Financial Wizardry

" Nobody talks about entrepreneurship as survival, but that's exactly what it is and what nurtures creative thinking. Running that first shop taught me business is not financial science; it's about trading : buying and selling "
Anita Roddick

Financial science is the study of taxation, internal auditing and financial management. Dealing with assets and liabilities and their degrees of uncertainty and risk. Finance is them the science of money management.

Before you reach this stage, you must first learn to buy and sell. You are a trader. Buying components. Putting them together to make a product. Then sell that product at the right price, which enables you to pay for the components, the labour, yourself and generate a profit.

Looks easy ! One key word in the quote above is survival. Assuming people want your product, there are possibly three unknowns, which will contribute to your survival or failure ; customer experience, quality and fast passing trends.

There is no wizardry to trading. You buy at X price, sell at Y price and generate a profit Z. If you pay too high a price and charge too little, you make a loss. If you charge too high a price and no-one is interested, you have unwanted inventory and a loss. If you enter a market at the tail end of a passing fad or bubble, chances for survival are slim.

Let's assume you buy and sell at the right price. Next comes two of the unknowns, customer experience and quality. People will go elsewhere if their experience of being your customer is bad. Your loyal customers will desert you if quality drops. It can be tempting if the cost of your components have risen, to drop the quality a little to maintain your profit margin.

Again we come back to the word trading. To believe you can drop the quality of your product and people won't notice is dangerous. You have heard the old saying " you can't make a silk purse out of a sow's ear ". Yet people will try.

When you are successful at trading and are looking to expand or for capital investment, this is where financial science comes in.

Until then, Buy, Sell, Trade and Survive

Colin Myles Author

P.S.
By selling products that people want to buy, the butcher, the brewer and the baker hope to make money. If they are effective in meeting the needs of their customers, they will enjoy financial rewards.
Adam Smith " Wealth of Nations