Keeping your finances - and emotions - on an even keel - small business financial management

Home Office Computing, Sept, 1991 by Linda Stern

Keeping Your Finances - and Emotions - on an Even Keel

How much are you worth? If that question runs through your mind as you run your business, you are falling into the No. 1 psychological trap of entrepreneurs: confusing self-worth with financial worth.

Because we create our own companies, we tend to think the business is a mirror of ourselves. If we lose a client, we must be losers. If we are struggling through long workdays (and nights) and still not making as much as the salaried worker next door, we much be chumps. If we are raising our fees and charging friends for our services, we must be pigs. And if business is bad, we must be failures.

This high financial anxiety is so widespread today that there are two new breeds of professionals cropping up to relieve it: financial planners who specialize in psychology and psychologists who specialize in finance.

I recently talked to three of these specialists to get their best tips on how entrepreneurs can keep their emotions and business finances on an even keel through good times and bad.

Victoria Felton-Collins is a financial planner with a doctorate in psychology who became interested in the psychology of money when she went through her own divorce. The author of Couples and Money (Bantam Books), Felton-Collins has offices in Irvine and Lafayette, California.

Olivia Mellan is a Washington, D.C., psychotherapist who discovered that money was "the last taboo." She specializes in the psychology of money conflicts for both individuals and couples. She's the author of Ten Days to Money Harmony: A Guide for Individuals and Couples (Olivia Mellan & Associates).

Jerrold Mundis is a New York writer and consultant who learned about money and stress when he found himself "in a state of futility and despair and hopelessness" with $50,000 in unsecured debt and no guaranteed means of support. He wrote How to Get Out of Debt, Stay Out of Debt & Live Prosperously (Bantam Books) about his own psychological and financial rebuilding process.

MONEY AND YOUR PSYCHE

Here's what the experts, all three of whom are self-employed, had to say. By following their advice, you're more likely not to mix up your self-worth with the size of your bank account - and therefore you'll be more likely to succeed in your business.

Learn to separate money from self. This is the crucial problem for most entrepreneurs. Even language use can help - Mellan suggests that you never ask the question, "What am I worth?" but instead think of your fees in terms of fair market prices.

Felton-Collins offers another way to isolate your self-worth from your bottom line: She tells clients to develop personal, as well as financial, net-worth statements. "We all have certain assets and liabilities. Certainly a limited amount of cash would fall into the liability side of the ledger. But good planning ability, common sense, and a product you believe in would be assets."

Mundis says he got so involved in his career as a fiction writer that he once told someone "writing is not what I do, it's what I am." When he heard himself say those words, he pulled out a piece of paper and wrote a list of all of the other things he is: father, brother, meditator, consultant, friend, and so forth.

Don't lowball your fees. When you price your services, figure out what you really need to earn for a "humane life," says Mundis, including annual vacations and the occasional dinner and a show. Too many entrepreneurs underprice themselves because their thinking is faulty. They think, "I don't deserve any more than this." Or they hold down their fees because they lack confidence and fear they will lose all their clients if they ask for more money.

Plan your ace in the hole. My backup plan - I tell myself - is that I could always go back to waiting tables. Mellan says that if her practice suddenly disappeared, she could become a theatrical translator for the deaf. Just having some contingency plans can help you weather slow or stormy periods. Mundis, who is big on making paper lists (and I find they work, too), made a list of 100 ways he could increase his income if he needed to.

Practice selling. Some of us are really good at writing, accounting, programming, or whatever, but are really lousy at selling ourselves. "I was so shy about selling that I once went on a 22-city book tour under a pseudonym," says Mundis, who taught himself to overcome his fears by realizing he has marketable abilities worth offering.

In the most severe cases, sometimes you are better off just hiring a marketing professional, notes Mellan. Or you can role play with your friends: Practice cold calls to the long-shot clients you don't expect to get and make lists of the points you want to make during any selling conversation.

Stop beating on yourself. Have patience. It can take months, or even years, for some prospects to turn into clients, says Felton-Collins. If you feel as if you are working hard and earning little, don't feel like a sucker; chalk it up to a cost of doing business or consider it an investment in your future.