Know Your Numbers: Financial Literacy for Startups
What constitutes a business has changed considerably over the years, and so have the people starting them. When the startup revolution was just beginning, a businessperson was someone who borrowed money from a bank and started a small enterprise with a few members of staff, providing a product or service to more and more people as they grew. The rules were clear.
In 2021, startups are looking for exponential growth, 10xing, and that unicorn status - we begin a business looking for a massive customer base within months. We have side hustlers, serial founders, momtrepreneurs; the barrier for entry into the world of business has never been so easy to overcome. This is fantastic for competition, creativity, and equality. But it also means that it’s much more common that a smart and passionate individual will follow their dream, and build their idea, with grit and speed and without the proper financial knowledge. And that can end in a nightmare: an incredible 29% of startups fail because they run out of cash.
Literacy in your personal life – handling credit cards, debt, and budgets, planning for retirement just in case you don’t see that nice fat exit check – is a great starting point for understanding the finances of your company. Not everyone gets taught that in school, and in fact experts have been pushing for an expansion in education on this topic.
As the founder of a successful startup, or as anyone who runs their own enterprise, you’ll need to be comfortable with tools and concepts like balance sheets, income statements, and cash flow statements, and to understand and undertake financial planning. Looking for partners? It’s crucial to have a good grasp of how to place a value on your company before you give a percentage away. Seeking investment? If you don’t demonstrate not just a literacy but a fluency in the language of finance, you’ll have a hard time being taken seriously by those who live and breathe it. To secure funding, you need to prove you know what you’re talking about in the real world of funding, and outside of your Big Idea.
Get in touch to have a chat about what Metric Bee can do to help you or your team become financially fluent.