Entrepreneurs are people who have the vision to identify and capitalize on risky and new business opportunities. However, underneath the veil lies abundant skills that allow the pioneering spirit to flourish. These skills are not necessarily something the individual is born with, but a conviction and willingness to seek out and exploit innovative ideas. Step 1 unleashes the mind to develop, create experiments in the mind, and generate potential opportunities. Step 2 emphasized how a resilient mindset eschews setbacks and uses them as a learning experience. It also fosters self-awareness and shapes an inner strength by placing oneself in a positive and nurturing environment. However, beyond the subjective veil, aspiring business leaders must possess a holistic financial knowledge base to make the necessary informed decisions and shield themselves from others who may exploit their aspiring dreams for their use.
Financial fortitude requires diverse skills to overcome loss and prevent failure when conceptualizing a business idea. Demonstrating a firm financial foundation empowers entrepreneurs to make informed decisions. In turn, objective decision-making leads to managing resources effectively and facilitates bringing one’s business dream alive.
Understanding and the ability to create financial plans and budgets is the foundation of financial awareness. Possessing this skill will allow the next big thing to remain financially viable and a means to sustain it once established. Specific skills to do this at a meaningful level include understanding and the ability to forecast revenue and expenses reliably, allocating resources to the segments of the business idea effectively, and making sound financial decisions that may impact a part of or the entire business idea. Forecasting revenue in a formal setting also helps to encourage viability and future sustainment.
One of the most effective ways to forecast revenue early in the business planning stages is by leveraging historical industrial and like data and predictive analytics. Timely customer insights and market research also serve as critical elements to shape the likelihood of success in a turbulent market. The crucial factor for the entrepreneur is not to trust one’s instinct or base it solely on historical information but to continuously be guided by here-and-now data-driven decisions that allow them to remain agile and responsive to ongoing, disruptive conditions.
Cash flow management and day-to-day operations are also imperative to avoid breaking the bank and financial hardship due to unintended cost overruns. Managing the operations entails examining incoming and outgoing cash, managing overall accounts receivable and payable, and, most importantly, ensuring the liquidity meets the needs of any short-term obligations. The intent is to monitor daily expenditures and what it takes to remain sustainable while balancing the entrepreneur’s ultimate dream.
Recognizing and understanding profitability helps the entrepreneur shape and develop informed pricing decisions. Cost optimization is critical to help understand what the market is willing to bear for the next big idea. At a minimum, an entrepreneur must be able to calculate and understand profit margins, tabulate and comprehend cost-benefit analyses, and translate the results into improving the overall outlook and profitability of the organization or at least have a trusted business partner who can manage and maintain it for them.
Risk management entails the entrepreneur’s formal ability to identify, assess, and manage financial and operational risks associated with the business. Factors such as market conditions, industry shifts, consumer preferences, disruptions, and competitive forces can all wreak havoc on a business strategy. Therefore, a risk mitigation plan must be drafted and maintained throughout the process to weather the challenges and stay ahead in delivering the entrepreneur’s dream.
Tax planning and compliance are also critical factors at the country, state, and local levels. Awareness of tax deductions and credits can also help boost the business and allow the entrepreneur to take advantage and build upon it where it is plausible. Sound, professional advice is also critical in getting the most out of it, raising awareness in remaining compliant, and getting the necessary support to build the entrepreneur’s future state vision.
Precise and accurate financial reports and analyses serve as a means to report compliance and facilitate sound decision-making. Income statements, balance sheets, and cash flow statements are three primary examples to help promote and stabilize a sound entrepreneurial mindset to flourish. Each of these reports serves as a crucial piece to understanding and delivering a meaningful outcome and, more importantly, facilitates making informed decisions through an objective prism.
Debt and equity financing options, when needed, help entrepreneurs secure the necessary funding when they opt not to bootstrap their businesses. Furthermore, as wealth accumulates, prudent decisions on behalf of the business to manage potential investment decisions and risks are necessary. The intent is to know when to seek professional advice instead of going out on a limb or a hunch to make the entrepreneurial dream come alive.
Although incorporating financial fortitude in the entrepreneurial mindset is not as fun as mind experiments and creativity for many, it does ground the fundamental concept into a meaningful and data-driven result based on financial success. As Dave Ramsey once said, “A budget is telling your money where to go instead of wondering where it went.” Mastering financial skills is essential to creating a harmonic balance in the entrepreneurial mindset to remain innovative and profitable. When necessary, the entrepreneur should reach out and build trust in others with the financial savvy and understanding to help prop up and keep the dream alive through sound financial advice. It is not a weakness to seek advice but a strength and a valuable lesson in self-awareness.