Whether you started your business from the ground up or inherited it from a prior owner, it is important to ask yourself if you really KNOW your business? You may feel like the answer is obvious – but truly knowing your business goes beyond simply knowing what you do and the yearly revenue you earn. What else do you need to know?
In this two-part series, you’ll learn about the TOP 10 quantitative aspects of your business you need to know if you want to GROW!
Your cash flow
Why did you go into business? Was it to pursue a passion? Make money? Reach your financial goals? Support your family? Most often, the reasoning is associated with some type of financial gain. This is why cash flow is so vital – you must know how much money your business is keeping each month in order to pay yourself first, your team members second, and then the rest of your bills.
I’ve personally seen it all too often – business owners run out of money, can’t meet their expenses, and end up not paying themselves for a month (or even multiple months in some cases).
So you need to ask yourself: Is the money I’m making enough to pay myself, my employees, and my expenses each month? If not, you need to rethink your business’ financial plan.
What drives your sales
Where is your money coming from? Is it marketing? Selling food? Clothes? Producing effective results for clients?
You must understand what you’re selling, who you’re selling to, why you’re selling it, how much of it you are selling ($) and how to present it in the most appealing way. Repeating that process is what creates a successful business because if your sales go down, your business structure will likely go down with it.
The true cost of your employees
Many think of the cost of their employees in terms of their hourly rate or salary. But you have to think beyond that.
What is included in their paycheck? Will you supply benefits? Paid time off? Calculate these numbers before making an offer to potential employees.
Your tax liability
In short, if you collect all of the money you make in sales and put it in the bank thinking it’s yours, you’re only fooling yourself. For example, if you’re collecting sales tax, 6.35% for CT, that money needs to be set aside because it technically belongs to the state. That amount would be considered part of your tax liability.
There are also income taxes – both Federal and State – that must also be set aside, not to mention payroll taxes, social security taxes, state unemployment liability, federal unemployment liability, etc. Regardless of whether or not you have employees, knowing your tax liability and setting aside the funds to pay it are crucial to keeping your business afloat.
Your overhead expenses
What are some expenses that are not directly contributing to the production of your product or service? These are usually expenses that you pay month after month. Overhead expenses can include, but are not limited to, rent, utilities, office expenses, home office expenses if you working from home, etc. Knowing these amounts helps you to create a basic budget for your business.
Want to learn more? Stay tuned for part two!