Financial Skills Needed To Create Success

financial skills

Whether you plan to start your own business, participate in the gig economy, or just be a good employee, you need financial skills since business relies on making a profit to stay in business and grow over time. As a new business owner, it may surprise you how many different hats you must wear (especially in the beginning), including at least some rudimentary financial skills. If you work in any capacity except the most unskilled labor, you also need some financial skills to keep on track to ensure your areas of responsibility are met. After all, you’re probably responsible for a lot more than just the functional tasks that make up your job descriptions and to advance, you need some financial skills to move up.

financial skills
Image courtesy of Unsplash

Financial skills

Most financial skills begin with the basic mathematics you learned in elementary school: simple addition and subtraction, maybe a little multiplication and division. But, people often face math anxiety and freak out at the first sign of a number. For those looking to strengthen their foundational math skills to better handle these financial tasks, consider exploring Tucson math tutoring services. This might get you through a number of financial tasks we list below, such as setting up a budget. Other financial tasks are a little more challenging, even though they involve simple mathematical manipulation. For instance, bookkeeping involves understanding an arcane system of debits and credits much more advanced than the average small business requires since most operate on a cash basis. We’ll talk more about this a little later.

Other financial skills are more based on organization and thinking, including analytical thinking such as price setting.

And, some financial activities, such as business intelligence and financial modeling take more sophisticated financial skills that you likely need a professional to accomplish. In this post, we’ll focus on less challenging financial tasks.

Financial tasks that require minimal financial skill

Setting up a budget

When it comes to starting up a business, one of the most challenging tasks is estimating your expenses and burn rate so you can explore startup loan options or other forms of financing your business. Remember, you need several months of expenses on hand before you start to ensure you don’t run out of money. Cash flow accounts for more business failures that not making a profit. 

startup failure rates
Image courtesy of Profit from Tech

Planning for your set-up costs should include all necessary equipment and material you need, rent and utilities, marketing costs, salaries and wages, and insurance and any other legal or regulatory fees, such as a business license. Most experts recommend that you also have enough in reserve to run for a minimum of six months while you get the business up to speed and build a solid revenue stream.

It’s challenging to find the data you need for budgeting. One way to collect information is to actually plan out as much as possible and then query providers as to the costs for recurring fees and one-time needs. Many vendors are happy to give you quotes since they need your future business. Another tactic is to build relationships with non-competing businesses who will often help you by sharing their cost information.

One of the hardest costs to calculate is your marketing cost. When I worked for the US Small Business Association I found many prospective business owners either drew a number out of their hat or didn’t plan for any marketing cost. Both are a disaster waiting to happen. Instead, most businesses plan to spend a percentage of revenue (or anticipated revenue) on marketing. Often, startups spend more than more established businesses on marketing so you should adjust your marketing budget accordingly.

small business marketing budget
Image courtesy of Merehead


Having an accurate picture of the money coming in and going out of your business is important for a number of reasons. Firstly, it gives you an overall view of where you are in a financial sense, which allows you to work toward optimizing your ROI (return on investment). Accurate bookkeeping also lets you plan your future payments so everyone is paid and you know if you have excess money to invest in something that will help your business grow.

Lastly, it’s a legal requirement to have an accurate accounting of your financial transactions. Failing to do so could get you in pretty serious trouble with the tax man and may mean you’re in violation of the terms of your loan or investor contract.

There are many ways to record money in and out that can keep you on top of your finances. Find a bookkeeping software that integrates with your business bank account and other systems to help ease the task. For most simple businesses on a cash basis, you don’t need to understand debits and credits. You could even set up your books using an Excel spreadsheet.

Financial projections

As a small business, you need to understand and predict future financial inputs and outflows. That means preparing simple financial statements that normally include an Income Statement, which shows your profits and/or losses at a point in time. When you prepare these in advance to project income, it’s called a Pro-forma Income Statement. You might also prepare a Balance Sheet that lists the value of all your assets after subtracting the money you owe, such as rent due at the end of the month. A Pro-forma Balance Sheet projects your assets and liabilities for an upcoming financial period. A Statement of Cash Flows is very important to ensure you don’t run out of cash since your actual cash on hand might not match up with your income as you might not collect revenue immediately.


Getting the best deal on anything you buy can make a huge difference to your profit margin. Whether you’re choosing an insurance policy or taking on a new supplier, apply some rigor to the process, don’t just accept renewals without pricing your options and don’t expect to pay the price demanded by suppliers. Shop around and feel free to ask for a better deal. Many fees in the business-to-business world are negotiated between supply chain partners rather than paid based on a price list. The worst they can do is say no.

Understanding financial positions

Not only do you need to know where your own business stands financially, but you need to analyze the financial positions of potential clients, competitors, and partners too. Learn how to understand the cash flow, income, and balance sheet statements prepared. This puts you in a better position to negotiate a price that’s favorable to your firm.

Price setting

Pitching your products or services at the right level is very important. Too high, and you price yourself out of the market. Too low and you devalue everything you’re doing, making consumers think your product is cheap or doesn’t work as advertised. And you leave money on the table that could help fund other activities to advance your business.

The old standby for pricing is called cost-plus pricing. This involves calculating the total price of the products you sell and then adding a percentage to the price to cover overhead, profit, and to provide money to grow. Because industry standards are often available (for instance, many industries add 100% to the cost), this pricing strategy is easy to implement but inefficient.

Another tool for determining selling price uses break-even analysis. Break-even is calculated as:

break even

Armed with your break-even point, you can play a series of what-if games, called sensitivity analysis, to anticipate your profit/loss at various prices to help determine the right pricing strategy.

Remember that consumers are the ultimate determinant of your price. If they don’t think your product’s value is sufficient to justify your price, it doesn’t matter how fancy your calculation was.

Borrow well

Most businesses need additional investment from time to time. For instance, you might need a little extra to tide you over during slow periods or during economic hardship. You might also need money to fund an expansion or develop a profitable new product.

Knowing when to seek additional funding is critical as borrowing represents a cost in terms of interest or loss of control to investors so you don’t want to seek money until you really need it. That’s where your projected cash flow statement really helps.

Where to find financing is also important. You don’t want to pay too much money on interest or accept other unfavorable terms.

Know when to outsource

With more and more people working for themselves now, it’s very easy to outsource areas of your business so you can concentrate on other areas where you have the expertise or can do things better on your own. This is referred to in financial circles as leveraging.

Outsourcing allows you to husband your resources, especially if hiring a full-time employee is a waste when you only have a few hours of work for that person. By the same token, some tasks require expensive equipment or software. By outsourcing, you hire a business that can spread these costs over a large number of clients rather than incurring these costs by yourself.

The same goes for other expenses that you can leverage. For instance, renting equipment rather than buying it makes sense when you don’t have sufficient cash flow to afford the cost or when you don’t anticipate sufficient use of the equipment to justify the cost. You might rent a piece of construction equipment needed for a project if you don’t anticipate using the equipment after you finish the project. The same goes for people, where you might hire a gig worker versus hiring an employee when you won’t need them long term.


Getting the financials right is the cornerstone of running a business. You may already have some of these skills from your previous roles, or everything might be new to you. Make sure that you take the time to learn everything you need to to be confident with the numbers.

Need marketing help to support business growth?

We welcome the opportunity to show you how we can make your marketing SIZZLE with our data-driven, results-oriented marketing strategies.  Sign up for our FREE newsletter, get our FREE guide to creating an awesome website, or contact us for more information on hiring us.

Hausman and Associates, the publisher of MKT Maven, is a full-service marketing agency operating at the intersection of marketing and digital media. Check out our full range of services.