Last week, Rebecca Knight, business journalist and contributor to Harvard Business Review, wrote “How to Improve Your Finance Skills (Even If You Hate Numbers).” It’s worth the read. Here’s a snapshot of what she covers. We’ll apply her findings more specifically to entrepreneurs, and provide additional resources below.
Takeaway #1: Without Basic Financial Know-How You Limit Your Opportunities
Knight cites Harvard’s Richard Ruback, who asserts that knowing the language of money leads to greater success. More specifically, when presenting on products or strategies, “decision-makers… want to see a simple model that shows revenue, costs, overhead, and cash flow… why it’s a good idea.”
Takeaway #2: “It’s not rocket science”
So again notes Richard Ruback, who likens business finance to keeping score in a ball game. “It’s mostly addition and subtraction and occasionally some multiplication and division.”
Takeaway #3: Dive In
Knight suggests finding a mentor or enrolling in a community college course. Anything to get you started down the path of learning how business numbers work is helpful. (Even Google is cited as a resource).
In our experience, it’s never enough to simply have that finance guy/gal cover all the details. You need to understand your numbers, and for these reasons:
- Increase the profitability of your business
- Explain your business with greater confidence (to employees, investors, and customers)
- Make calculated decisions
Read Rebecca Knight’s complete article here.
More Online Financial Resources to Help You on Your Way
HBR Blogs Finance and Accounting. Harvard Business Review consistently provides solid resources for your business. Their finance and accounting articles will serve you well
Financial Metrics and Ratios. Fidelity provides explainer videos on several key metrics.
4 ways to assess your business performance (BDC). The Business Development Bank of Canada is a good resource of knowledgeable articles for any company. When those they help succeed, their programs are available to greater numbers of entrepreneurs. Whether Canadian, American, or international BDC resources will help businesses do well.
Nasdaq Company Financials (e.g. HP). This is an example link to HP, as one of America’s largest technology companies. Change the URL to reflect any Nasdq-listed company ticker number. You’ll see their key financial metrics. Even if your company is not publicly traded, these figures will give you good insights into what makes these firms thrive or dive.
5 financial metrics you should know. Mary Ellen Biery is succinct and explains how to know whether your company is successful, providing five metrics important to entrepreneurs.
65 Questions Venture Capitalists Will Ask Startups. This Forbes list is a great one to go over in your next strategy meeting. How would you answer these questions? More specifically here, look at how many of them require some basic financial acumen. Use these to determine how far you need to go in learning your numbers.
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