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Are Emotions Impacting Your Numbers?

Are Emotions Impacting your numbers?

When chatting to business owners, one of the things you generally see are the emotions they show when asked how their business is performing. Some of the reactions I get:

  • How are sales looking at the moment? We’ve smashed budget for the month!
  • How is your cash runway looking? We’ve just secured more funding and we have an extra 12 months to…
  • How is your staff member / business partner going? I think they’re going to leave and I don’t know what to do without them!

There is nothing like a mixture of happiness and fear to keep things real in business. The reason I talk about this emotion is that at any stage of the rollercoaster that is the business life cycle, there can be pure happiness and exhilaration and the deepest troughs where our ultimate fears are exposed. Feelings that contribute to and drive success but can also lead to things falling apart along the way.

The reason emotion is so important is that when it comes to looking at the finances of your business; we often see emotions dictating the look, feel and performance of how people describe their business’ performance.

Business owners can overplay their success and work more from a vibe then a genuine understanding of what is actually happening in their business. This can lead to:

  • Sacred cows in your business, products, business lines or time commitments that you just have to keep or have always done without thinking about them?
  • Feelings that you have invested too much time and money into an idea or venture and to pull out now means you lose a significant amount of time, effort and money?
  • Your business becoming an extension of your personality?

With the above, it can often boil down to the fact you are too emotionally attached to your business.

While the emotional attachment and passion you have towards your business is probably the reason you have a level of success in the first place, it’s even better sometimes to take a step back (and away from the emotion) and look back into your business. Why? Because starting to think like an investor or advisor to your own business may tell you some interesting things.

So what are some things you should be careful of with your business?

  1. When making decisions, don’t look at the time and money you have invested into your business or product line. It just starts to become all too emotional if you do. If what you have worked on to date won’t help you achieve your goals, maybe it’s time to take a different approach. It’s like the saying, ‘don’t throw good money after bad’, the same applies to our time. Are you really willing to continue to invest your time and effort into something that won’t help you achieve your goals?

  2. Numbers don‘t lie. When looking at the financial and customer metrics, use them to form a complete picture of how your business or product lines are going. Why? Because the numbers will help you to work out what doesn’t work quickly!

So as a takeaway, and to ensure that the emotion within your business is used positively to achieve your goals, use your numbers to measure your business performance. Create a budget for the 2014/2015 financial year and track your performance each month. Measure your product lines to see which ones are taking up your time and making you money. Just remember, the highest volume product you sell may not be profitable at all.

And look at your numbers every month. Simple black numbers on a white background can help remove the emotion and work with you to achieve your goals.

How do you track the vital numbers in your business? How do you keep your emotions from impacting your numbers? Share with us in the comments!

About Aaron Wallace


Aaron Wallace is ​​Operations Director at Nudge Accounting and​ Chief Financial Officer of The Entourage. Aaron works extensively with small businesses and startups to help them develop strong financial systems and use their numbers to develop and refine their operations. Aaron was previously a Lecturer at the University of Technology Sydney and a Manager at KPMG Corporate Finance.

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