Finance for Entrepreneurs: Importance of Finance for start-ups

Over the last few years of teaching entrepreneurship to faculty, students and practitioners, all of them have asked for more material on finance. With a plethora of books and web links providing more than adequate amount of information about finance, I always wondered why my entrepreneurial folks would always feel let down by these resources! The reason has become clear to me only recently – they don’t want to learn finance; they want to learn how to use finance in understanding, showcasing and running their businesses better. But considering that most of these people (serious entrepreneurs) are from the engineering, technology or creative domains, most if not all get anxious the moment the word ‘finance’ is brought on to the discussion.

Even during my consulting and mentoring fieldwork I have found entrepreneurs and small business owners not too comfortable to discuss finance and accounting. In fact most of the finance work in early stage and small businesses starts and stops with the accountant. Even the fact that finance and accounting are different is not obvious to them. Most of them consider finance as accounting and compliance and hence spend the time with their chartered accountant (individuals or firms) when the compliance deadlines arrive. Most of the statements are prepared and filed so as to ensure compliance issues are avoided.

What happens to the statements prepared by the accountants? Are statements prepared more often than the statutory mandated dates? If they are, what is done with them? Most entrepreneurs tell me they don’t do anything with these statements even if they are generated.

The other reference with respect to the term ‘finance’ commonly is (mis)understood to be raising money! Similarly there are number of misconceptions around finance and these have made the use of finance in entrepreneurship limited and underutilized! But surprisingly the entrepreneurs themselves seem too uninformed to utilize this tool well in their business especially for making important decisions on growth and sustenance.

I am starting this series titled “Finance for Entrepreneurs” to write a post every week on finance with a special focus on entrepreneurs and small business owners. All professionals who think they are non-finance executives can follow this series and make themselves aware of the subject in a slow but structured manner. If some are in a hurry, I hope they will find inspiration from the blog to go ahead and pick a few books or courses to hasten their learning.

Entrepreneurs need to understand ‘finance’ – that’s a paramount need. It will make them use more concrete inputs in business decision making.

Hope you will all join in and keep the conversation on learning finance going. If you are an entrepreneur then feel free to write to me on topics that you would like to learn about; and if you are a seasoned professional / consultant / mentor to start-ups, please leave your suggestions on topics that you feel need to be covered here as part of the series.

Look forward to lots of learning and discussions so as to create financially literate technology enabled creative entrepreneurs – India needs them!

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6 thoughts on “Finance for Entrepreneurs: Importance of Finance for start-ups

  1. Lenders draw utmost comfort with promoters who understand finance well. It answers them a simple question.. Is my money in responsible hands. No matter how good a business enterpreneur may be technically, lack of financial understanding may set the business model directionless.

    1. Thanks Sandeep for sharing the views of an investor. It is a very important reason why entrepreneurs (especially technical ones) must understand finance. Hope the weekly lessons will help educate the entrepreneur fraternity to be more finance friendly and hopefully that will also enable the investors / lenders feel more comfortable talking and investing into more of them.

  2. Dear Mr Raj S, This is Himansu S M (We have met thrice) from KIIT-TBI, Bhubaneswar. For sometime now I have been mulling the idea of imparting “Finance Fundamentals” to the Incubatees here. Now that you mooted the idea, I want to do both – (1) organise the informal / formal training here for the in-house incubatees; and (2) write for you. Pls let me know if you agree. After that I shall send you a list of small topics for discussion. Thanks & awaiting your reply.

    1. Will be happy to share and contribute to this idea. Finance is such an important topic for entrepreneurs and if there is any way we can enhance their understanding i will be glad to work along. I have replied to your email and will be glad to collaborate.

      In fact I started this weekly blog post containing lessons on Finance for Entrepreneurs every Friday for the sake of hundreds of entrepreneurs and entrepreneurship educators across the country who face this challenge. Hope to see how much more value we can add to this ecosystem in our own small way.

      Good Luck with your initiative.

  3. I read all the posts in the reverse chron. order… so this being the last one, it felt like an hour’s brush up on FA and linking that to Entrepreneurship. .. and the style of the posts are easy to understand for anyone reading. .. Thanks sir!

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