Schools don’t teach us how to run a business, so most of the entrepreneurs don’t have any prior financial knowledge before launching their careers. Our expert for today is Tracey Bissett, a banker on a mission to redefine the world’s economic future by increasing the financial literacy of entrepreneurs.
In this interview, you can find out more about:
- Biggest entrepreneurial financial mistakes
- Making a business plan
- Proper positioning as a lender
Biggest Entrepreneurial Financial Mistakes
The first one is ignoring the issue, thinking that money is going to take care of itself. The second mistake is hiring a bookkeeper or an accountant, and then never looking at the reports yourself. You can only reach your goals if you understand your numbers. You may hire help, but the responsibility for those numbers is yours. Their job is not to provide financial advice. They only record your transactions as well as you explain your business to them.
Various tools can help you to understand your financial position. For someone who is just starting, there is no need for complicated accounting software, Excel is perfectly fine. When a business starts growing, QuickBooks is an excellent tool for seeing your numbers. Cash flow forecasting is also widely recommended. It’s all about how much money is coming in, what is going out, and timing when it happens.
The Business Plan
People often don’t analyze enough how much it will cost them to deliver a specific service or a product. When it starts impacting cash, they think that increasing sales is the key. However, if it’s done on a losing product or a service, it will only magnify the loss. Appropriate pricing and making sure that you are profitable before the sales process is critical. That is why making the business plan before launching the business or a new product/service is so important.
Especially in service-based industries, entrepreneurs often forget to give value to the time that they are spending to deliver their service, which results in the negative amount per hour that they are earning. There are several stages of calculating the real cost of delivering something. After adding up the costs that go into it and the often overseen additional costs, make sure that you are getting paid. Then, think about the reasonable profit you’d like to meet and compare it with the market.
Proper Positioning As A Lender
It is critical to establish credit for your company at the very beginning. Taking a small loan, even if you don’t need it, can be very helpful in establishing a credit history. It’s important to build a strong relationship with your bank, to be transparent and honest with your business plan, but to keep everything professional. You should be able to demonstrate your credibility as a financial manager to them.
John is the Amazon bestselling author of Winning the Battle for Sales: Lessons on Closing Every Deal from the World’s Greatest Military Victories and Social Upheaval: How to Win at Social Selling. A globally acknowledged Sales & Marketing thought leader, speaker, and strategist. He is CSMO at Pipeliner CRM. In his spare time, John is an avid Martial Artist.