Step 5: Know The Numbers In Your Business - Pt 1

Sad to say in many cases, while owners understand certain sets of numbers in their business, they are often ‘in the dark’ about other numbers which they really need to know intimately, in order to get the best from their business. Unfortunately, they are not made aware of these numbers and while I might think that it behooves their accountant to make them aware, that very often doesn’t happen… and many accountants themselves are not attending well to these numbers in their own business.


Margins and Markups

Getting the numbers wrong in this area of the business can see you going backwards faster, the more that you sell!
When you start discounting your price, the ramifications can be severe, so you need to understand the full impact of that – even when you have your starting numbers for your markups correct. If you start with the wrong numbers… it can be a disaster.

Marketing

Marketing is often confused with advertising, but is much more and the two need to be clearly understood as separate activities. Advertising will fall into the marketing plan and form a part of the overall marketing strategy. Like any other activity, there needs to be a clear understanding of what needs to be done and how to do it as well as a method to determine if the money we are spending is worthwhile. It is this return on investment (ROI) of any activities that are undertaken, that we should be able to clearly track and compare, against previous and future activities.

Take the case of an advertisement in Yellow Pages. How many sales were made from this in the previous year? What’s the dollar value of those sales? How does the cost of that advertising compare with the return made from investing in that advertising? How does this year compare to last year? How does that compare with the cost of new business acquisition from other sources? What other methods could you be using that were less costly (reduced size of ad, and more information available on the link to your website) And importantly, how much return do you expect to achieve above the cost of the campaign, in order to be satisfied with the results?

These are things that you need to consider long before you commit to spending money on something that may or may not deliver the results you need to get value from your spend. Without measuring your results and doing a cost benefit analysis on your marketing and advertising, you are gambling. Not making sound business decisions.

And Remember! Ignoring your current customers and not nurturing them is also a costing your business money. This is so, whether you know it or not.