A lot of my posts have been very specific to detailed marketing strategies but rarely do I touch upon general subjects. I though I’d do so with this blog post. Something that most entrepreneurs SHOULD figure out after some time.
We all have a friend that loves to talk about business. Every day they come up with an ‘amazing’ idea and how he can make millions from it. He/She will tell you their idea with such conviction and passion that after a while even YOU start to think, “hey, that’s not a bad idea!”. It’s great to see this type of enthusiasm and we’ve all had it ourselves, mostly, (and sadly), about an MLM product.
After a while in business however, you realize NOTHING is a good idea until it makes sense on paper. After you’ve run a small test with real $ and you’ve put it into action in some way. You then proceed to put all this data you’ve found on paper and analyze the costs associated with everything and the potential revenue it can bring you in days, weeks, months, years and then and ONLY then, will you start to really run with this business.
So what does all this have to do about Accountants?
When I used to work for a construction company, I would run my projects past my accountant at the end of every month so he could put it in his spreadsheet and send it off to management. As much as I’d love to talk about the project(s) I was running, I knew at the back of my mind, this guy just wanted numbers. He wanted a breakdown of my every cost, to the cent. The exact revenue received and when this money was expected to come through to our bank account.
At the end of all this, regardless of how much of a super hero Civil Engineer I had been through out the project, success was eventually governed by the profit made on the project. All I saw from my 1-2 months of hard 10 hour+ days of running around managing subcontractors, dealing with picky clients and general stresses of construction was one, finely calculated number.
This is all my accountant cared about and he was totally right to do so.
Business is great to be in but there’s no point being here if you’re not continually assessing where your money is going and how much is coming in. If you’re not constantly looking at reducing your costs and increasing your revenue.
This is the main reason I have a monthly spreadsheet of how much revenue is coming in and how much this revenue is costing me to sustain. I can spot trends, I can spot likely drops in income, I can spot where my money is being lost and where I can potentially increase my revenue. All core focuses that help me increase my profits and essentially, better my business. I look at this spreadsheet DAILY. I have a more detailed one that’s broken down to the exact traffic sources I use and the exact affiliate programs generating me revenue. The more detail the better for me.
If you’ve watched enough Dragons Den episodes, you start to see how dis-interested the Dragons get when people start talking too much fluff but the moment they mention a number, they start to become attentive again. No matter how great the idea, if you can’t come up with, “this cost me EXACTLY $x,xxx”, “I’ve had this many sales this month with a profit margin of $x,xxx”, “Projected sales for the next 3 months are $xx,xxx, based on a success ratio of 20% for retail product pitching”, etc, etc, then you’ll struggle as an entrepreneur and for you, it will most likely, just be a dream that’s just out of your reach.
Shift your focus and habits to looking at your numbers. Take the advice of every successful entrepreneur out there and make the below words part of your every day life.
‘data’, ‘tests’ ,’profit’, ‘loss’, ‘tracking’, ‘percentage’, ‘profit margin’, “sales”, “annual projection”, “trends”, etc, etc.
You should be constantly using these words and looking at these numbers. Numbers don’t lie, and we’re very grateful for that. They tell us the cold hard truth just like a mirror does about our appearance. This is why you should train yourself to be a numbers guy, (or gal).