I ran a company for two years without understanding this
- 4 days ago
- 3 min read
In this article: Many entrepreneurs run successful businesses without fully understanding the numbers behind them. Alan shares his own experience of confusing profit and cash, and why understanding a few financial fundamentals can make you a better business decision-maker.
Answer in 1 sentence: Understanding your numbers is essential if you want to make confident, informed decisions.
You’ll learn:
Why profit and cash are not the same thing
Which financial reports are worth paying attention to
How understanding your numbers helps you make better business decisions
The financial mistakes that can trip up otherwise healthy businesses
Key concepts: profit, cash flow, financial literacy, business finance, financial reports
Who it’s for: Founders, entrepreneurs and business leaders who are good at running their business but don't always feel confident understanding the financial numbers behind it.
Yes, it’s true: I once ran a company for two years without properly understanding the
difference between profit and cash.
Not ‘didn’t think about it much’. Didn’t understand it. Two full years of nodding sagely in board meetings while quietly hoping nobody asked me to explain the balance sheet.
I got away with it for a while. It’s surprisingly easy to. When you’re busy building a business, understanding the mechanics behind the numbers has a habit of slipping down the list.
Until, of course, it matters.
And I’ve discovered over the years that the problem doesn’t necessarily disappear as the business gets bigger. Whether you’re working from a spare room or sitting across from three non-execs with a bank covenant to worry about, it’s remarkably easy to find yourself in a finance conversation that’s moving just a little faster than you’d like.
Richard Branson tells a wonderful story about this. He was 50, already running what he described as the biggest group of private companies in Europe, when he finally admitted in a board meeting that he didn’t know the difference between gross and net profit.
One of his directors took him aside, drew a fishing net on a piece of paper and explained it to him using fish. Branson says that was the moment he finally got it.
So, if you’ve ever sat in a meeting pretending to understand the numbers, you’re in pretty good company.
I think far more entrepreneurs bluff their way through this stuff than admit it. I certainly did.
Which is one of the reasons I created Alan Wick’s Business of Finance® online training
course.
And I’ve taken an entire module from the self-paced online programme and made it available for free.
It’s not a teaser. It’s the full lesson, with the workbooks and planning templates I use with it. It includes:
The critical difference between profit and cash, and why it matters.
The financial reports worth paying attention to.
How to use your numbers to make better decisions.
Some of the financial mistakes I’ve seen trip up otherwise healthy businesses.
Practical things you can put in place straight away.
If you already know all this, send it to someone on your team who doesn’t.
That’s it. No catch. Just one of the lessons I wish someone had given me before I spent two years bluffing my way through board meetings.
And, if you’d like to talk through other ways I can help you to grow and run your business successfully, I’d love to meet. Let’s see if we’re a match!
