Why is it important to a business owner to know their numbers?
The one thing successful business owners have in common is that they all know their numbers.
What does it mean to know your numbers?
It means knowing and understanding your operating costs per hour.
It means knowing and understanding your gross margin percentage on key products.
It means knowing which products make you the most money and which products make you the least.
It means knowing your inventory, your inventory turns ratio, and understanding when its slow moving.
It means knowing your direct laborers average wage rate
It means knowing how many days your receivables are outstanding
It means knowing when to time your disbursements and how many days your payables are outstanding
It means increasing the overall accuracy of your decisions
It means improving the productivity and performance of your business because you are able to evaluate the productivity and performance of your business.
It means knowing the metrics associated with your advertising campaigns
It means being aware at all times of how much cash you have on hand.
It means knowing your monthly debt service.
It means knowing if your capital expenditures are productive, and if so, how.
It means answering a question with total confidence when an employee or a vendor needs a decision because of your knowledge about the most important numbers/metrics in your business.
To be on top of almost all business scenarios, maintain a stronger sense of control over your business, and most importantly to reduce the risks of running a business, a good business owner should know their numbers.