How your Personal Financial Situation can Destroy Your Business

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Charles Dickens with phrase your personal financial situation can destroy your business

As a business coach, I am often going over a business's finances with the business owner, looking at their current financial situation, their future budgets, and their creation of long-term equity in their business. These are all very important because we need to create sustainable businesses, and sustainable means profitable. A business can't be sustainable unless it is profitable.

When it comes to a businesses and a person's financial stability, there are many dangers out there from the obvious loss of clients, lack of credit from banks or vendors, loss of margin do to competition, inflation, deflation, they can come from all sides. But it's interesting that there is one area of threat that isn't talked about as much because it's never really reflected in the business finances. That's the business owner's personal financial situation.

When you are in business for yourself, you effectively have two different sets of finances, and I can tell you from experience that if one of them is out of shape then it will affect the other.

Not having your family finances in order can cause some strains on both your mental outlook as well as your business.

I worked with a business where from the outside, the business looked like it was going great. It seemed very successful. But once you looked inside at the financial picture, there was always financial stress, much more than should have been there for the stage that the business was in. What I realized later was that the owner was giving me an incomplete picture of the finances of the business. What he showed me made sense, but there were black holes in the business. At first, I didn't question them, but the longer we went the more obvious they became. The problem was that the owner was in subtle ways co-mingling the money from the business with his personal finances. These things weren't being recorded properly in order to hide them because he clung to the hope that things would just turn around and he could make all those issues go away. He never dealt with the underlying problem that he and his wife had no discipline in their personal spending. Strangely, he had great discipline in his business spending habits so it took me a long time to realize that something was off in his personal life.

I have watched a very well-respected lawyer who was in practice for 25+ years hit some personal rough patches in the 2008 credit crisis and started pulling money out of some of the trust accounts he was entrusted with, thinking that it was temporary and that he could fix it before any audit came along. However, it was detected and he lost his credibility, his license, and faced some criminal charges.

Having your personal finances in order is essential for both the peace of mind and stability that it takes to run a business. People have this idea that if they just make a little more then that will stabilize everything but one needs look no further then the lives of sports stars who are in constant stress in spite of having multi-million dollar salaries. Many of whom will declare bankruptcy soon after their career ends.

I was recently reading the book David Copperfield by Charles Dickens, and I came across this very sound advice given to a young David Copperfield. I found it to be marvelous in its simplicity and memorable in its delivery.

“'My dear young friend,' said Mr. Micawber, 'I am older than you; a man of some experience in life, and—and of some experience, in short, in difficulties, generally speaking. At present and until something turns up (which I am, I may say, hourly expecting), I have nothing to bestow but advice. Still my advice is so far worth taking, that—in short, that I have never taken it myself, and am the”—here Mr. Micawber, who had been beaming and smiling, all over his head and face, up to the present moment, checked himself and frowned—'the miserable wretch you behold. My advice is, never do to-morrow what you can do to-day. Procrastination is the thief of time. Collar him!' After which, he was grave for a minute or so. 'My other piece of advice, Copperfield,' said Mr. Micawber, 'Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the God of day goes down upon the dreary scene, and—and in short you are forever floored. As I am!'”

It's not how much you make. but how much you save, that will determine your financial stability. 

Part of this starts with keeping the two different financial pictures separate so that you can see the reality in both areas of your life. 

The business owner who takes cash and puts that cash into his pocket as spending money will never have a clear picture of what's happening in his business or his life.

I have worked with students who are launching their first business and one of the simple pieces of advice I gave them was before they got a dollar of revenue to get a business bank account and everything for the business goes through that account and everything personal goes through their personal account.

Get those pictures clear and straight and it will make the creation of your business much easier.
For more information, check out my page Who & Why or send me an email at


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