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    6 Dumb Money Decisions Entrepreneurs Make

    By Adrienne Burke | Yahoo Small Business

    Author Emily Chase Smith, "The Entrepreneur's Money Expert"

    During her years as a bankruptcy attorney for business owners, Emily Chase Smith says she found herself sitting across from her clients thinking, “Man, I wish we met a year ago. This all could have been prevented.” So she wrote a book, The Financially Savvy Entrepreneur: Navigate the Money Maze of Running a Business, aimed at giving business owners the information they need to stay out of bankruptcy attorney’s offices. Smith, who calls herself The Entrepreneur's Money Expert, also writes a blog and hosts the Money Morsels podcast featuring “small bites of wisdom for entrepreneurs” on topics such as “Growth Without Debt,” and “3 Things All Business Owners Must Know About Money.”

    Chase Smith packs The Financially Savvy Entrepreneur with lots of easy-to-understand-advice expressed in entertaining prose on topics useful if not crucial to anyone running a business. These include: how to assess your current financial health and come up with a “runway equation” that predicts how long you can continue to operate with your current funds; what you need to know to grow your baby startup into an adult entity; why you need to get a grip on your financials, set up an accounting system, and hire a bookkeeper; how to mine for gold in your P&L statement; and how your business interacts with your personal credit score.

    In a chapter titled "What’s Eating Your Lunch?" Chase Smith explores the many “dumb money decisions” she sees entrepreneurs make. Some, she says, are tragic, and some—like the 1,000-plus postcards she confesses she has left after a failed marketing campaign—just require an extra-large trashcan.

    In particular, she says six dumb decisions are the most common ones she sees. If you see yourself in any of these, you might want to pick up her book this summer.

    1. Saying, “It’s a write-off.” Chase Smith says that phrase is a justification for buying what you want. Like buying something simply because it’s on sale, justifying a purchase—such as a new delivery truck instead of a used one—as a write-off “stops the true analysis of how that item will serve us and whether the cost makes sense in our business,” Chase Smith says. “’It’s a write-off’ … makes everything sound like a bargain.”

    2. Not controlling business expenses. “Money only counts if you keep it,” Chase Smith points out. “No matter what your business, you will benefit from keeping a tight rein on the money.”

    3. Losing perspective. Chase Smith cautions against forgetting the value of a dollar. “Money gets skewed when it flows in large volumes,” she says. In other words, just because there are hundreds of thousands flowing in and out of your business every month doesn’t mean a lunch is now worth $100.

    4. Going large. The “think big” mindset of most entrepreneurs is both a blessing and a curse, Chase Smith observes. “As we run toward the goal, we act as if the finish line is already a reality instead of scaling as we grow.” Let your business evolve before offering generous benefits packages and signing a lease on a beautiful office, she advises.

    5. Getting the office and the car. “Spend now on what your clients will see”—a high-quality briefcase, a great website, gorgeous signage; not high-end office furniture—“and grow into the other, less important items,” Chase Smith says.

    6. Indulging in too many luxuries. “Luxuries are one of the reasons to be an entrepreneur, Chase Smith concedes. “If we wanted just an ‘okay’ living, we could get a J-O-B and uncomplicated our lives. … But if luxuries are impeding your cash flow, you end up with a garage full of Mercedes, an empty fridge, and a dead business.

    For more words of wisdom from Emily Chase Smith, check out her blog, podcast, and book at emilychasesmith.com.

    Yahoo Small Business Services