A lot of business owners are flying blind when it comes to knowing their business financials.
In today’s episode, I share the 5 numbers you need to know in your business.
In this Episode:
00.56: The sales numbers you need to know
03.48: Why your profit is more important to know than your sales number
05.05: Make sure tax time isn’t a scary time
06.52: Getting to know your cash balance
08.18: The numbers to add to your budget
A lot of business owners are kind of flying blind when it comes to being across the financials in their business. So in today’s episode, I’m going to be sharing with you the five numbers you need to know in your business.
Hello and welcome to The Clare Wood Podcast, where myself and incredible guests share about money mindset, financial successes, and how to manage your money in a fun and practical way to create wealth and abundance in both your business and your life. I’m your host, Clare Wood. I’m a business coach and a money mentor. I strongly believe that money has the power to positively change the world. I can’t wait to help you transform your mindset around money, create a love of numbers, and build the business of your dreams so you can live a life of financial freedom, giving, and global impact.
The sales numbers you need to know
The first number you need to know is your sales number. Now, it seems pretty obvious, but I’d like to ask you to check in, do you actually know your sales months to date right here, right now, and also on a year-to-date basis? Now, from my experience, most people ballpark have an idea, but they don’t know exactly what their sales results have been.
So I would love for you to start tracking this metric and for it to be something that you check in on every single day in your business. It’s something I certainly do, and I’ve even got a cool little sales tracker that I update every day. And it really gives me the opportunity to feel confident about where I’m tracking, but also to have gratitude for people who are choosing to invest to work with me. It can be a really beautiful practice to actually take the time and acknowledge the sales that are coming in. I’ve shared this before on the podcast, but when I update my sales tracker each day, I actually really think about the person who has made the payment and send a little wish to them and say, “I hope this investment comes back to you many times over.” I actually originally heard this on the Manifestation Babe Podcast and I loved the principle behind it. So it’s something that I’ve incorporated. And of course, if I’m launching a high volume, low ticket, then I am reaching collectively out to the people who have made a payment. It’s just a really beautiful practice to lean into the energetics of money and be appreciative of those that are investing to work with you.
There’s a couple of reasons why I believe you should be right across your sales number. Firstly, it’s about confidence, about knowing that you are in the driver’s seat of your business, knowing that you know how your business is tracking and really feeling like you are in the driver’s seat.
The next reason is we’re tracking against your business goals. And we are going to talk a little bit more about this later, but one of the best ways for you to elevate your success is to set goals and then track your performance against those goals you set.
The next reason why’re tracking your sales is a great idea is because it is a good indicator of the success of your marketing efforts and also your customer retention. This can be one of the first indicators if you’re perhaps not investing as much of your time and energy into your marketing or your customer retention as you could be. And so it can be an early warning sign, “Oh, I might need to get these things back on track.”
Why your profit is more important to know than your sales number
So sales are fantastic, but the next number that you need to know in your business is your profit. I talk about this a lot. Yes, accountant Clare. We know it’s coming out, but it’s really important to understand your profit number. The reason why it is so important for you to know your profit number is because you do not get to keep all of your sales. You will likely have expenses that you incur in your business. And after you do have your profit number, you most likely need to pay tax out of that number as well. So your profit is your sales, less your expenses. And I would say that your profit number is far more important than your sales number. So many times in the online world, we hear the six figures or seven figures thrown around without the actual context of the expenses that that business incurs. I am much more interested in what someone’s profit number is than their sales. So for you as a business owner, make sure you are right across your business profitability.
Make sure tax time isn’t a scary time
The next number you should know in your business is your tax liability. There is a saying, “There are two things certain in life: death and taxes.” So it’s pretty unlikely that you’ll be able to go through your whole life without having to pay tax, particularly if you are running a successful small business. So what happens is as you earn profit, you incur what’s called a liability. You are liable to pay tax at a future point in time. You might not necessarily have to pay the tax bill straight away, but invariably, you will have to pay it. Your tax liability is the money you currently owe to the tax office. So you might be bringing in income of $5,000 a month and life seems pretty fine, but then three months or 12 months later, you get hit with your tax bill. And it might be a nasty shock. Trust me, it’s happened to me before and I’m a qualified accountant. So it can definitely happen to you.
At any point in time, it is really important that you are aware of how much you need to pay for tax. And I really recommend that you always put that money aside. This is something that I’ll be teaching in my upcoming course, The Profit Academy Foundations, where I teach people how to get right into all of the details of their money. And inside this program, I share that you should be saving your tax as the year goes, because trust me, you do not want to be encountering tax shock.
Getting to know your cash balance
The next number I want you to know all the time is your cash balance. Now, this is different to your sales number or your profit number. This is how much you actually have in your bank account. A great little money practice that you can get into is checking your business bank balances every day and just staying really familiar with what they look like. Again, this is just helping you to be empowered around your money, to know how much cash you’ve got.
One of the things that I love to do in the space of cash is cash forecasting. This is a tool that I’ll be teaching about in the Profit Academy Foundations. And if you’re loving the sound of it, you can jump on the wait list via the link in the show notes for today’s episode. But the point that I was trying to make is that being across not only your current bank balance, but also what is coming up will feel so empowering. It means you won’t be in a position where you get shocked from an upcoming bill, and it also means that you can invest with confidence into your business because at any point in time, you’ll know exactly how much cash you’ve got and also what is coming up in the future weeks. Staying across your cash balance is a really fantastic way to feel more empowered with your money.
The numbers to add to your budget
And the last number that I believe all business owners should know is their budget. Now, when I say budget, there are a number of numbers that we budget for. And I think it’s really fantastic to say right across your budgeted sales and also your budgeted profitability. Now from my experience, very few business owners actually create a budget for themself in business. And the reason why this is a bit scary is because it means they don’t have a plan. One of the fastest ways to shift you from where you are to where you want to be is to have a clear plan of how you were going to get there. And not just setting some lofty sales target, but actually breaking down the investments that you need to make in your business to get there. So I highly recommend that all business owners create a budget and they then track their progress against these budgeted numbers.
The best way to do this is to map out your income and outgoings month by month for the coming 12 months.
Now I know this can be a little bit overwhelming if you haven’t done this process before, but this is something I will be covering in The Profit Academy. I created The Profit Academy because so many business owners just aren’t in the driver’s seat when it comes to their numbers and maybe they get a little bit overwhelmed or anxious talking about it to their accountant. So I created this program to show you that numbers can be easy. You just need to know what numbers to look at and understand how to do so. I’ll be teaching all of this inside The Profit Academy and it will be coming up very soon. So keep an ear out for when I announce the launch of The Profit Academy Foundations.
To sum up today, as a business owner, as the CEO of your business, you really do need to be right across your numbers. And five key metrics I would love for you to be in the detail of at any point in time, are the following:
- Your sales number.
- Your profit number.
- Your tax liability, make sure that you know how much you owe the tax office.
- Your cash balance.
- Your budget. What exactly is it that you were shooting for and how are you tracking against it?
I hope you have enjoyed today’s episode of the podcast, and I look forward to chatting to you more about money next week.
Thanks so much for listening. If you loved this episode, please share it with your audience and don’t forget to tag me on Instagram @clare_wood_coach. And also make sure you hit subscribe so you never miss an episode. Have an abundant week, and I look forward to talking to you again next week.