Finance Skills All Entrepreneurs Should Have
I may be an entrepreneur in the quantitative trading industry where strong financial skills are mandatory; however, a set of basic financial skills is crucial for entrepreneurs of all industries, be it a tech startup or an ice cream business. Managing money is a vital part of any business, so anyone looking to start their own business should brush up on these basic finance skills:
Acquiring Capital
In order to start a business and bring in a profit, you will need seed capital. Knowing where to acquire capital for your startup and how to assess which source of funding is the best option is a vital skill. As I discussed in my blog, “What to Consider When You Approach Venture Capital Funding,” there are many avenues of funding for startups, and it’s essential to know which kind is right for your business. Venture capitalists are investors who see potential in small-to-mid-sized startups, and this type of funding is a type of strategic partnerships that is considered high-risk/high-return, the amount of risk and return dependent on the size of the company, its assets, and stage of product development. Other types of funding to consider include raising your own funds, crowdfunding, loans from family and friends, a bank loan or credit, or an angel investor.
Managing Cash Flow
According to Inc., “Cash flow is one of the most critical components of success for a small or mid-sized business,” because without it, profits are meaningless. You have the potential to make a lot of money with your own business, but you need to know how to manage the cash that comes in or you could go into bankruptcy. Cash flow is simply the movement of funds into and out of a business. It sounds easy to master in theory, but in order to keep your cash flow positive, you should take the following actions: collect receivables, ramp up sales efforts, offer discounts to customers if they pay early, and secure loans.
Pricing Your Product
“You can have the best product or service in the world, but if you don’t have a solid and contextually based go-to-market (GTM) strategy and execution plan, you will fail,” says Patricia Fletcher for Inc. In order for your business to succeed, you will need a solid pricing model, which you develop through identifying your business goals, carefully considering the market in which your are operating in, analyzing your target audience, and knowing your competition. From there, you can craft an action plan.
Planning
As an entrepreneur, you need to be organized and plan ahead all the time. It’s not just about making money, but planning out how you spend your resources. Successful business leaders account for every potential risk and benefit, and weigh the cost of every decision they make. Time and budget are crucial for setting plans into motion.
