Do you know your numbers?

How clear are you on how much your business does, or doesn't, make? Do you know how much profit you made last month, or last year? Is January the time of year you submit your tax return, in a panic, and realise that you made a distressingly small amount of profit?

If you are not clear on your numbers, you're not alone. Lots of business owners have little to no idea how much profit they are making until it comes time to submit their tax return. By the time they realise that they would have earned more getting a paper-round than they have in their business, it's too late.

There are three main reasons that you might find yourself in the dark when it comes to your finances. Number one, you've told yourself that you're not good with numbers. Number two, you're too busy to keep your books up to date. Or number three, you're in it because you're passionate about what you do and you're not in it to make money.

First up, you're not good with numbers. I've said it before and I'll say it again, if you're capable of running a business you're more than capable of understanding a profit and loss sheet. You don't have to be a maths genius, and you don't need an accountant's level of knowledge but you do need to be able to look at your books and understand what they are telling you. Your profit and loss shows you your revenue, i.e. how much income your business brought in, and your expenses broken down by category. Crucially it also shows you what was left after your expenses have been deducted, which is your profit. This is the critical bit, your business needs to turn a decent profit if it's going to be sustainable in the long term. If you feel a sense of blind panic thinking about any of this, take a deep breath, and start small. Watch videos on Youtube, read a book-keeping basics book or ask a friend with a grasp if these things to explain some of the basic concepts. Once you get started it will gradually start to seem less daunting.

Reason number two you might not be clear on your business's financial position is that you don't have the time to keep your books up to date. Running your own business is time consuming, there are always five million things to do. It's easy to slip into the pattern of thinking you'll catch up on book-keeping when you have a bit more time. This can particularly be a problem when you know that your business isn't making enough money. You focus on driving revenue as this feels like the most important thing. The reality is that whatever else needs doing as well, keeping on top of your numbers needs to be a priority. You can't make informed decisions about where you are going if you can't see where you have been and where you are now. Perhaps your cost of goods (ingredients costs) is disproportionately high. Perhaps your staff costs have significantly increased as a proportion of your sales. If you aren't keeping an eye on your financial data, you won't know. If you are waiting until you submit your tax return to see how you did the previous tax year it is by then far too late to do anything if things haven't gone as well as you would like. Little and often is key, don't wait until you have a dustbin bag of invoices, input your sales and expenses regularly. Book-keeping software, apps that will scan and read your receipts, bank accounts that can be linked to your accounting platform; technology will do the lots of the heavy lifting for you. Commit to spending an hour a day on your business finances until you are caught up and then keep it that way. You'll thank me in the long run.

And so finally to number three, you're not in it for the money, you're in it for your love of the craft. Being passionate about what you do, wanting to run a business that does good in the world and running a profitable business are not mutually exclusive. As Rachel Rodgers says, you might like to think that you're above making money but unless you are also above eating food and having somewhere to live, you're kidding yourself. Tough love time, a business that consistently doesn't make any money is a hobby, not a business. There are a couple of reasons you might be indulging in the 'I don't care about money' charade. You might be worried that earning a decent living will turn you into Elon Musk overnight. It won't. Money is an amplifier, if you want to do good in the world and serve your customers you can do that to a greater extent in a business that supports you financially. Alternatively, you might feel ashamed or embarrassed that your business doesn't make much money and hide that behind a mask of pretending you don't care about money anyway. Virtual hug time. Running a business is tough and when it's not properly profitable it can feel demoralising. I've been there, most people in the industry have been there. You're not crap at business; you just need some time digging into exactly what the obstacles are and making a plan to overcome them. You can do it.

If you're finding yourself relating a little too hard to any of these scenarios, all is not lost, in fact everything is to gain. If you have a lack of clarity around how your business is performing financially and why, that's a big opportunity for growth. With most things in business 20% is tactics and 80% is mindset or to put it more bluntly 80% is getting over your own bullshit about why things are the way they are and then making some changes.

If you need help with either the 20%, the 80% or with both, give me a shout. I'm rooting for you.

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