The StitchCrew Guide to Finances: Understanding the Basics

Finances can feel really intimidating when you’re already wearing a hundred other hats in your business. Most founders didn’t start their company because they were excited about spreadsheets, reports, or financial terms. But at some point, you do need to understand what the numbers are telling you, because they shape everything from pricing and hiring to how much room you actually have to grow.

When you know what money is coming in, what’s going out, and where things feel tight, it gets easier to make decisions with more confidence and less guesswork.

Start With What You Need to Know Right Now

The first year of finances in a business is very different from any other year. In an established business, there’s usually a baseline to work from. You know what customers tend to spend, what it costs to run the business, what your margins look like, and what to compare it to. But when you’re growing a new business, or trying to level up an existing one, there’s often a lot you’re still figuring out.

In Year 1 of business we don’t know shit.

That's why we need a model that is less about "tracking our financial transactions” and more about “how to make some wild-ass guesses about how things might go and then quickly changing everything when we find out how wrong we were.”

That’s true whether you’re building a startup, running a service business, or growing a lifestyle company. The numbers help you make sense of what’s actually happening, not just what you hope will happen. They help you plan ahead, spot problems earlier, and make stronger decisions about pricing, hiring, marketing, or expansion. That’s why knowing your numbers matters. They help you understand what’s actually happening in the business so you can make smarter calls as you go.

The Numbers That Matter the Most

Some numbers matter more than others when you’re trying to understand how your business is doing at this stage. You don't need to track everything but it's important to know a few numbers that tell you whether the business is healthy and where the pressure points are.

Start with the basics:

• Revenue is the money coming into the business. It tells you whether people are buying and how much demand there is for what you offer.

  
  

• Expenses are the costs it takes to run the business. This includes things like supplies, software, contractors, rent, payroll, shipping, or marketing.

  
  

• Profit is what’s left after those expenses are covered. This is the number that helps you understand whether the business is actually making money, not just generating activity.

A lot of founders only pay attention to their revenue because it’s the easiest number to celebrate. But revenue alone doesn’t tell you how the business is really doing. You can have a strong sales month and still feel stressed if your expenses are too high or your margins are too tight. That’s why it’s important to understand how these numbers work together.

The Basics of Startup Accounting

While you may not know all there is to know about your business yet, there’s still going to be some good old-fashioned accounting to do. So let’s break out the calculator.

At its core, in order to be an accountant, you need to be able to collect all the sources of income and expenses and translate those into a spreadsheet. When the numbers are small, this is so easy to do you'll wonder why people get paid to do it. When they get large, you'll wonder why anyone is willing to do this for any amount of money.

The process is pretty simple.

• First, add up all the money you earned. That means looking at your payment processor, your bank account, checks, cash, invoices paid, or any other source of income that came into the business.

  
  

• Then add up all the expenses you incurred. Look at your bank statement, credit cards, payroll records, software subscriptions, rent, supplies, marketing costs, and yes, even the random coffee shop purchase that somehow made its way into a business meeting.

• Last, you find out if you made any money. Once all of your income and expenses are loaded into your spreadsheet, through the wonders of code and math, you find out whether you made money and turned a profit, or lost money and took a loss. Typically you find out you lost money, you cry, and you go back to work. That’s how businesses work. Don’t blame the spreadsheet.

The goal here is to get a clear view of what your numbers are telling you. And this is where consistency matters. A simple spreadsheet you keep up with regularly will do more for you than a complicated system you never touch. The more often you track what’s coming in and going out, the easier it gets to spot patterns, catch issues early, and make decisions with less panic.

Yes, this gets more complicated later. As the business grows, you may start dealing with things like payroll taxes, health insurance, receivables, more detailed reporting, and more advanced cash flow planning. Those things matter. But they don’t all matter today. Once the business gets more complex, your systems can grow with it.

Why Cash Flow Matters More Than You Think

A lot of founders assume that if sales are coming in, things must be fine. But cash flow is where many businesses start to feel pressure, even when revenue looks strong on paper. That’s because revenue and cash are not always moving at the same speed. You may have invoices out that haven’t been paid yet, large bills due before your next sales cycle, or a seasonal gap that puts pressure on the business even when things look fine on paper.

Cash flow is really about timing.When is money coming in? When is money going out? And can your business handle the gap between the two?

That gap is what creates stress for a lot of business owners. Maybe your biggest expenses always hit before your biggest sales month. Maybe a late-paying client is creating more stress than you realized. Maybe growth is putting pressure on the business because you have to spend money upfront before you make it back. Knowing your overall cash flow helps you see those patterns before they become bigger problems.

Use Your Numbers to Make Decisions

Your numbers are not just there to tell you what already happened. They’re there to help you make decisions. They can tell you when it’s time to slow down, when there’s room to invest, and when something that looks fine on the surface needs a closer look. But looking backward is only part of the job. Every decision you make next is based on some kind of assumption. The more honest you are about those expectations, the easier it becomes to test them before betting too much on them.