As I’m sure you know, a lot goes into building and running a business. Simply having a good idea for an app, product, or service isn’t enough to develop and build out a company that can sustain itself.
Technology tools and social media can provide a significant leg-up to help jumpstart your business, especially for Millennial entrepreneurs comfortable with using technology. But hacking and data breaches can cause enough stress to make even the most level-headed entrepreneur break out in a cold sweat. Staying one step ahead can occupy an increasingly large amount of your time.
Even if you’re starting your new business idea while still working full-time at your 9-5 job, you’ll need to think about product development, marketing, your positioning in the market, and of course — the competition.
After analyzing and reviewing all of these different forces and trends that can have ripple effects on how your business performs, the last thing that may be on your mind is finance and accounting ideas. But even if you don’t consider yourself a financial guru, expert, or even that mathematically skilled, you simply must understand some of the basics of finance to help your business grow.
Finance is not the be-all or end-all of entrepreneurship or business ownership, but it’s very important for sustainable business success. Let’s take a look at some of the basic building blocks of finance all entrepreneurs would be well served to know and understand:
1. Net income does not equal cash flow.
Every businessperson, including you and me, focuses on net income, methods to increase it, and how to continually grow it over time.
That said, cash flow is an often overlooked metric that is arguably more important than income for many small businesses. Bills, employees, and suppliers cannot be paid with income (it’s just an accounting figure), but they can be paid with cash flow.
2. Debt is a tool.
For many individuals and entrepreneurs, debt can be a four-letter word, and represent something that should be avoided at all possible costs. It’s never a good idea to get over your head, on a personal or business level, with the amount of debt you acquire — but it’s important to remember that debt is a tool.
Like any tool, you have to know what you’re doing in order to make the most effective use of it without tripping yourself up. Always be sure to consult with a financial professional, but remember that debt does not have to be something to avoid.
3. Finance needs to be planned.
Building, growing, and sustaining a business requires that you keep your head on swivel, keep yourself informed about current issues, and stay one step ahead of the competition, but you cannot afford to forget your finances. Like anything else your business undertakes, you need to take some time to plan your finances, forecast future inflows and outflows, and tweak your forecasts based on changes in the market.
Finance might be a subject that every small business owner has been trained in, but it is something that every entrepreneur needs to know about. While every business is different, and you should always work with a CPA or other trained financial professional to keep your finances in order, there’s no reason why you cannot help yourself get started.
Money can seem complicated, but it doesn’t have to be. Hopefully, these suggestions can help you manage your finances as well as you manage your business.