Knowing Your Business Numbers
Updated: May 30, 2018
I have said it before, and Lewis Carroll said it before me . . .
“Would you tell me, please, which way I ought to go from here?" "That depends a good deal on where you want to get to." "I don't much care where –" "Then it doesn't matter which way you go.”
You must know the numbers that drive your business. What are those numbers?
a. How much money you have made this year?
b. How much money you needed to make?
c. Which products or services quickly and easily increase your income?
d. How much more of the products or services from "c" do you need to sell so you can hit the number from "b?"
Did you get all that?
So, if you are a business to consumer service provider, it might look like this:
Sal's Custom Kitchens design custom kitchens (shock). Sal must sell at least $20k in new design projects monthly. This is key for cash flow purposes (if you don't know what cash flow is, email me). However, we are in November. Sal needs to think about ending the year strong so he can start the new year strong. Sal made $180k so far this year, leaving him with a $60,000 gap to make up in the next 40 days. Sal's easiest and most profitable service to sell is kitchen remodels, for $5k to $20k depending on kitchen size and finishes. If Sal has an end of the year special on deluxe remodels (approx. $12k), limits discounts to a max of 20%, he can still make a tidy profit off the reduced margin.
Sal needs to sell approximately 6 deluxe remodels before year end to finish the year strong and start 2014 healthy. That is his focus for the next 40 days.
Know where you are on your business "map," know where you want to go, and then figure out the shortest and least painful way between where you are and where you want to be.