Use your financials to profitably grow your business

There’s power in knowing your numbers.

I teed up this post a couple of days ago and then just yesterday a request for assistance showed up in my feed.

The basic gist of it was: a female founder has a growing business and is at the point of needing to bring on team members to help serve her clients, and she is wondering how to address this in terms of financial forecasting.

I was so darn happy to see the question because this is exactly the right way to look at it.

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Your numbers are your tool to profitably grow your business.

You’ve likely heard me say this, but it’s worth repeating — your P&L (profit and loss statement) is your friend. That is your revenue, expenses, and net profit/loss.

So is your cash flow statement (the timing of funds flowing in and funds flowing out). Most small business owners use a “cash basis” for their accounting (rather than an “accrual basis”). Depending on how quickly you’re paid (funds flowing in), your P&L can pretty much match your cash flow.

However, there are times when this doesn’t quite work. This is especially true if your clients are not paying you upfront and/or there is a significant lag in your invoicing and payment, AND you have expenses associated with that revenue that you need to be paid, perhaps ahead of the incoming revenue.

If this is you, then in addition to your monthly P&L, you need to maintain a monthly cash flow statement in order to not lose sleep at night.

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Some numbers worth tracking.

With these financial reports in mind (and some additional data capture), here are the key numbers you should be looking at in your business:

  • Total revenue by month, quarter, year

  • Total expenses for the same

  • Total expenses as a percentage of revenue

  • Net profit (your bottom line)

  • Net profit as a percentage of revenue

  • Revenue by product and/or service offering

  • Revenue by customer/client

  • Total expenses in your top 2-3 expense categories

  • And, where your business is coming from - percentage by source (referral, LinkedIn Instagram, etc.)

Okay, so you have these numbers, now what?

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How to use this data.

As with the business case I mentioned at the start (and why I was so excited when I read it), knowing where you stand financially provides you with the information to make decisions about where to invest to profitably grow your business — to increase your top-line revenue without increasing your expenses in a way that hurts your bottom line.

Some of the questions to ask to inform your decision-making process:

  • What are the financial targets for your business?

    • Are you meeting/exceeding them?

  • Are you profitable?

  • Does one client or product dominate your revenue?

    • If yes, are you okay with this or would you benefit from more diversity?

  • Are you spending money on business development/marketing efforts that are not delivering clients/customers?

    • Is it possible to eliminate those costs so you can double down on what’s working?

  • If you’re thinking of adding to your team, can you afford it?

    • What is the right role (or right roles)?

    • What is the associated cost?

    • Will it help you add to your topline? How will it do that?

    • Are you still profitable or will you be in x months?

  • If you need to trim expenses, where is the easiest place to do so without compromising service/product delivery and your top-line revenue?

There is more, but my intent here is to give you a sense of the power you gain by knowing your numbers and perhaps incite you to take action in your own business.

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If this has your “eyes glazing over” and you know you need help, we can dive in and empower you in a day. I have a 1:1 VIP Day intensive where we dig into your financials, assess where you’re at and your goals for your business, and develop a plan to profitably get you there.

You’ll leave the day knowing the right steps to take, and with the knowledge and tools to confidently take those steps.

Learn more here.

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