Most business owners and entrepreneurs want to get rich. That’s the reason so many of them leave the corporate grind—they have realized they won’t obtain real wealth if they let someone else dictate what they are worth. But many entrepreneurs limit their income potential by making tragic mistakes. To build a business that doesn’t keep you trapped and delivers the income you truly deserve, consider the following three rules:
1. Stop lying to yourself. This is a tough one for us entrepreneurs, because we always believe that tomorrow will be better. We understand that it costs money to make money. The challenge comes when the entrepreneurial spirit turns to blind optimism.
One of the first steps to getting on track with your financial life is to be totally honest with yourself. Take a hard look at your debt. If you have debt across multiple credit cards, business lines of credit and even personal loans, tabulate them now. Next calculate your expenses—not some of them, all of them.
Most business owners only have a rough idea of their expenses and debt. As they increase their income, their expenses increase, but when their income decreases they often don’t decrease their expenses. Stop lying to yourself about your economic situation, take a hard look at what you are making and your expense structure, and get on the right path right away.
2. Understand the real numbers of your business. Entrepreneurs tend to avoid the details because they are “big picture” thinkers. They leave the details for someone else to deal with and that can cause problems. Understanding the real numbers behind your business comes down to asking yourself questions that most people seldom (and sometimes never) ask themselves.
Consider asking yourself the following questions: How much do I make per client? How much is a client worth to me on average (lifetime value of a client)? What is the amount of marketing I am spending to get each client? How long does it take me to acquire a new client?