Has anyone ever asked “How are your numbers?” For your business, I mean.
That seems to be one of the first questions every business owner and entrepreneur gets asked by bankers, investors, and advisors. What numbers are essential for you to understand, know and remember?
Even those who took Accounting and Finance in business school (waaaay back when, in my case) may not remember clearly distinctions between gross margin and profit margin — UNTIL it is put into context.
My work life began in publishing. I can still remember the first time I had to present a book proposal to the Editorial Committee. It was my responsibility to project revenue and how much profit we stood to make. After working up my numbers, I entered the meeting proud to share my $100,000 in revenue, 70% gross margin and NOP of 20%. But those were the targets I’d been given.
How different this seemed once I started my own business. I had to make sense of what numbers and equations would mean my business would be profitable and successful. What should my targets be?
First off, the numbers were ever so much smaller. Second, I paid much, much closer attention to each of them, where they came from, how they related, and the story they told. For one thing, rather than publishing books my business provides services. What did that mean went into my cost of goods? Should I be pleased or concerned by a 70% gross margin? Where should I be aiming?
This new journey involved reinterpreting some of the accounting principles I knew, starting with the essentials.
Essential Financial Terms and Ratios eBook
I’m happy to share with you a brief “cheat sheet” providing a few Essential Financial Terms and Ratios for Business Owners. Send us your email and we’ll return a link for a free eBook that may help the next time you’re speaking with your bookkeeper or accountant, or when you’re asked “How are your numbers?“ [contact-form to=’[email protected]’ subject=’Essential Financial Terminology and Ratios CheatSheet’][contact-field label=’Email’ type=’email’ required=’1’/][/contact-form]