NT(650): Entrepreneurial Finance Intro

What would you do if I gave you twenty-five thousand dollars? This question comes up a lot in the advertisements lately and is frankly quite annoying. Regardless of the fact, for entrepreneurs, having answers to such questions is very important along with, how much money do you need? and Why should I invest in you?

To answer these questions and to better understand our position in the market, as entrepreneurs, we must comprehend entrepreneurial finance and where such numbers come from. According to the Ernst & Young study, about 95% of new consumer products in the United States fail. Companies fail because people are starting companies then learning about cash flow management, accounting, and bookkeeping rather than investing time and money in learning from successful entrepreneurs beforehand (Rogers 2020). 

Failure is painful for everyone, especially for those that lose personal finances and life savings. However, failure should be treated as a stepping stone and a chance to begin more intelligently. An entrepreneur who learns from failures and past experiences is more likely to get funding for their projects than new entrepreneurs with no experience, as long as the fault was not intentional.

The three financial statements that entrepreneurs must understand and learn how to read are the income statement, the balance sheet, and the cash flow statement (Rogers 2020). Grasping the concept of such reports will help the entrepreneurs measure the company’s financial health and performance, the debt, and whether it can remain in business.

Over the next six weeks, I will write more about the financial statements, cash flow, and cash management, as described in the Entrepreneurial Finance book by Steven Rogers and additional resources I find useful on the topic.

Stay tuned…

References:
Rogers, Steven. Entrepreneurial Finance, Fourth Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education, 2020.

3 Comments

  1. Semir,
    Excellent blog post! As entrepreneurs, we must be able to fully understand all financial aspects associated with a company before deciding to invest. You made an excellent point that people tend to hurry and start a business without fully understanding even the basic financial aspects that relate to cash flow, balance, and income. It seems obvious that one would want to fully understand financial aspects prior to starting a new business. However, people tend to only think about making a profit and not realizing what it takes and how to properly make a profit based on finances.

  2. Great post, Semir. This course and the material we’ll cover provides an incredible amount of potential topics. I appreciate your point of learning from the inevitable failures of life, something we talk about as “failing forward” here at my school. It’s fun to hear even our youngest learners encouraging their classmates and helping them remain positive even when things have gone a bit sideways. Hopefully, early lessons of growing from a setback will have these future entrepreneurs a step ahead of the competition.

  3. Semir,
    Understanding a business’s numbers is really important. It is also important for a business owner to use the services of an accountant. However on a day to day basis, the owner would not be consulting an accountant. Therefore, in order to make small changes as necessary, it is important for the owner to understand where the business stands financially. It is these small adjustments that are made frequently to “right the ship” that make a business successful.
    Best regards,
    Mike Weimar

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