Don't Mix Money and Emotions

Financial fitness for women is a trendy movement I hope is here to stay. Thanks to mass media's love affair with financial girl gurus such as Jean Chatzky and Suze Orman, retirement plans and emergency funds are as hotly coveted as the latest Jimmy Choo shoe--with less risk of going out of style.

Depending on dead relatives, successful children or the teetering Social Security system is an old trend that women are finally getting past. Now they are taking the actions necessary to guarantee their own stability, no matter what the future may hold.

So you'd think women in the business world would also be approaching money matters in a more practical and efficient way. But feedback from our survey last month revealed evidence to the contrary.

Last month's column, "Test Your Financial Savvy," included a self-test to determine how healthy your relationship is with money. What we learned is that women still mix emotions with money--the equivalent of putting diesel into a gas engine.

To compete in today's business environment, these two items need to be separate. The following six steps will get you started on the road to governing your business with less emotion, but with greater effectiveness, profitability and joy:

• Know your rate: As a business owner, you need to have a billable hourly rate, which should be the highest rate in the company. By having an hourly rate and tracking what you spend your time on, you'll discover how your time is invested. Tracking your time should deter you from fixating on emotionally comfortable but non-income-earning activities.
• Work the numbers before you work your plan: The most common but deadly mistake you can make is to fall in love with an idea, invest time and money in implementing it, and then hope it makes money. If your next idea can't be reduced to a clear action plan and a guaranteed return on your investment on paper, it shouldn't be implemented.
• Question before you collapse: In the face of pricing objections, do you cave in to unwarranted objections? Try a different tactic. Pricing concerns are value conversations waiting to happen. If the client says, "I cannot afford this," you need to ask, "What kind of value would you need to receive in order for my price to seem reasonable to you?" That could be all you need to increase your business value instead of lowering your price. If your client is highly interested but tentative about buying, you can offer a money-back guarantee or a 90-day trial. Don't be afraid to share the risk so your client can experience the value your business offers.
• Be an owl, not an ostrich: Some entrepreneurs would rather be pulled apart by wild boars than study a financial spreadsheet. But not knowing where you stand is a recipe for disaster. If you need help staying on top of your numbers, get it. But make sure you know four critical numbers at all times: sales, expenses, receivables and profit margin. Having these numbers at your fingertips allows you to make wiser choices about which clients to pursue and--even more important--which ones not to.
• Earn the opportunity to volunteer: Many women entrepreneurs are guilt-ridden if they do not volunteer their time to charities while growing their businesses. But you may need to concentrate on making your business profitable first. Understand that if your business succeeds, everyone around you, including your favorite charities and organizations, will succeed. You can even create a plan designed to set aside a percentage of your profits to support your favorite causes. Either way, you must consider efficient time management.
• Resist your inner hostess: As women, we are natural hostesses. But unless requested, this may not always work in business. I often hear stories of businesswomen doing twice what was asked of them, then being disgruntled because their efforts go unrecognized and unappreciated. Did the client request the extra service? If not, have the courage not to provide what has not been requested because it is likely not to be valued.

Next month, we will take a final look at how and where we invest money in our businesses and ourselves.