The lack of financial awareness and experience in running a business are the two big reasons many new businesses fail within the first year or two. A lot of entrepreneurs prefer to put their energy and focus on the creative parts of running a business, like coming up with new product ideas, or how to market the business. They tend to neglect the money portion of running a business. But this is one of the most important aspects about being a successful entrepreneur, because lack of financial awareness can actually lead to making poor business decisions.
Being an entrepreneur and setting up a small business has become more popular than ever before. Many people think being your own boss and running a business is easy… As all small business owners would attest, this is not the case. Running a business can be challenging, especially if you’re a first time entrepreneur or business owner. According to both the Small Business Administration and Bloomberg Research, only 50% of new businesses survive for the first five years and only one-third of new businesses are able to survive for 10 years. The worst part about a failing business is that the entrepreneur is unaware of the financial problems they are facing until it is too late.
Three Things That Every Entrepreneur must Develop
Financial awareness can be boiled down to three important abilities you must be willing to develop. These are essential assets for starting and sustaining a thriving business. The desire, willingness, and conscious choice to develop these financial awareness skills and abilities can contribute to your success.
The three things that are important to achieving success in business are:
- The knowledge, skills and confidence to make responsible financial decisions. Without knowing financial basics like budgeting, profit and loss reports and reading a balance sheet, you may have difficulty managing and growing your business, or even keeping it afloat.
- The ability to understand money, how it works within the world, how it is earned, spent, invested and how it affects your business and your life directly or indirectly.
- The ability to look at your finances from a long-term standpoint, with an on-going financial management strategy that works towards future possibilities for you. In order to generate a thriving business and prosperous financial health, you have to be able to do more than simply manage your budget on a daily basis.