Let me get one thing out of the way right up front. You most likely got into business because you have a big vision that will ultimately create a lot of value for people. You probably didn’t start your business for the sole purpose of making money. I don’t think there is anything wrong with that but if you think that money isn’t everything and you run a business, be careful what you wish for.
Dollars Follow Value
The primary function of your business is to create value for the public through producing a good or service that people want/need. Primary function 1a is to make money. As a good friend of mine says, dollars follow value. If you don’t create value, all the money in the world won’t help you. If don’t believe that then ask all the lottery winners who go broke.
Here’s Where Business Owners Go Wrong
A large percentage of business owners that I work with focus on their value and then forget about their money. They never look at their financials, except for tax purposes, and even if they did look at their financials, they wouldn’t understand what they are looking at.
While creating value in your business is important, if you don’t manage your business finances, you will find yourself out of business sooner than later. What’s one of the primary reasons that businesses fail? Poor financial controls.
How To Manage Your Business Finances
First off, make a commitment to your business finances and get educated. A great book to read is Financial Intelligence For Entrepreneurs. This book gives you the ABCs on your finances in an easy to understand manner.
Get a professional involved. Are you still doing your books? If so, stop as soon as possible. Having a pro, that knows your industry, doing your books may very well supplement your cost of hiring them. Have regular meetings with your accounting team as well. Don’t just meet with your tax advisor at the end of the year, meet with them on a regular basis to plan and forecast.
Set up a regular schedule to review financials. This is part of creating the right habits in your business. Keep your finger on the pulse of your financial health. Reviewing your financials weekly is a great place to start and use the metrics as means to manage your business.
This isn’t about being greedy or to infer that you are a loser if money isn’t the most important thing in your life. Here’s a news flash, money isn’t the most important thing to most people so this position is hardly unique. Don’t use this position in a destructive manner and let it fool you into thinking that money isn’t important. It is.
Even if you didn’t study business in college, you can still master the financials in your business. Caring about value and making that your focus is great. That value, however, does you no good if your business is broke and is forced to close. Financial literacy in your business is a key part of a winning business.
Great point Brandon.
Too many people think that money is a dirty (yet necessary) thing, and in trying to be a ‘good person’ they want to have as little to do with it as possible.
However, money follows the same natural laws as everything else… in other words, if you don’t pay attention to money, it withers and dies leaving your business to do the same.
You’re 100% right. Money is important and needs to be paid attention to because the more money you have, the better job you can do at serving your clients and improving the world.
Great as usual!
Very true. We think we are going being altruistic but really we are destroying our ability to create value. Well said Derick