Get Good With Numbers
Numbers for the numerically challenged
Watching Dragons Den last Sunday I listened to ‘the story’ then laughed when all the questions on numbers started to come and saw the pitches fall apart. It’s TV, so quite funny, sat in the comfort of your own sofa to think how daft someone would be, after all the season’s shows, to turn up without knowing all your numbers. The thing is, in our own businesses it’s not really funny at all. Most of us learn the hard way about the numbers we need and from the heady days when we see ourselves in our own spreadsheets, millionaires on paper by day 3 of opening our doors, website and launch – it’s not like that at all.
Numbers are hard – Get good with numbers
I was brought up by my widowed Mum who was a mathematician, she could see patterns in numbers, would use algebra to work out almost everything and enjoyed numbers. She ‘got’ numbers and was completely at ease with them. I was not so gifted. I never did see anything in numbers, I could follow the basics but didn’t enjoy handling them, would happily defer to someone else to do a calculation and barely scraped through any maths exam. I ‘got’ physics and chemistry but that was because there I could make the connections with the numbers and their practical application.
Getting better with numbers
Over 30 years since starting my own first business I am finally at ease with the numbers. I still rely on a series of spreadsheets, tools and others to help me but have learned, the hard way, how lovely and important they are. Now, I am not saying business is ALL about cash and money, it’s not. Yes, really, if you are building a business just to make cash for consumption of things you will not have the stamina, love or staying power to last the course. Money is not enough on its own to drive your business but, and here is the rub; it’s a driver, a source, a core requirement and, most important of all, it has to stick in the business to support your plans. It cannot come in and go out in a whoosh, you have to have cash flow and cash sat in your account.
For me, and accountants tend to agree here, there are 3 main numbers you need to get crystal clear on in your business:
1. The number of customers buying from you
2. How much each customer spends with you in each transaction and is it priced properly?
3. How many transactions each customer will have with your business – here I work on monthly, quarterly and annual spend
The magic three
Any one of these magic three can cause serious challenges in your business, you may consider and I certainly have in the past, that a focus on number 1 will sort all things out. It may do, but only if you have number 2 right. Without number 2 being in order no matter how much goes on with number 1 you could just be churning cash through your business with none or it, or very little, sticking to the sides in terms of profit.
Number 3 when numbers 1 and 2 are right makes for sleep filled nights as this is where the magic happens, you see number 1 costs money to bring in, each new customer won and retained costs on their first sale with you the largest customer attraction spend. So if they only buy once and its a low-cost item, profit (remember our old friend 2?) is at its lowest. Turn that spend into life long spending and its a winning formula.
The magnificent Ten
Our trusty 3 are supported by a magnificent 10 which systemizes how to win, price and keep clients and achieve business growth, certainty of income. You see, its not a lack of passion, availability of clients or general market trends that causes problems, it’s the lack of a system that defeats many small business owners. I am talking here about systems which work on automatic, are hardwired into your business as a daily routine so things don’t get missed. More of this in other blogs. If you ever considered systems boring, you were right! Seriously few of us get excited about systems, but what they can yield for you is truly exciting and makes the early pain in getting a system in place all worthwhile. Want to know more about the Magnificent Ten? Talk to us – people here who know the numbers you need in your business.