Some people consider it boring but, for me, it is so important.  I make no apologies for this month’s newsletter.  Only one joke but lots of good advice about... wait for it... counting. 

A few months ago I wrote about the importance of business planning to be successful.  One important way of monitoring progress is to count and record what you do, when you do it and the results you get.  This is what I call managing by numbers. 

Most people go into business because they enjoy creating or selling a product or providing a service. That is generally the fun part and it is easy to spend most of your time on that, with the result that some less interesting, but important, tasks are not done.  Unless you are an accountant or book keeper you probably aren’t thrilled by the prospect of managing your numbers, but it is one of the keys to real success.

The important point is to know what you should be counting and how to analyse the numbers you produce. 

Financial information such as income and expenditure are givens – you have to do these if only to keep the Inland Revenue from your door.  But do you analyse these numbers to assess how your business is performing month on month, year on year? 

Do you compare your monthly ins and outs with those of the previous year?  It is very easy now, with the range of software available, to produce graphs which can show your peaks and troughs.  You can see at a glance those months when your income or expenditure was higher or lower than expected.  Think about why that happened.  Look at your customers’ behaviour at those times of the year – is that significant? Does it relate to your marketing spend?  Is that really giving you value for money?  

Think about what you could do to eliminate the troughs (unless you are a pig farmer). Does this always happen at certain times of the year?  Why is that? What can you do differently to drive up business at those times?  Remember you can’t afford to simply maintain the status quo in business. Managing your numbers will give you ideas on areas where you can move forward.

In order to make the best use of your numbers sit down and make a list of all the things you already count in your business and what those numbers tell you.  This could be the number of items you produce in a week/month/year. Is that acceptable, or is there a way to improve your productivity?  How did it compare with last week/month/ year and why is there a difference?  

How many regular customers do you have and how much do they spend with you each year? How many referrals have you had?  Has that changed in the past year?  If so, why?  How many new customers have you attracted this year and which methods worked best to achieve this? Think about the relationships between the different sets of figures – the impact one set may have upon another.

What else could you count?  Is it useful to know how much time you spend creating your product/delivering your service compared to the payment you get for it?  You may decide to stop doing certain things because they don’t bring in as much income as others or because the profit margin is not as high as you would like.  Is it because your materials have become more expensive?  Could you get a better deal by shopping around?  Is it the right time to increase your prices?

If you know and understand the numbers which answer these questions you can make informed decisions about how to grow your business.  If you don’t count you could be missing opportunities to improve your profitability.  

If you would like any further help with managing your numbers, or any other business issue, just get in touch here.

To see my previous newsletters go here.