Business Financial Intelligence

According to the Small Business Administration (SBA), one of the main reasons why many small businesses fail, is a lack of what’s referred to as “business financial intelligence”. It’s not that the small business owner lacks technical competence, operational excellence or high interpersonal skills but this thing called, “business financial intelligence”.

On the basis the vast majority of our newsletter subscribers are employees of large organizations, I’d like to relate my opening statement to them. My observation has been, one of the main reasons people don’t fulfill their potential in the workplace is the same reason why most small businesses fail: a lack of business financial intelligence.

Now before I lose the attention of our subscribers who work in non-corporate jobs, please be reminded that your organization IS a business. All organizations need to generate returns (net income) that’s larger than the cost of using other people’s money (debt capital or equity capital). All organizations need to ensure their income is larger than their expenses. All organizations need to ensure their assets are larger than their liabilities.

So what is business financial intelligence? Its the ability to think like an owner. It’s a mindset and skillset few employees have and all organizations need. Its the ability to connect the work you do everyday to the money-making or revenue-generating model of your organization. Its the ability to look for opportunities to improve income and reduce expenses as if it was your organization — we call this an intrapreneurial spirit.

Business financial intelligence is sharpened by listening to the Earnings Call, if your company is publicly traded on the stock market. Its the ability to be able to read an income statement, balance sheet, statement of equity and cashflow statement. Its the ability to demystify jargon such as ROE, ROIC, amortization, EBITDA, goodwill and the joys of the accrual basis of accounting.

My observation has been that individual employees can only make so much contribution based on their area of technical competence. Over and above this, they need to be good at managing themselves, influencing others and have this mindset and skillset, called “business financial intelligence”.

In conclusion, whether we’re talking about the sustainability of a small business or an optimized employee career, I really do believe business financial intelligence makes all the difference. As an employee you’re able to transition between departments, achieve promotions and even traverse across industries when you have business financial intelligence — you become able to make faster and smarter decisions. Hey you may even want to start your own business one day!

Newleaf Training and Development offer a program called Business Financial Intelligence which is available across all four of their delivery platforms — seminars, keynotes, coaching and online.

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