A lot of entrepreneurs have no financial background or interest in finance. However, to run a business, you have to know some basics of finance. Your business can be generating sales and leads but not making profit.
You need to know how much is going out and going in. As a small business owner, you probably cannot afford to hire a financial expert to help you prepare financial statements etc.
Then the question pops up, what do you do in such a scenario? As an entrepreneur, you need to always find a way, if you don’t have money to hire a financial expert, what happened to networking? You should try and meet someone that knows one person that knows a financial expert, talk to such people and let them know you are a startup, if one fails to help you, the other would help. These people can help you construct Accounting systems that would ensure all your financial activities are accounted for. If you are spending money, you need to be sure you are making more money back. Some of the reasons why you should know your figures are highlighted below.
- It helps investors value your business
While trying to raise funds for your business, you would need to be aware of what your current numbers are and what you project to have in a few years to come. While presenting to investors, whether angel investors or venture capitalists, they want to be sure you know the figures you are giving and not just cooking numbers.
- It helps you in planning
While planning for operations to be carried out in different departments of your business, your numbers will serve as a guide in drafting out executable plans.
- Scope of action and Strategy Implementation
There may be situations whereby you will need to come up with strategies or take actions which you did not make plans for. This contingencies can occur due to your updated financials. These figures will tell you what next to do.
- People would see you as someone who has the interest of his/her business at heart
You may be an entrepreneur with no background whatsoever in finance, knowing your numbers will show people how committed you are to your business. You have to be very versatile as an entrepreneur as you manage the overall activities. This display of commitment can help you in getting people to help you.
- Price Setting
Your numbers would enable you set prices for your products, these prices would be set with the aim of possibly recouping your investments into the business.
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