This made me sad.
Yesterday I met with a woman who has owned a business for fifteen years. She’s really bright, knows her industry inside out, and provides great service. She has an exceptional opportunity to grow because she’s put a fresh spin on an old concept. I see lots of growth potential.
So why am I sad?
She’s broke. In two weeks her rent and payroll are due and she won’t have the cash to make those payments. In two weeks, it’s possible that fifteen years of work will go down the drain. Worse, twelve employees will be out of a job.
How could this happen?
She doesn’t fully understand her financials and therefore doesn’t manage cash flow well.
Don’t get me wrong, she’s great with math. She has stacks of Excel spreadsheets. But because she’s never learned how to keep her books properly, the information is not well organized and not properly tracked. Her personal finances are mixed in the business account—a big no no. So the data isn’t that useful.
She can’t really tell how – or even if – she’s making a profit.
She doesn’t use any financial software. She takes information off her bank statements and enters it into and Excel spreadsheet. This is incredibly inefficient and eats up a lot of her time that would be better spent getting more customers.
I’m sad because she’s smart. She just doesn’t know what she doesn’t know.
When it comes to business, the first rule is…never, never, run out of cash. There are plenty of other problems a business can recover from. Running out of cash is fatal.
If I could wave a magic wand, I’d make sure every woman who wanted to start a business would learn how to understand her numbers. She’d learn how to track income and expenses in a way that will tell her which products or services are most profitable.
I’d make sure every women knew how to track all the right metrics and to have a clean set of books.
Every women would be able to answer this one question: How does my company make a profit?
If you don’t know the answer to that question, you can’t run your business successfully.
Not understanding your financials is one of the key factors in why women run smaller businesses than men. For other factors, get my free report.)
Business don’t fail without clues. Your numbers tell the story. You can have all the passion, talent and innovative ideas in the world, but if you don’t know how to understand the relationship between what revenue comes in and what expenses go out, your business will not achieve full potential.
It’s women like the one I met yesterday that fuel my passion to teach female entrepreneurs. With a little education, with a little help, she could be incredibly successful.
I just hope she can get through the next two weeks.