Business owners face a number of challenges, with the most common struggle being how to manage their finances properly. Whether you’re a seasoned entrepreneur or new in your business, understanding and taking control of your numbers is important for the long-term growth (and health) of your business.
Here are some tips to master your numbers and build a thriving business:
Get Back To Basics
Business owners can sometimes over analyze their business, constantly thinking of something that is always new and innovative instead of addressing and streamlining what is right in front of them. ‘Going back to the basics’ involves removing unnecessary complexities, evaluating your original business model or plan, and reestablishing clarity on the main purpose of your business.
Have a Solid Business Plan
A solid business plan provides a guideline for achieving your goals, serves as a foundation for decision-making, and helps you navigate through challenges effectively. Whether you skipped this step initially or need to revisit and strengthen your existing plan, here are ways to know if you have a solid business model:
Know how your money flows through your business – Follow the dollar bill like it is on a conveyor belt! This process involves tracing the path of money from where it enters the business to what happens to it afterward. By understanding this flow, you can identify any cracks or areas of improvement that may be affecting the business.
Do not be afraid of cracks in the business model – A lot of business owners admit that they are afraid of looking at their business model thoroughly to find any cracks. It is okay to be in this position, but know that you need to confront your financial challenges as early as possible. A proper analysis of your business model will help you find the areas that you need to improve on. Then you can have a new model that’s clear and concise.
Go through your business model in a visual way – Visual drawings can simplify difficult concepts and make them more understandable. By visualizing the business model, business owners can grasp the key components, relationships, and flows within their business more easily. You can tag the numbers later after you have walked through the model in a very visual way.
Love Your Numbers
Love your numbers and they will love you back. For business owners, it’s not uncommon to have second thoughts on facing your numbers. You may find yourself reluctant to delve into financial statements, budgets, or projections, for fear of what you might uncover.
Here are some activities or strategies to help overcome any reluctance:
Bring out your current or past set of projections – Bring out any previous projections you may have and compare them with your current financial status. By doing so, you can identify where you may have gone off course. This simple side-by-side comparison can be an eye-opening or an aha moment. You may find, for instance, that your sales are on track but the expenses are not, or vice versa.
Bring out bank statements and a highlighter – if you don’t have any projections or budgets in place, which is common for many business owners, you can grab your bank statements, preferably from the last three months, and print them off. Go through them with a highlighter and mark and add up different categories of expenses and income. Doing this gives you the opportunity to step back and see the path of money flowing through your business. It helps you identify areas where you may be overspending or missing out on potential savings
Know How to Handle Your Debt
Debt is a part of many businesses, it serves as a means to finance growth, expansion, or overcome temporary financial challenges. Debt is described as a necessary evil, it is never great to have any kind of debt. But the thing is, you can make debt your friend – if you have a plan for it. The only way that you can pay for your debt is through profit, and how do you make a profit? Through your business model! Again, this all goes down to your business model.
To maximize your business to be as profitable as possible, it becomes crucial to reassess and refine the business model. Analyze the cost of generating income and identify areas where profit can be enhanced. By thoroughly understanding the inflow and outflow of funds, business owners can make proper decisions about pricing strategies, cost management, and resource allocation. The aim is to strengthen profitability, and ultimately create a sustainable way to pay debt.
Learn From the Professionals
Learning and listening to professionals and seasoned business owners when it comes to managing your business and finances can have significant benefits for your overall success. You can learn a lot from their expertise and experience in this field. They have likely encountered various challenges and opportunities in business and finance that you may be facing at the moment. You can do this by reading books made by professionals, listening to podcasts, reading blogs, or appointing a consultation with one.
Conclusion
Mastering your numbers is really essential for your business to thrive. Many business owners are scared of facing their numbers, and it is something that needs to be overcome. If you are currently having a hard time with the finances of your business, the first thing that you need to do is to go back to the basics. Remove any unnecessary complexities that hinder you from seeing the bigger picture of your business. Keep in mind that taking charge of your finances is a continuous process that involves continual analysis, adjustment, and learning. So don’t be afraid of your numbers – face them, understand them, and allow them to direct you in the direction of success.