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“Financial planning causes a struggle between the rational brain and the emotional brain.” (Michael C. Finke, author of Money Management Skills)

You didn’t start your business to become a psychologist. But understanding the way emotions creep into your decisions could be the difference between plain sailing and struggling to stay afloat.

Entrepreneurs are often painted as rational, profit-driven operators. In reality, money decisions are rarely made in a vacuum. Stress, fear, pride and even guilt, can all shape your thinking. The danger is, emotional decision-making doesn’t feel emotional. It feels instinctive, even responsible. But it can erode cash flow, distort pricing, or block growth, while giving you the false sense that you’re doing the right thing.

The goal isn’t to ignore emotion. It’s to recognise where it’s hiding, so it doesn’t quietly sabotage your progress.

“We set prices by gut feeling”

Pricing should be based on data, not personal sentiment. In reality, neither owners nor customers inherently “know” what a fair price is. Research on psychological pricing shows that people usually assess value by comparison, not by intuition.

When owners set prices based on how they feel instead of cost and market demand, they often undercharge. In short, emotional pricing leaves money on the table. The fix is to base prices on costs, competition, and demonstrated customer value instead of just a hunch.

“Raising prices will make customers revolt”

Price increases make many owners nervous, but fear is often worse than reality. A report from the U.S. Small Business Development Centre found that, when questioned, owners commonly say “I’m afraid I will lose customers if prices go up.”

In practice, customer loyalty depends on quality and service, not just on getting the lowest price. Studies note that some customers might switch if you raise prices – but most (or all) will stick around if value remains high. In fact, a modest price hike often increases profit more than it costs in lost sales. Raising prices at the right time (e.g. after adding value or amid industry-wide inflation) is usually safe and can strengthen a business.

“Our sales will meet this forecast”

Owners tend to be optimistic about sales, but wishful thinking skews forecasts. Sales teams frequently rely on “gut” when updating projections, which breeds overconfidence. In other words, they estimate sales based on hope rather than hard signals. Behavioural finance experts call overconfidence bias “one of the most common issues in financial decision-making”.

The result is frequent forecasting errors: too much inventory, staffing overruns, or cash shortfalls when sales fall short. To counter this, successful owners use data and regular feedback loops. They treat projections as hypotheses to test, not guaranteed outcomes.

“I can do the books myself”

Many business owners feel they must handle all finances alone, but that can backfire. It’s common to believe nobody knows your business “as well as you do,” and thus avoid outside help. This reluctance to delegate leaves owners overworked and stressed. Bringing in an accountant frees up time and adds expertise. Trusting trained professionals with your money management usually strengthens control (and sanity), rather than eroding it.

“We’ll fix financial problems later”

Procrastinating on tough money decisions is a costly mistake. Delaying the reality-checks, like overdue invoices, unpaid taxes, or necessary budget cuts, may feel easier now, but hurts later. Studies of business strategy show that postponing financial actions leads to “immediate cash flow constraints” and lost growth opportunities. For instance, skipping a pricing review or ignoring rising expenses might result in steep interest charges or a cash crunch.

In short, avoiding unpleasant choices compounds risk. The smarter move is to tackle issues early: tighten budgets, renegotiate costs, or adjust plans when there’s still time to gain an advantage.

What’s the takeaway?

Businesses can often counter these emotional pitfalls by simply bringing data and perspective into their decisions. We highly recommend seeking outside input and using structured decision frameworks to ensure actions are taken based on clear reports and forecasts.

Don’t be afraid to doubt yourself. Questioning each emotional assumption and verifying it with facts is the surest way to protect your margins and future growth.