Do you understand the direct connections between what you do each day as a professional in your field and how it impacts your company’s success? Can you give a company tour and explain the core role of each function or department? Do you know how your company makes money and delivers shareholder value? Can you read and understand your company’s financial statements?
These basic questions define your knowledge of general business. When you continually cultivate your knowledge and understanding of how businesses and organizations run at every level, you improve your ability to make good judgments and quick decisions each day as well as position yourself for career success.
What is Business Acumen?
Business acumen is the understanding of how a business operates, how a company makes money, and your role in that process. “Acumen” is the ability to make good judgments and quick decisions. It is an awareness of the drivers that move your company forward and what you can do to impact the bottom line. In order to advance in your career and climb the corporate ladder, you must be fully engaged and contribute to your company’s success; you must understand how cash is generated for your company, what makes your company profitable, what creates growth for your company, and why your customers buy from you instead of your competitors.
Why is strong business acumen critical for career success? As you think about advancing your career and growing to the next level, it is important that you understand the core business applications of sales and marketing principles, accounting practices, innovation, and operational functions within your respective companies. Every action you take and each decision you make impacts another area in some way. You must understand how. If you do not understand, you must ask questions and do additional research. Developing your business acumen will also give you the knowledge you need to be able to participate in discussions of a financial or business nature with your executive leadership and other team members.
Develop Business Acumen
Business acumen development demands your time and attention. However, this is a skill you can develop. The key is exposing yourself to a diverse and wide breadth of experiences, education, and resources to support your growth in this area.
5 Strategies for Developing Business Acumen
1. Read: This may be one of the toughest because who has time to read these days. The reality is the more you read company news, business publications, journals, and other publications, the better you will understand today’s business environment and stay current with the trends of your company’s future. With technology today, you can download many apps that offer free news feeds that give you the latest information within industries and business. It is important to follow industry trends, emerging markets, and new technologies that your company serves.
2. Get Involved: Joining industry associations is the best way to stay current of the latest industry or professional trends. Attending conferences and seminars keeps you connected to the pulse of what is going on in your profession and industry. Later, we will talk about the benefits of developing a strong network locally, regionally, and globally. Take getting involved to the next level and find out how you can volunteer on your association committees or board of directors. This is a great way to practice business acumen in a safe place as well as broaden your skills and competencies. Also, be sure to get involved in your association groups on social media sites like LinkedIn and Facebook.
3. Continue learning: Many companies offer tuition reimbursement for continuing your education. Whether you are thinking about getting an executive MBA or taking some business and finance classes at the local community college, developing your business and financial acumen happens one class at a time. Completing the career development program is also a great way to develop business acumen.
4. Ask to do more: Your career support team should be able to help you get involved in company projects, initiatives, or special assignments. This is a great way to gain a deeper understanding of how your company runs. Every company is looking for ways to be more efficient, reduce cost, improve quality, and improve net income. If you find that your company does not have initiatives you can participate in immediately, consider spending time with peers or colleagues outside of your functional area to learn more about a different function as well as gain a deeper level of knowledge.
5. Review company financial statements: Developing financial acumen starts with understanding the basic financial statements. The three most common financial reports you will have to review on a regular basis are a profit and loss statement, a cash flow statement, and a company balance sheet. The profit and loss statement is a summary report that covers a specific period of time, usually monthly or quarterly, and will show how money came into the company and where it went when it left. The cash flow statement is a more detailed version of the profit and loss statement that can show you exactly what areas of your business are generating profit and which ones are losing money. The balance sheet is an annual summary of all of the company's assets compared to liabilities.
Develop a Keen Understanding of Your Company
Developing business acumen does not happen overnight. One strategy for developing this skill is to learn something new about each of the categories below:
Your Company’s CEO
Your Company’s Competition
Your Company’s Clients
Your Company’s Top 20 Clients
One of the top leaders in your field or profession
Societal, cultural, or economic trends that may affect your company’s business
A sales topic – forecasting, sales cycle, overcoming objections, value proposition
A marketing topic – direct-response advertising, social media marketing, direct mail, Internet
A financial topic – financial modeling, budgets, revenue recognition, cash flow, aging reports
A topic in the current news of great interest or importance to your company’s clientele
A method – a means, process, technique of doing something useful for you, whether learning how to do a component of your job more efficiently or using a piece of software more effectively
Research your company and industry.
Find 3-5 stories that relate to your industry and determine how your company relates to the news story. Set alerts for 2-3 news publications with a daily email with latest stories. Check out stories on a daily basis to stay current with news and industry trends.
Seeing the Big Picture: Business Acumen to Build Your Credibility, Career, and Company, by Kevin Cope
Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean, by Karen Berman