In fact, Daymond John of Shark Tank and FUBU fame agrees:
“While good business ideas are plentiful, many entrepreneurs struggle to understand payroll taxes, health care and other thorny issues… In other words, they don’t have the financial literacy to scale their businesses and attract investors.” – Daymond John, August 2013
That’s enough to scare any business owner straight. We’re all here to win the prize, not to fail for lack of the proper footwear.
How to keep your finger on the financial pulse of your business
Now that we’ve firmly established the “why”, let’s look at the “what”. I know you are a business owner, not a bookkeeper, accountant or CPA. Your core business is selling frozen yogurt, providing coaching, or building apps. It’s not crunching numbers. So here is the minimum you need to keep your finger on the financial pulse of your small business finances:
- A bookkeeper (or yourself) closely tracking and categorizing the income and expense in your business and generating consistent Profit and Loss statements.
- A weekly, and then monthly, time set aside to review the Profit and Loss statements and glean the “P&L Gold” that lies within. The gold will help you guide your business into the most profitable waters.
- A cash flow projection for the next 12 months ensuring you won’t run out of money before you run out of business. This will help you determine when you need a cash infusion and how much before the situation becomes desperate.
- An emergency fund for your business. Imagine a Google update wipes out the majority of your traffic or a key supplier fails to deliver. You emergency fund will help you weather the storm.
- A framework for making solid business decisions based on the finances of your business. This will ensure you are not overextended and can rest easy that you’ve make the best decision possible each and every time.
It’s not enough to merely be the CEO of your business, you need to wear the CFO hat as well. It’s not as tough as it sounds and it will pay dividends you can literally take to the bank.
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