Franchisees, licensees, independent business owners – we all start in business for a range of reasons, two of which are to make a profit and to build wealth. We know they are not the only things that matter, but we also know they are important.
To run a profitable business you must keep track of your financial results. They show the outcomes of your activity and help identify areas that need attention.
Step two – know your numbers
There are two aspects to this: planning and monitoring.
Planning includes preparing a budget and cash flow forecast.
Monitoring is reviewing regularly the key numbers that show you how you are going compared to your goal.
You should monitor financial and non-financial numbers. Examples of financial numbers are sales, cost of goods sold and net profit.
Non-financial numbers are things like number of customers, average transaction value and unique visitors to your website. Find the ones that are relevant for your business.
Once you start monitoring these numbers, you will need to compare your actual results with your goals and take action if you are off track.
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