If you want a thriving business then it’s essential you know your numbers.
If you’re serious about the success of your business then you have to keep up to date with the most important numbers, the numbers that REALLY matter so you understand exactly what’s going on in your business.
Most business owners don’t measure the right things.
From experience, most business owners don’t focus on the things that are really going to help them drive their business forward. They tend to just focus on numbers like sales and turnover. And often, to make matters worse, many rely on their accountant to produce these figures and they only get them once a year in their annual accounts, usually several months after their year-end by when it’s just too late to react.
It’s not that you don’t need to know any of those traditional measures, but on their own they aren’t the best numbers to help you grow or run a better business – you have to know what is driving them. You need to know the numbers that help you look ahead get you where you want to be. You need to know what is causing sales or profits to go up or down, which bits of your marketing are working and which aren’t, where you’re strong or weak.
You need to focus on the numbers that run your business. The most successful business owners know that the only way to understand what is happening in their business is to know these numbers inside out.
And because they understand their numbers, they’re always equipped to make the best decisions for their business.
But what are the numbers that matter?
The most important number to know is your CASHFLOW. Cashflow is what keeps your business afloat – it basically runs your business. As long as you have enough cash you will always be ok in business. Cash is actually much more important that profit!
The second number that you need to know is PROFIT but I don’t mean what last year’s accounts said. I mean how much money you made last month or, even better, last week. If you don’t know this then you really do not have a good grasp of the numbers in your business. If you cannot tell me how much you made last month then you are in a seriously dangerous position. Think about it.
The third number that you need to focus on is the RETURN ON INVESTMENT (ROI) on each particular piece of marketing that you do. I know exactly what return I get from my marketing spend but, from experience, this is not something that most business owners can say. You need to know this if you want to be successful.
The final number that you need to focus on is your OVERHEADS. These are your fixed costs, the costs that you incur whatever the level of business. Too many business owners focus on the sales and revenue generation and fail to take care of the costs. In many businesses there are serious savings to be made but they do not happen because, once again, the business owner does not know his or her numbers.
Until next time, remember …
You REALLY need to know your numbers – if you don’t then you should start number crunching straight away!