A non-financial entreprenuer is a business owner/artist/ or self employeed individual that engages in business actions, but fails to realize what the costs are!
I’m constantly amaze by how many business (including self-employed and contractors) that are hanging by a thread because they aren’t managing their money well. This recession has made a lot of them go out of business.
Here are a few examples:
- My nonfinancial friend the artist. this individual is very talented, but she fails to account for her materials, driving time, and other expenses. She thinks she’s making a profit, but really she is losing money, not to mention the extra taxes she does have to pay! If I were closer to her, I would approach her about it, but I can only do so much…
- Big business that lacks adequate Cost Accounting. Thru my millionaire friend, I know of a big business owner that is dying a slow prolonged death. This business owner is charging the same prices he did 5 to 10 year ago, but that doesn’t work out well for his bottome line.
- The business owner that keeps going because of his employees. This business is dying too, and the owner knows it. But the owner want to keep his business going to keep his employee’s employed. This might surprise some of you but small businesses (and sometime larger ones too), feel close to their employees and their families, they want to see their workers live well. The problem with not paying attention here is the fact that he’s hurting both his workers and himself. If he were to close shop, he’d be able to save money instead of losing money each year. I hate layoffs, but the ones that do get layed off will still have unemployement benefits to live off of, and doing so may prevent the company from going under, causing everybody to be unemployeed.
All of these problems come back to the same root cause. Running a business without a proper accounting system in place, and accounting for not pricing the product well! Having a mastery, or an employee that has a mastery, of accounting can be a powerful aid in staying afloat in business!
If you are a small entreprenuer, buy quickbooks, and take a few quick accounting courses. Make sure you understand the cashflow properties of your business, and how to cost materials! Not to mention figuring out your ideal profit margin…
Note, this was the advice that my millionaire friend told me, while I’ve dabbled being an entreprenuer and contractor at various stages of my life, I’m currently more of a company employee.- MR