You Cannot Lead the Business if You Ignore the Numbers
You can love the work. You still need to understand the numbers.
Molly Varangkounh
Keynote Speaker & Leadership Advisor
Most people don't start a business because they love reviewing financials.
You started because you figured out a problem to solve, and someone was willing to pay for the solution.
This shows up often in owner-led businesses. Many founders would rather spend time in the work itself than behind a computer reviewing reports.
Whatever your thing is, that's usually where your attention goes.
At some point, you also have to put on the business owner hat. If the goal is to build something that lasts, the business side needs attention too.
As your business grows, the needs of the company grow with it.
You start needing better information to guide decisions. The financials begin to play a bigger role because they show what is working, what is not, and where improvements need to be made.
Some owners and top leaders shy away from the numbers and it turns into "that's not my thing."
That's a missed opportunity.
If you are the leader, the numbers are your thing.
The Numbers Connect the Dots
The numbers show how day-to-day actions in the shop, in sales, or in operations show up in the performance of the business. When you understand that connection, you start to see what helps the business move forward and what holds it back.
You don't need to become an accountant.
You do need someone who can help translate the numbers so they make sense. When you understand how decisions show up in the financials, you start making better decisions about the future of the business.
Understand Your Financial Basics
A good place to start is by understanding a few basic numbers.
First, look at what drives revenue. What are you selling and how much of it are you selling?
Next, look at the cost of those sales. If your cost of sales is consistently higher than what you are bringing in, something needs to change.
Once you have a feel for what your product or service actually produces in profit, you can start looking at the other costs of running the business.
Keep It Simple
Keep things in big chunks at first. Operational expenses. Overhead. The major categories that show where money is going.
Your P&L should not be ten pages long. It should fit on one page, maybe two.
Too often financials are broken down into so many small categories that it becomes harder to see what is really going on.
Start simple. As you understand the numbers better, you can always dig deeper when you need more insight.
You can love the work. If you want the business to stay strong for the long term, you also need to understand the numbers and what they are telling you.
That is part of the job of leading the business.
Frequently Asked Questions
Why is financial literacy important for business leaders?
The numbers connect day-to-day actions to business performance. When you understand that connection, you start to see what moves the business forward and what holds it back. You do not need to become an accountant, but you do need to understand what the financials are telling you.
Where should a business owner start with financials?
Start with what drives revenue: what you are selling and how much. Then look at cost of sales. Once you understand the profit your product or service produces, look at the other costs of running the business. Keep it simple and in big chunks at first.
How detailed should a P&L be?
Your P&L should fit on one page, maybe two. Too often financials are broken down into so many small categories that it becomes harder to see what is really going on. Start simple and dig deeper when you need more insight.