While our literacy rate is an impeccable 99% in America, our financial literacy is not nearly as impressive. When surveying the staff of a successful locally owned mid-size business on how much profit their business was earning, 45% employes estimated 11-25% profit while 10% of the staff pegged the profits at over 50%. Without the proper understanding of basic financial metrics and the factors influencing the business’s finances, the staff’s ability to have a direct impact in limited.
At CWC, when transitioning a single or partner held business to an employee-owned enterprises, we help each employee co-owner understand how their actions, decisions and creativity directly impact the bottom-line.
In many cases, when undergoing the financial literacy training, the new found understanding and knowledge is directly applicable to the employee’s personal finances.
The training begins with basic and practical concepts. How does cash flow work? What are the little things we do everyday help improve it? What does A/R really mean? What would happen if our clients paid us 10-15 days earlier. What are the implications of the amount of inventory we hold? Too many business owners control the reins on all the financial decisions and then complain that their employees are not sufficiently implicated in the business or ‘just don’t care.’
When employees understand the impact of their decisions (and often indecisions) and their personal success is tied to business success through their equity stake – small innovative breakthroughs somehow begin appearing on the surface where they were once nonexistent.
Here’s an article that discusses the basics of designing a business literacy program.
Business and financial literacy is a critical step in Core Work Capital’s process in helping business owners retire and successfully sell their firms to their employees and have it continue to grow and prosper post-sale.