What gets measured gets analyzed, and what gets analyzed gets improved.
This is especially true in the world of business, and one of the many reasons why well over 90% of small businesses fail and shut down in their first year of operation is because the people who own these businesses do not take the time and effort to track their numbers, especially their financial figures.
Any business that is in the interest of prospering on any kind of level must learn the art of tracking their financial figures to the point where everything is balanced almost perfectly.
No matter how big any given business is, there are many financial figures that allow a business to run properly. Some business owners do not know about certain financial figures about their business either, which is even more disturbing.
Among the dozens, if not hundreds of financial figures that affect small businesses, there exist four that represent the core of nearly any business. These four figures should be tracked very intimately and carefully. This will ensure that a business will be able to succeed in the long term.
These financial figures are the following:
Carefully track all four of these, and your small business will do better than most others.
4 Financial Figures You Should Track
This is the most obvious aspect of these four financial figures. Whether it takes the form of information, services, physical products, subscriptions, or consulting sessions, a business must sell something to buyers.
Nearly every business tracks sales numbers, but they are not detailed enough when it comes to tracking these numbers. A common small business will track sales numbers yearly. While this is a good thing, it is much better to track sales numbers across smaller time periods.
It is much more preferable to track monthly sales numbers, or even weekly daily sales numbers if that is possible. If you have the staff to do it, you should track sales numbers daily. This is useful for making predictions to see which days, weeks, or months are the most profitable.
2# Employment costs
This is another figure that businesses probably track as well. Most small businesses will indeed track the kinds of money that they spend on employment, but like with revenue, this is not tracked closely enough.
When it comes to hiring people, most businesses only track how much they have paid their employees and freelancers. It is very rare for them to keep a running total of how much they have paid their employees and freelancers.
Why is this necessary? Staff are an investment for a small business that reflects time as well as money. The whole concept of paying anybody for anything is predicated on saving time by paying somebody else to do tasks that are time consuming.
The correct way to track employment costs is to indeed chart how much a staff member is getting paid, but also to analyze what kind of tasks they have done and how effective these tasks have been performed.
Doing this can actually reduce costs. If you as a business owner has found that the employees or freelancers you have hired are costing you money but not doing the tasks assigned in an efficient manner, it would be a much better investment to hire some new staff members or do the things you thought you needed staff members to do yourself.
3# Marketing costs
Among the many aspects of a small business, marketing is one of the most costly. If the marketing is performed on a word-of-mouth dynamic, it can cost unusually large amounts of time but will be extremely cheap.
If the marketing is handled by a person or an organization, it will cost a lot of money but will save time.
Just like with the aforementioned two, not enough is done by a small business when it comes to tracking how much is spent on marketing. Tracking how much money goes into marketing is only half of the whole story when it comes to tracking marketing costs.
You need to also track how effective this marketing is. That is the other half of the story. If the money you are spending on marketing is not as effective as you want it to be, you may need to seek out other forms of marketing.
Everybody, even the unemployed, pay taxes in some aspect. Keeping track of what kinds of taxes your business needs to pay is something that all businesses must do.
A smart way to keep track of the taxes your business pays is knowing what kinds of the taxes the business needs to pay and what can be done to reduce the taxes. Many small business owners believe that they need to hire a tax attorney to detect ways to save on taxes, but in many cases, this is not necessary.
If a tax attorney is necessary, this also needs to be added into the “taxes” category since it is related to taxes. Many businesses either forget this or they separate the money they have spent on tax attorneys from what they have spent on taxes.
How should this be organized?
Organizing financial figures can be a complicated task, but it is also something that is possible to simplify without hiring staff members for it.
What a lot of small business do to organize this is use spreadsheets. These spreadsheets are often either disorganized in and of themselves, or it costs a lot of money to hire somebody to organize them.
This can have the possibility to not end well, and there needs to be a better way to organize these financial figures.
The answer to this is simple. Because it is so easy to start businesses going into the 2020s, more and more software is being created with the purpose of being able to organize these kinds of financial figures of your business.
This type of software is accessible from a smartphone, making it very easy to access. This is a very good thing for any business owner who wants to save money on staffing.
Because contractor software also contains software for all aspects of any given business, it is much easier to organize all the aspects of tracking key financial numbers of a small business without needing to hire full teams of employees or freelancers.
Marie Erhart is a Success Manager at FieldPulse, creators of field service software that lets you run your entire contracting business from a single app. She works with contractors to help them grow their business using best practices.