Entrepreneurs don't need to be financial specialists to build a successful startup. Nonetheless, being financially competent is critical to business success.
This means you need to have a good grasp of the fundamental financial knowledge needed to make competent and prudent financial decisions. Budgeting and planning your runway is crucial, and if you want to raise capital - then you’ll have to produce convincing financial projections to attract investors.Second, finance seems to have a very steep learning curve, and while this is true if we are talking about becoming a financial specialist, it is not necessarily the case for startup founders.
Generally speaking, all you need is a good grasp of arithmetics combined with good familiarity with a handful of financial andYou need to know the difference between revenue and profits, direct and indirect costs, debt and equity funding, gross and net margins, and pre and post-money valuation. Moreover, you need to understand the meaning of leverage, dilution, burn-through rate, customer lifetime value, and customer acquisition costs.
For example, if you are buying and reselling a product, you’d be able to distinguish between the direct cost of each sale and the overheads . With this knowledge, you’ll be able to judge your breakeven and margins with specific sales volumes. Having this depth of knowledge over your business would give you a higher degree of confidence when it comes to making key decisions.
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