What Do Numbers Have to Do with Our Success?

April 9th, 2010

One thing you may not know about me is I often break out into song when someting happens or is said that makes me think of one. In this case I heard the song “What’s Love Got to Do with It?”

Another thing you may not know is I know alot about numbers and what they have to do with business. I used to teach math and statistics, got my first masters in educational research and my second is an MBA.

Why am I sharing this with you?

Because if you want to take your business to the next level, you need to know your numbers.

Many self-employed solopreneurs tend to wing it. In other words, we do not know our numbers, what they mean, and how we can use them to make better business decisions. We tend to evaluate how well we’re doing by how much is in our bank account. If we can pay our bills and still have money left over we think we’re doing okay. As you may be discovering during these challenging times, (which might not have been apparent during better economic times) that may not be enough.

In part, that’s because many of us didn’t get schooled in how to run a business. I remember when I was in high school. The business track was for the people who weren’t going to college. And in college, until my MBA, I didn’t learn a thing about business. What’s business got to do with being a psychologist or a teacher or a coach? If you’ve got a store, or a factory, yes. If you’re a professional, you’ve got a practice.

At least there’s lots of information and help available if you’re a dentist or chiropractor or realtor. There are training programs for them on practice management.

I’ve got to tell you, even some of those who have gone through such training don’t know they need to treat their practice as a business. In fact, you can be a great professional and a poor business owner, and not be able to keep sharing your gifts and talents because you can’t keep your doors open.

Why? There are many reasons for this.

The one I want to look at right now is most of us don’t know why a businses exists. We think it’s so we can do what we love. This is the reason behind a business.

What we forget (or never knew) is a business exists to make a profit… not make sales, not make money. a Profit! That means there’s money left over after you’ve paid everyone and paid for everything that it takes to deliver whatever it is you trade for money = products, programs, personal and professional services, presentations, etc.

For example, knowing the 3 major financial reports we need to generate and evaluate: Income Statement, Balance Sheet, and Cash Flow Statement.

These 3 documents read and understood help us understand how you can make sales and go broke. One example is you’ve sold something yet haven’t gotten paid yet. So you don’t have the money to pay yourself, your payroll (if you have one) or other expenses.

I’m not going to go into greater detail on these 3 financial reports. If you want to know more, comment, ask your questions, and I’ll answer. Or do some online research. There’s tons of information on this stuff. I promise.

One number that’s in the news a lot lately is ROI, or Return on Investment. The concept says you want to get back more than you put in.

You calculate your ROI to determine if you’re making a profit on whatever you’re spending your time and money on. This is especially important for marketing.

We forget our time is money. Social media and social marketing are free, aren’t they? Well, if you did all your own set-up so didn’t lay out a penny, and you do all your own writing of your Tweets and posts and comments, you’re not out making money during that time. We forget we need to pay ourselves for work as if we were an employee. We forget to figure our time into the ROI equasion.

Here’s a post that does an excellent job of giving you a handle on how to determine the ROI of your social media campaign. He also gives great tips about “How to Use Google and Twitter to Find Your Customers.” Customers means revenue. That’s a good thing. Now go check that you make more on those customers than it cost you to find them (or them to find you.)

If this has been a post that has you squirming in your skin a little, good! 

Why am I saying ”Good?” I’m suggesting to take our business to the next level, we need to lead by taking ourselves to the next level. That means whatever you call yourself - a professional, solo-preneur, self-employed, etc. remember you are a business owner, too. Otherwise you’ve got a hobby that makes some money, even if it is supporting your lifestyle. During tough times that may not be enough.

And I understand. I’m squirming, too. Even with all I know about numbers, how important they are to track and evaluate, I don’t always do wnat I know. We all do that in some area(s) of our lives.

I so want to know what you’re thinking as you read this. Please comment. Ask questions. Share the link with friends.

Let’s stick together and learn how to build a successful business one that’s sustainable, scalable, and profitable.

Be well, be wonderful, and enjoy!

The Energizer Bonnie

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