As a founder, entrepreneur or even just senior employee in a start-up, you’ll find it very helpful to have a basic set of financial literacy.
Obviously, almost anything is more interesting to talk about than finances.
No doubt you’ll love evangelising about your products and services, your team, your company’s emerging culture or the new social media websites you created. A company’s finances are not usually what gets anyone overly excited; not even the founder.
Or as Tren Griffin, author of a popular 25IQ blog about business, technology and investing, once wrote: “They love products not term sheets.”
A company’s finances are not usually what gets anyone overly excited; not even the founder.
How to best get yourself up to speed with that all important subject when you lead a busy life?
Fortuitously, I recently came across a book that I believe will require only one focused weekend of reading to make you understand all important aspects of managing a technology start-up’s finances.
Enter “Financial Management for Technology Start-ups,” published a few months ago by Alnoor Bhimani, Professor of Management Accounting at the London School of Economics and Founding Director of “LSE Entrepreneurship”.
Whereas the title says the book is written for technology start-ups, I do believe other entrepreneurs will benefit almost as much from it.
Just to have said it right away, I get neither paid for this endorsement nor do I get invites to PR parties with dancing elves and free booze. I simply read the book and figured “here is something that a good number of my readers would probably find useful” (which is why you see only a few books recommended on my blog). Also, it was published by a niche publisher, so you are unlikely to read about it on billboard advertising.
Why learn about financial management?
At the fundamental level, you’ll need to be financially literate to determine and manage the following central aspects of your business:
- Are you getting more money out of your business than you are putting in?
- Are you on the right track to achieve the (long-term) financial targets that you set in your mind?
- Are you using the fewest possible resources to generate the highest possible value?
- If you are considering to take outside investors onboard, are you in a position to satisfy the 1,001 demands that investors will inevitably make with regards to your management of the company’s finances? (Actually, it’s more like 10,001 demands, but I didn’t want to scare you off fundraising!)
I admire any book author who can make a complicated, broad subject accessible in the form of a 200-page book. Having read a lot of management books in my life, I’d like to second one of the testimonials written on the back of the book:
“A smart, jargonless book that shows how accounting numbers can be used
to propel a tech start-up to success.”
There are another 30 testimonials in the book, written by people from around the world. For what it’s worth, Amazon has four reviews, all of which are five stars.
If you count my experience as worth listening to, it’s the kind of book I wish someone had given me 20 years ago. I read it back to back because I enjoyed reading something that was clearly written for an audience that is:
- Time poor.
- “Doing it.”
- Determined to learn about a subject in a practical way.
If you count my experience as worth listening to, it’s the kind of book I wish someone had given me 20 years ago.
Also, I do think if you unplug everything and lock yourself away for a weekend (possibly a bank holiday weekend to have an extra day or two), you can use this book to get on top of the entire subject of managing your start-up. You’ll probably want to re-read it some other weekend and occasionally delve into it, but this book is clearly geared towards giving you a lot of practical knowledge within a short period of time.
Don’t procrastinate, do it now!
Not only have I have seen it so many times, it’s even something that I had to learn the hard way myself.
The reality is, by the time you are fundraising or negotiating a transaction, it’s too late to learn about these matters.
Founders are usually only willing to invest time into financial topics when they are fundraising or working on a transaction. During the rest of the time, however, they consider themselves to be too busy with seemingly more important things.
The reality is, by the time you are fundraising or negotiating a transaction, it’s too late to learn about these matters. You need to be ahead of things, which then also enables you to work strategically towards the fundraising or transaction so that you start off from a better negotiating position.
Take my word for it; it’s a good use of a founder’s time to spend a bit of time getting themselves up to speed about financial topics that will impact their business, including that all-important subject of fundraising. You’ll avoid having to learn a few lessons the hard way.
If you want to get this done without having to spend weeks or months in a classroom, I wholeheartedly recommend you invest GBP 25 ($25) for Bhimani’s book. Also, buy it from the publisher, rather than Amazon. Jeff Bezos is rich enough already!
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