Sep 24, 2020
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Entrepreneurs Need To Teach Their People About Money

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I ve been writing about how entrepreneurs raise capital and manage money for several years. In all that point while I ve focused on a way to handle investors a way to understand the cost of money a way to monetize your magic I ve failed to discuss the one major thing entrepreneurs should do

 

Teach your people about money. How you make it. How you waste it. How you replicate it. How much it costs once you re waiting on payments. How much they cost you after they sign up for SaaS subscriptions that nobody is using. The list is endless. Do your people know what actions bring about the main revenue and profit? DEPOSITPHOTOS Many entrepreneurs focus on educating themselves on better financial management

 

And definitely you wish to find a good finance manager great financial advisors or even better accountants. But your ability to make money make a profit and keep it starts with the people on your team. And unfortunately sometimes it ends there. Literally. It really is especially important once you start to scale rapidly because suddenly other individuals are spending your money

 

Years ago my boss Chris Coleman had a bit in our employee handbook that said Spend our money as though it were your own. It’s important in your people to appreciate this concept because their raises their shiny new monitors or their new direct report s wages are riding on them taking this position when they’re spending the company s money

 

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You likely review reports and you may still be informing proposals and pricing. But don t mistake your intimacy along with your sources of revenue in your team s understanding. The Pareto principle—the 80/20 rule—is real. 20 percent of your customers generate 80 percent of your revenue. Do your people know who that 20 percent is? If so fantastic

 

However knowing is not enough. Do your people focus their efforts activity evangelism and love on the largest 20 percent? It s too easy to get caught up in activity particularly in rapid growth and forget to dance with the ones who brung ya. Be sure your people know who to bounce with and if they re no good at it send them to Fred Astaire s Dance School

 

How you make a profit If you re scaling your corporation with entry-level talent they may not know what profit is or how different revenue and profit are. For one thing they is probably not privy in your detailed expenditures or cost of goods sold. They created a have to know basis for a reason and you don t have to share your financials with everyone but you do have to ensure that your people know the things that bring about profit

 

This stuff may be lowering your cost of sales or shortening your sales cycle. It could be as simple as explaining how long you wish to retain a customer before they break even. Are you ensuring people focus on retention? You may be super direct and tell them your most profitable clients or vertical markets and feature them focus their attention there

 

Teaching people about money and ensuring that everybody makes a speciality of securing revenue and maintaining profit doesn t require everyone to get a finance degree. They don t actually have to wait a course when you are communicating the things that matter and measuring their performance to drive more of the profitable activities

 

How you keep money I ve written stories about entrepreneurs who go crazy with an office build out. Or you may begin catering lunches or installing Kegerators to keep people engaged. Do your people know what those things cost? Do they have spending caps? Do they care that they’ve spending caps? Well what are you going to do about that? I ll share one with you

 

We had been using FreeConferenceCall. com and last year the team decided they each needed their own dedicated number so that they weren t having to share numbers or have conflicts when scheduling our conference lines. It sounded totally reasonable. We got our key people dedicated conference lines they loved it and you know what happened? Our monthly conference expenses started coming it at $700 a month

 

We went from $0 annually to what was about to be $8 400 annually. Not good. We re not doing that anymore and they didn t like the change to another but the costs were prohibitive. Know what is cost-prohibitive and explain it in your people. What your money costs The cost of money has always been hard to explain

 

When someone hasn t run a business they haven t had to take a dollar and pay recruiter s fees on it commissions on it overhead on it carrying interest on it or taxes on it. They simply think a dollar is a dollar. It isn t. Help your people understand why you may mark-up certain costs you pay in advance

 

Help them understand why you may charge interest to a customer who chronically pays late. Help them understand why you re willing to name a customer to gather if they re not because excess receivables cost interest and are a sign of weak financials—both in real life and inside the eyes of the bank which extends you credit

 

This probably isn t the type of article you usually turn to Forbes for. It could seem too obvious. However sit down along with your employees and ask them how you make money how you make a profit how you keep money and what your money costs? The answers may surprise you

 

You may find that this was one of the best stuff you ve read all year. That’s if you do something with the information

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