How Well Do You Know Your Financial Numbers?
Friday, July 17, 2015
There are 2 shows on TV that I thoroughly enjoy: The Profit on CNBC and ABC’s Shark Tank. If you are in business, which you more than likely are, I highly recommend you watch a few episodes. Viewers get the opportunity to look inside a “failing” business or hear a pitch from a business in need of capital. The reason these 2 shows intrigue me is quite simple: the “art” of business is really interesting when done right. The shows also challenge me to consider how well I know my area of expertise, sales and marketing.
One thing the “sharks” and the “profit” come back to time and time again is the specific details of the finances, aka the numbers. How well the entrepreneur knows his or her financial numbers almost always correlates with whether or not they get a deal. The better they know the numbers, the more likely they are to get a deal, and the opposite is also true. I have seen people with great ideas and businesses not make deals because they did not know their numbers.
If you are a business owner, my suggestion is to know your numbers! The better you know your numbers the better off you are to not only protect yourself from theft/fraud, but also the better position you will be in to grow the business. Every business owner should have a firm grasp on the financial reports (income statement, P&L, and balance sheet) as well as sales figures and operational measurables that they deem pertinent.
So the question I anticipate is this: what if I am not a numbers person? The answer is simple: hire someone that has a great understanding of numbers to oversee the business in this area. The reality is, someone with decision-making power MUST be a numbers person, because in business we live and die by the numbers. Have your team develop reports that make sense to you and that clearly explain the area for which you are requesting the report.
Also, how well does your team know their numbers? The person overseeing sales should have a great understanding of the sales figures and the same is true for your operations manager. The person overseeing collections and finance should also have a thorough understanding of their numbers as well.
Get to know your numbers and have your team do the same. Success comes with clarity and understanding. The more clarity you have and the better understanding you have of your business, or your area of expertise, the more your company will succeed and have the opportunity to grow. Business is really interesting when it is done right, and it can also be very lucrative. When you know your numbers, you get to watch with a smile as they increase.
– Written by Aaron Getty