Knowing your numbers

In these crazy times of change and uncertainty, it’s more important than ever to have a handle on the vital signs of your business – you know, the numbers that keep the engine running smoothly.

Businesses can hit a rough patch just because they’re not keeping tabs on those key numbers. Not knowing where your leads are coming from, how well you’re turning them into customers, or the value those customers bring, can lead to chaos and a shaky future.

On the flip side, those who stay on top of their numbers are the ones who can spot trends on the horizon and pivot like pros. They’re not just surviving; they’re thriving.

So, what’s important for a small business?

You should watch your balance sheet ratios – that’s the equity you have in the business. In tougher times, like right now, you should have more equity in your business than in good times. Take the example of a property investor who can rely on increasing property values when times are good. A 20% equity works fine. But when times change you need more, otherwise there’s too much borrowed money and too much interest to pay.

Keep an eye on your KPIs – that’s your key performance indicators. These are things like:

Revenue growth. This measures the increase in revenue over a period of time. It indicates the business’s overall financial performance.

Profit margin. It shows the percentage of revenue remaining after all expenses are deducted, reflecting the efficiency of operations.

New customer cost. Knowing what it costs to get a new customer gives you a good idea of how effective your marketing and sales are.

Customer lifetime value (CLV). This estimates the total revenue a business can expect from a single customer over their lifetime, guiding decisions on customer retention and loyalty programmes.

So, keep your eyes on the prize, stay agile, and remember that with the right insights, your small business can not only weather the storm but come out stronger on the other side!

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