5 Financial Skills I Wish I Had When Starting in Business

Summary

This video script emphasizes five crucial financial skills for business success: understanding financial fundamentals, analyzing company performance, forecasting, building valuation models, and creating effective strategies. The speaker shares personal experiences and offers free resources to help viewers develop these skills and boost their business acumen.

Takeaways

• 💼 **Understanding Financial Fundamentals**: Knowing how to read an income statement, balance sheet, and statement of cash flows is crucial.
• 🔍 **Analyzing a Company**: It involves looking at historical performance, identifying KPIs, and understanding the trends and variances in financial data.
• 🌳 **Breaking Down Value**: Decomposing financial metrics into a logic tree helps pinpoint areas of strength and weakness in a business.
• 📈 **Forecasting**: Building a rolling forecast that goes beyond profit to free cash flow, including balance sheet and retained earnings projections.
• 🏦 **Valuation Models**: Creating models to understand the current and potential value of a business using income, multiples, or asset-based approaches.
• 📘 **Strategy Development**: Formulating a strategic blueprint that defines purpose, principles, strategic problems, options, and performance metrics.
• 🚀 **Linking Strategy and Finance**: Combining strategy with financial analysis to drive value creation and make better business decisions.
• 💡 **Continuous Improvement**: Regularly updating forecasts with new financial data to adjust strategies and operations effectively.
• 📱 **Learning Tools**: Utilizing tools like Mative for visual tracking of KPIs and BYFIQ app for learning financial skills on the go.
• 🆓 **Free Resources**: Accessing free courses on cultvour.com to learn how to build a strategy blueprint and improve financial acumen.

Q & A

What was the speaker's experience starting a business at 16?

The speaker started their first company at 16 and grew it into a multi-million dollar business in their early 20s out of their sister's garage.

What financial skills does the speaker feel are crucial for business leaders and owners?

The speaker identifies five key financial skills: understanding the fundamentals of finance, analyzing a company, forecasting, building a valuation model, and understanding strategy.

Why is understanding the story behind the numbers important?

Understanding the story behind the numbers involves knowing how to read an income statement, a balance sheet, and a statement of cash flows, and comprehending how they all connect to determine the free cash flow of the business.

What does the speaker mean by analyzing a company?

Analyzing a company involves looking at historical performance, identifying key performance indicators (KPIs), and understanding the trends and drivers contributing to the business's value creation.

How does the speaker recommend visualizing financial data?

The speaker uses software called Mative to track KPIs in a visual format, which helps in understanding trends and areas for improvement.

What is the significance of breaking down value into a logic tree?

Breaking down value into a logic tree helps pinpoint exactly where the drivers in the business are performing well or struggling, and where opportunities lie.

What is the difference between a budget and a rolling forecast according to the speaker?

A budget is a plan for a fixed period like a year, whereas a rolling forecast is an ongoing process that looks at the business performance month over month, from revenue down to free cash flow.

Why is it important to forecast out the balance sheet and statement of retained earnings?

Forecasting these elements allows for a more comprehensive view of the future performance of the business, including how it will affect free cash flow.

How does building a valuation model help in understanding business value?

A valuation model helps understand the current performance of the business and its optimized value, showing the potential upside for improvements.

What is the speaker's view on strategy and how does it relate to finance?

The speaker views strategy as defining where and how to compete and win, and driving value creation by combining it with finance.

What resources does the speaker offer for learning more about these financial skills?

The speaker offers a free course on cultvour.com and a free app at byfiq.com for learning these financial skills.