How The Magic of Numbers is Essential to Your Business

Are you keeping track of your company expenses? How about your revenue? But are you keeping track of the cost of goods, gross profit and gross margin of every type of product?

I never did. Yes, like you I kept track of expenses and revenue because I need to track profit against my yearly goal, but that was the extent of managing the company numbers.

Norm Brodsky and Bo Burlingham, the authors of The Knack, share an amazing piece of advice, one that I wish I knew early on:

”Here’s the best piece of advice I can give to anyone starting a business: from day one, keep track of your monthly sales and gross margins by hand. Don’t use a computer. Write down the numbers, broken out by product category or service type and by customer, and do the math yourself, using nothing more sophisticated than a calculator.”

The exercise can be as simple as taking a sheet of file paper and tracking sales and gross margins by product category. Which give you insight to which are your good products and customers, and those that are dragging you down.

Once you have identified what is dragging you down Brodsky and Burlingham recommend:

”There are basically four ways to deal with this type of situation. You can raise your prices. You can reduce your manufacturing costs. You can say no to low margin business. Or you can find other products that you can sell at higher margins.”

By following the strategy, you should start seeing larger profits which will help you in supporting yourself and building the business.