By Contributing Writer- The Black Math Academy
Why is math important to business?
Mathematics is concrete, practical, and necessary. Tangible data is always important when it comes to decision making. Without it, it’s just conjecture without data. Since when has guessing been a better option than evidence? Mathematics is also a universal language. It’s rules, properties, theories, and conclusions are the same no matter where you travel on the planet. It allows us to understand and connect with the world around us so that we can not just survive, but thrive. Here are 4 aspects where math is sacrosanct to the performance of your business.
1) Accounting PNL reports, profit statements, and spreadsheets are all measurements of how the business is working. It’s a tally of what’s coming in and what’s going out. The data gathered from this can then be compared to last year’s performance or even a competing company. Your CPA or banker doesn’t want to hear your opinion on the numbers. They want the books so they can see the numbers so they can accurately assess what’s really going on.
2) Data CollectionThe basic formula for profit is P=R-E (profit equals revenue minus expenses). If ‘R’ and ‘E’ are the same, you’re at equilibrium. In other words, you broke even. You want your revenue (‘R’) to be greater than your expenses (‘E’). In your algebra class, you were taught a concept called systems of equations. This subject utilizes revenue and expense formulas for the purposes of understanding multiple aspects of your business and it’s the impact on your bottom line as well as competitors. When graphed, you get two lines with different slopes that intersect. The intersection point is the ‘break-even’ point. Anything made or sold before that point means debt and anything made or sold after that point is profit.
3) Financial Literacy vs. Entrepreneurship both of these ideas are axiomatic when it comes to not only individual success, but that of your business as well. Financial literacy is the knowledge, wisdom, and understanding of finance, economics, and commerce. Entrepreneurship is taking financial literacy into action. So here are the combinations and how they impact you and your businesses’ existence. If you are not financially literate NOR are you an entrepreneur, it’s likely that you’re broke. You don’t have the wherewithal to get money or use it in your favor. Not being financially literate but having an entrepreneurial mindset means that money comes in but it also goes out. Being an entrepreneur brings in the money, but financial literacy allows you to keep it. Being financially literate but not having the entrepreneurial spirit leans towards you being financially secure. You make money, however, you’re not in control of it. Your wages are subject to outside circumstances. Being both financially literate and an entrepreneur means that you have financial freedom. The money you generate is owned, controlled, and can be passed down by you.
4) Business Lessons and Critical Thinking Business is where all capital comes from. It’s no wonder why governments treat them more favorably than employees. As such you should be the captain of your economic ship. Otherwise don’t expect others to spend money on you or stick with you. Your ability to turn $5 into $10 demonstrates you know what you’re doing. Business ownership REQUIRES time learning BEFORE investing knowledge and money. Master the subject so people will pay you above average for what they don’t know or can’t do. Especially if it’s difficult. You can then leave the realm of wages and into the realm of business.
Credit is using other people’s money to get what you want. Most of us don’t have hundreds of thousands of dollars lying around so borrowing is next best bet (or group economics). You can’t do that if your score is lower than your shoe size. I recommend 650+. Start with a secured credit card, a low limit, use it, and pay off the balance in a 30 day period. 2/3 of your credit report is your debt and how well you pay it off. Understand the difference between good debt and bad debt. Good debt is debt from investments. Bad debt is debt from purchasing consumer goods. Even though you owe the lender or creditor, your savings will still be intact. You’ll avoid being cash poor and can then start to invest. This also avoids spending your life savings on a failed business attempt. Be sure to have enough to start AND continue.
Hangout with people who are smarter than you. Those who have the knowledge AND have something to show for it. In this case your CPA, tax attorney, banker, loan officer, etc. These people deal with large sums of money on a regular basis so they’re likely to know what they’re doing than some fella on the internet kvetching. Sit down and LISTEN to the game being laid out. Lastly, you must reinvest. Get new tables, chairs, amenities, flooring, decor, equipment, etc, and whatever else you need to revamp your business. Demonstrate improvement, display progress, and desire to innovate. Like Denzel Washington’s character, Robert McCall said in the movie “The Equalizer”, “progress, not perfection.”
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The Black Math Academy