5 Finance Topics Every Small Business Owner Should Master

Cash is king, and profit is queen.

With 82% of small business failure due to poor cash flow management (Business.com), it’s no wonder business owners lie awake at night wondering if they’re gonna make payroll. 

If you want to get serious about (sustainable) growth, you’ve got to get serious about your numbers. Here are 5 finance topics every small business owner should master.

1. Cash flow: Keeping the business alive and healthy 

There’s probably nothing more stressful than worrying about paying the bills and the team. If you don’t have a good handle on what’s coming in and what’s going out, you’re constantly living in a state of suspense (or using your bank balance as a proxy for business health, which it’s not). 

Why master cash flow: Smart business owners obsessively focus on cash flow because it’s literally the first domino for every other decision you can make. 

Want to hire? Need cash. Need to buy product? You’ll need some cash. Want to invest in R&D? Cash please. Want to replace yourself and take some of the stress off? You’ll need cash.

2. Accounting: How to read financial reports

Want to know what almost every business owner’s dirty little secret is? 

They don’t know how to read financial reports. 

In fact, the #1 question we get from clients is, “How come there’s no cash in the bank when the P&L says I made money this year?” 

The #2 question is probably “How am I doing?” followed closely by “How do I log into Quickbooks?” (Doh)

Why master your books: You don’t have to do the bookkeeping (we actually recommend that you don’t), but you should be able to read and understand your reports. You should know seasonal trends, profitability by product or service, whether or not your balance sheet is healthy, and who owes you what.

3. Taxes: Don’t rely on clickbait TikTok Tax advice

Sure, you can hire your kids to appear on your company website. Expense your high-end handbag. Donate a luxury vehicle to a charity and then drive it yourself. Tiktok’s full of click-worthy tax tips, but the most successful business owners we know don’t spend all their time obsessing about saving a few dollars with tax tricks. 

Why focus less on tax: Successful business owners focus their time on maximizing profit, reinvesting in growth, and taking advantage of reasonable but powerful tax strategies that require strategy on the part of their tax advisor but fewer backflips on their end. 

For example, many states now offer a pass-through entity tax election that allows your business to pay state taxes, which come through on your personal return as a deduction. This can add up to thousands in savings …and you’re not inviting the IRS in for a cup of tea and a full explanation for why you were clearly living in your “office” all year.

4. Exit Strategy: How to maximize business value

Most business owners have a “number” in their head but aren’t really sure what their business is worth. And they’re often in for a rude awakening when they discover the market doesn’t think their baby is as cute as they do. In many cases you are the business and it’s worth a whole lot less than if you took yourself out of the weeds, put some processes in place, and had a good handle on your finances.

How to build a business others want to buy: There are a lot of nuances to creating value from your business, but they essentially boil down to sustainability (is your business financially sound with a repeatable sales process, bankable profits, and transferable value?), scalability (do you have systems and processes in place to ensure continued growth?) and transferability (can this business operate without you into the future or are you the key person and therefore the key risk)? 

5. Financial Planning: What to do with your earnings

You did it! You tamed the cashflow monster, learned to intelligently read and take action from your financial reports, dialed in your tax strategy, and are on the road to creating an exit-ready business. Which all means you’re swimming in profits and have a new problem: What do I do with all this cash? 

Why master financial planning: You’ve arrived where every business owner wants to be, but now there’s a new layer of complexity in your life. From reinvestment into the business, to business acquisitions (M&A), to plugging your cash into retirement or real estate or crypto, to taking that dream trip, you have options. Your dream team is your business finance advisor, personal finance advisor, and tax advisor to help guide you through the implications of these decisions and twist the dials to maximize the benefits to you.

Picture of Gretchen Roberts

Gretchen Roberts

Gretchen Roberts is CEO of Red Bike Advisors LLC. As a business owner herself, Gretchen has a deep understanding of the problems, questions, and financial pain points that business owners experience on a daily basis, and how strategic financial and tax planning is the key to "breakaway" business growth and success.
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