Numbers don’t lie, people lie… to themselves!
By Kynan Albassit & Janty Ayoub
Are you afraid of the dark? No? Good, it’s something most people grow out of but these days, most business owners seem to be more afraid of the light. They are scared that under the harsh commercial glare of their profit and loss (P&L) sheet, it will come to light that their business is in trouble, or heading for trouble, or… that a change needs to happen.
Unfortunately, or fortunately, change is one of the few constants in today’s world and yes, that includes the business world. Change absolutely is going to happen but understanding how your business may need to adapt in step or ahead of market forces, will determine how your business thrives in this environment. But again, at the heart of it all, is the need to know where exactly you are, which means… knowing your numbers.
Running from reality is easier to do in the dark
Have you ever seen something shocking or disturbing or gross that you simply couldn’t unsee, or perhaps heard something you wish you could unhear? It can shake you up and stay with you for quite some time. We actively try to avoid those scenarios, don’t we?
Now, what if your accountant or a business partner revealed to you that your business was losing $100k a month, or a week, or depending on the size of the entity, a day! How much worse is that than a clip on a social channel? I’m guessing you would immediately, call a meeting, call a halt to everything, call an accountant, a lawyer, something. And there might be some pretty immediate changes and hard discussions to be had. And from there, there’ll be two distinct impulses:
- Try to stop the bleeding immediately, essentially attempting to go from minus $100k/month or year or week, to plus $50K in the same time frame. That lofty goal requires more upheaval and strain on the commercial infrastructure than most businesses could bear – they’ll be at risk of breaking apart.
- Take a more measured approach and act immediately to reduce the losses by $10k-20k at a time. But to achieve that, you’ll need to know your numbers (and the number behind those numbers).
How much easier would the next days, weeks and months be if you simply didn’t know about any of those shocking financial revelations and could carry on, blissfully ignorant, through the darkness for just a little bit longer? Thousands of businesses, even as you read this sentence are doing exactly that. Are you one of them? You don’t have to answer that but let’s take a quick look at some of the reasons behind the unconscious or conscious preference to keep the lights turned off.
Here’s why some business owners prefer to bask in the darkness
Sure, trying to avoid the horrible truth is definitely a reason for staying in the dark. But there are a couple of other reasons to dig into before we get to the benefits of knowing your numbers:
- It’s all too hard. I mentioned the P&L sheet in the opening paragraph. Yes, to the uninitiated and experienced, the P&L sheet can seem complex and depending on the complexity, there can be an awful lot of numbers. My advice? Stick with it and get help if you don’t understand it – there are a lot of positive and negative indicators in there that can be a warning or… an opportunity!
- Ignorance is bliss. Perhaps for a while, but as demonstrated, ignorance can take you from a bad spot to a disastrous one in no time at all if left unattended. Still, there are those who prefer to stay in the dark, put it off and face the music another time.
- Knowing your numbers means knowing everything – including yourself. Nobody gets into business to get into debt they can’t get out of yet people still get into business without ever looking at the numbers! The mentality is similar to someone that withdraws money from an ATM but never looks at their balance, knowing deep down, that it may affect how they spend that money. Again, it may mean they have to… change: their plans, their spending habits, their expectations.
Whatever the reasons, it’s better to know – it is to your advantage and to the advantage of everyone involved in and with your business.
Okay but exactly why is it better to know your numbers – how does that help?
Put simply, you can’t afford to not know the numbers that count, such as:
- Incoming gross revenue – don’t be fooled by the big numbers though, it’s all about nett profit.
- Expenditure – how much are spending and on what… and when. The more detailed this section, the easier it is to make adjustments if you need/want to.
- Net profit – if it’s sustainability you’re looking for, you will want to keep an eye on the direction your nett profit is heading. Staying the same is a bit like going backwards when your market, the economy and the rest of the world is moving forward. “Staying ahead of the game and your competitors” means more than simply keeping up. You can speak with our experts about ways to ensure you’re not left behind.
This is not an exhaustive list but it is a good place to start.
The advantage of knowing your numbers lays in the advanced notice of the good, the bad and the ugly of your business and where it’s all heading. All crucial to thriving in this environment of change.
3 simple steps you can take immediately to improve your business
At AiiMS we pride ourselves on uncovering the heart of the problem and getting straight to the solutions. So, here are some things you should do right now:
- Wake Up – Face the music, look at your numbers, and know what they mean. You don’t need to make any changes straight away, just know your reality.
- Take ownership of your numbers, don’t palm this task off to someone else, be actively involved, learn, strategy, work with your accountant.
- Do it today, take action now, don’t wait for reality to bite, down the track.
I’m not saying, it will be easy but, having done it, you will realise that it was absolutely necessary.
A final thought. I know some of you will be saying to yourselves, “I’m not a numbers person, it’s not what I’m good at.” The answer is to enlist the services of a “numbers expert” – an accountant, a specialist in this area – that actually cares and understands your business and where you want to take it. Listen, knowing your numbers will help you make the right budgetary calls, minimise poor decisions, help you scale your business and give you some confidence around resourcing which is vital.
In other words, knowing your numbers makes your business better and that’s the truth.
Janty and Kynan are important resources within our brains trust and are on hand to help set your business up for ongoing success with the right type of guidance during these ever changing times.
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