Numbers in business

As Richard Branson explains in his book, The Virgin Way – Listen, Laugh, Lead (I highly recommend every business owner/entrepreneur read) –

“One positive lesson I took away from the whole public company experience, was that there are quite a few public company-like disciplines that start-ups should adopt from day one. The reporting requirements leaves no room for the levels of creative ‘we’ll worry about that later’ accounting that a lot of start-ups practise for years. While the disciplines are mostly on the financial side, better tracking of your forward progress in all kinds ways gives your people a better metric by which to measure their own contributions and development.”

So, to summarise this even more, if you don’t start your business with some idea of the numbers around what makes it breathe, then guess what, it will inevitably die.

What I mean by numbers, you need to firstly establish soon after you understand your product or service offering, what your capacity to deliver is. In other words know how many times you can sell in a month or how many plumbing jobs you can attend in a month, then when you have done that put some costs around how much it will cost to sell that product or deliver that service. Our hourly rate calculator is a great tool to use to establish your costs and charge out rates. Don’t get too worried about these numbers they will all make a lot of sense pretty quickly and will either surprise or shock you, I’ve never seen anyone I have done this exercise with be in the middle.

We are not talking massive accounting feats, nor do you need to have a degree in accounting, there are great software programs around that can help you with this. Accounting packages like Xero, MYOB and QuickBooks all have these functions in them to help you better understand your costs.

I was exposed to how powerful numbers are in business many years ago when I was marketing manager for a Malaysian Car Company, and we had a Feng Shei and numerology expert come to Australia to help fix our sales issues with the brands in our company owned dealerships. I was the biggest sceptic, in fact I thought it was just a junket for these guys to come to Australia for a few games of Golf. Which they did anyway. But truth be known the changes they implemented put dollars on the bottom line and very quickly for the fledgling manufacturer. Pretty amazing.

It wasn’t till much later that I had a meeting with one of these guys.