Key Numbers in your Business

It's really important that you know all the key numbers in your business - it's the only way to keep on top of your business and know where you're going.

Whilst it might seem scary, your numbers are really important to know if you want growth and longevitiy.

If you don't really know what your numbers are, let's start with some of the easy stuff;

Know how much time you're spending on things - things like how much time you spend on client work, how much time you're spending down a social media rabbit hole, how much time you're actually working.  I recommend something like Toggl to track your time.

Cash - it's always said, revenue is vanity, profit is sanity, but cash is king. Cash is really, really important. If you haven't got cash, you can't pay for anything. I always recommend that you keep about three months worth of cost in your bank, balance your bank account so that you can save that money and keep it aside plus your tax. If you're self-employed that's about 30%, and if you are a limited company keep 20%, and don't forget you need to keep your personal tax aside as well.

Profit - in your accounts, you have a profit loss account, and you have a balance sheet. The profit loss account is basically the income and the outgoings of your business (income, expenses, overheads) and then on the balance sheet, you have your assets and liabilities.

Direct costs - If you have a subscription for something that you will only use in your business, that is fine to class as a business expense.

But if you're buying an outfit for an event that you could wear again, that doesn't count and you can't claim that as a business expense. You have to be really careful with expenses and ensure you can prove that the expense is wholly and exclusively in the running of your business.

Travelling to a client, that will be absolutely a wholly and exclusively event in your business. You can claim working from home allowances, which are also important.

If you're a product business, you might have cost of goods sold, which is where you have expenses that only are only incurred if you make a sale - these are direct expenses and classed as the cost of making the product.

In a service business that might be the outsourced work that you do. It might be that you take on a piece of work that you outsurce a part of to another freelancer, for example.

And that outsourcing to someone else only happens if you get the sale. So it's not a fixed cost, it's what's called variable and is dependant on you getting that work in the first place. If you get that work, you will need to outsource but you don't have to pay that person if you don't get that work.

Overheads - These are all the things that you pay regardless of your sales. For example, you pay for Zoom, Gmail, your virtual assistant. These are all fixed costs that even if you didn't do any business, you have to pay for every month.

An important thing to remember, especially when you are starting out and you are still small is to try and keep that contained as much as you can. Really look at those those fixed things and understand the cost. If you don't make a turnover or have to be out of business for, say, 3 months - what is that going to look like? Because that can get really expensive.

If you're paying for things like coaching, or you've got a virtual assistant, you've maybe got a social media manager, then all of these things really start to add up.

This is something that I really had to look at last year, when I was ill, and discovered that actually my costs were really, really high. I'm only now really thinking about what I can put back in and what's worth it, but I need to be earning more.

Understanding your profit - Looking at your profit (and seeing that you are making profit) is an important part of understanding your business numbers. Your profit is basically your sales, less your costs, giving you a profit in simplest terms.

For most of us the profit is what we pay ourselves. If you're not often not paying yourself a salary, it doesn't come in as an overhead.

But I want you to start thinking about paying yourself as an overhead in your business. So if you want to pay yourself £1,000 per month, that is a fixed cost that you're going to pay, and you need to be charging enough to make that happen.

Really spend some time getting to know how much time you're spending in your business and how much you make per hour  - it's really important.

If you don't know already, I have a pricing calculator and I also can help you understand your business numbers.

That's kind of what I do! You can check out my services here.