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

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

Exercise 6 – My Net Worth

Finance guys understand the meaning of Net Worth. This is one of the easiest terms to understand.

What is my Net Worth? If I start with the total value of my Assets– so if I add up the value of all my assets I get the value of Total Assets. From this figure, if I deduct the total amount that I have to pay to my creditors (my Liabilities), the resulting figure is my Net Worth. It is also called as capital in accounting terminology.

Accountants maintain books of accounts on Historical Cost basis. This means that the value of the asset is shown at the Cost price in the Balance Sheet. It may be worthwhile to prepare a statement of Net Worth as per Market Value and preserve the document for future reference.

Ultimately personal finance is about increasing your Net Worth. All your financial actions ultimately result in improvement of Net Worth. Hence it is important to undertake this exercise at yearly intervals and study the 5year/10year trend from time to time.

Download this exercise by clicking here and track your own net worth.