I recently read an interesting article about how much a business owner should tell their spouse about their company finances. Two different opinions were shared and explored. I'm on the side of sharing the info myself, but certainly not everything in detail.
That article got me to thinking about why so few construction and remodeling business owners share financial information with their employees. First, I'll offer a few great reasons to do it. I hope the benefits will motivate more business owners to do so. Then, I'll offer my thoughts on why business owners avoid doing so.
3 reasons to share your business financial information with employees:
Construction business owners who keep all the financial information about their businesses to themselves are definitively missing out on several potential benefits. Simply put, by sharing financial information you can accomplish at least three things that will help lower your financial anxiety and help you make and or keep more money:
- You can get the opinions and advice of others so you can be more confident in your numbers and using them to make sound business decisions. Getting insight from others can also help you avoid costly mistakes.
- By involving the right employees with the creation and interpretation of business financials you can share the workload required to create them. This can make getting your financial reports much more timely and therefore improve their accuracy.
- By mentoring employees on how to use financial reports you can help them learn to think like a business owner so they too can make sound business decisions. This is an important and required step if you ever want to remove yourself from the day to day management of your business and or offer a profit sharing plan to employees.
So then why do so few owners share their financial information?
Let me also offer three common reasons why many construction business owners can't or won't share business related financial information with their employees:
- The most common reason is because the business doesn't have a real financial system that properly separates and tracks costs and expenses. For these business owners their financial system is really no more than a checkbook showing money coming in and going out. Without the ability to identify and separate your actual job costs from overhead expenses there is no way your business can get a meaningful profit and loss report. These business owners don't share the information because there really is nothing of value worth sharing. Eventually, once a year for most of these business owners, their accountant gives them the good or bad news when their tax returns are ready to be filed.
- Often financial information is held back because the business owner is embarrassed that he or she doesn't understand the business finances well enough to explain them or answer questions about them. This is not good. Imagine what a great employee will think about his boss and or the business if he discovers the owner is guessing at the financial health and well being of the company. Think about it. If you were an inspired and career motivated employee would you want to invest in your career at a business that is in the dark about predicting and measuring profits?
- During my years of experience providing financial consulting for construction business owners I have had many owners share with me their concern that if they educate employees about and share company financial information with them it will only serve to help them get ready to leave and start their own businesses. This could be true. On the other hand I found by educating my employees most of them figured out they didn't want all the stress and financial responsibilities that came with being a business owner. However, those who did leave and started their own businesses where in a much better position to be financially successful. As a business owner I found personal satisfaction in helping make that possible.
Some words of advice
If this articles speaks to what is happening at your business it's up to you to do something about it. I definitely recommend you do not consider growing your business in any way, or sharing the information with employees, until you and your business can produce and interpret accurate business financial reports. To help you see if doing so might be worth it try this self quiz to see if a properly setup financial system can help you and your employees improve business profits and reduce financial anxiety. Let me know if you want my help.
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Shawn McCadden founded, operated, and sold a successful design/build company. A co-founder of the Residential Design/Build Institute, he speaks at industry events and consults with remodelers about owner issues, management, lead paint regulations and other industry issues. ShawnMcCadden.com email@example.com