5 finance tips from some of history's greatest thinkers
Sometimes a pithy quote or insight can help bring everything into focus, especially with a topic as broad and complex as your business' finance. That's why we post these blogs every week, to help bring you clarity on the importance of understanding the most common financial issues. However, we thought we'd break things up a bit this week, by highlighting some of the intelligent things other people have said about finance, and how it relates to your business.
So, here are 5 brilliant quotes about finance from some the greatest minds the world has ever seen:
The importance of analyzing expenses, big or small
"Beware of little expenses. Even a small leak will sink a great ship."
Businesses thrive and survive with the right balance of investment, profit, and expenditures. More often than not, we think that only large expenditures can throw the balance off, but even little expenses are worth keeping an eye on. If you aim to sail a big ship and take your business to as far as it can go, you’ve got to make sure that you don’t have “small leaks.”
The true value of revenue
"Our incomes are like our shoes; if too small they gall and pinch us; but if too large, they cause us to stumble and to trip."
It is a fallacy that tons of revenue guarantees survival over the years and decades to come. You’ve definitely heard about huge companies going bankrupt and household brand names disappearing into oblivion. The reason? Without proper financial planning and management, increased revenue just exaggerates the problem, causing them to stumble and to trip.
Borrowing and lending literacy
"Any informed borrower is simply less vulnerable to fraud and abuse."
Borrowing with the right information can make the difference between boosting your company’s growth exponentially, or carrying a painful burden for the next several years.
Understanding financial cycles for better planning
"As sure as the spring will follow the winter, prosperity and economic growth will follow recession."
You know what it feels like to deal with uncertainty on a daily basis. But it doesn’t really have to be like that—if you understand the rhythm and flow of your finances. Be observant, work with financial advisers that are trust-worthy and knowledgeable, and save for a rainy day so you have the financial tools and wherewithal to survive downturns and rise higher during financial booms.
Realizing the relationship between profitability and debt
"The very nature of finance is that it cannot be profitable unless it is significantly leveraged...and as long as there is debt, there can be failure and contagion."
There is a nuanced argument being made in this quote about the way money is used to make more money. Essentially, the only way you can turn money into more money is by leveraging it. But as soon as you leverage, there is an inherent risk of failure. While Greenspan is talking specifically about financial products, there is a lesson here for small business owners. It takes money to make money is an old adage that is no less true for its age. Owning and growing a business is a necessarily risky venture that always carries with it the risk of "leaning out ahead of your skis," which is why good advice and guidance can be such a valuable resource as you grow your business.
If you'd like to learn more about business finance, and how to read financial statements and gain key insights from them, download our free eBook "Business Finance is Hard...but it doesn't have to be."