- March 15, 2018
- Posted by: Darryn Le Grange
- Category: General
Like it or not, the numbers in a business are critically important! You need to know and understand your numbers if you are to run and build a successful business. In our coaching practice, we deal with 2 types of entrepreneurs – those who know the numbers and those who don’t – the number savvy ones generally perform a lot better. WHY?
The key principle of business is that a business MUST make a profit. This is over and above the owner’s salary. Business owners often live out of the till and take cash when its available, then put it back when the business is under cash flow pressure. This is not the way to do it. Business owners must pay themselves a market related salary for the work they do, this is the same salary they would earn if they went and got a job working for another company. In addition to this, the business must make a profit. This profit is in exchange for the blood, sweat, tears, early mornings and late nights.
If you are not making a profit, then why are you in business? Rather go and get a job working for somebody else where you don’t have the risk and stress that comes with owning a business. Harsh reality – Yes, but it is the truth….
So, what are the key numbers to know?
- Turnover and profits and their respective targets;
- Break-even ie: what do you need to sell on a monthly, weekly and daily basis in order to a) keep your doors open and b) achieve your desired targets;
- You need to know your gross margin and which products or services have the highest margins so you can focus your marketing efforts on these;
- You need to know your cash gap and have a good feel for your cash flow cycle;
- You need to keep a close eye on your debtors and stock levels as these can have a huge impact on cash flow;
Although not financial numbers per se, you also need to keep track of your number of incoming leads and your sales conversion rate as these impact directly on your revenue figure. There are a host of other numbers and industry related stats that will need to be monitored too – so do yourself (and your business) a favour and ensure you ‘know your numbers’.
Our offer to you is a COMPLIMENTARY coaching session available to qualifying business owners where we will conduct an assessment of your business and discuss some strategies to improve the areas you are not currently happy with.
Click here to request your session and we will revert to you.
The ActionCOACH Ignite Team
(Offices in Kloof & Durban North)