop suffice? Successful entrepreneurs don't start by purchasing luxuries -- they start by purchasing the necessities and no more.
3. Know your liabilities.
A successful entrepreneur knows every single one of their business's financial liabilities. They know what they can and can't be sued for -- and it's this knowledge that allows them to stay out of legal hot water. While it's wonderful to think that everything will be great all of the time, at some point, your business is going to run into difficulties. It's at this point that it's absolutely imperative that you know what you could be liable for at any given time.
Spencer Barclay, COO of BenefitGuard, gives an example: "An often overlooked liability of a small business is the company retirement plan. You will find numerous recent lawsuits where a company is being sued by employees for simple mismanagement of the 401(k). In many cases, the company thinks their provider is the one on the hook for this, when in reality, very few providers across the country are actually taking on any fiduciary risk."
4. Delegate money, too.
Every entrepreneur knows they need to delegate. After all, you can't do it all. But successful entrepreneurs look at delegation differently -- they look for financial delegation. As in, who should they pay to accomplish a certain task? When you have a problem, you must spend some combination of time and money to fix it. The more you spend of one, the less you spend of the other. A successful entrepreneur looks at each problem and considers how valuable their time is versus the cost to solve the problem. Should you solve the problem yourself, or does it make more sense to spend money and hire outside help? Know how much your time is worth.
5. Learn from small financial risks.
The market is constantly changing. Many successful entrepreneurs have found a way to adapt. Rather than launching a product with a massive investment, they'll develop a test project, and put forth a minimal financial action to see how receptive the market is. Effectively, this minimalist process serves two purposes. First, it allows entrepreneurs to test the market to see whether it's interested in a new product. Secondly, it protects the entrepreneurs from risk. Since the financial investment is minimal, if the investment fails, it won't sink the business. You take a small risk, learn from that risk, then eventually scale up.
6. Put the market first.
There's an old saying -- the market is never wrong. Every successful entrepreneur needs to look at the market, and put the market before themselves and their ideas. No matter how great an idea is, it needs to be financially validated by the market to be worth pursuing. Don't put your ego ahead of the market -- or your business will suffer dramatically.
7. Understand the dynamics of your cashflow.
Entrepreneur and best-selling author Ed O’Keefe explains: “The most important key for starting a new venture is to map your financial future and grow it with. Too many new entrepreneurs fall into an illusionary trap. The business is growing and everything seems to be going great. Customer acquisition is humming along. In theory, the business is a success. But there's not enough positive cashflow to sustain operations in the short run. Before you launch, make sure you can cover all your expenses for as long as necessary until the business sees a profit.”