As a Part time CFO I see a lot of Business Owners and the one thing that the most successful business owners have in common, is that the most successful business owners Know Their Numbers.
What does it mean to Know Your Numbers? Here are just a few things that it means:
It means understanding and knowing what your operating costs per hour are.
It means understanding and knowing what your gross margin percentage is on key products.
It means knowing which products you make the most money on and what products you make the least money on.
It means knowing your inventory and what is slow moving.
It means knowing your inventory turns ratio.
It means knowing your average wage rate of direct laborers
It means staying on top of how many days your receivables are outstanding
It means knowing how many days your payables are outstanding and knowing when to time all of your disbursements.
It means being able to answer a question with total confidence when an employee or a vendor needs a decision because your answer is centered on the knowledge you have about the most important numbers/metrics in your business.
It means increasing the overall accuracy of your decisions
It means improving the productivity and performance of your business because you are able to evaluate the productivity and performance of your business.
It means understanding the metrics associated with your advertising campaigns
It means knowing how much cash you have on hand at all times.
It means you know what your monthly debt service is.
It means knowing how productive your capital expenditures are.
When a business owner knows their numbers they are on top of almost all business scenarios that can take place in their business. They have a stronger sense of control over their business. Most importantly, the business owner who Knows Their Numbers reduces the risk of business ownership!