We always wonder as to what sets the great founders of Billion Dollar companies apart from the other normal people. What sets great executives & CEOs apart from other CEOs? Is it just their passion, focus and commitment? Many people will agree with this. Most of us will believe that the commitment of the senior management to exceptional customer service, product development and outstanding branding and marketing are good enough to make you stand apart from the competition. However, there is a lot more to this than just these. One important aspect that tends to be ignored and does not get the right amount of attention is the business acumen of that leader.
Business acumen comprises of a lot of things. It is used loosely by many writers and journalists as the ability to understand the pulse of the market. That ability is actually a very small part of the overall business acumen needed to run and grow an organization.
1. Understanding of Organization For Your Business-
It starts with understanding the kind of organization that is suitable for your business. It can be a sole proprietorship, partnership, private limited or a public limited company. Each type of company has its own advantages and disadvantages. The advantages can be in the form of Government support like subsidies or benefits which will make it easier for anyone to operate their business.
2. Recruitment for Business-
Recruitment is easier in a Public Limited or a Private Limited company as the Government asks for a lot of details from the promoters and hence is comparatively easier. Many times, some companies insist on their vendors/ suppliers being registered Public/ Private companies, without which they may not do business with them. This is true specifically for Government tenders. This makes it very very important to know the right kind of company structure that is needed for your business.
3. Promoters for Business-
Another important aspect to note is the liability of the founders/ promoters. In a partnership/ proprietorship, the founders are personally responsible, .i.e. the banks, vendors and employees can legally get the personal assets of the founders in order to claim all their dues as settled. However, the promoters personal assets cannot be touched as the law does not allow it. These are some protections that every promoter and founder should be aware of.
4. Funding and Financing for Business-
Understanding the various forms of funding and financing for companies is one of the most important points. Most businesses in their infancy need a lot of capital. This is true also for established businesses which have been operational for a few years.
Knowing the best options for raising funds at the lowest cost, .i.e. the lowest rate of interest on your loans is the most important task for your business. Getting cheap capital in order to grow your business is a major reason for the reason for people from finance getting senior positions in the company.
Raising funds from the market may be in the form of loans, debentures, stake/ share sales, etc. and choosing the option that is the most beneficial one for your company is the decision that sets you apart. Sometimes a wrong decision can result in your business being unable to keep up with the finance payments and could result in the banks taking over your business or replacing you with their CEO.
5. Networks for Fund Raising-
Raising capital is difficult business. Raising cheap capital is even more difficult. It is extremely important to be well networked in order to raise capital at a favorable rate of interest or in a way that doesn’t cost you too much. The best way to build these contacts is through your personal networks, through professional networks and you can start very early too. It is possible to collect such contacts while you are still in college.
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6. Managing Working Capital-
Managing working capital in the best possible way is another important skill that is a part of having business acumen. Most of the times, cash will always be short in supply and it is your decision to allocate it smartly in order to avoid borrowing any of the cash. 90% of the times, it is your clients which do not pay on time and this results in a cash shortage that impacts your day to day operations. If one is able to collect the out-standings on time and avoid any such situation, you are able to avoid the additional cost of loan financing that you may need.
7. Understanding Of Financial Ratios-
Understanding the various financial ratios is important as that is the language in which most bankers and investors talk. Knowing and talking about financial ratios is very very important as the better your firm looks on a balance sheet or any other financial statement, the better chances of you raising more capital.
Leading your company through the industry and keeping up with its demand for capital and other requirements can be a demanding task. You may face disappointments, despite managing all stakeholders well. However, there is a solution to all this and as always its to NEVER EVER QUIT.
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