Transcript
Entrepreneurial finance is definitely different from personal finance, but as we’ll see later during our conversation, there are also some similarities and some concepts that you should clearly know and that apply [applies] to both settings.
Entrepreneurial finance is all about the finances that you need to manage and be aware of when you start your own company. Now, we know that some of you are first time founders, and we know it’s not always so easy to get your head wrapped around these ideas, but trust us, we’ve been there. We’ve done it. It’s doable. You can learn it. It’s basically like a language.
Entrepreneurial finance is really about the money mindset and the money management skills that you need to run a business. When women first start a startup, they quickly become aware of the fact that there are essentially three different phases that are essential to running a startup and to its creation. So, first of all, you have to start a company and you have to run it and then you have to scale it.
For all of these different phases what you really need to have is to have a healthy money mindset, and we’ll talk about money mindset later. You also have to be comfortable with numbers – if you’re not comfortable with numbers, you better learn how to be, because numbers, money, finances will accompany you for the rest of your entrepreneurial journey. And then – something Clara really likes and I do too – it’s a cool concept, it’s basically work with what you’ve got. In our context, it means work with the capital you have and learn how to maximize the capital or also identify additional revenue streams.
Having all of these money mindset/money management skills really helps you with respect to, once again, starting, running, but also scaling your business. It’s very helpful that you know how to structure your finances as an entrepreneur, and that you are keenly aware of all the different costs, but also the different revenue streams that are part of entrepreneurial finance.
Just to give you a little bit of an idea, for instance when you start a company there will be certain one-off costs. For instance, maybe you have to pay a designer for creating your logo, so it looks professional. You may have to pay a lawyer to actually inaugurate your company and make sure it has a legal form that is viable in your country. Or maybe if you operate in the EU, you have to pay a lawyer to make sure that your company can sell products in [the] EU or maybe even beyond that particular framework. You have to be aware of your recurring or monthly costs. For instance, is there rent? Are you going to pay a freelancer that every month, for instance, to run your Instagram channel? There are lots of different items.
It’s really important that you know how to plan and manage money, and that you are aware of certain concepts that will always be there. So cash flow is really important: how much cash comes in, how much goes out – so this is also your liquidity, right. Is there enough money and capital there to pay for certain expenses?
And also [an] investment and return, and that is such a core concept that we never tire of mentioning it because you have to know how much you put in in order to get a certain result. For instance, if you want to acquire customers, then you want to look at certain investments for marketing and understand how much marketing budget you need to acquire a single customer, just an idea.
And also other concepts that are essential to entrepreneurial finance are concepts like the burn rate: how much money do you have? How long will it last you? Maybe also diversification? Are you only going to create revenue from one stream or from different ones? Will you only sell one product or maybe five? And then also, how much assets do you have? So for instance, how many computers do you have? What is really the worth of your business?
This may sound complex, but it really isn’t because when you start out as an entrepreneur, you become so familiar with these and you will also go to meetups and talk to other entrepreneurs and they’ll have similar challenges around entrepreneurial finance that you will end up discussing these concepts with people. Also, if you’re not that familiar with them in the beginning, get help, get an advisor or ask an experienced entrepreneur for insights so that you can be sure that you’re on track.
Discover Some Statistics on Women & Money
Statistics on women in the financial context bring some bad news, but also some very good ones.
A data analysis performed by Fidelity Investments, reveals that females saved on average 9% of their paycheck annually, versus the 8.6% saved by males. Furthermore, another study conducted by Fidelity Investments suggests that women earn higher returns than men when investing. In particular, data analysis on their customers shows that women’s performance when investing was 0.4% better. Both these values may seem minor at first but can make a huge difference in the long run.
Despite these promising statistics, several studies confirm that women invest on average considerably less than men. The CEO of Ellevest suggests that over 70% of women’s wealth is not invested, but kept in cash instead. This leads to a wealth gap between genders. One potential cause of this phenomenon is that women are on average less educated on financial topics. A National Financial Capability Study was conducted by FINRA to examine financial literacy through a test. The results show that on average women were correct on 48% of the answers. Contrarily, 58% of males’ answers were correct.
In conclusion, these statistics suggest that women should be provided with the right education in order to close the wealth gender gap. Therefore, here is another good news: you are in the right place! Go to the next lessons to learn how to make the best financial plan to nail your personal and business finance. At the end of this course, you will be able to create a positive financial future and make your contribution to closing the wealth gender gap!
