The Numbers That Matter In Your Business

When running a business, it’s important that all your operations are talking to one another. Part of this process is understanding your key financial figures so you can understand what’s doing great in your business and what may need a little work.

Today, let's have a chat about the numbers that matter in your business journey, beyond just looking at your bank balance.

Revenue

Think of revenue as your business's heartbeat. While it's exciting to see money coming in (who doesn't love that?), what really matters is understanding the rhythm of your cash flow. It's all about knowing where that money is coming from and where it's going.

Many business owners focus solely on their total revenue, but that's like judging a book by its cover. The real story lies in your net revenue. What's actually left after all those necessary expenses. It's the difference between saying you sold £10,000 worth of products and having £3,000 to show for it. 

Profit

Let's talk about profit, my favourite topic! But profit isn't just one number. Your profit is made up of many layers:

•  Your gross profit (the first layer) shows how good you are at pricing your products or services. 

• Your operating profit (the middle layer) reveals how well you're managing your day-to-day costs. 

• And finally, your net profit (the top layer) – that's the best bit! Showing what you get to keep.

The Cash Flow Conversation

Now, here's something that might surprise you: you can be profitable on paper but still struggle with cash flow. It's like having money in a savings account but nothing in your wallet when you need to buy something. Understanding your cash flow means knowing not just how much money you have, but when it's coming in and going out.

A real game-changer is keeping an eye on your cash conversion cycle. How quickly you can turn your products or services into actual cash in the bank. The shorter this cycle, the healthier your business's cash position.

Customer Numbers That Nurture Growth

Your customers are relationships represented by numbers. Understanding how much it costs to acquire a customer versus how much value they bring over time can transform how you approach your marketing and customer service.

If you're spending £100 to acquire a customer who only brings in £80 of profit, that's like buying £20 notes for £100 each! But if that same customer returns multiple times, suddenly that £100 investment becomes much more valuable.

Health Check Numbers

Just like you get regular health check-ups, your business needs them too. Your debt-to-equity ratio tells you if you're relying too heavily on borrowing. Your current ratio shows if you can handle your immediate bills. These numbers are like your business's vital signs and they help you spot potential issues before they become problems.

Making It All Work Together

To really be able to understand your business, it’s important to understand which numbers tell your business's story. Start with the basics: your revenue, your costs, and your cash position. As you get comfortable with these, gradually expand what you track based on what matters most to your business.

They're the difference between hoping your business is doing well and knowing it is.

Need Help Making Sense of Your Numbers?

Understanding your business numbers doesn't have to be overwhelming. At Pinnacle Advisory Services®, we specialise in helping business owners like you turn these numbers into actionable insights. Whether you're just starting to track your metrics or looking to dive deeper into your financial story, we're here to help you make sense of it all.

Book a call