Published on August 24, 2021

Conquering money issues: Why this is so hard for entrepreneurs

Most advice columns about small business and money are prescriptive. They offer “wisdom” regarding the “right thing to do”. I have written many myself, with titles like: Ten things not to do with a Business Credit Card. Noble stuff!

Entrepreneurs are not super human however. Even those that are, still have to contend with that “human part.” And there is a great deal of research showing that this human part can be problematic when it comes to actually implementing good advice. This is especially true when people have multiple demands placed on them, as is the case for most business owners.

Sadly few people recognize this, as Moira Somers points out in her book on “Advice that Sticks.” Both advisors and those seeking advice overestimate the distance between good intentions and changed behavior. As such, they don’t do enough to reduce the friction that impedes change.

What can one do about such friction? First, a bit of self-analysis on the part of the entrepreneur helps. They need to question their current relationship with money is and honestly answer what it is they most want to change. They need to build up a sense of why this change is important.

They should write (yes write on actual paper — it cements motivation more than keying it into a memo app) what difference such a change will make to their business and mental well-being, i.e. “My business credit card debt seems overwhelming. I recognize that I have always considered myself a creative type and therefore facing my debt scares me. I would like to get a handle on my business credit card spending and create a plan for tackling its balance. Cutting my interest bill and knowing my balance would create a cushion for a true emergency and improve my score if I were to apply for a SBA loan. It would also reduce the sense of impending doom that I feel every time I swipe.”

The entrepreneur should also pinpoint what they are most likely to struggle with, and who might be affected by any action plan. They should then brainstorm how to “hack the task” to remove obstacles and make it easier, i.e. “I will struggle to commit to a payoff plan and am unlikely to go through my statements after a long day. My assistant will probably push back if any cuts affect her. To reduce friction I will take a small step each day, like turning off one-click ordering. I will get my assistant to leave a print-out of my accounts on my desk first thing. I will ask her for two suggestions as to how to slice costs, getting her buy-in in the process.”

Bolstering self-efficacy is also vital. Entrepreneurs should estimate their confidence in their ability to adhere to action steps. They should think about (and write down) times when they have successfully changed behaviors, and what steps would make it easier to succeed this time.

This would include an assessment of useful external support, i.e. “When I started this business I sacrificed a great deal in the short term for the long-term gain of being my own boss. I leaned on a women startup group for encouragement. Since I know that my family and employees will probably push back on any attempts to rein in spending, I will research and join an online debt-cutting group. I will download their app and commit to uploading my progress over lunch each day.”

Above all, both advice-givers and seekers should remember the “human” in their desire for behavior change. We should recognize that fear, inertia and the external environment play far bigger roles in goal achievement than the soundness and/or necessity of the goal itself. Let’s work with ourselves (including the knotty human part) by removing obstacles to change, instead of beating ourselves up when motivation alone does not succeed.


Article written by Krista Tuomi.
Krista Tuomi is a professor in the International Economic Policy program at the School of International Service, American University. She has worked as a policy analyst in the areas of innovation and investment, and recently her focus has been on best practices in the startup investment climate, particularly on policy related to angel investing, crowdfunding and seed financing. Her passion for the field of innovation and entrepreneurship extends into her volunteer work, which includes SCORE, Boots to Business, the Veteran Small Business Challenge Competition, Syracuse’s Institute for Veterans and Military Families, and the Angel Capital Association.

Initially published on Bizwomen.