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Why Financials Matter

Having control over your financials is key to maintaining a successful business. Watch Ken Burke explain why financials matter.
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Your financials are not just for your investors, but they’re also for you. And this is very important, that you have to use these financials to run your business. First thing you have to think about is getting funded, and financials are a required part of getting funded, so make sure you understand that. It also tells you how much funding you need. That’s a very important part as well. So do you need a million? Do you need 2 million? Do you need 500,000? Your financial statements will actually lead you to that answer. I want to make sure though also you don’t raise too much money, and you don’t raise too little money. Money is expensive.
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Capital is expensive to raise, so we want to make sure that you raise the right amount. If you raise too little, you’ve got to go back again and again and again. That’s not good. You raise too much and you gave too much of the company away. So make sure you understand that. Also, it creates benchmarks for your business. This is really important. When you start running a business, you’re going to understand exactly every month where you should be. So it’s going to benchmark where you are, where– versus where you plan to be. It also creates predictability. Predictability in terms of running your business is wildly important. It also is wildly important for investors as well.
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It allows you to adjust your business plan up, down. You can see whether you’re on track. You can see whether you’re over budget, you’re under budget. Hey, if you’re on track, stay the course. If you’re over budget, reduce expenses. And if you’re under budget, hey, maybe we’re not investing enough, and we need to invest more because we can grow this business faster. In addition, adjust your spending. It allows you to adjust your spending to make sure that you hit your financial goals. So let’s say your revenue isn’t coming in the way that you thought. It’s coming in a little slower. Great, OK.
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It’s not great, but at least we can go ahead and reduce our spending in order to compensate for that and maybe grow a little bit slower. But I’d rather you grow a little slower than go out of business. Also, it allows you to monitor your cash flow. Probably the most important thing that you can possibly do in your business is monitor your cash flow, and I will tell you that more businesses go out of business because of poor cash-flow management than any other reason. You could be wildly successful. You can be growing like crazy, and all of a sudden you’re You go, what I’m bankrupt? I’m growing like crazy. It’s because you run out of cash.
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Let– don’t let this happen to you please. Also, it forces you to evaluate your business decisions on an ongoing basis so you’ll have something to validate your strategies against, validate how the business is going. It’s very important. Having visibility over your entire business is incredibly important. You can’t run your business just by gut. A lot of entrepreneurs actually do. They start out that way, but I’d rather you really get down the discipline of running your business based on a financial model. If you do that, you’re going to be much more successful, I absolutely assure you.

Nothing is more important than having a control over our financials. Most companies that go out of business is not because of a bad product or service but they lose sight of their financial situation. Keeping your financial model updated and in control will help prevent this. Also no investor will invest in your company unless you have a financial model that makes sense.

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Complete Guide to Financial Planning for Your Business

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