Know Your Numbers

In my 20 year career as a professional accountant and now business coach, I have worked and talked with hundreds of entrepreneurs.  I’ve seen many grow their business exponentially, and I’ve seen some fail.  Many entrepreneurs have told me they’re struggling to make ends meet.  When I ask them if they know how much money they’ve made and spent in the last 6 months, or if they have a plan, almost all of them say no…they don’t track their numbers (many handing over all their receipts for the year to their accountant at tax time), or if they do have their bookkeeping done, they don’t look at the numbers.  Many tell me that they don’t look at their numbers because they don’t know anything about finance, dealing with finance/money stresses them out, and/or they don’t have time.  This certainly backs up the statistic that over 85% of business failures can be attributed to a lack of financial planning and organization.

If you want to have financial wellness and abundance, one of the essential keys is to know your numbers and what to do with them so you can take the appropriate action in line with your business (and life) objectives.

If you don’t track and review your numbers, how would you know how you’re doing?  How would you know if the products you’re trying to sell are making you money?  How would you know if your marketing and sales efforts are paying off in profitable returns?

What numbers could you be tracking?  Literally, hundreds.  But here are some key financial numbers that every business owner should know and understand:

  • Cash in, cash out, net cash flow – What do you bring in, spend, and how much is left each month?
  • Collection rates – How long does it take you to get paid? Do you have policies and processes in place to ensure you’re getting paid on time (or faster)?  Statistics show that any money owed to you that is more than 90 days old likely won’t be collected.
  • Cash burn rate – How fast do you burn through your cash on hand? Typically, you want this to be 3 to 6 months.  It’s a fast track to failure if you don’t have cash to meet your next payroll.
  • Revenues – Are your sales increasing? Decreasing? Are you hitting your targets?
  • Product and Client profitability – How much money is each of your products/services and clients making you…you want to focus on the profitable ones, and let go of the ones that don’t make you money.
  • Gross margin and profit margin – Compare your margins to plan and industry averages – how are you doing? Do you know how much sales you have to make for every dollar you spend in order to have the profits you’d like to have?
  • Capital spending and Return on Assets (ROA) – What are you investing in your business (and do you have a plan for this)? Are the assets you’re buying making you money?
  • Cost of client acquisition – What is it costing you to bring on a new client [=total marketing costs/# new clients]?
  • Return on investment (ROI) – Are your investments making you money, and how much? You can look at this not only from actual investments in stocks/funds/etc., but from every expense line and every effort you make. For example, you may want to know the ROI on your investment in your learning, investment in marketing and advertising efforts, or investment in people.

Whether your focus is on marketing, sales, productivity or profits, you need to track the appropriate numbers and review them on a regular basis to make sure you’re on track with your plans.  By looking at your numbers, and understanding their story, you can then identify the money/productivity leaks and opportunities on which you can take action to grow your business and your profits.

Every person has the opportunity to have financial wellness and abundance.  The difference between the 30% of the population who thrives financially, and the 30% of the population that struggles to survive, is that those who thrive have a plan, track and review their numbers, and take inspired action to grow their net worth.

Your numbers tell a story.  They tell you where you’re making money, where you’re losing money, and whether your efforts are paying off.  Do you know what story your numbers are telling you?

If you would like to empower your financial wellness and abundance, and get to know you numbers better, I can help.  Drop me a line and let’s talk.

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[author] [author_image timthumb=’on’][/author_image] [author_info]Linda Spencer, CPA, CA Certified Money, Marketing & Soul Coach [/author_info] [/author]

Gap Analysis – it’s a matter of perception

When you take the time to look at things from many angles you not only expand your awareness, you multiply your opportunities. r2g-p5-ai7-Dont-Wait-web

Think of your business as a road trip (and not the scenic kind – you’re on a mission!).  You identify where you want to go, where you are starting from, the fastest route, alternate routes, what you need for your trip, and start navigating your way to where you want to go, in the most efficient way possible.   In this series, I help you get clarity at the different steps of creating and navigating your road map to business success.  This is the third installment of this eight week series. 

In last week’s post, you determined where you are currently in your business.  This is your starting point, point A of your road map to success.  So now you know where you want to go (point B, determined in Step 1 – Start with the end in mind), and where you’re starting from (Point A, determined in Step 2 – Know where you are now), the next step is to figure out what you’re missing and need to put in place (Step 3 – Analyze the gaps between where you want to go and where you are now) in order to effectively build your action plan for how you will achieve the goals you set for your business in Step 1 of the 8 steps to create your road map to success.  (By the way, If you missed my 8 Steps to Building your Road Map to Success post, or the posts for Step 1 (Kick-start Your Year with Clarity and Focus) and Step 2 (Do You Know Where You Are?), you can get them HERE.)

So, what are you missing?  Where do you need to invest more time/effort/resources. What skills and training do you need to develop/upgrade?  Where do you need to shift your time and resources?  What money and success mindsets and habits do you need to adopt to help close those gaps?  What systems and automation do you need to help you run your business more efficiently?  What support do you need, from who?  Who do you need to add to your team?

This is an exercise in self-awareness and being truthful with yourself.  It’s not about figuring out how to do it all yourself, or how to get all your tools into your tool chest before embarking on the adventure or your business, but rather, it’s about identifying what you know to be missing to get you from point A to point B in your business.  Sometimes, the gap is filled by hiring someone (staff or outsource) to do certain tasks for you, allowing you to spend your time more efficiently on the tasks that you are a specialist in and that will generate revenues for you. Sometimes, the gap is filled with the tools that you will acquire along the way in your adventure.

When you take the time to look at things from many angles you not only expand your awareness, you multiply your opportunities.  When I took the time to look at what I was missing, and how I could fill those gaps (from many different angles, asking many questions to help me see the big picture, along with all the details), I realized that a really big skill that was missing for me was effective marketing using social media.  You see, I consider myself a great student.  I learn quickly and typically recall things quite easily.  However, when it comes to marketing with technology, I tend to flounder and have to work extra hard to understand how make it work.  I’m just not technologically savvy, no matter how much training I’ve had with it so far.  Taking a different view, and a shift in mindset from doing everything myself, instead of spending a lot of time and money to try to master this skill in marketing with technology, I will instead focus my time and energy on what I’m an expert at.  For 2016, this has led me to seek the counsel of a marketing specialist, to learn some key strategies and processes, and HIRE someone to execute the best strategy for me.  As a business advisor and coach, I’m continuously learning new skills and content to create value for my clients. My mastery is in creating and delivering great content to clients as it relates to money mastery in business. The marketing must be done, but it doesn’t all have to be done by me…and I get to multiply my opportunities to create 🙂

When you expand your awareness of the gaps in your business, you find more opportunities to close those gaps. So look at where you want to go with your business, and what’s missing from your tool chest to get there, ask key questions and focus on taking inspired action to close the gaps to realizing those business results that you want to achieve! 

If you would like assistance or clarity in building your business road map to success, contact me to set up your complimentary Business Clarity Breakthrough Session, or ask for my Business Management Assessment Questionnaire to help you identify the gaps in your business.

PS – Speaking of content and creating value, I’ve been working on a great new line up of workshops and programs for small business owners to help them master their business cash flows more effectively and efficiently.  Watch for our calendar of events and MARK YOUR CALENDAR – the next one is coming up on February 29th (registration opening soon)!   Get on the VIP Invitation List to receive added bonus offers that will not be offered to the general public (in fact, the only way to get these special offers is to be on the VIP Invitation List)VIP List