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Top Traits of an Entrepreneur: ‘Managing by the Numbers’ Sample 10 Questions
Friday, March 12th, 2010
If you are starting a business and especially if you are already in business, a critical responsibility of a business owner is to have financial control and clarity over the numbers that impact your business. As the business owner you do not need to be the bean counter and number cruncher; that is why there are expert CPA’s, financial analysts and CFO’s out there, but you have to be able to understand, interpret, and make decisions based on the numbers. And those numbers can be and are NOT limited to your:
- revenues
- account receivables
- profits
- expenses
- labor costs
- customer acquisition costs
- job costs
- # of customers
- # of leads
- etc.
Some are specific profit and loss (P&L) numbers and some are sales and marketing numbers.
Based on your industry; manufacturing, services, telcom, banking, and others, there will be metrics and data points that are specific to your business.
You need to understand what they are and more importantly how to use those numbers to influence and make important decisions in your business - what to spend, what you need to cut back on, what you need to generate, what are basic costs of doing business.
Having financial control over your business is NOT an area to skimp or consider as an expense. Knowing your numbers is a matter of survival or death of your business. If you do not know what you have coming in and going out how do you know if what you are doing or not doing is working.
TIP: engage your Accountant, Financial Analyst or CFO. Have them review what you have and don’t have and what you need to put a financial management and performance structure in place.
10 questions an ENTREPRENEUR knows about their business:
1. What was the revenue LY (last year) and 2 years prior?
1. by QTR (quarter)?
2. What is the revenue PL (plan) next month and every month going forward TY (this year)?
3. What was the net profit of the business LY and PL for TY?
4. What are our Labor Costs LY and PL TY?
5. What is the % of Marketing Costs to the TOT (total)?
6. How many Customers do we have?
7. What is the Profit by Customer?
8. What is the Number of ACT (actual) Jobs/Orders per Month?
9. What is the AVG (average) Order Value $?
10. What is our Customer Acquisition Cost?
We could go on, but this is a sampling of some financial questions that you should be asking so you can determine:
- What, where and how to generate revenue to meet forecasts
- How spending should be allocated to secure profits
- What type of customers are profitable ones
- What customers should you be keeping and which ones should be de-prioritized
- What marketing efforts are working and which are not
- Are your labor costs producing a return on investment
- etc….
Entrepreneurs realize the importance and power that this type of financial control provides them so they can manage their business effectively, allowing them to go off and do what they do best. And they know they need to hire and engage an expert in order to maintain their financials.
Financial Management and Performance is a key trait of an entrepreneur as well of a healthy business. Make 2010 the healthiest and wealthiest year for your business. Get control by managing your numbers!
Following my blog posting yesterday regarding creating standards, procedures and repeatable processes, I had a solo proprietor business owner contact me and ask, “I am a open business owner, do I really need to take the time and effort to create process and standard procedures?
