What are the numbers that matter in your business?
Let’s start with profit. There are a few different “profits”
Gross profit = the amount remaining from sales after you deduct the total cost of production. It is always useful to express this as a percentage of revenue
Revenue or Sales = all monies generated from selling what your business offers – goods and / or services
Cost of Goods Sold = the cost of all the materials used to create your offer – ingredients, materials
Cost of Sales = any cost incurred to create your product – materials, parts and wages
Net Profit = Gross Profit less Overheads
Overheads = these are all the expenses that you incur that are not directly related to production. Usually these remain constant, or fluctuate independent of production; rent, marketing, professional service, insurances, wages of non-production people
Break Even = Gross Profit covers all Overheads
Why are these important?
Tracking how your business is performing on a regular basis – daily, weekly, monthly is critical.
I used to work in a manufacturing company and we knew how much profit we were making hourly.
Set up a dashboard, spreadsheet to track these numbers. Ask your accountant or bookkeeper to provide the numbers on a regular basis.
What we measure improves.
Ultimately you want the profit to increase, when you track the results regularly, you begin to see where the opportunities are for improving profit
