The Numbers Every Business Owner Needs to Track to Drive Growth, Profitability and Cashflow

This week, let's explore The Numbers Every Business Owner Needs to Track to Drive Growth, Profitability, and Cashflow

Knowing your numbers is essential—accurate, near-real-time data helps you understand what’s working, and what isn’t, and how to manage and drive your revenue, margins, profitability, profits, and cashflow effectively.

Many businesses only track the basics, like profit and loss for tax purposes, missing the opportunity to build real value. If you’re a business owner aiming for more—a highly profitable, valuable business you could sell one day—getting your numbers right and using them to guide your decisions and strategy is essential.

Remember the famous line from Jerry Maguire, “Show me the money!” Where’s the money (profit) in your business?

I hope you get something useful from this week's newsletter you can use.

Rod Fraser

Join the Business Growth & Exit Ready Network - if you are not a member, join now.

Quotes of the week:

"Profit is an opinion; cash is fact." – Alan Miltz

"The ultimate measure of business success is sustainable profitability." – Greg Crabtree

"Price is the most powerful lever for profitability." – Hermann Simon

"You can’t manage what you don’t measure." – Peter Drucker

Book Recommendation:

Simple Numbers, Straight Talk, Big Profits! by Greg Crabtree simplifies financial management for business owners, focusing on achieving sustainable profitability through clear metrics like a 10% net profit margin, optimal labor efficiency, and maintaining core capital reserves.

The book highlights common financial pitfalls and provides actionable strategies to simplify reporting, identify inefficiencies, and build scalable systems. With real-world examples, it empowers business owners to make data-driven decisions for long-term growth and resilience.

I love this book. It is a must for every business owner and accountant. Greg is a CPA who works with EO (Entrepreneurs Organization) members.

This week's article:

The Numbers Every Business Owner Needs to Track to Drive Growth, Profitability, and Cashflow

Managing a business requires a clear understanding of the numbers that drive growth, profitability, and cash flow. This article outlines critical metrics across profitability, cash flow, pricing, and financials and provides actionable strategies to improve business performance. By focusing on these numbers, you can make informed decisions, optimise operations, and build a more valuable business.

1. Profitability: A Clear View of What Works

Profitability is about efficiency and ensuring your business is generating sustainable returns. Key metrics to track include:

• Core Capital: Keep at least two months of operating expenses in cash.
• Labour Efficiency: Measure the revenue generated per dollar spent on labour.
• Net Profit Margin: Aim for a minimum of 10% to ensure long-term sustainability.

Actions:

• Review your profitability by product or service to identify and focus on what’s most profitable.
• Optimise labour efficiency by streamlining processes and leveraging automation.
• Conduct monthly financial reviews to ensure your profit targets are on track.

2. Cash Flow: The Lifeblood of Your Business

Cash flow is the real measure of a business's health. Key metrics to track include:

• Cash Conversion Cycle (CCC): Measure the time it takes to convert revenue into cash.
• Gross Margins: Understand your margins at the product, service, and customer levels.
• Operating Cash Flow: Monitor the cash generated from your core operations.

Actions:

• Use a rolling 12-month cash flow forecast to anticipate shortages or surpluses.
• Improve payment terms with customers and negotiate better terms with suppliers.
• Monitor cash flow daily to avoid surprises and ensure sufficient working capital.

3. Pricing Strategy: The Key to Optimising Margins

Pricing has the power to transform your business. Even a small improvement can have a significant impact on profitability. Key pricing strategies include:

• Value-Based Pricing: Charge based on the value you provide to customers.
• Segmented Pricing: Tailor pricing for different customer segments.
• Regular Adjustments: Revisit pricing periodically to reflect market changes.

Actions:

• Evaluate your pricing model and align it with customer value.
• Test incremental price increases to gauge customer response and improve margins.
• Review pricing quarterly to ensure competitiveness and profitability.

4. Financial Metrics: Staying on Track

Effective financial management requires tracking the right numbers consistently. The new break even is 10% profit. Key metrics include:

• Break-Even Point: Know how much revenue you need to cover costs plus 10%.
• Net Cash Position: Maintain a positive cash position to ensure financial security.
• Overheads: Monitor fixed and variable costs and expenses closely.

Actions:

• Use dashboards to track key metrics daily, weekly, and monthly.
• Regularly review overheads to identify areas for cost savings.
• Ensure financial statements are accurate and up to date to inform decision-making.

5. Building a Metrics-Driven Framework

To manage your business effectively, establish a clear rhythm for reviewing numbers:

• Daily: Cash inflows and outflows, revenue, and sales pipeline.
• Weekly: Marketing metrics, conversion rates, and labour efficiency.
• Monthly: Profit and loss statements, net profit margin, and pricing reviews.
• Quarterly: Cash conversion cycle, profitability trends, and pricing strategies.

Turn Your Numbers Into a Growth Engine

The numbers you track in your business are more than just data—they’re the roadmap to growth, profitability, and long-term success. By focusing on key metrics like cash flow, gross margins, labour efficiency, and pricing, and reviewing them regularly, you gain the clarity to make smarter decisions.

Start small: identify one or two areas to improve this week, whether it’s tightening cash flow, increasing margins, or fine-tuning pricing. With consistent effort and a focus on the numbers that truly matter, you can transform your business into a more profitable, valuable enterprise—one ready to thrive today and in the future.

The journey to business growth and profitability begins with action. What’s your next step?

Rod Fraser - Business Mentor + Investor - Business Growth Strategies

Helping business owners grow and scale, a profitable, and valuable business.

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