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In Business: Know Your Numbers

Almost everything in the world can be broken down into a mathematical equation.   Dance steps can be broken down into a mathematical equation.  You can’t send a satellite to Mars without a mathematical equation.  If you want to purchase carpet or wood for your floors or paint or wallpaper for your walls you need a mathematical equation to know how much material is needed.  Even food recipes are mathematical equations with all sorts of different ratios when blended together make for cakes and cookies.   

You can’t run your business in an organized, efficient way if you don’t understand that there is an order to the universe and most things in your business can be looked at from a mathematical perspective.  There are some easy things to understand.  For example:  What percent of income tax you have to pay.   How many days it takes to receive a delivery.   Or checking an invoice to see if it was added correctly or how much sales tax needs to be added to the total. 

But you can also use mathematics to understand sales.  Such as:  How many prospects do you need to get an appointment?  How many appointments to get a sale?  You’ll find that the numbers usually stay constant so once you work this formula out and you know what your average sale is all you have to do is state the goal you want and look at how many qualified prospects you need to see to reach that goal. 

You can also determine with mathematics the ratio of people that you need to the amount of work you have coming in.  How many hours it takes for a certain task.  Or how many trucks you need to deliver your product.  Or how to schedule your employees based on the business load and number of hours you are open for business.

Do you know how to read your profit and loss statement?  Or do you just toss it in your file cabinet?  Do you know what the percentage of labor is for administration, sales or production?  Have you compared this financial statement to the last one and the one before that?   Have you asked why labor is, for example, up 5% over last quarter? 

Do you see how valuable all this information is?  Success and profit isn’t made on a yearly basis.  It is made day by day.  Your numbers help to tell you what is going on or what isn’t going on, depending upon how you look at the numbers.

Although math may not have been your favorite subject in school, it is the pathway to understanding and operating a well-run more efficient business.

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