I can remember when I was growing up as a teenager in high school I use to be absolutely terrified of numbers.
I hated any type of math, anything that involved using any type of equations or numbers no matter what it was; I didn’t want anything to do with it.
This phobia concerning numbers continued on into my early years of college until I started to realize just how important mathematics was, especially when I changed majors and started attending business school.
Numbers are imperative for any entrepreneur to understand, even if it’s just the mere basics. One of the biggest issues that young entrepreneurs struggle with I believe is financial matters and it’s not just young people who get into to trouble when it comes to finance but older individuals do as well.
No longer can the entrepreneur just turn all of their materials over to a C.P.A. and let them handle everything and take their word for it. You must understand financial statements, learn how to interpret and read them, and make imperative decisions once you figure out what your financial situation is.
This is the same action that will take place when you go to acquire financing from banks, venture capital firms/angel investors and any other types of traditional/contemporary funding that’s available today.
Lending institutions are usually less concerned with your fantastic idea and more interested in reviewing your numbers or the numbers that your company can project.
If understanding financial equations or reading financial statements is something that you feel you don’t completely understand, try reading up on the topic just to grasp the general information and basic necessities of this area.
You don’t need to be an investment banker or anything, but just being able to know what you’re looking at and knowing the “lingo” when attempting to put deals together can be enough to help you grow as an entrepreneur and widen your abilities and skill sets.
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Totally agree. The best way that I learned about finances (accounting, balance sheets, profits, losses, etc..) was from studying stocks. Studying publicly traded companies and really digging deep into how they make money, is a great and fun way to learn. I’ve been studying stock for about 3 years and I have learned plenty of priceless information during that time. Great article!
Thanks David and you’re absolutely right when you say you can learn a lot by analyzing and reviewing public companies.
You make an excellent point that I really had never considered as far as using this method as an opportunity to actually understand finances better.
I would imagine that analyzing stock will be much more hands on, fun, exciting and beneficial to entrepreneurs rather than just sitting down and reading a book. Thanks for the insight.