Free Advice Below and It Will Cost Ya!!

So those that are anything like me you are always researching and reading and in search of opportunities to improve your business.  I read as much as I can and I watch videos and informational shows all the time about being a business owner.   Entrepreneur has to be the most commonly used word these days.  With economic struggles and the instability of the corporate arena, more and more folks are looking to do it themselves.  They are looking to get into business and call their own shots.

Well I watch Shark Tank and Profit just as everyone else and TED talks is one of my favorites!  The same message is made in every avenue of starting a business. It is hard work and you need to know where you are before you know where you are going.

If you are already in business or just starting out it is imperative that you know your financial position, today so you know where you want to be tomorrow.  It is broken down in the components below.  Focus on these and no matter what continually review and assess. It is a cyclical process and you have to remain persistent.  You have to look to people that can help you if you can’t do it yourself.  The key however is to DO IT!

Revenue – How much money is coming in, daily, weekly, monthly, yearly? You have to keep track of how you are performing at different increments of your time.   You should have an idea already of what you need it to be so now you should look to see how close or far you are from that target.

Gross Profit – Revenue minus costs = plain and simple. Once you have determined your costs for making or providing your product then you should deduct from what is coming in.  And again it should be done weekly, monthly, quarterly, and/or yearly.  Typically when all is said and done you want to shoot for your gross profit to range in at best 50% more once direct costs are deducted.

Expenses – Every business owner needs to know how much is costs to run the business.  What are you spending in terms of administration, operations, and marketing.  How much do you allocate to these expenses and where the flexibility in what you can control is. Compensation is one you know you can control.  You need to know of your expenses in total how to fluctuate in the moment of a crisis. Marketing and advertising are always a variable so you should carefully review them and if possible they should be in line with your sales so that the expense can be justified.

Profit Margin – the key, the key, the key.  Look at your gross profit and reduce it by your expenses.  Take this number and then divide by your total sales and you have your profit margin.  This number is vital as it tells you in a nutshell how profitable you are in business.  AGAIN, review, review, review and assess.  A rule of thumb is to research others in your industry and find out what their profit margins read. You want to be in line with if not better.  Use your research as a benchmark!

In assessing and identifying your numbers it is going to take time. It is not something that is going to come easy initially but I assure you it will open up a world to you once you become familiar with what your business looks like financially.  And as I mentioned you can ALWAYS find help. If numbers are not your thing then find and accountant or even an accounting software package that will bring those numbers to you. 

Let me add…knowing your numbers is crucial for whether you are selling a product or service. If you are providing a service then you have to reach for more intangibles but the points are all still the same.

I wish you luck in your business and I wish you tenacity.  Stick to it and hang in there!  GOOD LUCK!

Leslie Crudup writes for The Business Liaisons, LLC – Business Consulting

www.thebusinessliaisons.com