It's not personal

It’s time to separate your personal spending preferences from your business spending habits.

Because they should not necessarily be the same.

You may be frugal or a spendthrift in your personal life

But depending on your business model, those personal spending habits may conflict with what the business requires.

Generally speaking, frugality and extreme expense scrutiny make sense for low-margin businesses (aka. low profit-to-revenue ratio businesses) with little room for innovation:

• If you’re working with 5% EBITA margins, one slip on marketing spend could turn you into an accidental non-profit :(

But in high-margin businesses where innovation or premium quality is essential, being frugal is a terrible strategy:

• It distracts from more high-ROI (Return on Investment) activities

• It prevents you from seizing investment opportunities

• It makes you vulnerable to the innovations of your competition

If your personal financial preference conflicts with your business model, you might need a wake-up call:

• Take a look at your business model, your profit margins, and decide: Are you a business that needs to count pennies or do you need not to get distracted by them?

• What routines or cues can you use to remind yourself of your business’s financial priorities?

• What reports can you rely on to trigger better decision behavior?

• Who can you trust to give you feedback on money decisions for your business to counteract your incompatible instincts?

Because your company's spending habits should not be personal

But your system for making good money decisions should be.

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