As a business owner, you should understand the numbers that drive your business. It is important to track these numbers as they reveal hard evidence that can equip you into growing your business over the long haul. Below are several ways to monitor your numbers. Focus on them so you can better manage the financial side of your business.
It is important to track the money available to fund your business’ daily operations. Your working capital is the difference between your current assets and current liabilities. The rule of thumb is you should have about $2 of current assets for every $1 current liability.
You should also know your monthly, quarterly and annual sales so you can see how close or far you are from your goals. Your gross profit is the difference between your revenue and your product costs. Note that you should have at least 50 percent of your sales volume left after you deduct your costs.
It is also very important to track your profit margin by subtracting your administrative and general expenses from your gross profit and dividing it by your sales. Doing this will allow you to know how profitable your business is. Make sure it is not in the negative and that this figure is on par with your competitors. If it is lower than others in the industry, you should find ways to improve your margin.
You should also manage your compensation, marketing and R & D expenses periodically. These are some of the largest expenses for businesses and you should be able to adjust them quickly and decisively. Set a budget based on anticipated costs needed to achieve a goal. Regularly measure your progress by comparing the expenses to the proximity to your goal.
Another way to understand your business is to find and manage underlying issues for sales such as number of sales calls, live connections and proposals given and closed. If you track the numbers of underlying issues, you may be able to fix even a bad sales month early on. You can also track employee and customer feedback to quantify success and failure and know if your business is performing well.
As you look for different ways to grow and improve your business, seeking professional advice from a business consultant could prove to be an important and helpful decision.
You can click here to speak to business experts. We would love to help you formulate investment strategies and streamline your processes to take your business to the next level. Our goal is to help you grow your business, find ways to invest more and increase your productivity.