Time To Go Back To The Basics
Apr 14, 2020
With our business worlds turned upside down, it’s time to go back to the basics.
Time to learn or review core concepts and re-build our financial foundations. Not only build them literally but also to really know what they are and what they mean.
Core financial concepts are the basics that savvy business owners use every day to make decisions.
Whether you’ve recently started out in business or been operating for a number of years, unless you’ve taken the time in the past to truly learn about the core financial concepts you’ll have been missing out on important data about what’s been happening in your business.
Invariably, when business owners approach me for assistance, they’re feeling out of control. They are usually overwhelmed and inwardly admitting their inexperience.
From Inexperience to Understanding
The lack of experience usually results in poor cash flow and low profits. You can’t focus on the numbers to improve the results if you don’t know what you’re looking at.
The first step in the process is to know what the numbers are.
Once you’ve got that knowledge, then it’s time to look at understanding the numbers, what I call “seeing through the numbers”, and interpreting them.
The basics, or what I refer to as Core Concepts include the reports that assist in three areas:
- Creating a viable business
- Growing money
- Building value
Let’s face it, we all want our business to be viable, we all want it to make more money and ultimately, we want a business that is growing in value so that potentially, one day, we might sell it.
Even if you don’t plan to sell it, it’s important to be building value in the business. This means there will be value in the business to be paid to you.
There have been times in my working life when I’ve ignored the basics. I’ve stopped looking at the financial reports, especially when times got tough. I was stressing out about paying the wages, the rent and the bills. And I was worried, not knowing whether there’d be enough money in the bank when I needed it.
I felt scared, fearful and worried that I could lose everything. Whilst it is okay to allow yourself time to be in that state, it’s super important to pull yourself out of it as quickly as you can. Pick yourself up, give yourself a good shake and talking to and remind yourself to go back to the basics.
Look at the reports. What are they telling you? What obvious decisions do you need to make when you see the numbers?
Once you do that, you will find your confidence growing again. It may not be a rosy picture. In fact, it won’t be. But the fact that you’re taking action and making decisions will increase your confidence no matter how dire the situation is.
Whether your business is shut down, you’ve got a team working from home or it is business as usual, now is the perfect time to get back to basics. Learn about the numbers, the financial reports and how to use them to make good decisions.