I really should have known better.
There I was pondering my sad state of affairs.
I’d started my accounting business two years before this moment of despair.
In 2008, I’d just walked across the stage to receive my Masters of Business Administration diploma.
I had a few years of accounting experience, as well.
I knew the language of business (accounting), so my business owners fail to understand.
I had all the knowledge that I needed to be successful in business.
However, my bank account was yelling at me that my business was failing.
How could this happen when I had all the knowledge I needed?
I was frustrated and tired.
I’d been working as hard as I could to grow my business.
I had grown my business for over two years.
In year two, my business earned more money than it did in year one.
The problem was that I allowed my business to spend more money than it earned.
I was paying everyone else first.
I was getting the last scraps of money if there was any money left each month.
I had depleted my personal savings.
I maxed out my credit cards.
I was at a critical point where I had something had to change, or I would be facing financial disaster.
I realized that I was what needed to change.
I sat in thought for some time trying to figure out how I was going to navigate out my predicament.
What am I going to do?
How did this happen?
I felt like I was at the end of my ropes.
The worse part about it was my wife, and two toddler girls depended on me to put food on the table.
My identity as a man was beginning to vanish.
What kind of man would I be if I let them go without the basic necessities of food, clothing, and shelter?
I continued to wallow in thought.
Then the answer came to me in three simple words.
Pay Yourself First.
It was a breath of fresh air.
I knew instantly that this was the solution to my dismal failing business.
I recognized that the reason my business was failing because I wasn’t paying myself first.
I’d learned the lesson of paying myself many years ago and had seen great results.
Back when I was employed, I always saved some money.
I’d always been interested in money and read a book by George S. Clason entitled The Richest Man in Babylon.
There are many nuggets of wisdom about money in that book.
The two principles from the book that meant the most to me were:
- Pay Yourself First
- Spend Less Than You Earn
In my mid-twenties, I had some student loan debt and some credit card debt.
I used the principles of paying myself first and spending less than I earned to get out of debt and build up some savings.
It had been so easy in my twenties to get a handle on my money.
However, for some reason now that I was a business owner, I stopped living by the pay myself first and spend less than I earned rule.
I got distracted by my ambition to grow my business.
I heard a bunch of lies spread by other business owners.
As I reflect on that, I realize it was a situation of the blind influencing the blind.
Here were some of the false beliefs I allowed myself to fall victim to.
- You’ve got to spend money to make money.
- Time is money.
- Increased sales with solve all my business problems.
- The next new customer will make all the difference.
I know now the error of all these fallacies.
These are the great lies of business.
What I learned the hard way is that my business needed to be built on a solid foundation.
A business should be designed to make money.
The only true way to know if your business is making money is if there is cash in the bank.
If there is not cash in the bank, the business is not making money.
I’ve heard many business owners complain to me that they are having cash flow problems.
When I hear them say they have cash flow problems, I point them to the real problem.
Cash flow problems are a symptom of a deeper problem.
If a business has a cash flow problem, this indicates that the business has a profit problem.
If the business had a true profit, it would have enough cash.
Remember, this cash in the bank is the only true indicator that matters in a business.
If the business doesn’t have cash in the bank, the business is failing.
I had finally figured out that not paying myself first was the fatal flaw I had in my business.
I decided that I was going to fix that problem immediately.
I went to my bank and set up a second bank account.
I nicknamed this bank account the Damon bank account.
Then every time I got paid by a customer, I moved ten percent of that customer.
When I decided on July 9, 2010, to set up my Damon bank account, I had no idea how much that simple decision would positively transform my life.
Now more than nine years later, I recognize that setting up my Damon bank account was the best financial decision I’ve ever made.
Within six short weeks, I’d amassed more than $1,000 in my Damon bank account.
That may not sound like a lot of money, but for me back then, that was an enormous amount of money for me.
All the worry and anxiety I’d been living with for the past two years began to melt away.
I started to become focused on improving the profitability of my business.
I stopped allowing my business to spend more than it was earning.
I was getting paid every month.
I was building up cash reserves and started to pay down my credit card debt.
I was moving in the right direction.
I was finally getting my head above water.
Calmness was coming back into my life.
There were times when my business tempted me.
My business whispered to me that I needed to buy this newfangled shiny object.
Then I would look at my business operating bank account, and I realized that I didn’t have the money in that bank account to purchase the shiny object.
My business would need to do without that purchase.
My business even whispered to me that I could “borrow” the money from my Damon bank account.
I responded with anger and rebuke.
“How dare you! That is my money. That is my payment for all the blood, sweat, tears and sleepless night I’ve poured into my business.”
I stood vigilant.
I would not allow my business to rob me of my money.
My business continued to grow profitably.
In four short years, I realized I’d created my ideal life.
I’d built a business that had given me an amazing life.
I was maxing out my retirement account.
I stopped working seven days a week without a break.
I was working on regular work hours.
I was taking three to four days off every month to enjoy my life.
I had a profitable business that was giving me 75% of revenues earned.
I had created my ideal life, and it was a direct result of the decision I made on July 9, 2010.