All businesses have two things in common, no matter what type of business or where it is operated. It is a business and it must be run like a business!
While a college degree in business or accounting is not essential, knowledge of at least some of the more simple and basic business practices is. Understanding ideals such as budgets, operating capital, expenses, income, and what profit and loss is are vital.
When you look at it, some of these things aren’t much different than what you encounter with your household budget. You need to know how much money you have coming in (income), how much has to go out (expenses), and if you are going to end up with savings (profit) or a loss (into the overdraft perhaps). You need to have plans in place on what to do with the savings (operating capital) and what to do in the event you come up short or have an unforeseen expense or a life change.
On that note, it stands to reason then if someone contemplating a business venture has a hard time balancing their own check book, or forgets to pay their bills, or has a habit of overextending themselves financially, or has no idea what they may have or not have in the bank, it may be a good idea for them to keep their day job and forget about starting a business.
Sure you can hire an accountant to take care of all the record keeping, keep track of your income and expenses, balance the check book, and let you know when a payment is due. Your accountant will even provide you with some nice pretty reports that tell you if you have made a profit or if you are at a loss. But unless you understand what the reports are telling you they will be of little use to you. That is because your accountant can only give you the numbers. They can’t tell you how to make a profit or how to overcome a loss. That is where your business knowledge comes in.
Successful businesses operate on sound business principles .Their owners and managers have the insight to spot trends, develop new business, and ensure overhead expenses, such as taxes, are recognized and taken care of. They realize that it is unreasonable to expect to make a profit from a new business venture, and that it could take months or even years to do so.
Business owners who take some time to gain basic business knowledge before launching their businesses, or in the very early stages, are better prepared to build and run successful businesses. They understand what they have to look for in the numbers and what they have to do to change them.
Enlisting the services and advice of a qualified and experienced professional business consultant is always a good option too.