6 issues with money you need to tackle

How do you feel about your finances? Does money make you feel guilty, embarrassed or stressed? Do you struggle to charge your full worth?

Alisa Barcan
Alisa Barcan

We all have different stories about money. Stories about whether it’s ok to spend it, what to spend it on, how much others will pay for our products and services, where to put our savings. In this Q&A, chartered certified accountant and qualified financial coach Alisa Barcan runs through six key areas where people struggle with the concept of money.

This is a transcript of a conversation in the Drive The Network Facebook Group

Alisa Barcan Money is a sensitive subject and I appreciate that many people will not be comfortable to openly talk about their financial fears in front of so many other people. I commend the ones that will be brave enough, but I want to involve everyone who wishes to participate but may be a bit shy.

From my experience working with small business owners, I identified 6 main financial fears people have:

1. Fear of the numbers themselves.

I often hear people say “I’m not a numbers person”. This translates into “I don’t understand finances, they are too complex, and the jargon and technicalities are overwhelming.”

You don’t have to understand everything at once, and some aspects will not apply to your business. Take it one step at a time and focus on what is most important for you to know at a point in time. Unless you are an accountant producing year end accounts for a very complex organisation, all you need to have are basic math skills and common sense which we all have. There are many great resources online, HMRC’s website being one of them and they also have a dedicated telephone line for tax questions/self-assessment, etc. Also, make use of the resources available on Drive. I don’t act as an accountant anymore but I can certainly explain concepts and rules.

Emma James The fear can be really paralysing for some people. I try to reassure people that they don’t need to know everything, but that it’s also important not to let their fear stop them from knowing what’s going on in their business. Quite often new clients will apologise for not using the correct terminology, but it’s whatever works for you. If you think in terms of money in and money out, that’s enough.

 

2. Fear of not generating enough income

Alisa Barcan Will my business be profitable enough, will I be able to survive without having a part time role, will I attract enough clients, etc?

The key here is the word ‘enough’. How much is enough for you? Many people can’t answer that question because they don’t set clear financial goals for their businesses. Once you’ve set a goal it is much easier to mitigate this fear by breaking the goal down into its components. Examples include calculating the income generated per unit of activity, determining what your most profitable activities are and identifying the ones which produce losses or barely break even. Based on this analysis you can translate your income goal into the number of clients needed for each profitable activity in order to generate that revenue. If you run a business which has a lot of seasonality (varying sales depending on time of the year or major events) you need to make a plan for compensating on the quieter months but also up your game in the busy months (do you need extra staff, etc.?). Once you have a plan on how to achieve the goal you need to review it and adjust it periodically, measuring success and analysing the present, reforecasting based on new information and allowing for changes. This way you will know if/when you’re off course and you can rectify in a timely manner.

Emma James “Enough” is really personal too and can be quite emotionally charged I think. Because of how I manage my personal and business finances I know exactly how much money I need in order to maintain my current lifestyle, which is my base level “enough”. But if you don’t keep that in mind it can be very easy to fall into the comparison trap and to start thinking that what you previously thought of as enough isn’t. I think it can also be hard to detach ourselves from our businesses, our value isn’t tied to how much turnover the business has.

 3. Fear of charging too much for our products or services

Alisa Barcan Assuming that we are too expensive and our clients won’t be able to afford us, believing we don’t have enough skills, experience, talent, etc. in order to charge a certain price or that there are not people out there who will be willing to pay (therefore don’t value) what we offer.

Helen Lindop Another REALLY common one. What helped me was when I realised I had to just put a price out there and let the client decide. It wasn’t appropriate or even possible for me to decide what they could afford.

Alisa Barcan Absolutely Helen, that is not for us to decide and we don’t want that decision to become a self-fulfilling prophecy either. This is a complex subject and we could spend hours talking about it. Personally I would advise three things and I’ll put them in separate comments so that they are easier to read.

  1. Do your research. What is your position on the market? Are there any substitute products or services available? These are products/services which are not exactly the same but produce similar results. Who are your competitors and how much are they charging? How similar is their offering to yours? Is there anything extra that you (can) offer? What is your unique selling point? This will put you in a very good position to explain (perhaps even to yourself) why your services are priced at that level.
  2. Identify your costs. If you offer any packages, break them down into their component parts, itemise your services as much as you can. Now look at what is necessary for you to do in order to provide those services/products. Are you taking into account all the costs, not just the monetary ones? Transport, time, research, opportunity cost? Sometimes we price something and we think it’s reasonable but when we take into account all the costs we realise that we might be better off being an employee if we stick to that price.
  3. Experience it for yourself. How much would you pay for the service that you offer and why? Do it! Pay yourself what you’re charging others. Provide the service to yourself like you would any other client and then transfer the price from your personal to your business account. How does it feel? We tend to make up stories about our clients when in actual fact we are describing ourselves. Do we fear they won’t afford it or are we actually nervous ourselves of paying that much for a product/service?

Finally, some food for thought. If you had to hire someone to substitute you in your business how much would you pay them? Inevitably per hour but some time is idle time. Would you accept that offer if it was made to you? Be aware that this person will incur no costs. How much do you make compared to the offer you’ve just put together?

Helen Lindop But what if your clients genuinely can’t afford the price you decide for yourself?

Alisa Barcan I imagine that if your prices are along similar lines to what is already out there on the market then you will have a very small percentage of people who genuinely can’t afford. The way I go around this is to select a small number of people who I work with for free. Not at a discounted price because I don’t like the association that creates but for free, out of my desire to help them. That still brings them value but doesn’t impact my bottom line by having to offer discounted prices for every client because I set a precedent with one client.

Charlotte Ashley-Roberts I do this too. As I get to know people in my community I understand what they can afford and whether they can/won’t pay.

Alisa Barcan Glad to hear it Charlie. I find that it works really well and those clients become raving fans which recommend you to other people!

 

4. Fear of making a financial mistake

Alisa Barcan Unintentionally making an error which will have a negative ripple effect.

We all make mistakes, it’s human. Let’s start with the benefit of the doubt and assume that nobody wants to intentionally make a mistake. Mistakes usually happen because of lack of knowledge or understanding, lack of attention and hurry/pressure.

It’s important to mitigate all of these by:

  • documenting yourself and acquiring enough knowledge and information;
  • approaching tasks when you are well rested and can fully focus and allowing yourself enough time to complete a task and review it before the deadline.

It’s always a good idea to establish a process and follow it, as well as to ask for a second opinion or for help if you are unsure. If a mistake does happen, usually it can be corrected. If it can’t then you will have learned not to make that mistake again.

The fear of making a mistake can be paralysing. Can we afford not to take action though? What is the cost of making a mistake and how does it compare to the cost of doing nothing? Make no mistake (see what I did there?), there will be a price to pay for not taking action which is sometimes bigger than making a mistake and learning from it.

Finally, perhaps we avoid mistakes because we are afraid of learning a lesson. What is the lesson that you are afraid to learn? Are you afraid of the consequences of the mistake or the consequences of you making a mistake (knock on self-esteem, self-confidence, etc.)?

5. Fear of spending money

Alisa Barcan Fear of investing in the business and ourselves, getting help (staff, systems, etc.). The fear of spending money is not so much a fear of giving it away but rather a fear that we won’t be able to get in back.

Let’s talk about this fear of spending. What is money if not a social construct? These days we don’t even physically see it as often anymore. All we see following an exchange of money is a bunch of numbers changing on a screen. Why do we fear those numbers so much? There is more money in this world than we can count and yet we fear that if we spend some we won’t be able to get it back. There isn’t a finite amount allocated to us in this lifetime and if we want more we can get more. There is plenty of it around.

It’s important to understand that we all have the tool to make more money: our mind. I look at this from two perspectives. One is using our mind in a creative way to render services or produce products which we then sell for a profit. Everything that was ever created first existed in someone’s mind. The second perspective is that of believing (in our mind) that it is possible. This is probably hardest to do and it requires discipline and a certain amount of mental hygiene (eliminating negative beliefs and thoughts, trusting our abilities and skills, etc.). I am sure you are aware of these mental blocks as a coach Charlie and have possibly encountered them with your clients?

6. Fear of having too much money

Alisa Barcan Not so much fear but feeling guilt and shame about earning more than one’s friends and family and the effect money will have on their personality, relationships and life in general.

This fear usually comes from negative beliefs people have about money. We’ve all heard them: “money is the root of all evil”, “rich people are corrupt”, “one cannot be rich and honest at the same time”, “selling one’s soul to the devil for money”, etc.

The first step would be to be honest with ourselves and identify those beliefs and where they come from. Most of them won’t be something we’ve developed, but rather ‘inherited’ from our parents, siblings, friends, etc. Once identified, I suggest looking at ways in which those beliefs drive our actions and influence our results. In what ways do they hinder us?

Finally, we can decide to replace those beliefs with more positive ones. This whole process can take a lot of time and can be quite emotional so be patient and kind and to yourself.

Helen Lindop I think one big source of financial stress for us self employed folk is the feast or famine thing. Andy Bargery did a great presentation on using pipelines to avoid this and you can of course put some money in the bank to see you over the lean times, but do you have any suggestions for dealing with the stress and potential knocks to your confidence that come with this?

Alisa Barcan Great question Helen Lindop, thank for asking. It’s very easy when we are self-employed to put the blame on us for everything that happens. Even if the economy is bad or our business is seasonal, we still find reasons why it’s our fault, we’re not good enough, we should have done more, etc. This is because we are our worst critic and in some circumstances that serves us. Not in this case though.

My suggestion would be to think about how you would deal with this situation if you had an employee. What would you say to them to comfort them that it’s not their fault? You would probably find logical reasons to explain why business is low at that point in time and that it’s nobody’s fault. If those reasons are true for someone else, why wouldn’t they be for you?

There are many external factors which can affect business and we cannot control them all. Make sure you are happy that you’re doing all you can within the areas you can control and accept that the rest is not up to you and therefore not your fault. Chances are other business owners are in the same boat.

Would you like to know more? Get in touch with Alisa Barcan.