Have you ever gone to purchase a used car, or heard the commercials that proudly announce a 150-point inspection. Why? These inspections give the potential consumer a peace of mind that the vehicle they are looking to purchase has value and is a good investment.
The same can be true of a financial growth multi-point inspection in your business, especially when it comes to your Profit and Loss Statement or Net Income Statement. Do you know what numbers you should be looking for? Do you know where you stand in relationship to your goals? Your profit? Income? Expenses? Do you know what you are owed, by whom and when you should expect payment? These are some “inspection locations”, but there are more, and they will vary depending on your business. Some, on a weekly or monthly basis, others on a quarterly one. Here’s a couple of points you’ll want to check on frequently:
Do you know how many contacts you need to make in order to make a conversion into a client? Do you know how much each client is worth?
Why this matters: Well, if you know you spoke to 100 people and that yielded 35 customers valued at $1,200 each, you can set benchmarks for your revenue. For example, you can determine that you want your new salesperson to speak to 200 people per month in order to generate an additional million dollars in revenue annually. Knowing your numbers creates predicatable financial growth in your business.
Is your marketing funnel creating a return on investment or are you losing money with every ad you run? Do you know how much profit each of your products and/or services creates?
Why this matters: Many small business owners simply look at income and expenses, and if they are in the black, they feel good. However, by looking at profits, especially your mid-line or Gross Profit, you can discover which products or services contribute the most to the bottom line or Net Income.
Gross Profit, also known as Gross Margin, when expressed as a percentage of sales is critical. So critical to sustainable profitability that it is why you see Marcus Lemonis on The Profit always say, “You have to know your numbers”. The first thing he always asks is “What’s your Gross Margin?” You need to know how much it costs to produce your product or deliver your service because if the margin isn’t enough, you’ll end up selling yourself into the poor house.
Finally, metrics are important for tracking where you are and where you want to be with real, tangible numbers. No more guessing or assuming, but really knowing what route you are on and, more importantly, what direction you are heading.
Your financial growth multipoint inspection puts you in the CEO driver’s seat
Time and again I find small business owners so busy working in their business, they fail to work on it, causing a disaster - a crash - some of which they can’t recover from. Those owners who step into the role of the CEO know how to manage their finances and have a financial understanding that helps them predict, plan, and prepare, which leads to success.
Whether or not you have tracked these numbers in the past, Your Profit Catalyst can help you understand your numbers and show what to track so you and your business will be in integrity with your finances and experience financial growth. When you know your numbers, you know the whole story of your business, the non-fiction version, because numbers don’t lie.