How to Develop Good Business Sense
The phrase “business sense” is often used to mean the ability to make smart financial decisions as an entrepreneur or manager. It makes good business sense to choose activities that result in your company making enough money to sustain itself in bad economic times and increase profits in good economic times. Developing business acumen skills is a matter of understanding what makes companies succeed and fail over the long term.
Learn about finance. Because the point of business is to make money, even if it’s for a charitable purpose, all business decisions are essentially financial in nature. You’ll need to be able to determine whether spending money on marketing will produce more profit than spending money on engineering to make your product better, or whether your company will be financially better off buying another company, growing your own internal expertise, or increasing the production of your current products.
The better you understand finance, accounting and economics, the more sophisticated your business sense will be.
Talk to serial entrepreneurs. People who have both succeeded and failed at business have gained business acumen and are prime candidates to enlighten you on practices that actually work or don’t work in the real world. Listen to their stories and advice, then apply it to your own situation and ask for their feedback on your comprehension.
Take business classes or pursue a business degree. Some aspects of business wisdom have already been discovered by entrepreneurial pioneers and have been agreed upon as being useful and successful. Good business sense includes understanding those principles well enough to apply them to new situations.
Read the business section of your daily newspaper, case studies and books that profile companies, both their successes and their failures. In particular, look at the true market-changing innovators such as Starbucks, Aravind Eye Clinics and One Laptop Per Child. Ask yourself what those innovators saw that the rest of the world didn’t.
Study risk management. This field has developed specific tools that help you understand what the risks of any activity will be before you engage in it. Going through those exercises will help you determine the difference between worthwhile risks and foolish risks.
Become an entrepreneur. There’s no business acumen teacher like experience, and the earlier you start making mistakes and learning from them, the less expensive that experience will be. And if it’s your own money and company on the line, you’ll experience an entirely different perspective on how to prioritize spending or take appropriate risks.