What is under the hood of your business?
Freedom is without argument the foundation for the American Dream. The easy access to capital has led many Americans to achieve their greatest dreams here in America.
Capital is the private financing of a business and, in essence, the whole reason that businesses exist. Without the lure of profit, there would be little reason to begin a business. Altruism can only carry a person so far because at some point a person’s efforts to improve the world must feed, clothe and shelter him or her or else that person will not make it very far with the business.
So, in step the capitalists with their bags of money. Okay, so if you started your own business without anyone else’s money, you may not have bags of money, but you have certainly invested your money and time into something you are hoping will turn a profit.
This investment, whether from you or from other individuals, is called your Capital or Equity. This Equity is the engine that runs your whole company.
So back to our car analogy, you hopefully have the shiny exterior, you may or may not have all the fancy innovations of a luxury car in the interior, but what is under your hood?
You want your engine to be the premier in getting people places. You want your car to be able to get you there safely, efficiently and in the quickest way possible.
The same can be said for your business. The phrase that it ‘takes money to make money’ is perhaps overused and is not necessarily true, but access to capital to invest in your business sure can help you reach your goals sooner.
So if you have the opportunity to expand the capital for your business, consider the consequences carefully and discuss them with your Accountant, Business Coach, Lawyer and Financial Advisor. But realize that capital used wisely will help you reach your goals sooner.
The second aspect to consider with your capital is your efficiency. A large engine is great, but is likely to use up more gas as well. You want to make sure your engine is as efficient as possible, so that you can get where you are going as quickly as possible, but also so it costs you as little as possible.
The profit of the business falls under the Equity category. Consequently, all expenses fall under this category also. Naturally, as you cut expenses, your profit increases and your business operates more efficiently.
The big engine is great and I recommend increasing your capital in most situations, just remember to operate efficiently also. Keep good records and, as always remember…
Without Foundation, your business fails!