Growing Your Business
The 6 Building Blocks of Financial Savvy
Financial savvy – it’s something every business owner wants, but it can be hard to know exactly what it entails. Here are the 6 building blocks:
1. Do the Windows:Gain a Clear View with Good Data
You need good information to be financially savvy. Imagine a plate of spaghetti. Those noodles represent your financial transactions, both personal and business. The first step is to separate them. The second step is to hire a bookkeeper to put the now separate transactions into something that can be used via an accounting system.
2. 20/20/20 Vision:A Simple System Consistently Applied
Now that you have data, let’s look at it. This step is the one hour per week or month – depending on your experience and what’s happening in your business – you spend delving into the financial data and connecting it to the actuality of what’s happening in the business.
3. The Tortoise:Incremental Measured Progress Toward Defined Goals
The third building block takes that financial data, converts it into goals and measures progress towards those goals. I can feel financial savvy kicking in a big way now.
4. Gauge the Runway:Plan for Sufficient Cash Flow
Cash flow, or lack of it, is what keeps you up at night. The best business idea with the best execution will fail for lack of cash. The best time to know you’ll have a shortage is before it happens. Planning for cash flow lets you handle it and regain your sleep.
5. The Shield of Achilles:Systematic Removal of Risk
Business owners pull from everywhere to make their business a reality. The result is that the business and your personal wealth and wellbeing are tied closely together. Identifying and systematically removing the risk means you can build wealth outside your business.
6. Tomorrow For the Win:Wise Decision Making
The icing on the cake of financial savvy is that when decision come – and they do quite frequently if you’re doing it right – you make them with a financial basis. No finger in the air or “educated” guess. You have a solid basis for the direction in which you steer your ship.
The 6 Building Blocks of Financial Savvy begat the 3 Promises of Financial Savvy:
1. Reduced stress
2. Increased profitability
3. Financial security
Here’s a graphic you can print out and hang up to guide you on your way.