You will not believe how many entrepreneurs I meet on a weekly basis that don’t know their numbers. And successful ones, too! They think they are making anywhere between $5k and $50k a month but that’s about how much they know about their business financials.
Not only do they not track their KPIs but also haven’t established which KPIs are most relevant for them and their industry. OR maybe haven’t even heard of the term “KPI” and thus have no idea what I am talking about in the first place.
So if you are one of the ones currently hiding from your financials, your KPIs and make decisions based solely on what feels good - this article is for you!
Why do we NEED to change something about it?
The simplest answer: Because hiding from them doesn’t make your situation any better. A lot of entrepreneurs know the basics, most of them can answer the question of revenue per month. But once you dig one level deeper and ask for profitability they are lost.
Personally, I believe that this is not how business owners of successful companies should be acting! If we ask any CEO of the Fortune 500 companies, do you think they won’t know their numbers? Well I don’t think so either.
Knowing your numbers, tracking revenue, expenses, profitability and other relevant KPIs means you can spot trends and changes immediately and always be on top of decision making. Informed decision making this is, not the one purely from the gut because “this launch feels off”.
No more of that though, it’s time to step up your game and be in the in charge leader that you deserve to be. Being a business owner means … owning a business. And with that come certain responsibilities. One of them is making sure that whatever you are doing actually makes money, because no money = no business.
Where do I get started in tracking financials?
Before we can start tracking anything we need to know what exactly we are supposed to track.
Step 1) Define your key performance indicators (KPIs)
Key performance indicators are those numbers, that are most relevant to your business and industry. Without putting in a good amount of thoughts and defining the most meaningful KPIs, you might as well be watching the sky for signs that your business is successful.
KPIs will be different for every industry and business. Revenue & profitability is relevant for almost any company. Additionally think about what directly impacts your business outcomes, how do you want to measure success based on specific goals and targets you have in your company?
Some examples of the most common KPIs are: Average Profit Margin, Sales Per Rep, Average Cost Per Lead, Funnel Conversion Rates, Marketing spend per customer, Lifetime value of a customer, Customer acquisition cost, Website traffic, Page views, Followers growth, Social shares, Click thru rate, Email Opening rates
As you can see there is a lot of different KPIs to choose from, so make sure to take your time, do some research, talk to mentors / other people in the industry to figure out which numbers to focus on.
Step 2) Create your KPI dashboard
So just knowing what to track will not help us get anywhere.
We want to have one place with all numbers right in front of us: our KPI dashboard. Our goal with this is to get a good overview over time to spot trends and tendencies and also at any given time be able to see your numbers and draw conclusions from them.
You can either go with a KPI tracking software out there … or especially when you are just starting out you can start as simple as possible: start with an excel or google sheets document.
Make sure to create different sheets for every different number you are tracking, so revenue would have one sheet, leads generated another … and then the top sheet, the very first one is the actual dashboard, the visualization of your numbers. Most likely this will be a combination of tables, bar charts, pie charts etc.
Step 3) Start tracking
Every week from now, probably the most logical would be either Friday or Monday fill your sheets with all the relevant information. So that over the weeks and months you are doing it you are building a timeline of your own business, making sure you see all relevant information with one look at your financials.
Words of encouragement …
If all of this is new to you… don’t worry, as I said before, quite a few entrepreneurs try to hide from their numbers which never ends well so congratulations first of all for wanting to change this and now just take it one step at a time!
Have any q’s on this? Shoot me a message at firstname.lastname@example.org happy to answer any and all of them.
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