F53-025: Numbers Every Business Owner Needs to Know to Be Successful

Show Summary: This is a general, straight-up talk for a business owner that runs his/her service or product-based business. You have to have a way to review your numbers. You must have somebody doing your bookkeeping and providing your financials. I've seen this so much and it's so disturbing that people don't even have the most basics figured out and they really manage business through their checking account and that is just so scary. Why is knowing your numbers critical? To fix issues To prevent issues before they become out of control To measure your success and to have goals Having your head in the sand is not an option. You need to be an expert in your business and in tune with what's going on in your business financially. Let's jump into some of them. Revenue Be aware of how much money is coming in your business, otherwise you will never be able to know how much money is going out and how much you really have to spend. Expenses Know all of your expenses (rent, labor, utilities, annual expenses). Know when your money needs to come out. Accuracy is super important. Cost of Goods Sold What's the cost to you to provide your service or build your product? Inventory Levels As an investor, every time you walk into a store room and there's inventory, it should be making you excited because it's turning over and making money or it should make you sick because it's money you spent but just sitting there. Make sure you manage your inventory levels so you remain profitable and be able to move your product. Profit Margin You don't know what your profit is if you don't know your expenses. Know how to reverse out your profit margin. Cash Flow You need to be acutely aware of how much cash is coming into your business and how much is going out that you've committed to. Many companies don't know this so they're giving cash squeezes because they're not able to manage the cash flow process or they don't have cash on hand. Cash is king. You have to plan for higher unforeseen expenses. Plan on a slow-pay or no-pay customer. You have to have cash on hand to account for that. Other numbers you need to know: Profit and loss statement Balance sheet From a business operation standpoint, here are some things you should consider: Cost of Acquisition How much does it cost you to acquire a new customer? How much advertising or money are you paying to acquire one new subscriber? Customer Retention If you're acquiring a customer, how long are they staying with you? If your retention is not able to outrun the cost of acquisition, then you're losing money by getting a new customer. This is a bad business model. Marketing and Sales Funnel Efficiency There are a number of spots in the sales funnel that affect your business. Raw leads (a reflection of your marketing and business development outreach) Qualifying a lead (a reflection on your marketing message and lead nurturing and business development prospecting) Prospecting Proposals Customers Here's a metric you can follow: If you know your leads are down 60%, there is a chance your sales is going to be down 60% soon if you don't do something to fix that. Breakpoints Know what your break point or capacity is (physical space, operating hours, number of staff, etc.). If your team is not set up properly or your processes are not in place, you lose quality. Hence, your capacity can dictate the quality of your service delivery for the rest of your products. Other KPI's: Renewed customers Total number of clients contacted Here are some metrics I monitor in my business: Webinar attendees Podcast downloads (Libsyn) Leads Subscribers to all social channels Email subscribers YouTube followers Website stats The financial side of a business can intimidate so many people but you have to understand what's going on in your business. If you're not aware of your numbers, it will come back to haunt you. Key Takeaways: Make sure to keep accurate books. Hire a bookkeeper. Get an accountant. Review your key numbers weekly, monthly, or yearly or whenever is necessary for that specific metric. If you need help, do whatever it is to get help. Books, People, & Resources: F53-010: Dominating The Market - Growing a Global Golf Company – GolfTEC - Joe Assell Download the 15 Most Popular Tools Business Owners Should Be Using