Connect with us

David Brown

These Are the Most Important Financial Metrics You Need to Know

Keep the pulse of your business by checking these six figures regularly.

mm

Published

on

IF YOU DON’T enjoy numbers, you’re not alone. A survey by Ogilvy and Co. discovered that around 60% of people have trouble dealing with numbers in simple everyday circumstances. Nearly one-third of Americans would rather use the bathroom than solve a math problem! That said, numbers are a part of our lives, and understanding them, particularly as a business owner, is even more crucial.

It’s easy to get overwhelmed by the sheer magnitude of data available, but using it effectively is about applying the 80/20 rule and focusing on the few key metrics that will tell you most of what you need to know.

Below, I’ve outlined the key numbers you need to be monitoring and how frequently you need to focus on them.

Advertisement

1. Sales. They are your lifeblood and need to be monitored daily. Waiting until the end of the month to see how you fared is too late to make meaningful changes if the numbers aren’t stacking up.

2. Cost of Sales. What did you spend to make those sales happen? This data needs to be viewed at least monthly, and a good financial system should be able to deliver you up this information very easily.

3. Gross Profit Margin. Sales less cost of those sales will provide you with the gross profit from this effort. The important measure on this is your margin: What percentage is your profitability? This can be achieved by dividing the gross profit by the sales achieved and multiplying by 100 to get a percentage. Your daily reports will give you this figure instantly. How does it look compared to your target?

4. Other costs. Aside from the direct cost of sales, you will have other expenses during the month such as rent, wages, advertising, etc. Your financial system should make it easy to track these monthly.

Advertisement

5. Profit. What are your sales less your cost of sales and other costs? Again, you should be able to calculate a monthly profit based on actual performance. This will lead to …

6. Profit Margin. Your profit divided by your sales and multiplied by 100 to give you a percentage. This should again be measured monthly.

Advertisement

SPONSORED VIDEO

She Wanted to Spend More Time with Her Kids. She Called Wilkerson.

Your children are precious. More precious than gold? Absolutely! Just ask Lesley Ann Davis, owner of Lesley Ann Jewels, an independent jewelry store that — until the end of 2023 — had quite a following in Houston, Texas. To spend more time with her four sons, all in high school, she decided to close her store. Luckily, she was familiar with Wilkerson and called them as soon as she knew she wanted to move on to bigger, better and more family-focused things. Was she happy with her decision? Yes, she was. Says Davis, “Any owner looking to make that life change, looking to retire, looking to close, looking for a pause in their career, I would recommend Wilkerson. Hands down!”

Promoted Headlines

Most Popular