It’s the CEOs, presidents, business owners and entrepreneurs throughout the United States that make this country work. Which means it’s YOU that creates the dynamic economy. You do it when you buy a new copier for the office, when you fill the gas tank of your car to make a business trip, when your children go on class field trips and when you pay the mortgage on your house each month. When it’s pay day at your company your employees, in turn, circulate their money into the economy by going to the grocery store, picking up coffee and donuts for the morning meeting in route to work, or buying a birthday present for a family member. These are just examples of how business, every day, makes the economy vibrant.
On a regular basis, business people contact me to help solve ongoing business problems and business issues. If you are a regular reader of my blog posts, then you know that I always ask questions.
To solve your business problems and business issues; in order to grow your business, you need to know your numbers.
Here are three examples as to why you need to know your numbers to grow your business:
1) When in conversation with a CEO or business owner, I may ask:
– How much revenue is your company producing?
– What’s your cost of labor?
– What are the latest numbers on the company’s P&L (profit and loss) statement?
Often the reply is: I don’t know.
So I go on to ask:
– What’s your company’s sales closing ratio?
Again, the answer may be: I don’t know.
Or I may then ask:
– What the average sale?
– Do you do a P&L every month?
It’s shocking how many people running a business don’t know these numbers or know where to gain access to this information.
Could you answer these questions about your business?
2) Here’s another example:
A CEO or business owner may call me inquiring about how to get their company to the first million dollar revenue mark. Of course, this is indeed an achievement and certainly a worthwhile goal to accomplish for many business people leading a company.
The question I ask is: How much do you have to do to get there? Quarterly, monthly, weekly and daily? The simple answer, with basic math, is: $4,000/day. Is that possible with your business, the way it is set up now, to do? If not, what needs to change?
Here’s another example as to why knowing the numbers in your business is important to your success:
How many sales people do you have? For each sales person, what is the prospect to closing ratio? Let’s say you have two sales people, Fred and Jack. Fred’s prospect to closing ratio, when the numbers are tallied, is 1 out of 4. But Jack’s may be 1 out of 10. Fred is doing well. But Jack may need some sales coaching.
3) The final example is your profit and loss statement. If you look at the January P&L as soon as it’s ready for review in February, you have an excellent opportunity to improve any of the numbers as the business year progresses. But if you wait till September to look at the numbers, it often times is too late and involves too much catching up to achieve more desirable business numbers.
Remember: Just because there is money in the bank one month doesn’t mean that money will be there three months from now.
Often, CEOs and business owners are visionaries and not interested as much in the numbers. But you need to be a bean counter to grow your business. You need to know the numbers in order to live your visionary business dreams. The numbers will help you understand your business.