Do you truly know your business if you don’t know your numbers?

I would like to believe that, by now, everyone in the business world has heard the saying, “If you don’t know your numbers, you don’t know your business”. The formidable businessman, television personality, and philanthropist, @MarcusLemonis, first proffered these words of wisdom. Not only does he have a winning approach to aligning the main components of a successful business (Process, People, Product), but also understands that certain details can describe the overall health of a business.

While this concept is certainly familiar, the spotlight on business finances has increased in recent years. And rightly so. While many accounting departments already understand the impact that financial data has on company performance and decision-making, a budding generation of entrepreneurs is still discovering this principle. According to the Census Bureau, more than 4.4 million new businesses were created in the U.S. during 2020 — the highest total on record. This means that there is a massive number of business owners who are running operations that will require attention to multiple areas, including accounting, to be successful.

What are your numbers?

First, let’s take a look at what this phrase means…

Basically, knowing your numbers is about taking proactive steps to understand how revenue and expenses are impacting your business. Most business owners may not always know the total amount of what is coming in (i.e. revenue) and exactly how much is being spent to run the business (i.e. expenses). In these cases, the gauge of business health is usually tied to whether or not the owner has to invest money periodically into the business to keep it running. According to the ‘Do You Know Your Numbers’ article under the Business Learning section on the marcuslemonis.com website, here are the top 3 numbers with which it is recommended that every business owner must familiarize themselves:

• Annual Sales Revenue – money coming in
• Expenses – money needed to keep the business running
• Gross profit margin – the difference between your revenue and your costs

Some additional numbers mentioned include cash flow, net income, gross margin, customer acquisition cost, and customer retention rate.

Why should you know them?

There are lots of business owners who do not see the importance of keeping track of their business financial activities. Whether it’s due to a lack of time management or know-how, newly-initiated entrepreneurs can sometimes struggle with keeping tabs on these numbers. Unfortunately, whenever business owners fail to review their finances in a meaningful way, they eventually find themselves taking on unnecessary risks. These include making key business decisions on little to no reliable information, incurring debt to cover operating expenses, or being unable to identify areas for improvement or growth.

How to get started?

There is a myth pervading the small business community that deems accounting services as a necessary implementation only after significant business growth. This could not be further from the truth. If you are not currently keeping track of your business finances on any level, I would strongly recommend that you start looking up options based on your current situation and business goals. Start researching small business bookkeeping services and compare pricing. If your business is not generating enough revenue to reasonably invest in third-party financial support, then consider using tools like MS Excel or similar software where you can list your business transactions regularly. Reach out to your network, friends, and family members who might be able to provide free support in this area until the business can allocate resources to this necessary business investment.

Do you truly know your business if you don’t know your numbers?
Sadly, the answer is no.

A passion to share your products or services with the world is not enough. Take time to see exactly where your business stands. While it might be unnerving or even scary to start tackling your finances, using this data to make timely decisions can mean the difference between success and failure for your venture. If you have any questions or need help getting started, feel free to leave a comment below or send an email to budgeting@officemanageronline.com to schedule a discovery meeting. I’m here to support you.

Shalom, everyone!