Numbers are for nerds, right? “Let the bean counters take care of the numbers and I’ll worry about running my business.” It is completely understandable why we feel this way. After all, our business is reflective of what we love and are passionate about – so naturally we want to spent our time and effort focusing on the products or services that we sell. However, without a financial leader in the business, things can go south very quickly. But if sales are good and we are growing, the financials take care of themselves, right? WRONG. Here is an example:
In business guru Michael Gerber’s book E-Myth Mastery, he tells a chilling tale of a company growing exponentially, having the “best” year it has ever had, that wakes up one day to discover that they are in complete financial ruin and on the brink of bankruptcy. He tells how the business owner was completely blind-sided by this news because sales were through the roof, they were growing market share, bringing on new franchisees daily and on and on. “How did this happen?!?” was all the business owner could ask.
That business owner was: Michael Gerber himself. The international best-selling author of one of the go-to books on how to run a small business was failing miserably because his company did not have a financial leader – a key decision maker in the business who had a complete and total understanding of the numbers of the business and most importantly, what those numbers meant and the decisions that needed to be made based on the meaning of those numbers.
Gerber believes he isn’t alone. In fact, he estimates that more than 95% of small businesses today lack a true financial leader. Scary, huh? Well, it doesn’t have to be. As a business owner, if you do not have the accounting and financial skills, there are several options out there including joining forces with a partner who does have those skills and teaming up with a CPA firm that is dedicated to working with you every step of the way. However, these partnerships do not abdicate you of your responsibility for knowing and understanding your financials! It is absolutely imperative for the owner of a business to be involved in understanding the financials and using that information to make the very best decisions for the company.
We would like to help so we are starting a series of blog posts on some of the basics of understanding the financials of a small business. We will start with the basics and progress on from there. As you read, if you feel like there is no one in your business who has a handle on these financial basics, ASK FOR HELP! It is of critical importance for the future of your business to have a handle on the numbers of your business