Like everything in life, money plays a decisive role in the birth, development and death of a project. Therefore, every sensible entrepreneur with a serious intention to prosper must acquire some knowledge and skills about finances and money management before starting his project. Not doing so implies that the commercial project will have its days counted and that the entrepreneur will have a high probability of facing a loss of money, his time and even his hopes.
So that they do not take you off guard, in the first place, when undertaking with discipline you must know how to control the income and expenses in an efficient and transparent way. You must separate your personal economy from the economy of your business, because even if it costs you to believe it, they are not the same. Making realistic sales projections and cost estimates is vital. It is obvious that if you spend more money than you manage to collect for the different forms of income of your business model, you will be on the path of falling into a lack of liquidity and later into the condition of indebtedness. But that is not all.
You should also analyze a possible leverage or bank loan and define the ability to pay for your business, understand very well the different interest rates and their impact on your business, know the risks and benefits of a currency devaluation, know the rates of profitability, efficiency, liquidity, solvency, equilibrium point, the internal rate of return, the time of recovery of capital, the valuation methods of the current and new edges of the business, and strategically you have to know how to program the debts to be paid and receivable.
Knowledge of finances allows you ...
Get financing. Who moves within the financial world knows what doors to touch and what arguments to use to get the money he needs.
Financing at a better price. Knowing the operation of supply and demand, financial instruments and being aware of the news will make you have more options to turn to when looking for capital. If you also know how to choose well, saving is guaranteed.
Increase the liquidity of the company. What will result in a more solvent company. A good financier can play with cash flows and take advantage of cash flows while maintaining acceptable levels of cash.
Know the areas that most add up in the company. A simple analysis of financial flows will be enough to know where and how the company is growing and to be able to make decisions about it. Issues such as the departments to increase the budget and those who cut it are common and make a difference.
Know the real value of the company. One of the biggest mistakes of entrepreneurs is overvaluing their company, which ends up scare away potential investors and new partners. In the end, it is due to the enthusiasm for their project and the lack of financial knowledge to determine the real value of their assets or the work invested so far. A solid financial knowledge is the best remedy. If you do not have them, you will need a consultant just to consider entering new members.
Know where to invest. The market is full of opportunities but to assess which ones are worthwhile and which ones do not need to know how to interpret the business figures. Again, finances will help you achieve it.
Know what structure suits your company, at least from the financial point of view and thus be able to establish organizational costs according to the possibilities of the project.
Plan the payment of taxes. Without financial data it will be practically impossible to know how many taxes the company will have to pay and how many you will have to pay as an entrepreneur. Do not forget that good tax planning can be almost as effective or more than a good business plan for the current year. If you have not calculated well, Hacienda can literally eat a good part of your profits.
Avoid legal problems in issues such as shareholding, valuation of the company, disputes between partners ....
Know the value you are generating around you. Yes, all business starts from the premise of achieving a benefit, but often the most rewarding is to see how the environment changes and how added value is created for those who collaborate as suppliers. Finances will give you a very close view of what you are achieving in that aspect.
My recommendation is that you read daily about finances, so that you familiarize yourself and document yourself in the matter, and if possible, sign up for a workshop or course on finance for non-financial or finance for entrepreneurs.
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good morning @rengela04 good writing, I like about entrepreneur