A lot of articles, books, and interviews have been made about the best financial habits to build to ensure success in life. However, despite the vast near-limitless resources available, not many business owners practice all the advice given. A comprehensive study was done among 1,700 owners of small businesses in the U.S. and it found that less than 25% of those who participated in the survey do all the seven habits we’ve outlined below. One harsh truth about owning a business is without great discipline and self-control, a business is more likely to fail.
If you’re an SME owner, you need to work hard at making these habits a part of your system.
Habit #1: Review your finances regularly.
In any business, there is a constant stream of expenses and income. The amounts may vary from season to season but they are two of the most constant things you will see in your business. As a business owner, you must understand how your finances are doing each season. Take the time to review your books and analyze the different patterns so you can make the necessary adjustments.
Habit #2: Set a budget and stick to it as much as you can.
Whenever finances are being discussed, it is inevitable that a discussion about budgets follows. If you’re just starting out in business, make a projection of your income and expenses. Go over your estimates once you get the actual numbers at the end of the month. That should give you a good idea of where you stand. From there, you can work on streamlining your budget to help you make better decisions as a business owner.
Habit #3: Put money aside for your taxes.
If there’s one thing you should never neglect as a business person, it is in giving Uncle Sam what he’s due. This means that the money you are setting aside for your taxes is not yours nor is it part of your business’ income. Don’t get it confused.
Get into the habit of setting aside 90% of your taxes from the prior year so you don’t deal with penalties.
Habit #4: Reduce your debts and prioritize your obligations.
Debts are inevitable in business. Sometimes it’s even necessary to ensure the long-term survival of your business. If you have any outstanding debts or bad credit from personal loans, you need to come up with a plan to pay off all of your obligations regularly. Make it consistent and work on reducing the principal amount as soon as possible.
Habit #5: Give yourself a salary from your business.
Paying yourself regularly from your business account conditions you to have the mindset that your business is separate from your personal income. Depending on your needs, you can determine the frequency of which to receive your salary. It doesn’t have to be weekly or bi-weekly. It just has to be regular.
Habit #6: Have contingency plans for taxes and other liabilities.
When it comes to owning a business, taxes and other liabilities are inescapable. You need to look for an optimal way to deal with them without compromising your business. Have contingency plans in place in case your primary plans don’t work. It would also be a good idea to really think about what type of business structure is suitable for you.
Habit #7: Take advantage of tax deductions and write-offs.
If you truly care about your business, you will put in the hours for tax planning. Identifying all qualified deductions and write-offs help reduce the taxes you owe the government. And besides, it’s perfectly legal to do so. Just don’t try to cheat the system because while the IRS is for you, it doesn’t make for a nice enemy.
It takes a great deal of discipline to become successful financially as a person and even greater for a business to succeed. No matter how hard it seems, just keep pushing. Stay committed and never compromise. In the end, you will surely see the fruits of your labor.