Know Your Numbers

People ask me what the first thing to do when a business is in trouble. The obvious answer is “Cash Flow”. Cash is king – everyone knows that (almost everyone). So unless cash position is healthy everything else will fall apart. Fix the cash, stop the bleeding, then panic disappears and calmness ensues.

What the not so obvious answer is this: “know your numbers”

Before we try to fix cash flow it is imperative that we know the numbers. Everything from sales figure, profit & loss, cost of goods, cost of operations, hidden expenses, and so on. If we are to have a chance to get to the bottom of the pit we need to keep digging .. and keep digging.

Some people are happy enough to get “an idea” of where things are – trusting their gut feeling and intuition. There is nothing wrong with gut feeling and intuition. Those are important to make a quick decision. But when the time comes to make a more involved and analytical decision such as “where to cut cost that does not affect the core business” – intuition can be misleading.

Knowing your numbers can be heart-breaking. Most business owners in trouble might avoid this because they know the numbers are bad. They couldn’t face reality. Some convince themselves into denial – hoping and praying that everything will turn around tomorrow, or the next day, or the next day.

The problem is of course, the longer they wait the worse it will get. If you cannot do anything with the business then at least do something else. The point is, you have to do something. And all of these start with knowing your numbers.

Knowing your numbers will not kill you, not knowing your numbers will.

A lot of things in a business are out of our control. We can only do so much, try to anticipate, be pro-active, and response to the best of our ability. Everything else is not our problems because we couldn’t control them anyway.

So don’t feel bad or afraid, we are only humans. In other words, don’t be too hard on yourselves. Know your numbers and improve, or exit and do something new.

 

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