You Must Know Your Business Numbers
Far too many business owners do not know their basic business numbers. Really! I ask every business owner I consult with what their annualized revenue is. Not a tough question, however, I must report many have no idea and can’t even guess. I then reduce the scope and ask what they make monthly, or weekly, and that doesn’t help at all. The answer is usually, “I need to ask my bookkeeper, I don’t know.” Or worse, “I’ll find out when I get my tax return back from my accountant.”
Are you kidding me? Is this possible? It amazes me. Of course they have not a clue as to their profit margins or if they made money or lost money. They just do not know. Numbers are not a part of the daily management style for many small business owners. How can one run a business without knowing the numbers? How can you tell if you are winning or losing? How can you improve if you have no idea where you are? Yet, it happens every day all over America. Small business owners are OK with not knowing their numbers. In fact, they usually add comments such as, “I am not good with numbers, I really do not understand them.” As if this makes it OK!
If you do not understand numbers, then stop being a business owner, as you cannot be successful without knowing, watching and managing, adjusting by what your numbers tell you. It just cannot be done. Still, so many do this, ignore their numbers and run their business by gut instinct. This is no different than driving a vehicle with blinders on. It cannot be done.
It is really not all that hard. Only a few numbers and a an occasional analysis are necessary. One must track revenue (daily, weekly, monthly, by product, etc.), figure profitability, understand your overhead and payroll, know your cash flow peaks and valleys, have a few budgets and key indicators and pay attention to them; they tell you how you are doing and what you must do to succeed. Until you are willing to get a grasp of your numbers you cannot run a successful business, ever. It really is not a foreign language. Your accountant can spend an hour and show you how and what to do. Ask for help. If you are running a small business it is your choice–drive it with blinders on, or with a road map and eyes on the road.
