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The Local Small Business Coach Podcast
Here is what we discuss in today's episode:
Knowing Your Financial Numbers
It is important that you know some of the key financial numbers of your local small business. These numbers are your business’s report card. They tell you how healthy the business is. We will take a look at 5 key areas you want to be familiar with and why.
• Profit Margin
• Product Costs
While you don’t need to memorize them, you need to have them at your fingertips. However, I will recommend few numbers you need to always know.
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Here are the show notes if you prefer.
Hey, badass business owners. Welcome to another episode of the Local Small Business Coach Podcast where each week, my goal is to help you get one step closer to that $100,000 in profit!
You know, when I started this podcast, I had one mission. That was to help you, the local small business owner, heck, all business owners, have a better understanding of their businesses and help provide tips, tools, and resources to help you take your business to the next level.
My passion has always been to help folks run a better business. Whether it was my Department Supervisors, Assistant Managers, Store Managers or anyone who would ask. Later, when I moved into the local small business world, I loved helping my fellow small business owners.
When I made the switch from big box to the local small guy, I realized how fortunate I had been. When you are running multimillion dollar businesses that get scrutinized at so many levels, you have no choice but to either fall down or start to learn how all the numbers interconnect. How sales numbers, impact your profit margins. How expenses and poor decisions can erode the bottom line profit line. And how inventory and payroll are two of the biggest contributors to your controllable expenses.
There are so many moving parts to numbers that I can see why it can be overwhelming to someone who is just trying to make a decent living for their family. Especially since so many of you are focused on just making enough to stay on top of your needs and get ahead a little.
I recently got a message from a business owner that felt I was glossing over (my words, by the way, his were a little more pointed) over what it takes to go from sales to true profit. He had a point and while I might not have agreed with how it was phrased, as I do make it simplistic. I do this for a reason.
As I just mentioned, for the vast majority of you, your number one goal is to create a nice take home pay. And in the most stripped-down version, your profit is Your Sales minus Your Products Costs minus Your Expenses equal Your Business’s Profits. We can discuss each piece deeper and I want to dig in more. However, I think numbers are easier to explain in videos or written methods vs audio. When I start talking numbers, I can just feel you drifting away. LOL
However, I can do a better job at explaining concepts here on the podcast. Knowledge is power and the more knowledge that we both have, the better we both get to be. So I thank Micah for pushing back a little, as it helps me realize I could be doing a better job on a couple areas.
Which is one reason I love all of your feedback. I want you to share what you are looking for or wanting more of. This show is about you and for you and not just what I think you need. Remember, you can email me anytime at firstname.lastname@example.org
WHY & WHICH NUMBERS YOU NEED TO KNOW
Since not everyone will go back and listen to all the previous episodes, I want to make sure that we touch on this very important part of your business a couple of times a year to make sure that we continue to expand our knowledge and we bring new listeners up to speed with us and our mission to help get you and your business to $100,000 in profit.
So, why is it so important that you know your numbers? Plain and simple, your numbers are the report card of your small business. Your numbers will show you the opportunities and successes that you are having. Sometimes, a success really is an opportunity.
So, let’s take a look at a few of the categories that you want to know your numbers.
The first area that you will find opportunity is in sales. Well, technically, everything leads back to sales in some way.
But’s, let's say while looking at your number, you discover that you have a blip in your sales around the 1st and 15th. You might discover that certain products go crazy or your services jump. Nothing too crazy, and it might be missed if not looking at the numbers.
Turns out you are in a community that has a heavy population that gets paid around the 1st and the 15th. Now that you see it, you have an opportunity to exploit it and find ways to take advantage of these blips and drive even more sales.
Maybe your blips aren’t the 1st or 15th, but maybe a particular day of the week or certain months. Knowing the numbers, arm’s you to take advantage of it.
Trust me, there are so many ways to find some good sales opportunities when you study your numbers. Especially when you look for trends.
Same thing with your inventory. You might notice sales go down right before your inventory comes in. Maybe you are running so tight, that you are losing sales. You discover this by knowing your numbers.
Here’s another inventory opportunity. You’ve heard me say this before, having inventory sitting on shelves is just like having dollar bills on the shelf. If you are watching your numbers, you might discover that you're not turning your inventory enough. Or maybe certain items are way over stocked.
Once again, you wouldn’t catch any of these inventory opportunities if you weren’t watching your numbers. Finding the right balance of inventory is tricky but when done right, can lead to better sales and more importantly, even better profits.
The next area that you want to really focus on is your product costs. It amazes me when I speak to someone and I ask them what it costs to produce their product or service and I get the deer in the headlight look.
I’ve actually seen people get excited by sales that made them little to no money. It never dawned on them that they gave away all the profits.
As you have seen, or rather heard, in previous episodes, sometimes you can make more profit from a small add on item than the higher priced one.
I’d rather see you push selling 10 small items at $2 where you make a $1 each vs 1 items for $50 where you only make $5. I’ll take $10 every day over $5. Wouldn’t you? This is why you need to know your numbers and how they work together.
One area you really want to clamp down on is your expenses. You need to know where your money is going after you pay your products costs. I’ve talked about these in the past. You want to ratchet down those fixed costs as much as you can. Plus, you want to stay on top of those controllable expenses. Especially the big dogs like payroll.
The key thing to remember on expenses, the more sales you do, doesn’t mean that all your expenses need to rise with them. Many expenses should be holding steady. For example, your insurance typically will not go up whether you do $50,000 or $100,000 in sales.
DO YOU HAVE TO MEMORIZE YOUR NUMBERS?
Another question I get asked all the time is, do I have to memorize all these flipping numbers? Heck now. But you do need to have quick access to them. You also should know at least the basic ones. Like what did you do in sales last month or how much did your company make in profit? I think even the worse memorizers can remember at least these two key numbers for their business.
WHAT I HOPE TO DO
Like I mentioned earlier, we need to focus on these critical pieces of your business more. But since I know they don’t translate well on podcasts, I’m going to try and work on some videos to help.
I have some projects prior to these ideas, but I promise, they will be coming later in the year.
And if you have specific questions on your numbers, please shoot them to me. I’d like to find some that are good for the podcast and some that will make great videos.
Speaking of which, if you have a topic you would like me to cover here on the podcast or a question you would like answered then feel free to shoot me an email once again to email@example.com I love to hear from you.
Don’t forget, if you are looking to take your local small business to $100,000 in profit, head on over to LocalSmallBusinessCoach.com/8steps to download the free ebook & workbook called: 8 Steps Local Small Business Owners Need to Take to Make $100,000 in Profit. Where I’ll walk you through how to double or triple your current profit level.
Also, don’t forget to shoot me an email on any topic or question you would love for me to cover in an upcoming episode of the show. Just send your ideas to firstname.lastname@example.org.
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My Recommended Bookkeeping Program for Local Small Business Owners: Freshbooks Link
Why? Helps you invoice quicker and more importantly, get paid quicker. Let’s you know when your clients have opened the email and they even help send reminders. Clients / customers can pay right from their phone or computer. Give it a Try: Freshbooks
**Freshbooks & Audible are affiliate links. This costs you nothing. I only recommend due to how much folks have loved it. I am paid a small commission but trust me. Even I use it. Try it for free for 30 days and see if you don’t love it too!
Two Great Books to Help You With Your Small Business:
Highly Recommend all Local Small Business Owners Read the eMyth by Micheal Gerber. You will learn some critical things about running your business.
The second book is one I wrote based off a popular example I always use when folks are trying to understand their role as a leader with their people. Check it out.
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