All the diversity of entrepreneurs who can get to know, always stand out mainly by some of these facets:
– Development of product or service, rather, the technological part
– Marketing and sales associated with the business itself
– Operations in generating new business
In none of these 3, there are always exceptions with regard to the entrepreneurial profile, highlight managerial skills where we can fit all the financial part of the business that wanted to rise. A good entrepreneur must and needs to know perfectly as the euro move on their balance financial and power radiographies correctly what state the company to determine the measures to take and move forward. These x-rays can be outlined the invaluable help of some key financial concepts.
Important financial concepts for the entrepreneur
They are:
1- “Bottom line” or income statement: refers to the net income of the company or earnings per share. this term is also used to refer to those actions that can increase or decrease the overall gain of the company.
2- “Gross margin” or net profit: it is expressed in%. It is the% of global sales that the company is after subtracting overhead, salaries, rent and others. If you get a 25% will mean that for every euro sold 0.25 dollars that remain are the company as net profit.
3- Fixed costs vs. variable costs: Fixed costs are those that are the same each month regardless of how the activity has run the company. And the opposite variables are those that depend on the productivity of the company.
4- “Equity” vs. debt: although it seems very obvious there are entrepreneurs who at some point have not been clear. “Equity” is the money earned by investors in exchange for a portion (%) of the company. And debt is the money earned by banks representing only mandatory be returned without the transfer of shares.
5- “Leverage” or leverage: explained very simply is the amount of money that has been borrowed to run your business. This form of finance company assets can be done through loans or “equity”.
6- “Capital expenditure” or investments in capital goods: becomes the items purchased by your business that can generate future profits.
7- “Concentration” would become the% of total business representing a client.
Major financial mistakes entrepreneurs
Once settled some financial concepts, just missing see what errors, the most common, we can avoid the financial ground for when we undertake:
1- Investing in excess in the first stage without having validated the business model numbers: if the only thing at hand are “acts of faith” investments should be moderate, fair to start with the business.
- Do not assign a salary to yourself: if you do not assign cannot set an actual accounting scenario. No charge is something that can be timely but not standard “until the business goes well.”
- Do not have a financial forecast for the worst -case scenario: sometimes self confidence can blind you and that is when we can find in “red number” suddenly for having planned an escape plan.
4- Mix personal assets and company: “We must give to Caesar what is Caesar’s” if we mix, besides not being serious, we will have strong financial acumen.
Finances are the major unresolved issue of the new entrepreneur?