Unfortunately, the financial literacy of the average entrepreneur or business owner is just far too low. According to the SBA (Small Business Administration), there are 27 million small businesses in the United States with a failure rate of 50% during the first five years with only about 33% percent surviving at the ten-year mark. In my opinion, that is a frightening statistic. One of my goals is to have tremendous impact on business profitability by educating this group.
Too many people are intimated by financial statements and think they are the purview of tax lawyers, CPAs and other professionals. I’m not suggesting that every business owner become an accountant or financial analyst, but it is critical that they become good consumers of financial information in order to drive their business forward.
Business owners and entrepreneurs need to build their financial IQ. And the only way to do that is by spending time with their financial statements every month and asking questions until they are confident that they understand them completely.
There are key metrics that are important in every business and unless the person running the company understands which ones are important to them, how can they make sure that their business is healthy?
When you go to a doctor for a check-up, they measure your blood pressure, take your pulse, and perform blood work and other tests to measure whether or not you are healthy. They compare your statistics to what is normal or healthy and make an assessment. The same must be done for a business.
Moreover, you need accurate financial statements from which to draw your statistics. Too often, small business financial statements are improperly prepared, inconsistent month over month, and disorganized.
Where should the entrepreneur start?
- Get a copy of my free e-book, “Expose Hidden Profits: How to reach greater profitability through financial insights”.
- Join my monthly newsletter, “Finance Matters”
- Read “Your Cash Is Flowing: Why every entrepreneur needs to think like a CFO”
- Check back often – we have much more to come!