24th November, 2020
More than most, small business owners are responsible for ‘knowing their numbers’. But what happens when financial literacy is variable across the board?
For many small business owners their day can be as colourful as a rainbow, juggling anything from products, to suppliers, marketing, and customer service.
They’re expected to be the jack of all trades, learning and adapting as they grow — the success of the business reliant on the knowledge of the owner; even more so if you’re a sole trader.
It follows then that small business owners are also expected to know finance and have a knack for numbers.
While some owners will be talented wordsmiths, able to spin a yarn for a Facebook advert, others will shy away from putting their services out there. The same can be said for owners with no financial background expected to do taxes, accounting, forecasts and revenue projections.
The difference being that you don’t get to choose the latter, and finance is key to your continued success as a business owner.
Financial literacy is a crucial part of your learning as an owner and a vital ingredient in your recipe for growth — healthy numbers reduce overheads, provide security, reduce stress, and is one less thing to worry about when you’re already beginning to feel like an octopus.
Let’s explore ways to make the numbers add up.
Budgeting is simple and you can start with something as simple as detailing your projected spending with your actual spending.
Approach this process with positivity and consider it a regular health check to adjust your projections as you progress.
Your homework this week is finding an hour to learn and absorb any resources you can on business and finance – you may even begin to enjoy it.
Listen to relevant podcasts, (I’m a big fan of Daily Mind Medicine, by Taylor Welch) and highly recommend Forbes and Business Insider to get you started.
Read the finance and business sections in media outlets — digest a little everyday and it’ll soon begin to make sense. Your regional news outlet will also cover business and give you a great sense of the local market.
Due diligence is something you’ll hear a lot when you start your business, and it’s important homework to hand in.
Research is your friend when it comes down to choosing your bank, loans, credit cards, suppliers, and even software.
Look at the reviews, further your understanding of interest rates and lending criteria. Your systems and software need to be in good shape — your tech stack is vital to the smooth running of the day to day, choose wisely and consider your options.
Late invoices are the thorn in the side of almost every small business, and it pays to be upfront about payment terms. You’re providing a valuable service and you should command the price you deserve — ensure you’re exploring every payment option to meet the demands of your business and provide a contingency.
Understanding your cash flow goes a long way towards achieving basic financial literacy for a small business operator, giving you a snapshot of what’s coming in and out, and what an average week or month might look like.
Remember, the healthier your business, the happier you’ll be. Invest time in yourself and your business will reap the benefits; it will also help you sleep better at night knowing you’re completely across everything and prepare for the unexpected.
During these uncertain times, the phrase ‘not all superheros wear capes’ has been frequently used, and I say this to the small business owners I meet. They’re providing food for the table, have the courage to march confidently in the direction of the dreams, have learnt to adapt and survive during a pandemic, and truly are the backbone of our economy.
I am in awe of the many owners I meet and am always left humbled by their vision, their motivation and desire to make their way in the world.
This is the second in a series of columns from entrepreneur Mel Power. Stay tuned for the next instalment in two weeks, or subscribe to our email newsletter service below.