The importance of knowing your numbers in business
The reason that many business owners start their own business is for more flexibility and ultimately, to make a profit. But how do you get there if you don’t really know what the numbers in your business mean? Let’s take a look at why knowing your numbers is key to running a successful business.
Why are numbers key to running a successful business?
Have you ever had your business coach or someone else ask you ‘What’s your current turnover and profit?’ and sat there thinking, but actually had no idea what the answer was?
While this isn’t ideal, it is important to know the answer. Or a pretty close estimate.
Knowing the numbers behind your business is essential because it can help you make informed decisions that have the potential to make a big impact on your business, your growth, and your bottom line.
What numbers should I measure?
There aren’t a set of hard and fast rules that apply to all businesses. Knowing the best numbers to measure for your business will be impacted by a few key areas: what industry you are in, how long your business has been operating, and what your growth aspirations are.Related Content: What Numbers Should I Measure In My Business?
There may be a set of numbers that your business coach, accountant, or bank manager recommends that you measure. So we recommend discussing the best numbers to measure for your business, with your own trusted advisors.
“You can’t manage what you don’t measure”.
However, it is important to keep a check on your revenue or turnover throughout the year, as well as your expenses.
How Do I Adapt If My Revenue Or Profit Isn’t Where I Want It To Be?
If your numbers aren’t where you want or need them to be, there are a number of areas to consider.
Have you created a budget for your business to help you keep track each month? Keeping yourself accountable by measuring your actual results each month against your budgeted figures can have a big impact on reaching your yearly goal.
Some other areas to consider if your numbers aren’t where you want them to be, include:
- Can you empower your staff?
- Have you created a rhythm of accountability in your business?
- Do you set KPIs for each staff member that is part of their annual performance review?
- Do you review key expense items regularly to ensure that you are operating effectively, and removing unnecessary costs?
- What are your current profit margins on products/services that you sell?
- Could you consider a price increase without it having a big impact on your customers?
If you were able to increase your monthly revenue or reduce your monthly expenses by only 2% - what would the overall impact on your net profit be?
How Can I Grow My business?
You might have looked into your numbers and everything is on target but you want to stretch your capability even further.
If you are looking to increase your revenue and grow your business, increasing what you spend on marketing for your business, can have a big impact. You may consider implementing a strategic marketing plan, an advertising campaign, and moving into a more digital marketing focus - the list is almost endless.
Some other options you could consider to help your business grow include:
- Expanding your existing services/products
- Offers to current clients to increase their average spend
- Entering new markets that you had previously not considered
- Reviewing your current margins and increasing these by a nominal amount
- Streamlining the delivery of your services or products
Taking the time to review the numbers in your business can help you to run a successful business. Understanding what the numbers mean and the impact that they can have on your overall profit will allow you to make more informed decisions for your business.
If you don’t know how to unpack the numbers in your business or feel like having the support and guidance of a business coach is what you really need, then it’s time to put yourself first, and contact our business coaches today. We’ve got the knowledge and experience to help you unpack the numbers in your business and use them to continue driving your business forward.
Get in touch with a business coach who can help you understand the numbers in your business.