“Money…” How would you complete the sentence? Money makes the world go around? Money is the root of all evil? What is your instinctive answer? And why is this important? says Adam Walker.
Well, the attitude that we have towards money plays a very important role in determining how much of it we earn, how much we keep and how we spend it.
The inspiration for this particular article came to me when I was judging the Negotiator Awards last year. I was fascinated, during the lengthy process, to see that no less than four of the entries in one of my reviewing and judging categories, actually said in their applications that, “We did not start our business to make money”. They then went on to say that they were motivated by the desire to offer a better service to their clients. However, surely, making a profit and offering a good service to all your clients need not be mutually exclusive. And surely, if you do not focus on making a profit, then your business will probably not make one.
I have lost count of the number of business owners who I have met over the years who have a strange attitude to money. I did some work for a firm in 2008 whose owner was obsessed by being the market leader in his town and by winning lots of industry awards. He was very successful at doing both these things… but whilst he was focused on doing this, he was hardly making any profit at all and during the same week that he was shortlisted for a major award, I was busy preparing a business plan for him to persuade his bank not to call in his overdraft and put the business into receivership!
If you offer a good service, you deserve to make a profit. It is an essential ingredient in the long-term success of a business and it is an entirely appropriate reward for hard work and judgement.
Another client has built a hugely successful business that turns over well over a million pounds a year from a single site. The underlying profitability of the business is over £250,000 a year but the two owners both draw modest salaries and frittered away most of last year’s profits on a ludicrously expensive office re-fit and a vanity advertising campaign, neither of which will produce enough additional revenue to cover their cost. I challenged them on the need for this expenditure and their response was, “We take enough from the business and we just want to reinvest in its future”. It was almost as if they felt that they didn’t deserve to draw any more money and I was left wondering what happened in their childhoods to make them feel this way.
PROFIT IS NOT BAD
To my mind, profit is an essential ingredient in the long-term success of a business and is an entirely appropriate reward for hard work and good judgement. If you offer your clients a good service, you deserve to make a profit, and if you so wish, you can then reinvest some of the profit in order to ensure that the business can offer good service to even more clients in the future.
The most extraordinary thing I witnessed though is the high number of successful business owners who run a profitable business and take substantial earnings from it, then squander the money that they have earned.
Time after time I see people who sell their businesses for substantial sums, then reinvest the proceeds in businesses that they know nothing about. As a consequence, they often lose it all. It is almost as if their subconscious mind believes that they don’t deserve to enjoy the fruits of their success.
Others go on wild spending sprees and spend the proceeds on foreign villas and exotic cars and luxury holidays. Often within just a few years, the proceeds of a lifetime’s hard work have all gone.
At the other end of the scale, some of my wealthiest clients are wholly comfortable with their money and live quite modestly without any apparent need to flaunt it. Others see their wealth as a privilege that should be shared with others and give substantial amounts of money to charity.
So what does money mean to you? It really is worth spending some time pondering on this question because your subconscious attitude to the meaning of wealth can and will have an enormous impact on how you live your life.
Adam Walker is a business transfer agent and management consultant who has specialised in the property sector for more than 25 years.