You can also include the following optional items: Your view on the industry. Your background as it relates to the business. Team and Organization Depending on the size of your business, you may or may not need an organizational chart or details for your team.
Email this Article Print This Article As a small business coach, many times I will start the initial conversation with a new client by asking the business owner: What are the financial statements? I have gotten such perplexing answers as: A bunch of numbers on a piece of paper?
Does it have to do with a balance sheet? Are there revenues involved or is that even on a balance sheet? Does it involve revenues or gross profits? My business partner, Jack Mencini and I have seen grown, husky men cry when we ask them to tell us what they see on their financial statements and tell us what the numbers mean.
Most small business CPAs are missing out on the opportunity to teach their clients the numbers by having their clients present the numbers.
Most business owners know they should know these numbers, and after being in business for several years, most people assume the business owner knows the numbers. With solid understanding of the financial statements, a small business owner will know, and more importantly, understand on how to take action.
Knowing what the numbers represent and what they are telling you, allows you, as a business owner, to succeed on purpose.
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In turn, the small business owner will turn to their CPA or financial person and that individual says: Typically the CPA thinks communication is great, but the owner is typically frustrated. Why You Need to Understand Financial Statements A big reason why understanding the financials is so important is that it allows you, as the owner, to do one of the most important things for your business, which is to create a profit plan for your business.
You may have heard it called a budget, but budgets often miss a key component, which is the sales forecast and not just expenses. So the first step for you, as a business owner, is to figure out what all the numbers on your profit and loss and balance sheet mean.
In fact, it becomes tremendously empowering. Picture having a road map for the next year for how your business is going to make money over the next 12 months.
That is usually hard to imagine for most business owners. I asked him what his goal was for the year. Late paying clients, which resulted in Accounts Receivables piling up. I wish you could have seen the smile on his face.
He had been wrestling with this question for a while and now he finally had an answer! If you put a good plan together, it is surprising and exciting to achieve the plan and be focused.
By understanding the financial statements, as a small business owner, you will begin to take management action to make things happen. Running a company successfully is not nearly as hard as some people make it out to be. Understanding your numbers is a key first step to simplifying that process.
Those small business owners who have reached out to coaches to help them understand financial statements take on a new demeanor that is a mix of being calm and excited.
It boils down to the confidence they have in their plan and running their business. At the point of knowing that they fully understand their business, the realization surfaces that they can steer their business in the direction for sustainability, success and profits.When you fully understand financial statements, you can steer you business in the direction for sustainability, success and profits.
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