How can understanding your numbers impact your business strategy?

Taking a look at your numbers can unlock a wealth of information about your business. Your numbers often indicate where your budget should be spent, which target markets are proving to be lucrative and where investment should be considered. Understanding your numbers will help you to ascertain the impact of each area of your business on cash flow, and ultimately profit.

 Make the right decisions for your business.

Even after years of working as prominent business advisors in Melbourne, we’re often surprised to find that some small business owners aren’t keeping an eye on their numbers. An understanding of the cash flow of your business and recording information into annual financial statements can really make a difference to small business owners when it comes to getting a loan. From cloud based accounting to hiring an accountant, there are ways to gain valuable insights on your numbers and the ways they affect your business. Fill bankers with confidence by having tax returns and financial statements readily prepared when they are requested.

Many small business owners run their business by touching on everything. From quoting, invoicing, completing jobs and ordering from suppliers they often have a hand in everything that’s going on. But as a business grows, it’s wise to develop processes and systems to manage the measurable aspects of the business.

Metrics make things manageable.

Focusing on making improvements across your business is a far more effective way to grow profit than investing heavily in one area. Understanding your numbers will provide direction on how your business can improve. Keeping tabs on your numbers can be as simple as introducing a cloud based accounting system or hiring an accountant.

As business consultants, SP Solutions are able to pinpoint what is holding your business back and help you to understand how to accurately run your numbers. Knowing your breakeven point is also central to your business operations. The breakeven point describes the point where your business is neither making nor losing money. Owners of small businesses should be aware of their breakeven point for that specific day, month or year. Understanding when your business is breaking even and making a profit is key in covering the costs of running your business.

Understand your breakeven point.

SP Solutions have worked with several clients to determine their breakeven points:

First of all we ascertain the breakeven point at which all business costs are covered to work out the ‘minimum salary’ of the business. This figure reflects how much money or the ‘minimum salary’ the business should earn to survive.

The ability to cover the expenses of the business and pay market salary marks another breakeven point. This means determining the salary an individual working in the position for someone else should be paid. Basing your pricing on the average salary in your market is essential for growth as few employees will be willing to work for less than this. Even if you’re not paying yourself market salary, pricing as though you are will mean additional profit is spared to be used to aid growth in the business. At SP Solutions, we call this ‘sweat equity’!

Want to grasp a better understanding of your numbers? SP Solutions are business advisors in the Melbourne area committed to helping small business owners grow.