When it comes to starting a business, it’s hard to deny that money is one of the most important factors on most entrepreneurs’ minds. There are numerous other factors that impact an individual’s decision to start their own business, of course, such as the desire for independence and growth, but the question of money is one that remains on an entrepreneur’s mind throughout the entirety of their start up operation.
According to entrepreneurial experts Karin Abarbanel and Bruce Freeman, there are four phases that almost every first-time entrepreneur will experience in their complicated and ever-evolving relationship with money. These stages vary slightly from person to person in terms of longevity and exact characteristics, but, in general, you can expect the following:
Phase 1: Money is tied to your emotions.
In this first step towards “money enlightenment,” your relationship with money will probably be very complicated. In this stage, most entrepreneurs find that their emotions are linked inextricably with the income of their start up. You’ll likely feel optimistic and positive when you receive a check and then doubtful and scared when money is scarce. This link between your cash flow and your emotions is completely understandable: You’ve been trained to associate money with success, for example, and your new status as an entrepreneur has you uncertain about your financial future. But this first phase of your relationship with money is rather unhealthy, and it can lead to emotional problems.
Phase 2: Money is the enemy.
Once the initial high of starting a business has begun to wear off, many people find they enter the second phase in their relationship with money: They begin to hate it. Your business is probably still growing, meaning it’s very needy, but you probably haven’t reached the point yet where you feel comfortable with your income. For many people, this results in them viewing money only in terms of the problems created by its scarcity. During this phase you’ll likely find yourself lamenting the non-abundance of money and doubting your business’s future by thinking things like “If I only had more money, I could afford to buy those shelves/ hire new employees/ purchase the supplies.”
This fear can paralyze an entrepreneur. To get through this stage, you’ll have to learn to disassociate money from your negative feelings by recognizing that its absence didn’t cause all of your problems, and so, logically, its presence won’t solve all your problems.
Phase 3: Money is a safeguard.
During this phase, your mindset begins the transition away from viewing money in your business as a part of your personal identity to viewing money in your business as a necessary part of your professional goals. At this point, you’ll probably start to realize that money is neither your enemy nor the primary determinant of your success as an entrepreneur, but rather a helpful way to protect your business. Your business no longer depends on every scrap of cash (and therefore accepting every project, offer, etc.) like it used to, so your relationship with money can begin to mature.
Phase 4: Money is useful.
This is the final and healthiest phase of “money enlightenment.” In this stage, most entrepreneurs find that their emotions are detached from their business’s income and that they view money as a means for advancing their business, not as a measure of their personal success. To reach this stage, you must recognize that money is fluid: It comes, it goes, and it usually returns again. It allows you some freedom in your business (in choosing clients, setting deadlines, etc.), but it does not control you. Experts recommend that you try to view money objectively by thinking of it as an invisible employee. Understand, for instance, that it plays an important role in your business and that you do have some control over it.