The Numbers You Need to Know in Your Business

As the year comes to a close and you begin thinking about next year, there is a huge opportunity for you to press pause, and do some serious reflection and inspection of your business.

Business has not been normal the last two years. For some, it’s been busier than ever, and for others, it’s been dismal. Regardless of what side of the spectrum you’re on, avoiding your numbers is bad for business.

Do You Know What The Most Important Numbers In Your Business Are?

In Episode 31 of She Talks Business, the topic is Pricing for Profit During Inflation. It is an important topic, one that many business owners will avoid considering in their business, and yet, if inflation continues to grow, and your prices stay the same, you could be putting your business at risk.

As you assess and plan for the upcoming year, it’s imperative that you look back at last year, and this year, and familiarize yourself with your numbers. Failure to do this makes it difficult for you to accurately plan and forecast for what’s next.

The reality is things cost more today than they did this time last year, and they may cost more again, next year. Are you prepared for that increase in your business?

There are 5 important areas of business that you should be looking at right now:

1. Sales: Take a good look at your sales last year and this year, then consider what you would like them to be for next year.

2. Expenses: Look at what the cost of doing business was last year and this year, then make an educated guess around how much it may cost you next year.

3. Profit Margins: Look at your profit margins last year and year to date this year. It is important that you understand what your margin is in order to plan accordingly.

4. Forecast: Once you know these things, you want to forecast what you believe your total sales will be next year, what the rise in costs will look like for your expenses, and get an idea of how that will impact your profit margins.

5. Pricing: When you see the forecasted impact on your profit margin, reassess what areas of your business need to be repriced in order to ensure your business remains profitable.

While I go into this in more detail on the podcast, let me give you some quick math to illustrate my point.

If your business generates $100K in sales, and has a 15% profit margin, after all of your expenses are taken care of, you’re left with $15,000.

That means it costs you $85,000 to generate $15,000 in profit.

If inflation causes your costs to go up by 15%, that means it will cost you $12,750 more to run your business.

That means you’ll be left with a profit of $2,250 instead of $15,000.

If your profit margin is less than 15%, there is a good chance that rising costs may cannibalize all of your profits and leave you in a deficit position.

As a business owner, you’re doing yourself, your team, and your clients a disservice to not prepare and anticipate how inflation could impact your bottom line.

The purpose of this post is not to create fear and uncertainty, but rather to encourage you to proactively look at your numbers and take control of the potential for this to happen so you’re not reacting to it after the fact.

Numbers don’t lie. No two businesses are the same when it comes to sales, expenses, and profits which is why only YOU can determine what makes the most sense for your business.

If you are not comfortable looking at the numbers this way, or if you want to be part of a community that talks about numbers regularly, get on the waitlist for The Strategy Lab. Our next planning sprint where we will be reviewing numbers for next year is on December 6th!

You don’t have to do this work alone, but you do need to do the work.