Improving Financial Skills Through Literacy

Financial management has been defined as understanding the financial consequences of your actions and ensuring you only do those things that enhance profitability. However, I would add financial failure to that definition, as it’s an important part of the industry and my work as a merchant banker.

In short, you can’t expect all of your investment to result in significant returns. So you need to condition yourself to deal with the failures and continue your work with the same passion you had prior to the disappointing outcome. That’s what makes a successful merchant banker.

But let’s take a step back. It’s been said that 90% of business failures around the world are due to financial mismanagement. Not poor marketing, not labour problems but plain old bad management. So how do we resolve this problem? We need to focus on financial literacy, one of the world’s biggest challenges.

Although there are many worthwhile financial literacy initiatives happening today all over the world, too many of us don’t have a basic understanding of things like budgets, inflation and rates of return. Although it’s unrealistic to expect everyone to possess sophisticated financial knowledge, it is broadly agreed that some financial knowledge is necessary to make important life decisions related to money.

Building personal financial capabilities early in life can give people the foundation for financial well-being in the future. Schools are an important channel to provide the education that can improve financial literacy. Studies in the U.S. have shown that financial education, when done properly, leads to an improvement in financial behaviour.

But there’s a long way to go. According to a survey of 13 million U.S. high school students, only one in six received mandatory financial education. And only 17 states require personal financial content to be included in educational standards.

Of course, people want to make good financial decisions that set them up for success but most haven’t had the opportunity to learn. For instance, a significant number of American adults can’t pass a basic financial literacy test with three questions on stocks, interest rates and inflation. Here’s an example:

Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?

  • More than $102
  • Exactly $102
  • Less than $102

Although 43% earned scores of three, meaning they correctly answered all the questions and another 36% received scores of two, 21% got only one or zero questions right. Across all households, the average score was 2.2. Considering that the questions are relatively simple, those scores aren’t good enough and show why financial literacy needs to improve, and not only in the United States. The correct answer in the sample question, by the way, is more than $102.

Financial literacy can be a hard sell for educators, many of whom don’t see the importance of adding it to the curriculum. But it’s a skill all of us need to succeed in life. If you teach a child about financial literacy, odds are he won’t come back to live in your basement after college.

Passion – A Key Ingredient to Successful Entrepreneurship

When entrepreneurs come to me and ask, “What is more important – drive or passion?” I answer and explain that the latter is more important. After all, passion is in many ways what makes an entrepreneur tick. Successful start-ups are not “driven” by a desire to make money — they are driven by a need to change the world and that, in turn, is driven by passion.

The same can be said of venture capitalists, they support and fund the companies about which they are truly passionate. Building strong business relationships doesn’t happen overnight, but a shared desire to create something important will only work to intensify the entrepreneur’s and VC’s passion toward a common goal.

When it comes to my own decision-making process with respect to potential investment opportunities, there are a number of factors that go into the process, one of those being how much passion does the particular entrepreneur or company have. When introduced to a particular company for the first time, among the things I’m looking to see is a sense of excitement about the company and the team as well as what problem it is they are aiming to solve.

That first meeting with a potential investor isn’t about convincing us to invest, rather, it’s about getting the investor excited about what you are trying to achieve. It’s demonstrating exactly how you plan to fill a void in the market and how that idea could potentially become a game-changer.

If I’m passionate enough about your idea, it is more likely that I’ll be advocating an investment in your company. This is the reason why I consider myself extremely lucky to work in this industry — because it allows me to feed off the energy and drive of extremely motivated entrepreneurs.

The dictionary defines passion as “an intense, driving or overmastering feeling of conviction” or “a strong desire for or devotion to some activity or concept”. I couldn’t agree more. Passion is one of the must-haves for any startup or entrepreneur.

Traits You See In Every Successful Entrepreneur

Starting your own business is hard work filled with long hours, personal sacrifice and a daily array of new problems and challenges. Anyone who tells you otherwise has probably never started one themselves. If you don’t have the drive to navigate these things, your business could implode faster than it began.

Understand, entrepreneurship is not for everyone. To determine if you have what it takes to make it, you need to be able to possess a number of quality traits. Leadership is at the top of that ladder. If you can’t lead, chances are you won’t be able to guide your company and its employees through growth and on to success.

If you seek a challenge filled with risk but also with financial potential, then you may be on your way to becoming a successful entrepreneur. Here are the most important traits I believe every entrepreneur should possess.

Self-motivation
No one has ever gotten ahead by sitting back and waiting for opportunities to find them. Successful people go out and create success by working tirelessly to solve problems that get in their way.

Adapt to change
Entrepreneurs must be able to adapt to changing situations without unraveling. Also, they must be able to motivate their team by helping them reach new goals and opportunities. Often times, successful entrepreneurs are driven by a more complete vision than just the task at hand.

Ethics and integrity
It goes back to the old saying, “cheaters never win.” It’s important to maintain high standards of integrity because, if you don’t, nobody will want to do business with you, especially when you are working with clients or leading a team.

Be willing to fail, then move on
Starting a business is risky and doesn’t always work out. Successful entrepreneurs must be able to accept that things don’t always go according to plan. Do not be afraid to fail, put your idea out there and give it your best shot.

Serial innovators
The mind of an entrepreneur is always spinning with new ideas. There has to be a constant drive to develop new concepts and improve on existing ones. That’s where the term “serial entrepreneur” came from.

In almost every case, entrepreneurs never succeed on their own. You are only as good as the people who support you. Surround yourself with a network of knowledgeable people who are as passionate about your project as you are. It takes a network of contacts, partners and resources to thrive.

Advice to Young Startups Looking to Make an Impact

When you’re thinking about diving headfirst into the entrepreneurial trenches, any piece of advice you can get from those who came before you is invaluable.

To get you started on the right foot in your startup journey, I’d like to share some of the lessons I learned along the way during my tenure in the venture capital industry.

First, remember that starting a company requires both time (lots and lots of long hours) and personal sacrifice. That’s why it’s important to make sure your business idea is something you believe will transform the market or directly impact a major void in a market. . Make it meaningful and something that will create significant interest from consumers.

A second guidance point, and this is probably the most critical: surround yourself with individuals and team members who are smarter than you and passionate about being part of a start-up. You need to build a diverse team of people who have a variety of backgrounds and perspectives and who can give you helpful, educated input and won’t be afraid to provide their opinions on the direction of your company. This will lead to higher-quality decisions and create a dynamic organization.

Be flexible. When you’re building something from the ground up it’s inevitable that you’ll make mistakes in the process. Being able to adapt to the unexpected will help you stay focused on what matters and the broader, more long-term goals. Don’t allow yourself to derail over the small things, and be prepared to react quickly to bumps in the road

All entrepreneurs need to prepare for every aspect of running a business, and this includes developing an ability to manage the company’s finances. Whether you are going to ask a lender for a loan or seek an investment from a venture capitalist, make sure to go in with a solid, well-researched business plan that shows the market opportunity.. Remember, angel investors hear pitches all day long and are really looking for a business idea that will stand the test of time and produce the largest ROI.

WIth that said, find a way to grab the investor’s attention. Be upfront about your business’s journey and your plans for its success.

Never fear failure. Instead, recognize that failure can teach you valuable lessons about your business as well as your career path. What works for one person may not work for you – don’t get discouraged. Try again until you get it right.

And my last piece of advice – go for it. There’s no need to spend years working on a business model. Just go and start. Do it. Test it. Good luck!

3 Things Entrepreneurs Should Keep In Mind With Respect to Venture Capital Fundraising

For an entrepreneur, starting one’s own company is both exciting and of course challenging. Being one’s own boss? Making one’s own schedule? Check and check — all positives. With that said, you’ll also want to be aware of the challenges that lie ahead as you plan to get started.

First, when it comes to potential fundraising for your company, prepare well in advance to meet with investors. Any venture capital firm will want to see solid data showing that your overall and addressable market is substantial—and that you have a first-mover advantage. Show what is different about your product, process, price or niche.

Display that you have done extensive due diligence. It is critical to support your pitch with data-based, industry-relevant metrics, and be sure to include revenue potential. While this may seem incredibly obvious, you would be surprised at how often it is overlooked.

Not all venture capital firms are alike or have the same investment philosophy. Some specialize in one area of investment, like green technology. Others only want startups that sell into Fortune 500 companies. Study them through their websites and the business media to ensure there is a potential good match.

Second, be able to demonstrate that you are not a one-person show, that you are ready with a solid, credentialed management team whose skills complement yours. Team-building is hard work. It’s not just finding the right candidates for certain roles — it’s factoring their cost into the equation and determining how they fit with your culture and other members of your team.

You will need each person on your team to buy into the overall vision. Take every opportunity to bring it up in meetings, in conversation, and in the normal course of your business.

Last, keep your enthusiasm alive and your passion burning. Even after 15 years of advising businesses on what it takes to grow, my day job doesn’t feel like work. I’ve always had a passion for investment and a passion for developing businesses. I truly appreciate the startup culture and creative mindset of entrepreneurs.

Maintaining your enthusiasm may be one of the biggest challenges as you strive for a successful launch and navigate the capital-raising part of building your business. Dealing with the unknown can be daunting. Sales, profits, customers – it all can be volatile and that is one of the hardest parts of being an entrepreneur. Keep in mind your enthusiasm will go a long, long way when meeting with venture capitalists and other investors.