Financial literacy is a business skill

When I started my business, there was one thing about money I didn't understand: how closely personal finance and business finance are tied together. I treated them like two different subjects. They aren't.

If you own a business, your personal budget, your income, and your spending sit right next to the company's numbers. You have to understand both. You need to read a profit and loss statement, a cash flow statement, and a balance sheet. You need to know your whole budget, how to forecast, and what a measure like EBITDA is telling you. You need to see how your small business connects to the larger economy, watch the trends, and do the research. And you need to build in buffers from the very beginning, working out those numbers before you open the doors.

The blind spot that almost cost us

My partner and I opened Juice Kings during COVID. We had planned for a normal economy. We did not plan for a pandemic, and honestly, no one could have foreseen the ramifications of a nationwide economic shutdown. That blind spot nearly cost us.

The lesson is the ability to plan for contingencies. It often makes the difference between failure and success. Plan for the best, prepare for the worst. I live by the five P's: prior planning prevents poor performance.

What I took from it:

• Planning for a normal economy missed the contingency nobody saw coming.
• Foresight and contingency planning separate success from failure.
• Plan for the best, prepare for the worst.
• Prior planning prevents poor performance, always.

Cash is not profit

Every new owner should understand that cash and profit serve different purposes. Cash keeps the business running. It covers payroll, rent, inventory, and the unexpected. A cash buffer gives you room to handle an emergency without putting the whole business at risk.

Profit is what remains after you account for your expenses, but that doesn't mean the money is sitting in your bank account. You can show a profit while still waiting for customers to pay you, and meanwhile your own bills come due. That's why you have to watch both how much you earn and when the money actually moves in and out.

The reverse is also true. Cash in the bank doesn't mean you're profitable. Some of it may be a loan, or already spoken for by taxes, suppliers, and upcoming expenses. You can't treat every dollar in the account as money you can take home.

Profit makes the work worthwhile and gives you resources to grow. Protect your margins, keep your expenses disciplined, and build cash reserves alongside profitability. You need enough profit to make the business sustainable and enough cash to keep it moving.

Where Financially Lit starts

When I teach Financially Lit, we begin with the foundation. Session 1 covers what financial literacy is, why it matters, and its key components. Session 2 is about setting financial goals: short-term versus long-term, and how to set SMART goals for your money.