If numbers don’t lie and they tell a compelling story (and they do), there’s no time like the present to know your business numbers as we push through the heart of tax season and head into the 2nd quarter of the year. In fact, it’s critical to keeping your dream alive and well – and growing – for years.
According to NAWBO member, past conference speaker and serial entrepreneur Allison Maslan, who addressed knowing your numbers in a recent article, it starts with three things: getting the support you need, focusing on sales and measuring everything:
- Get support: All major businesses have advisers who help them plan and execute their business strategies. Your business idea might be unique and brilliant, but without proper guidance, especially when it comes to financials, you could find yourself spending money and spinning your wheels.
- Focus on sales: Too many business owners push sales to the end of their business development process. They get stuck on logo development, website building and other items of building a business and delay sales until everything is finished. Let me tell you this: it’s never finished.
- Measure everything: From the moment you start your business, there are things to measure. Sales, leads, calls, clicks and conversions, views—you name it, every aspect of your business can and probably should be measured. Here are the most important ones to monitor:
–Revenue: By getting clear on how much money you are generating vs. how much you are spending, you will get a real picture of your operating costs. These numbers can help you tighten up expenses and even get more creative with bringing in revenue.
–Expenses: How much are you spending? A simple review of your bank and credit card statements will give you the numbers you need.
–CAC (Sales & Marketing Expenses/# of New Customers): How much does it cost you to get one customer? Common expenses include paid advertising, staff salaries, CRM and marketing automation software licenses, events, sponsorships, customer gifts, social media and website maintenance.
–LVC (Lifetime Value of the Customer): How much can you expect to earn from one customer? What is the sales cycle after the first purchase? How do you move them through the funnel for future purchases, and how much money will the average customer spend with you in their lifetime? Use this simple formula to calculate this number:
(Average Value of a Sale) x (Number of Repeat Transactions) x (Average Retention Time in Months or Years for a Typical Customer)–Lead List Size: How many prospects are you adding to your funnel each day? Keeping track of the number of fresh leads and aiming to grow them daily will help you streamline your prospecting activities and create more ways for those leads to get into your funnel.
Not feeling confident in your numbers knowledge? You’re not alone. Studies show two-thirds of Americans couldn’t pass a basic financial literacy test. Other studies show a literacy gap for women, whether it’s because they grew up in households where men controlled the money or because they never received financial education in school or the workplace.
Don’t let it discourage you. Rather, let it inspire you to take control of your own financial literacy. Enroll in a course, read books, scour websites and listen to podcasts about it to level the playing field. Look into financial management technology tools that can help you be more proficient. You can do it; after all, you started your own business!
- Edie Comminos, 2019-2020 president, NAWBO Chicago Chapter