On the surface, wild and outspoken ex-Microsoft CEO and current Los Angeles Clippers owner Steve Ballmer seems like the furthest thing from an accountant. He yells, has more energy than a professional basketball player, and gives off the perception that he’s anything but rational.
But when it comes to the advice he gives to entrepreneurs, Ballmer stresses the importance of accounting and having a strong pricing and business model.
“Pay attention to accounting. Pay attention to accounting. Pay attention to accounting,” said Ballmer during a fireside chat at Oxford University to students and young entrepreneurs. It couldn’t have been a simpler message, or a more important one for entrepreneurs. The startup world is fascinated with rounds of funding, product development, and developing a community around an app, product, or service, but what about accounting? After all, accounting is the language of business, and without knowing it and properly preparing a business financially, it doesn’t matter how good your product or service is or how many people think it’s a great idea.
Ballmer also sees this obsession among entrepreneurs within other aspects of business. “People will want to teach you about marketing, and they’ll want to teach you about finance, and now there’s a whole craze about product development and SCRUM and rapid innovation, but this thing called price/business model is really, really important.”
Why is it so important?
Let’s take Ballmer’s Los Angeles Clippers basketball team. Professional sports franchises have complicated business models that include merchandising, television contracts, ticket prices, thousands of employees, and a select few employees that make tens of millions of dollars. If every aspect of the business isn’t carefully managed and planned for within the accounting structure and business model of the business, they could easily find themselves in a large hole.
For example, if the average ticket costs the team $55 but is sold for $50, it doesn’t matter how many tickets they sell – they will lose money on this aspect of their business. If they only focused on sales and not how to cut expenses and get a better handle the business, they would go out of business. “Understand price. Think about price. Don’t ignore price,” Ballmer says in response to what he wishes he would’ve understood at an early age.
It all comes down to how you view and handle your business. Are you taking a full view of all aspects of your business, or just looking at sales or product development? “..really thinking about what you’re measuring, how you account for revenue, how you think about costs. It’s fundamental,” says Ballmer.
Getting a full view of your business is as simple as putting your accounting and bookkeeping to work for your business. Are you getting the most out of your numbers?
Take a step back to see what your numbers say and how your business model will impact the future of your business. If you need help, Kahuna Accounting would love to talk to you about how virtual accounting can save your business money and provide a full picture of how to grow your business to new heights.