Know Your Numbers: Financial Wizardry for Muggles - SWI #63

Read time: 2 mins

Numbers can be intimidating.

Especially if you didn’t study finance, or like Lynne, developed a fear of math in 3rd grade.

We have so many clients who aren’t financial wizards.

Their biggest challenge is making sense of their numbers, and knowing what to focus on.

But being comfortable with your numbers is more than a skill – it's a strategic business advantage.

Knowing your numbers makes it so much easier to make smarter and more confident business decisions, whether it’s setting prices, negotiating contracts, investing in growing your business, or anything else.

If you’re not a numbers wizard (or even if you are) – today we've got you covered.

We always start with 3 concepts for our clients to boost their financial literacy and grow their business - and we’re sharing them in today’s newsletter.

Let’s get into it!

KNOW YOUR NUMBERS: 3 CONCEPTS TO GROW YOUR BUSINESS

1. Understand Your Value Drivers:

Not all aspects of your business are created equal.

Some things are more important than others.

By understanding which elements in your business drive the most profit and value, decision-making becomes so much easier; you can prioritise your efforts & energy where it matters most.

Say you want to reduce costs in your business.

If 80% of your expenses are labour, don't focus on reducing the cost of your stationery.

2. Break Down Profit into Its Component Parts:

If we asked you to increase your profit by 50%, it would be really hard to know where to start.

But, if you break down your profit into each component part, it becomes easier.

Here’s the math:

• Profit = revenue - cost
• Revenue = price * volume
• Cost = variable + fixed

Once you know each of these variables, increasing your profit becomes a list of options:

• You could raise your prices.
• You could increase your sales volume.
• You could reduce your variable costs.
• You could reduce your fixed costs.

Break these down further, and you’ll get increasingly specific, granular options to increase your profit.

This is exactly what we do with clients to create a portfolio of profit-growth initiatives.

3. Materiality and Trends Are Your Friends:

Staring at spreadsheets with lines and lines of numbers can be daunting.

To make sense of it, use these 2 filters - they’ll save you time, energy, and maybe your hair.

• Materiality: Focus on the numbers that impact your business materially. If something isn’t material, (e.g. $2), don’t focus on it.
• Trends: Focus your attention on the things that are moving up or moving down. Downward and upward trends indicate that something has happened (good or bad) and you should understand it, as it’s likely important.

Master these 3 concepts, and you'll be well on your way to financial wizardry and business growth.

And if you want to vent about numbers or get some support for your business, send us a note or check out our free Profit Program, where we break it all down with examples and templates for you to use in our 90-minute video series.

Time to get to work!

Speak soon,

Lynne and Steve

TLDR:

• Knowing your numbers is your ticket to profit growth.
• Understand your value drivers to prioritise your focus areas effectively.
• Break down profit into its components to pinpoint growth opportunities.
• Use materiality and trends to focus on what truly matters.
• Need support? Reach out or join our free Profit Program.