In order to be financially successful, it it critical you understand all your numbers.
Recently, I had one of my top clients come to me with a problem. He said, "Susie, I know I make a million in revenue, but sometimes I can not pay my rent. What is the problem?"
Unfortunately, this is a problem for many entrepreneurs. They fail to see the bottleneck in their company, and that is because they do not know the numbers.
Gathering up the data, in the beginning, will be challenging; however, once you're in reality with where you are - you can make the necessary decisions to scale.
Knowing my way around business accounts did not come naturally, but I understood its importance, and I was serious about growing my business. So I invested some of my time and effort to learn the basics of keeping accounts for my business. In the end, I never had to do all the accounting since the business outgrew my capacity to do so. However, due to the knowledge, I gained while tracking my business's numbers, I am still able to review my records and tell which direction my business is taking.
Here are six essential points that will help you keep track of the numbers in your business.
Get clear on where your bottleneck is
When I looked at my client's numbers to see what his cost per person was, I was able to quickly determine where the money was going and why he had cash flow issues.
Each person within the company was expected to sell $3,100 per week, but they were only selling about $2,500. That is a loss of $600 per person. He had 30 people, which comes out to $18,000 per week. If you multiply that out, it equates to $864,000 a year. That is a lot to lose. To think, it all started with that small leak of $600.
When was the last time you looked hard at your sales numbers? One way I tell my clients to manage sales by the numbers is to use a sales member analysis tool.
I have a particular worksheet for this that will appear in my upcoming book Bootstrap to Bigtime. This strategy tells you what each salesperson in your business needs to make for you to reach your numbers.
Know which numbers to track
To understand which numbers to track in your business, you need first to understand what numbers matter. All numbers matter, but there are those that top the priority list. These include cash flow, profit, business wealth and value. To keep track of these numbers, you need a couple of resources and some little skills you can learn in a day. You will need cash flow reports to know how much money is coming in and going out regularly, income statements to function as your establishment's financial scorecard, and balance sheets to let you know how much you own and owe, as well as your net worth.
You need to know what expenses you have each month and where your money is going too. Not only will this help you identify where you're spending where you shouldn't be, but it will also show you how much you need to generate each month to break even.
This knowledge should be basic, but to many people, it is not. Do you allocate money to invest in growth every month?
It is important to allocate targets for each member of your sales team. It is a great way to know who is producing how much, and what they need to reach their goals. This formula holds you accountable to a certain number. If your sales team is not meeting the threshold, then you share that with them to make things work for your business.
Get all the help you can
When I was starting my entrepreneurial journey, there was so much fire and determination in my heart that I almost thought I could do it all on my own. However, I had learned something about life, and I was going to use it to get where I wanted in the business. I had learned from all the successful people I knew that asking for help is not a show of weakness.
When you ask for professional help, even from your head of sales, you acknowledge that there is still room for additional value. There will come a time when your business will be so huge that you won't be able to keep track of the numbers on your own. That's why it is wise to invest in advisors, accountants, and/or auditors.
Professional financial consultants can help your business grow by giving you detailed information on all the financial pitfalls in your business and how to best deal with them.
Know your dates
If you are ever going to be successful in keeping track of the numbers in your business, you have to get it right with the dates as well. Proper planning always involves the setting and meeting of deadlines.
To scale my business, I have had to target and achieve my financial goals by setting and meeting timelines. I always know when to pay my dues. I also always keep a record of all past important dates in terms of my purchases and sales. The reason is not that I still want to remember when I made the most money or the least; it is just that it makes it easier for me to refer back. You will need these records when you hire a financial consultant.
Take pride in your numbers
Be proud of how much you are making in your business. Don't get comfortable, but appreciate where you have come from, where you are and where you are headed. It does not matter at what stage your business is on in the development process.
Most businesses that fail to keep track of their finances during the initial developmental phase are likely to have a problem tracking progress. At some point in my business, I was making just enough money to keep the company on its feet. A friend, who also doubled up as my adviser, always reminded me to keep records even if it didn't make sense. She assured me that I would thank her later for the advice. Honestly speaking, I did. Every time I went back to making entries on my records, I would study the patterns, consult with my advisor and use that knowledge to plan. I started seeing a gradual improvement in the way the finances in my business were being handled.
On another note, when you learn to appreciate the little things in your business, it gives you the motivation to go for more and prepares you to recognize and manage the big bucks in the future.
In closing, when you create these systems, please share them with your team. Make sure they're clear that if they're not meeting targets, you need to work on a plan that helps improve your sales process. You can manage results a lot easier than you can people's behavior.
So, pull your numbers, determine what each person should make and what the goal is so you can have profit within your business. After you do that, hold your salespeople accountable through a system that's replicable and solve bottlenecks in your business by analyzing the data.