Updated: Jan 2
Are you mastering money, or is it mastering you? People are in conflict when it comes to money. How much money is enough? Should you be generous as a business owner, or frugal? Will you have enough money to pay your bills, or so much left over, you will be financially set for life? In this post, I will answer these questions and more as you understand how Core Energy™ intersects with your business.
There are eight critical mechanical components of business. There are seven levels of core energy. I’m creating a series of posts called Business Mechanics & Mindset. You can read about these topics in more detail in my book entitled, “Business Mechanics & Mindset: How Your Thoughts Create or Sabotage Your Business Success”. Today’s post is the fifth of this series entitled Core Energy™ Money.
Before I go too far, I’ve created another post that you may want to read before you read this one. It is entitled “What is Core Energy?”. It explains the seven levels of Core Energy™ in detail that will be mentioned in this entire series.
If you want to watch a video of this exact same topic, go here: https://youtu.be/SX4QLriqT10
(Core Energy™ is a registered trademark of iPEC and all Core Energy™ concepts described in this blog post are derived from iPEC’s Core Energy Coaching™ program.)
Money is a core component of any business. If you don’t have enough, you’re done. Rarely, will you have too much. In today’s post, I want to illustrate how Core Energy Coaching™ concepts taught by the Institute for Professional Excellence in Coaching or iPEC intersect with business finance.
In my business coaching practice, I’ve discovered that there are five critical areas of finance that impact business owners:
Money Mindset: How you think about and treat money in your business.
Cash: How you manage the level of cash to support business operations… not having excess cash in the bank; and having plenty to pay the bills.
Pricing: What prices you set to ensure you’re competitive and providing sufficient margins to stay in business
Budgeting and Forecasting: Creating a business model that forecasts revenue, expenses and direct costs on a periodic basis… and then sticking to it.
Investing & Debt: Requesting and obtaining added cash when you need it.
I want to illustrate the first topic of money mindset at each energy level with a hypothetical situation.
George owns EEE Engineers, an engineering firm with 20 engineers, 2 marketing people, and 3 administrators. In the past three years, his firm has earned a consistent revenue of $4 Million each year. This year may be a little different as a few key architects he relies on for business have indicated that they may not have as much work for him this coming year. He has $1 Million in the bank. He wants to create a financial plan for the coming year.
I will illustrate George’s thoughts and feelings as he climbs the ladder from Level 1 to Level 5 as he assembles his financial plan.
The Victim – Level 1 – I Lose
George is worried and convinced that his engineering firm will not do as well this coming year as in years past. He is creating a plan to lay off half of his staff. He plans to pull as much cash out of his firm as he can to put in his personal retirement plan so that his family can weather the financial storm that’s ahead.
The Fighter – Level 2 – I Win, You Lose
George is filled with fear and anger at the same time. He is convinced that the architects that had given him so much work in the past are now hiring his competition. If his customers are going to work with his competition, it’s fair game for him to seek out other architects who are more willing to work with EEE Engineers. So, George creates a list of other architects and tasks his sales team with a mission to win over competitors of his current architects.
The Survivor – Level 3 – I Win
George has decided to copy last year’s financial forecast to this year as if the two years will be identical. He figures since they managed to make a profit in the current year, things should be the same in the year to come. If, for some reason, EEE Engineers doesn’t get work from his architects as expected, they will lay people off to ensure they continue to make comparable profits to the current year.
The Lover – Level 4 – You Win
After hearing the news from his architects that they plan on lower activity this coming year, he offers to help them gain additional business. George had been asked by building owners in the past to plan and design renovation projects for their buildings. Since he was busy with new construction work from his architects in the past, he had refused this work. Now that new construction was slowing down, it’s a good time to team with his architects to help them create additional business to fill the void for the coming year.
The Opportunist – Level 5 – Win/Win
George sees the reduced workload from his architect customers as an opportunity for EEE Engineers to take the lead on creating projects with building owner customers. EEE Engineers is a mechanical and electrical engineering firm. They had always relied on getting work from architects in the past. While this was good work, they had little control over how much work they would get. George wanted to conduct audits for building customers and help them prioritize mechanical and electrical retrofit work. They would be able to charge better margins for this work, and they could directly control the amount of work they would complete.
I’ve just described five Core Energy™ levels of money mindset represented by George as he starts creating his financial plan for the coming year. There is no wrong scenario in any of these five reactions. However, George will create a completely different plan based on his mindset related to money.
Let’s look at the other four financial factors of Cash, Pricing, Forecasting, and Investment.
Level 1 - Victim
Cash: Victims will see any amount of cash as an insufficient amount. If they have cash, they’ll hoard it and try to get more. If they have no cash, they will be convinced there’s no hope for more.