So, let’s look into the future of your business six months from now. You have completed the Harbor’s program and you are landing clients and/or making sales.
You just made a monthly gross profit of $50,000. Is this a good month for your business? You probably can’t answer this because you don’t know the details. How would you know these details? How do you track, compare, and manage the profitability of your business? What are the critical metrics you should be tracking and how often should they be analyzed?
It is critical that as an entrepreneur you are intimately familiar with these details. Your business’ livelihood depends on it.
Here are several strategic ways that tracking your numbers will benefit your business:
Understand where you are in reaching business goals.
How do you know if your business is performing based on your expectations without measureable financial goals? Your business becomes a rudderless ship if it does not have a planned course, direction, timeline, and destination. Are your sales where they need to be? Are your costs being managed appropriately? Are you meeting financial expectations of all interested parties?
Review, target, and remedy key underlying issues.
In every business there are processes for sales, production, marketing, and hopefully accounting. Each process has many activities that combine to produce and overall result. Through proper analysis you will be able to isolate areas that need improvement in every aspect of your business that translates to your bottom line. Alternatively, you will see areas that are performing well and should be expounded upon.
Survival of the fittest.
Having relevant and timely financial data allows entrepreneurs to mitigate losses, adjust processes with minimal disruption to operations, and may even save it from a catastrophic event. Further, financially nimble businesses can more readily take advantage of profitable opportunities and enable them to be leaders within their markets.
Your business should track how using certain information sources, strategic partnering, or outsourced systems will affect the overall profitability of a business. You will have a solid foundation upon which to properly judge and utilize this assistance. You will know if your business is getting good value for these products or services and whether to continue with their use.
Lee Gessner IV, CPA
BookKeeping Express, Owner