Are Your Numbers Figured Out?

Most entrepreneurs are amazing go-getters and run great businesses. They focus on the product or service that not only brings value to their clients but generate fulfilling experiences that encourage repeat business. With the all the activity centered around operations, customer service, personnel and marketing, sometimes it’s possible for some to miss a few profit opportunities in each transaction or client relationship.

Today, let’s discuss some ways you can review quickly where you are and then move on to focus on the business of doing business.

How Clear Are You About Your Numbers?

  • To keep your business at its current level how much in pure profit must you generate monthly?
  • What are the profit margins of each of your key products/services?
  • Are your gross sales and net profit producing the cash flow you need each month?

Take a few moments to step back and think about your business activities and how it affects your profit line. Break it down and make note of what your most profitable business activities are and how likely they will remain consistent in the foreseeable future.

When to Begin?

Resist the urge to wait for an ideal time to start this process. It is just as effective any time of the week, month or year. The key is to mark your place and start your tracking. Once you add this discipline to your operations it will help you know where to take action and adjust course where necessary.

Start with the following:

*Create a daily cash flow worksheet – We all need to know where our cash is. Make it a daily ritual to review. Run the business on a 30-day cash flow projection sheet. Know what comes in and goes out daily. Make the improvement of cash flow a primary business activity and ritual in good and bad times.

*Know how to calculate profit for your business – Total revenue – total expenses = Profit

Calculate the profit margins needed as part of your growth plan.

Gross Profit Formula:

GPM = sales revenue minus Cost OGoods Sold divided by sales revenue

For instance: $120,000 sales revenue

minus $ 75,000 COGS

equals $45,000 gross profit

equals 37.5% Gross Margin ratio

Get familiar with your business numbers. Getting comfortable helps to avoid being at the mercy of the economy, recession or external financial systems. Start simply to establish a set routine.  Finally, get comfortable knowing where the profits are generated from and apply that knowledge to growing your company.

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