Revenue is up 40%. Why Am I Still Laying Awake at Night Worrying About Cash Flow? After many sleepless nights as an entrepreneur, peace of mind is priceless.

By Dr. Sabrina Starling

Key Takeaways

  • There's a better, more sustainable way to run our businesses.
  • We can design our businesses to be sustainably profitable and make choices that give us peace of mind, more time for what matters most, and a growing bank account.
entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Carl came to our coaching call in a panic. Payroll was due in 3 days, and there was not enough money in his bank account to cover it. Exasperated, he commented, "I feel like calling it quits. I'm exhausted. I don't understand why this keeps happening! I've been doing this for over ten years, and all the financial stress of owning a business is too much on top of balancing a family and our financial stress. Our revenue is up 40% compared to last year's, and I still can't pay bills. I am working harder than I was a few months ago. Just last night, my wife and I argued because we still haven't been able to do the kitchen remodel I promised her two years ago. Where will I get the money? Why does this keep happening? I have all this debt tied to my business. I want to close it all, change my name, and leave it behind."

Carl's pain is one many of us have experienced. Years ago, I struggled to figure out my business finances. It didn't make sense that the revenue was growing, but I was paying myself less than the previous year, and it was getting harder to cover payroll.

When I confided this to a good friend and colleague, he suggested I allocate a percentage of all revenue to pay myself first and set aside a percentage to run the business. Although this seemed like extra work because it involved having an additional account, I realized how much I looked forward to doing my allocations a few months into doing this. It was fun to see the money I was able to pay myself. For the first time after many years of running my business, I felt rich! Reflecting on that makes me smile.

Related: 10 Expert Tips on Managing Cash Flow as a New Business

What seemed like much money back then was enough for me to cover an extra month or two of my pay. It gave me hope for a better future as a business owner. About seven months into doing this, I was able to take a nine-week, fully unplugged, paid maternity leave from my business when my second daughter was born. That was incredible!

I realized that by running my business from one bank account, there were times when it looked like much money was available, so I would make large purchases and add the team to reduce my workload, thinking the business was doing well. Then, six weeks later, I struggled to pay bills and meet payroll. I had failed to account for increased payroll taxes, quarterly estimate taxes, and annual due subscriptions. I also didn't anticipate the drop in sales from my having to spend time training new team members.

I was running my business from the survival trap and making decisions accordingly. These cash flow crises led me to take on work with less desirable, demanding clients to get cash in the door. The additional client work caused stress, and I questioned if I was losing money by working with them because I never seemed to get around to writing my book, The 4 Week Vacation®, which I knew would bring in better clients.

Related: 5 Steps to Turning Experience (and Failure) Into Wisdom

I've learned much over the years of running my business in this way and sharing it with others. It's not about how much we make but how much we keep. Hustle culture would make us believe we need to grow our revenue and have more vehicles on the road, a fancy office space, and many employees. After all, those are the signs of success as an entrepreneur. Or are they? These are the very expectations that keep us from being profitable and paying ourselves appropriately.

Reflecting on Carl's challenge, it is easy for our expenses to creep up as the business grows. We start hiring to meet increased demand. This results in the need for more space and equipment. Payroll and rent are the most significant expenses.

As revenue grows, our most significant opportunity lies in creating efficiency in our businesses. Running the company with a certain percentage set aside for operating expenses forces me to make decisions daily to be profitable.

Related: Why Embracing Failure Is Good for Business

Limits force innovation and creativity. When we exceed our operating expense budget, we determine how to deliver excellent service with our existing team and platforms. When we hire, we have a training plan for getting the new team member up to speed as quickly as possible, and we articulate to that team member how the key results they are responsible for contributing to profit. I like to set aside three months of the new employee's paycheck in a separate account before hiring. This gives me confidence that we can afford this team member.

As a child, my parents scrimped and saved to send me to private school. They drove me to school in our old pickup truck. I cringed seeing my peers dropped off in Mercedes and BMWs. At dinner, I'd complain about my parents' "shortcomings." That's when I learned a powerful life lesson.

My father was a banker, and most of his customers were small business owners. They were in debt. My father informed me that it is possible to drive a BMW and be drowning in debt. Once a month, in the evening, he'd disappear into the back bedroom to make phone calls. He was calling his customers who were behind on their payments. He alluded to some of my peers' parents being his customers. My parents chose vehicles we could pay for without going into debt. Sure, we didn't have the fancy cars, but we had peace of mind.

After many sleepless nights as an entrepreneur, peace of mind is priceless. There's a better, more sustainable way to run our businesses. We can design our businesses to be sustainably profitable and make choices that give us peace of mind, more time for what matters most, and a growing bank account.

Dr. Sabrina Starling

Entrepreneur Leadership Network® Contributor

The Business Psychologist

Sabrina Starling, PhD, The Business Psychologist, is the bestselling author of How to Hire the Best and The 4 Week Vacation®. Founder of www.tapthepotential.com and host of the Profit by Design podcast, she and her team are on a mission to send 10,000 entrepreneurs on a 4 Week Vacation® in 10 years.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics

Business News

Red Lobster Changed Its 'Endless Shrimp' Promotion After Losing $11 Million in One Quarter — Now It's Hauling Out Another All-You-Can-Eat Deal

The restaurant chain reported a record $12.5 million operating loss in the fourth quarter of 2023.

Productivity

6 Habits That Help Successful People Maximize Their Time

There aren't enough hours in the day, but these tips will make them feel slightly more productive.

Business Solutions

The Ultimate AI ChatGPT and Python Programming Bundle Is $30 This Week Only

Expand your knowledge and bring more work in-house to improve your business.

Marketing

How to Make PR Campaigns Customer-Focused Instead of Company-Focused

The 21st century has seen a shift away from the company that's "selling" and toward the consumer that's "buying." Business practices, like PR campaigns, have had to transition in kind to stay relevant in the current culture and to resonate with the public.

Productivity

SMART Goals May Be Holding You Back — Try This Effective Goal-Setting Technique Instead

Everyone suggests SMART goals, but this framework is flawed. Learn why and how to create goals properly — ones that you can actually achieve.

Business News

2024 Could Be the Year that Makes or Breaks a Lot of Small Businesses, According to a New Report

About a third of small business owners indicated on a Slack survey that they aren't sure if their businesses will survive the year.