6 Steps to Understanding and Improving The Key Numbers in Your Business
Birds awake just as the sun rises, they fly with the wind, using the currents to soar and conserve energy, flapping their wings madly when they want to go in a different direction.
They find a safe place to while away bad weather, forest fires and other calamities and will have a favourite place to spend the nights. Animals of all sorts listen for the wind, sniff for the smells in the air, keep their eyes peeled looking around them, and they make decisions based on what they feel, see and smell.
Why then don’t we use the same when we run our businesses? We have the information available to us, and yet many people don’t pay any attention to the numbers.
I recommend the following 6 steps to help you listen to your numbers:
Make a conscious decision to make numbers your friend. Stop using excuses to avoid looking at the numbers. You truly don’t need to be good at maths to listen to the numbers. Honestly.
Accounting is principally adding and subtracting with a little bit of multiplication and division thrown in. Surprised? I’m not joking. And with calculators and computers, you really don’t even need to be any good at this.
Make sure that your bookkeeping is up-to-date. Forget sending a pile of paperwork to your bookkeeper at the end of the month or quarter. Get the bookkeeping done on a daily or at most, weekly basis. Online accounting systems make this super easy to do. For many Small Businesses, less than 15 minutes a day will keep your bank account reconciled.
Identify a few key numbers that you want to keep track of and work to improve. I suggest a maximum of five to work on at any point in time. These could be total income, gross profit percentage, debtor days, average sale value or number of customers per day.
For some businesses, a few of the numbers you may want to be watching aren’t financial numbers. Numbers like how many people sign up for your newsletter, how many new customers/clients you’ve signed up.
Put in place a reporting system for those numbers to be made available to you on a weekly and monthly basis. This could be as simple as setting up a dashboard report that you can log into at the end of the week that shows you these figures in graphical form.
The benefit of having graphs, rather than a series of numbers, is that it is much easier to see at a glance whether you are improving, maintaining a balance or going backwards.
Let’s face it 65% of the population are visual learners. In the past, financial reports were pages with lots of numbers on them. Now there’s no excuse for not listening to your numbers with the visual options we have available.
Set some targets of how much you would like to improve those five key numbers and then identify ways to work on achieving better results. Weekly and monthly monitoring will show you what impact those actions had on the numbers, and you can start to see improvements in your numbers.
Find an accountability buddy to talk to about the numbers. This could be a business colleague, your accountant or a business coach/mentor.
Research has shown that accountability accelerates results, keeps you on track and committed to actions and allows you to measure your progress and results allowing you to celebrate the successes along the way.
One of my clients has been listening to her numbers for the past year. She’s followed the steps above and has had significant results. Over the year, she has increased total sales by 40%, increased gross profit percentage by 29%, increased net profit by 6%, and that is after she increased her own wages by 57%.
If you’d asked this lady a year ago how she felt about her numbers, she would have told you that she was confused and didn’t really understand them at all. Her business wasn’t giving her the results that she wanted, and she was considering how much longer she would continue before throwing it all in and going back to a corporate job.
She’s just like you, someone with a dream of running a Small Business doing the work she loves, with the freedom of being her own boss. Now she has that and you can too.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
SHARE THIS ARTICLE WITH LIKE MINDED SMALL BUSINESS PEOPLE