Business is all about numbers, and your numbers, more specifically your financials, tell a story. To run a successful business, you need to understand that story and use the information to move forward. 

It is not uncommon to find small business owners fearful of what their numbers might tell them or intimidated and overwhelmed by the information. Many carry on, oblivious to what their numbers say, just hoping it will all be ok.  

Numbers don’t lie and whilst for some they can tell a story of success, for others they tell a tale less comfortable to hear. But you really can make your business so much more successful, and gain so much peace of mind by taking a few steps towards understanding them better and looking at them dispassionately and honestly.  

Here are 8 key reasons why you should learn to know your numbers. 

Numbers can help you identify where your business is profitable. 

Running a regular financial report will mean you be able to determine if your business is profitable. You may identify a large amount of expenditure in a particular category and can then monitor that spend to see if it is adding value. 

Numbers will tell you which of your products or services are profitable. 

You can measure the profit margins on each product or service you provide and know which is more profitable and where the weaknesses are in the ones with the lower margins. You can set expected margins and adjust expenses or prices to meet your goals. You will know what price you need to charge to meet your expected profits.  

 Numbers can tell you when and how you can grow. 

When you understand how many sales you will need to bring in to make a profit, it helps with establishing goals. You will understand what sales level your business needs to achieve to breakeven, and you will know at the point you have achieved your breakeven for the year. The same numbers can help you determine if there is enough profit and money to improve the business, take on a member of staff or move to a new office etc. 

 Numbers will explain why, although profitable there is no cash in the bank. 

You will understand why, despite plenty of sales you have limited cash. You will identify how you are using your cash and where it is tied up. You can then plan to increase cash and bank balances. 

 Numbers will allow you to plan for taxes and to pay them on time. 

Regular financial reports mean constant visibility of profitability and therefore tax liabilities. This allows for better planning and saving so there are no surprise tax bills and everything is paid on time, in turn saving on penalties and interest. 

 Numbers will help you increase profits without making another sale. 

With methods that keep your numbers in check, it will reduce your expenses thereby adding more profit to the net income. And more profit means more money in your pocket even without any extra sales. 

 Numbers will determine your Return on Investment. 

In a business, it’s not enough to simply make money. You need to have a way of measuring the return on investment (ROI) for all your time and effort. To do this, you’ll need access to information about how well your business is performing. This might include things like your monthly sales, net profit margin and monthly expenses and customer feedback.  By analysing these numbers, you can get an idea of how much value you’re providing for your customers.   

You can also use ROI to focus on improving certain aspects of your business. For example, if you know that three of your services are contributing a net profit margin of 5% but one is making -1%, you could use that knowledge to focus on either increasing the cost of the loss-making service, reduce the cost of delivering the service or even remove it altogether and save associated overheads. This kind of data will help improve the overall performance of the business and make it easier for you to reach expected goals.   

 Numbers will help you maximise your earnings. 

Regular profitability reports and reviews of monies owed, and owing will mean you can undertake much better planning around what the business can afford to pay you. You can even start with what you want to earn and work backwards to the profits you need to make. 

Understanding your businesses financials and numbers is not as hard as you might think.  A few simple reports and ratio’s run on a regular basis can fast track your business growth, empower your decision making and deliver the financial freedom your dreamt of when starting your business. 

Here at Beansprout we won’t hide your numbers behind a veil of mystery and talk to you in accounting jargon. We hope you are curious enough to want to learn more about how your numbers can help you be successful. We want to help you get confident and comfortable with your story!