What we can learn from successful businesses

Have you ever stopped to think about what separates a thriving, successful business from one that has failed? The first thing that comes to mind for me is the product or service – is it good quality, is it a fair price, is it easily accessible, do I need it, do I want it?

And sure, all those things need to be considered when I am purchasing goods and services. But a business can have all of that and still fail.

Why is that?

Let’s consider what happens behind the scenes of a successful business.

At a very high level, businesses will generally have someone or a team of people (if a larger organisation) focused on the finances. They will have two main financial documents to ensure the success of their business: a balance sheet and a cashflow statement.   

What is a Balance Sheet?

It is a statement of assets, liabilities and capital of a business at a particular point in time, basically what a business is worth at any given point.

What is a Cashflow Statement?

It is a statement that tracks all the money flowing in and out of a business; measuring the strength and position of a business.

So then, if a business has a great product or service plus keeps a close eye on its financial position, we can conclude that it has a higher chance of succeeding, compared to its competitor who may have a great product or service but is not monitoring its finances.

The same is true in personal finance!

How do we know whether our financial position and long-term prospects are good?

What if we introduced our own personal balance sheet and cashflow statement?

Would we have a higher chance of succeeding financially?

The answer is a resounding YES!

I have had a watchful eye on my finances for six years. I have been keeping a balance sheet and cashflow statement for our household. These documents are commonly known as a budget and a net worth tracker. I am currently working on releasing a free budget tool but for now you can find a net worth tracker here.

The transformation I have gone through whilst on this financial journey is profound. Here are some examples of how our life has changed:

• My husband and I went from carrying approximately $5k worth of credit card debt every month to having a $0 balance every month.

• We went from having mere hundreds in our savings to having a very healthy emergency fund.

• We went from not knowing where our money was going to being extremely intentional on where we wanted our money to go.

• We haven’t blinked an eye in the face of any financial emergency so far; we perceive these situations as nothing more than an inconvenience.

• I went from working an absurd amount of unpaid hours in a highly demanding and stress-filled job to working part time in a role that gives me purpose (and sanity).

I don’t provide these examples as a way to boast or as a show of conceitedness. It’s to say that the decision to act and the hard work that followed will pay off forever.

I have never felt so free and at peace than I do now. When I truly think about how that happened, it all links back to that moment in time when I decided to get serious about my finances.

Because when the financial strain is lifted, there is a whole other life waiting to be lived.