Key Business Numbers Every Entrepreneur Should Know

As an entrepreneur, you probably began your business for a specific reason. Whether it be to gain financial freedom, to pursue your passion, or to be your own boss, every entrepreneur’s goal is the same. 
Everyone aims to have a profitable business. But you need to have more than just the desire for success. You need to take action to ensure your business success because no one is going to do it for you. 

Financial metrics can be a tough topic to address.

A key part of your success is knowing your financial numbers. In other words, you need to actively keep track of your financial metrics by doing some sort of bookkeeping or financial analysis. Keeping track and analyzing your finances is a necessary business operation whether you are a new or experienced business. 
Now, how do you get control of your business finances?  I recently had the opportunity to chat with Danielle Hayden, a financial planner for small businesses. She highlighted a few steps entrepreneurs may utilize to take control of their financials. 
I’m sharing her recommendations on how business owners can begin to understand their business numbers, and how they can gain the confidence needed to create sustainable profits. 

What is your financial dashboard?

Your financial dashboard is your way of keeping track and managing your cash flows, expenses, sales, profit and loss, all to ensure that they meet your financial objectives. 
You first need to determine where you want to be financially speaking. You need to create financial goals for your business if you have not done so already. Establishing a financial goal will be a guide for the direction you want to take in your business. This goal will let you know how well you are doing in your business and how much further you have to go before you reach your target. 

Take a look at your cash flow.

After you have established the financial goals for your business, you then need to determine where you currently are in your finances. This will involve looking at your cash flow and expenses. 
Set dates on your calendar to review your financial dashboard on a weekly basis. Take a look to see what is your cash balance, credit card balances, etc. You need to look at projected cash flow such as who owes you money, how often you are paid, and the dates they pay you. You also need to ensure that you have systems in place in the event that one client pays late or simply does not pay. 

Track ALL expenses.

After determining your cash flow, you now need to take a careful look at your expenses. Do you have any upcoming bills such as software expenses, branding and website development, subscriptions, or utilities if you are a brick and mortar? 
In many cases, small expenses and routine expenses such as software expenses and subscriptions get overlooked and are not calculated against the business’s loss. The truth of the matter is that all these expenses will add up and should not be ignored. By keeping track of your finances on a regular basis, you will get a true evaluation of how much money is in your business. 
Another reason for evaluating your finances is to assess the needs of some expenses. In some cases you may find that there are some expenses that you do not need or you may not need expensive features and your business can survive with a downgraded plan. The ultimate aim is to eliminate waste. 

Time to compare.

After you assess your current financials, you need to compare your current financials with your financials from the previous month. Have the numbers improved? What did you do differently last month? What was your goal? What was your budget? 
By answering these question you will be able to determine if you are right on track or if you are way behind. Whatever the case, you need to start looking at income-generating activities for your business. 
During this process, you can also analyze to see if there are any expenses that you currently have that can be billed back to the customer. Once you have made all necessary adjustments, try to aim for a healthy profit margin of about 30% and consistent growth before reinvesting. 

Don’t forget to pay yourself.

You must pay yourself. Danielle expressed the shocking number of entrepreneurs who are not paying themselves from their business. One major reason for this is that some entrepreneurs do not know that they should be paying themselves from their business, and they just keep reinvesting all the profits. 
Another common reason is that many do not know what they should be paying themselves or how often. Danielle expressed that an easy fix for this is to look at your responsibilities to help determine how much to pay yourself and when. A safe number for frequency is to pay yourself at least once per month. 
Another commonly asked question is how to know when it is time to start paying yourself. What is the benchmark in your business before you are able to cut yourself a check? The simple answer is that you will only be able to answer that question when you start looking at your financials. 
Once you take home that first paycheck, trust me you will feel the difference in your business. You will feel a greater drive and more confidence to work harder to grow your business. So as a business owner, don’t just spend time looking at your business numbers; take the time to enjoy them

Here’s something that might help.

If you are ready to get your financial dashboard in check, you can access Danielle’s free Profit Planner Worksheets. Through this framework, Danielle will outline how to set up and analyze your financials. If you are in need of additional resources, you can also join my business coaching program where I coach entrepreneurs to grow a profitable lifestyle business that they love. 

Knowing your financials is key to your success.

Again, this isn’t always the fun side of business, but knowing where your business stands financially is imperative. Whether you have been in business for a short time or a number of years, you need to track, analyze, and know how to control your financials. 
Take the time to review your business numbers to see if there are any changes in numbers compared to previous months. From your analysis, you will be able to determine your true income, what your expenses are, and how to eliminate financial waste. There really is no way around this in order to determine if you are meeting your financial goals and truly making a profit that will sustain your business.

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