Q: Hi Dav, I’ve just set up my own business and really want to start off on the right foot. Everyone keeps telling me I need to “know my numbers” what exactly do they mean?
A: Getting your head around the numbers can feel like a bit of a minefield when you’re starting your own business. The strategy I use to stay on top of things hones in on 5 key areas: cash flow, profit & loss, revenue, customer acquisition costs and customer lifetime value.
Cash, cash, cash
Your number one priority should be staying on top of your cash flow figures – incoming as well as outgoing. It’s vital that your outgoing expenses don’t ever creep up above your incoming cash flow. Make that one a mantra that sticks.
Know your revenue patterns
Profit & loss is pretty self-explanatory, but revenue warrants a closer look. Revenue (in other worlds, sales or turnover) is what keeps your business afloat. So, you need to keep tabs on how and when it’s coming to you. Keep regular records so that you can look into any patterns or trends that show up: are there seasonal highs and lows that have a significant impact on your sales? How can you plan for those, to maximise the peaks and weather the troughs? Forecasting is key.
Attract, retain and grow
When you’re starting out, you’ll want to be building your brand awareness, authority and credibility in your chosen sector as rapidly as you can. It’s a vital step to start-up success, but attracting new clients is also an expensive process. So it doesn’t become overwhelming, maximise your organic customer acquisitions via word-of-mouth and referrals from your existing base. Finally, consider the numbers involved in your customer lifetime value. It’s a cold, hard fact that it’s more cost-effective to retain clients than it is to attract new ones, so that’s where your strategy should be aiming eventually. By levelling up your customer lifetime value, you can eventually reduce your customer acquisition costs, future-proofing your business’ long-term sustainability.
Edited to add: One stellar tip that came through from the community at the time of writing this was the importance of keeping business and personal bank accounts separate. I am a huge fan of Starling’s business bank account, I’ve no affiliation but I would definitely recommend!
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