4 Financial Numbers Every Small Business Owner should Analyze for Growth

Many small business owners dread and avoid analyzing their business numbers, as they are scared of what they will discover. They are mostly content with just making sales, without taking a closer look at their business’ financial health. This is like ignoring a festering wound; because it will hurt to take care of.

Our co-founder once consulted with a business owner, who always feared analyzing her business numbers. However, the day she took the bull by the horns and analyzed it, she realized how small she had been playing, as the business was more profitable than she knew.

With this knowledge, she was then able to expand the business from retail to wholesale and attracted international partnerships. This also made her employ more hands, thus, creating employment opportunities for others. But it all started with analyzing her numbers!

In this article, we will examine why knowing and analyzing your business numbers is key, and the business numbers to pay attention to.

Let’s dive in.

Why You Should Analyze Your Business Numbers

Business is a numbers game. When you don’t analyze your numbers, you are shooting yourself in the foot. Here are 5 reasons to analyze your business numbers:

1. Make better strategic decisions for your business

One core benefit of analyzing your business numbers is that it reveals many things about the business to you, aiding better and more strategic decision-making.

When you understand your business numbers, it helps you know and prioritize core things that generate revenue. It also helps you make better decisions, in terms of hiring, business expansion, etc.

2. Identify when something is wrong with your business

Many businesses are leaking money, without the owners’ knowledge; due to their ignorance of their numbers.

Your business number reveals the state of health of your business; helping you know if you are spending more than usual on a particular expense, if your employees are stealing from you, if you are gradually moving towards bankruptcy, etc.

3. Enables you to access finance and funding

To access funding from investors and credit facilities, a clear understanding of your business numbers is required.

A lack of financial records to show how the business has been doing in the past would make it difficult to ascertain how the business would perform in the future. Thus, making investors not confident enough to invest in such a business.

Need business funding to accelerate your business growth? Click here and let’s talk.

4. Helps you know your most profitable product/service

Another benefit of analyzing your business numbers is that it gives you insight into your most profitable product/service.

This then helps you make better decisions, in terms of pricing, setting of profit margin, etc.

5. Reduce unnecessary expenses

Analyzing your business numbers would also open your eyes to any unnecessary expenses you are incurring, to cut off or reduce to the barest minimum.

For example, if you are subscribed to a paid tool for your business, but discover that it is taking so much money without bringing in much revenue, you can switch to a free option that would bring similar results.

4 Financial Numbers to Analyze for Business Growth

Here are 4 financial numbers to pay attention to, to enhance your business growth.

1. Profit

Profit refers to the amount of money left in sales and revenue made, after deducting expenses.

In analyzing your profits, you should assess your pricing, to make sure you are not underpricing your products/services.

You should also assess the overall profitability of each product/service you sell, to know the products that bring in the most revenue. In addition, look for means to reduce your expenses, to increase profits.

Need to analyze your business numbers to increase business profits and block leakages? Let’s talk.

2. Expenses

Your expenses refer to the amount of money spent on the production of goods and services and paying for things like equipment, rent, marketing, etc.

In every business, there are recurring expenses and investment-based expenses. Investment-based expenses generate more money for your business over time; thus, they should be prioritized. For example, buying a tool that speeds up your work process.

In analyzing expenses, check if your expenses do not exceed your revenue. That is, spending more money than you are making, thus, leading to losses and debts.

3. Cashflow

Cash flow is the bloodline of every business. It refers to the amount of money that goes in and out of your business over a period and helps to determine the liquidity of your business.

To calculate cash flow, you should look at the difference between the cash you have at the beginning of a certain period, typically a month, from the cash you have at the end of that period. The difference between this is what determines if your cash flow is negative or positive.

To have a positive cash flow, track your cash and reduce the amount of credit you give customers. You can also reduce the amount of cash that goes out of your business, by spending less than you earn.

4. Sales

Sales is the money you make from selling your product/service and the revenue your business generates over a period.

In analyzing business sales, observe when there is a dip and when there is an increase. This helps you know what to do to prevent further dip in the future. And for an increase in sales, it helps you know how to sustain it over time.

Analyzing Your Business Numbers for Financial Success

Understanding your business numbers would keep you atop what is going on in your business, and help you make strategic decisions that move your business forward. Ignore your numbers? And you are a few steps away from running down.

At Triift Africa, helping MSMEs set up a system for analyzing their business numbers is our forte. And we have worked with many small business owners, who have seen success in this regard.

So, ready to take the bold step of analyzing your business numbers to accelerate your business growth? Send an email to us at hello@triift.africa or visit our website.

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