Written By: Alex Tveit, Vice President, Morrison Financial
There are some key pillars that are important when you are creating the foundation for your business. You need to understand the initial legal framework where you are operating, you need to understand your market, and you need to understand your numbers.
It is easy to get caught up in focusing on your business idea. After all, it’s your passion for your idea, or how you can commercialize it, which has helped you make the ambitious move towards becoming an entrepreneur. While there is nothing wrong with this focus, it could be fatal if you forget to make sure that the foundation of your business is robust.
Even if you outsource your bookkeeping, or if you have an accountant in house, it is still important that you have some fundamental financial literacy. Without understanding the key numbers making up your business, the hurdles for Canadian entrepreneurs are more difficult to maneuver across.
“The biggest cited regret by failed entrepreneurs is that they did not pay enough attention to learning how to track and manage finances in their first year. “
A study conducted by Intuit Canada showed that one in three business owners underestimated the amount of time they would spend on financial management. Over half those surveyed did not use an electronic or cloud-based software, but rather resorted to keeping track of their finances by hand.
While some of the dangers of not keeping on top of your company’s financials are clear, such as not being able to track your expenses and profit accurately, some are not so apparent:
First, realize that basic financial literacy is not fundamentally difficult. Even those without accounting or finance experience can relatively easily understand the basics. Also, even though the majority of Canadian SMB’s do their own financials, it is important to recognize when you need help. Accounting and legal aspects of running a business, are often areas where most entrepreneurs will need help from professionals.
Let’s look at some areas that strong financial literacy can help you with:
Sometimes all the different aspects of running a business can seem overwhelming. While rewarding it can be tough, especially if you are working by yourself. What you as an entrepreneur must realize, is that you are not on an island by yourself. There are resources available to you to take advantage of. From mentorship arrangements through organizations such as Futurpreneur, to topic specific workshops and seminars held by experienced organizations. Most of us realize that the only way we can foster a great economy in Canada, is through supporting entrepreneurs, and helping create a great foundation for them to prosper in.