How is your business doing? The only way to truly know is to get a crystal clear grasp of where your finances are. Public companies have to release statements every three months letting the public know how they’re doing. Likewise, you should periodically gather all the numbers in your business to see how you’re doing.
How often should you do this? Ideally, you’ll want to keep a running tally of your most important numbers and look at the less important numbers at least once every month or two.
When you’re taking stock of your finances, these are some of the most important numbers to look at.
==> Cash Flow
How much money is coming in and how much money is going out?
Cash flow is the lifeblood of any business. If you have high cash flow, you can hire employees, invest in marketing and grow your business. If you have low cash flow, you may need to cut back on expenditures for a time.
Assets, most importantly your cash in the bank, are another crucial element to running a business.
The more assets you have, the safer your business is. If you take a sudden hit, you can survive it if you have a safety pad.
If you have low assets, you might want to cut back on growth and save some money first instead.
How much money are you expecting to receive from customers to whom you’ve delivered services but haven’t received payments yet?
These can help you project your cash flow and assets in the near future. It can also help you identify potential problems in your business.
If you have an inordinate amount of outstanding receivables or late deliverables, you might need to look into your follow-up and collection systems.
==> Examination of Expenses
Are you spending money wisely? Track your expenses and identify the aspects of your business that are costing the most right now.
Are these good investments? Are there expenses that you should cut down on? Examine your expenses regularly to see if you can cut costs.
==> Lead Areas of Growth
What areas of your business are growing the fastest?
Businesses that focus on their lead area of growth have the highest chance of success.
Yes, in business there are going to be fires that need to be put out and problems to be solved. However, you should always have one eye on your major opportunities, even as you’re firefighting.
==> Individual Sales Funnel Breakdown
Finally, break down your sales funnel and see which are your strongest and weakest points.
For example, let’s say your funnel goes like this: People come in from the web, then fill out a form. They then receive a free CD, then get a five-step direct mail piece and two phone calls from sales consultants.
Which steps are generating results and which ones aren’t? Perhaps the direct mail pieces are doing much better than the calls and you can just save the expense of hiring sales people. Or you could realize that it’s time to spend more money on web marketing.
These are some of the most important numbers to look at when you’re taking stock of your business.