Building a business is like growing a garden. The more you nurture it, invest in it, and care for it, the more it grows. But you’d never be able to grow a beautiful garden, or build a successful business if you don’t pay attention to the signs it’s sending you. If the petals are dropping, or the leaves are wilting, that’s a sign that a change is required.

It’s the same in business. The numbers in your business are an important indicator of what’s really going on, and if you ignore them, if you don’t figure out what they are trying to tell you, you risk letting the business die. So even if numbers make you squeamish, or you’ve said a million times before “I’m not a numbers person,” you can do this.

Still not convinced? Read on for the 3 reasons you absolutely should not ignore the numbers in your business, and then my one tip to get started without feeling overwhelmed.

#1: The business numbers are a great health check.

Numbers are data, and the best way to know what’s going on in your business is to understand the data. Much like email open numbers and Instagram engagement rates, the financial data in your business provides insight into what’s going on and gives you good information to determine the next best steps.

Want more proof? Here are some real-life examples of things my clients have discovered when they started to dig into their numbers:

• One client discovered that it was costing her nearly 50% of her revenue for each client. We were able to reduce some of her expenses, increased her prices and raised her profit margin to 70%, netting her almost $200 more per client each month!
• One client realized that she was spending over $300 each month on technology and services she wasn’t even using!
• One client learned that her more profitable revenue stream wasn’t her $2k VIP package (which took up A LOT of her time and had a higher customer acquisition cost) but her $497 course, of which nearly 95% of that amount was profit! (for very little work)
• One client learned that when she factored in the cost of her time, she was actually LOSING money on her client work. We raised her prices, helped her with some money mindset work so she confidently projected her value to clients, and now she is firmly in the black, netting nearly 80% of her revenues as profit.

#2: The business numbers help you focus on what matters.

If I had a $1 for every entrepreneur I talk to that can’t tell me their profit margin, I’d be a billionaire by now.

OK, maybe that’s a bit of a stretch, but seriously, know your profit margin.

What’s a profit margin? I’m glad you asked.

Simply, your profit margin is the amount of each sale that is profit to you. So if you sell a package at $500 but your costs for that sale (including costs to acquire your client, as well as to provide the service) are $400, then your profit is $100 and your profit margin is 20% ($100/$500).

One thing to keep in mind – your time IS a cost and you need to factor it in. I’ve talked with so many entrepreneurs who tell me they have a 90% profit margin, but when we add in the value of their time, that drops REAL FAST. Like the client I mentioned above, in some cases, we realize they are actually LOSING money on each sale.

So knowing your profit margin can help you focus your time on the revenue-generating activities that really matter. In the example I mentioned above, where the client’s VIP package (priced 4x higher than her course!) was actually LESS profitable than her course, she used this information and started focusing on selling her course over her VIP program. She didn’t abandon her VIP program completely as it still brought value to her business in other ways, but she realized that boosting her course sales was the best way to bring in more profit with less work.

#3: Knowing your business numbers will save you money.

Saving money is one of the biggest benefits of knowing your numbers in your business. The more money you save, the more you can invest back into your business and pay yourself. Who wouldn’t want that?

And… I know no one wants to talk about taxes but they’re an inevitable part of life. The more you prepare for them, the less painful they will be. Knowing your numbers will help save you money when it comes to your taxes as well.

Knowing your numbers has pretty big benefits all around:

• You’ll have a better estimate of your income for the year to make quarterly tax payments, which will reduce/eliminate any penalties you need to pay. It’ll also keep you from having to make a big payment to the IRS at the end of the year.
• You’ll know what expenses are tax deductible so you can maximize your deductions and reduce your tax liability.
• You’ll know what invoices are outstanding to collect the money your clients owe you.
• You won’t have to pay a CPA to help you sort through your numbers at the end of the year. The better organized your info is, the easier it will be for your CPA to do your taxes! (or you, if you DIY it)
• You’ll cut down on unnecessary expenses so you can spend that money on more important things.

The Takeaway

Bottom line, knowing the numbers in your business will better prepare you to make smart, strategic decisions, help you focus on the right things in your business, save you money and make you more money.

So where do you start? It’s simple. Put 30 minutes on your calendar every 2 weeks. Choose a time when you’re energized and motivated; not a time when you’re feeling sluggish from the week. And DON’T reschedule it or make excuses. Treat that time as gold and stick to it.

Do the following during these 30-minute “money check-ins”:

• Review your revenues. Which product/service results in the bulk of your sales? Are your revenues increasing, decreasing or staying the same?
• Review your expenses. Are they increasing, decreasing or staying the same? Are you spending money on things you don’t really need? Where can you deduce costs?
• Calculate your profit and profit margin (remember – this is revenues – expenses). Which revenue streams get you the most profit in dollars? Which gets you the most profit in relation to the revenues brought in? (this is your profit margin)
• Identify the areas to focus on. These should be the ones that have the highest profit and profit margin. Remember, you want to spend your time on the activities that get you the most bang for your buck.
• Check in on your cash flow. Do you have enough cash in the bank to pay upcoming expenses plus some? Is there anything you can do to maximize your cash in hand without costing you money? (follow up on unpaid invoices, extend out payments if there is no charge to do so, etc.)

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