Dan Lutchansky CPA
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“This book is packed full of practical suggestions. Pay particular attention to the success by the numbers approach to starting a business. You might as well build a business out of bricks instead of straw.”

Craig Daley, President
Daley’s Drywall and Taping, Inc.

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SUCCESS BY THE NUMBERS


WHAT NUMBERS ARE VITAL TO THE SUCCESS OF YOUR BUSINESS?


Please review the following list to see which ones apply to you.

  1.  The number of leads generated.
  2.  The number of leads converted.
  3.  Average sale per customer.
  4.  Gross profit margins per product.
  5.  Gross profit margins for the company.
  6.  Percentage of operating expenses to sales.
  7.  Owner salary or draw.
  8.  Net profit before taxes.
  9.  Net profit after taxes.
10.  Cash in the bank.
11.  Cash flow for the next month.
12.  Average days outstanding for accounts receivable.
13.  Breakeven point.
14.  Inventory turnover.
15.  Realization ratio on service hours.


What other numbers are the key to you achieving sustained small business success?

See below for what we feel is your most critical number.

Let the key numbers drive you in the way you manage your business. Drive those key numbers and you are on the road to success.

Most small business owners don’t know or understand the numbers of their business. Many times a financial statement is glanced at “for the bottom line” and placed in a drawer never to be seen again.

All of us know people that have been successful in their own businesses for many years. Ask them if they know and understand their numbers. Almost without exception, they all do.

Ask people who have failed in business why did they fail. Most give a vague answer something like my marketing didn’t work, the customers wouldn’t buy or my timing was off. They should be saying things like sales were too low, operating expenses were too high or my employees were not productive enough. You want to know and understand the key numbers so you keep doing the right things or change the things that are not working.

You need to report the numbers for your taxes anyway. You should also use the numbers to manage your business.

The bottom line is you can’t manage what you don’t measure.

Even if you feel “learning impaired” when it comes to numbers, there is hope for you because your proper use of QuickBooks generates the numbers that you can look at every day and eventually, they will start to make sense and you will see patterns.

Spend five minutes at the end of each day reviewing these reports:

  • 1. Sales reports by product or customer.
  • 2. Employee reports of time by name or job.

Spend thirty minutes once a week reviewing these reports:

  • 1. Sales reports by product or customer.
  • 2. Employee reports of time by name or job.
  • 3. Accounts receivable aging report.
  • 4. Accounts payable aging report.
  • 5. Cash on hand and in the bank.

Spend an hour once a month reviewing the following reports:

  • 1. Balance Sheet.
  • 2. Income Statement.
  • 3. Cash Flow Statement.
  • 4. Plus all of the weekly reports.

The above reports are the minimum you should review to manage your business. Depending on the nature of your business, there may be others that are pertinent.

All of the above reports are automatically generated in QuickBooks.

If you take a “Success by the Numbers” approach to your business, you will be on your way to achieving sustained small business success.


YOUR MOST CRITICAL NUMBER

By far the most important number you must understand is the “breakeven point.” A simple definition of the “breakeven point” is the amount of gross profit you must generate to cover the basic overhead of your business. Gross profit is equal to sales minus the direct variable costs of producing your product or service. The basic overhead of your business includes your salary, which initially should be equal to what you would have to pay someone else to perform your duties.

You should use your “breakeven point” to manage your daily activities. It tells you on a daily basis how much the business must sell and produce to make money. Please read Our Book to learn how to build A Sustainable Business Model.