All finance is finance

A colleague recently asked us about finance and money tips for small businesses. Since we spend a huge amount of time analyzing very large companies from the perspective of the equity markets, it might seem that the lessons we teach those companies would not translate well.

The truth is the complete opposite. From a traditional corporate finance perspective looking down to small businesses, the questions are exactly the same: you need to focus on (and ONLY on – we can’t say it enough times) free cash flow. Cash flow for small businesses is easier for many business owners to understand if we talk about it in terms of actual cash, like money in the register, and start describing the business on that basis. Then we add in layers of detail (paying over time, getting paid over time, buying assets such as inventory with cash, or buying capital assets with cash) to help bring the owners along to what we see all the time. Those concepts aren’t inherently difficult, IF they are built up one by one and not wrapped in consultant jargon such as “driving revenue” or “high performance.”

We also, of course, advise and analyze small businesses. The message that we aim at clients who have understandable deficits in knowledge and experience with Fortune-500 corporate finance is that the rules, the equations, for money and finance in a big company are exactly the same as they are for a small business and are exactly the same as they are for people. Many of these business owners are successful because they have a good handle on their own money.

Harris Interactive made a big deal some years ago with their “myCFO” website or “solution” or “offering.” They tried to latch on to the same idea, but my recollection is that they didn’t actually provide anything remotely like an actual CFO service or advice for clients in the comprehensive way that we’ve done for ultra-high-net-worth clients. Instead, they provided the unremarkable service of selling investments. The original plan may have been different, but they ended up someplace else.

What’s the core lesson? It’s all finance; there’s only one finance; finance applies to you, to your family office, to your small business, to your company. The equations are the same even if many things are simpler in a small business; the equations are the same even if you are an UHNW family and your holdings seem irretrievably complicated. ThoughtStorm has applied our cutting-edge financial analysis and management tools to the needs of each of these clients. Contact us to learn how you can put real finance to work for you.

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