Simple Tough Questions – for an Entrepreneur

As a Management Consultant/ Virtual CFO / Board Adviser, I am often compelled to ask some simple tough questions in my client interaction:

1. How and why did you choose the business?
2. Are you aware of the demand and supply pattern in your business?
3. Who is your competitor?
4. Who is your customer?
5. Why should the customer buy your product- design/cost/relationship/convenience/habit?
6. What is your business model- B2B or B2C?
7. Are you selling a product, a solution or a service?
8. As an entrepreneur, what are your core functions?
9. How much time you spend on non-core functions?
10. How well do you know your customer?
11. What are the threats that can disrupt your business?
12. Have you ever done a SWOT analysis?
13. Who shows you the mirror- an Advisory Board, a Mentor, a Business Coach, a family member?
14. What is the long term vision of your business?
15. Why should talented people join your company?
16. Do you have a proper system of Corporate Planning and Control?

Simple, but tough questions- Set you thinking, don’t they?

That is the intention.

Do write in to share your thoughts on aipichai@gmail.com

Simple Uncomfortable Questions

Companies have already prepared their budget for the FY 2015-16. So let me ask you some very simple uncomfortable questions.

• What is your Net Worth today?
• How much will you save in FY 2015-16 in absolute terms and in terms of percentage of your income?
• How much cash will you have at the end of the year?
• When will you convert your savings into investments?
• What is the yield on your investment- is your money working for you?
• What is your Pi index? What percentage of your financial needs (necessity, comfort and luxury) is met by passive income?
• What percentage of your net worth is protected from inflation?
• What measures are you taking today to grow your active income? Is it in addition mode or is it in multiplication mode?
• Do you need professional help from a wealth coach?
• Do you have adequate medical and life cover?

Hope you had a tough time answering these simple uncomfortable questions. Do write in to share your experience at aipichai@gmail.com

Entrepreneur – Know your Balance Sheet

Some of the best names in business were masters in reading financial statements. Unfortunately these days I do not find many entrepreneurs who have the ability to read financial statements nor do they feel the need to have a financial guru in their team. I am worried about such guys.

Some of the best entrepreneurs I have met analyse the profitability of their business through the balance sheet.  However, the accountants generally analyse profitability by looking at the statement of profit and loss. Obviously the entrepreneur knows more.

Dhirubhai was a wizard when it came to reading the balance sheet. Even some of the Marwari business groups always make sure that the balance sheet reflects a good picture. They say that rest will take care of itself. Profit and loss statement, they believe shows a short term view.

The accounting profession is taking efforts to make the financial statements more meaningful. I am convinced that in reality they are achieving the opposite by making accounting more complex in the process.

We seriously need to improve our financial literacy to understand the balance sheet.

Exercise 7 – Future Projections

One of the topics we learn as Finance professionals is to make projections about the future based on certain assumptions. The output of this exercise, is your future projected financial statements- Profit & Loss Account, Balance Sheet & Cash Flow Statements.

Very few people apply this knowledge to personal finance. I have encouraged people to prepare these projections when I conduct my workshops on Financial Fitness. The results have been amazing. We call it OYE moments in our workshop.

Many times one tends to think about himself based on the past or present circumstances. This is a very myopic view of your finance. If you carefully prepare projected financial statements for 5-10 years, your vision about your future will change. This changes your perception. You now start thinking based on your future projected self instead of being trapped in your present. Believe me, try doing this and see your confidence soar.

Download a sample of this exercise by clicking here