| When a business fails or succeeds, there are several | | | | writing this right now) but they can get you closer to |
| different factors that come into play with regards to | | | | understanding where you are and how you need to |
| what caused the success or failure. Some of these | | | | get to your next point. |
| factors are simple enough to manage that, had some | | | | Monitoring Income and Expenses - Even accountants |
| time been spent on them, these problems could have | | | | spend money on things they don't use or that don't pan |
| been avoided. Keeping your books in order is one of | | | | out. The key with regards to expenses is to have the |
| those areas that are simple yet can have a big impact. | | | | ability to monitor where your money is going and to |
| Norm Brodsky, who writes the Street Smarts column | | | | analyze if you should keep putting money there. Have |
| in Inc. magazine, wrote a great book on | | | | you ever signed up for a monthly service, never used |
| entrepreneurship called "The Knack". In the book, | | | | it and paid for it for a year before realizing how |
| Brodsky talks at length about how important it is to | | | | unnecessary it is? I have. Keeping your books current |
| know the numbers of your business. He suggests first | | | | will help you avoid these common scenarios. |
| learning these numbers by breaking them down by | | | | With regards to income, it's essential in sales and |
| hand. Some of the numbers include; sales, fixed | | | | marketing to always be tracking how your efforts are |
| expenses, variable expenses, net revenue, profit etc. | | | | panning out. Without this analysis, you are wasting your |
| His reasoning for breaking these down initially by hand | | | | money and effort on marketing and sales campaigns |
| is so that you understand them inside and out. | | | | that you aren't sure are working. Understanding your |
| In addition to Norm Brodsky's point of knowing the | | | | income metrics can be a great tool for measuring |
| score, there are 3 other simple reasons to keep your | | | | company performance, employee performance as |
| books in order starting with a more in depth look at | | | | well forecasting. |
| knowing the score. | | | | Timing - What if you have an opportunity that can be |
| Knowing The Score - Knowing the score is obviously | | | | huge for your business and you need to do some |
| important but for all that we know of its importance, | | | | quick analysis? Do you want to spend that time |
| we also know that we, as business owners, neglect | | | | crunching numbers you should already have or do you |
| this area. Do you know what numbers you need to hit | | | | want to spend that time on analyzing the existing |
| for a successful year? Month? Day? Analysis of your | | | | opportunity? Timing can be crucial in business. Having |
| books will allow you to start formulating these metrics | | | | your books in order allows you to know where your |
| and ensure that you really know what is going in your | | | | business is at currently so that you can make better |
| business. Often our perceptions can be deceiving. | | | | and more timely decisions. |
| Having hard numbers in front us, keep us from | | | | In the 5 Laws That Determine All Of Life's Outcomes, |
| believing an illusion. | | | | one of author Brett Harward's success laws in the |
| Planning - Are you analyzing trends in your business? | | | | Law of Frequency. Having the right information allows |
| Do you have short term and long term projections? | | | | to act with better frequency and also allows you to |
| Many small business owners don't like to make | | | | adapt to changing landscapes quicker. This ultimately |
| projections in their business because they feel that | | | | allows you to reach success in a much shorter time |
| they don't have the necessary information to make an | | | | frame. |
| educated analysis. Keeping your books up-to-date | | | | Doing your books is not always fun (OK for me it is |
| allows you to be more comfortable in making | | | | but we are talking about you). Maintaining long term |
| projections in your business that are necessary to | | | | success for your business is fun. Keeping your books |
| keep your business moving forward. Projections are | | | | current is a critical success piece. If you don't like doing |
| never fool proof by any stretch (if I knew how to | | | | keeping your books, leverage someone else's passion |
| make fool proof projections, I probably wouldn't be | | | | and find someone who does. |