Numbers Every Successful Business Owner Should Know

You probably know how many clients you saw last week.

You probably know how much you charged them.

But could you tell me how profitable those appointments actually were?

That's where things get interesting.

Running a business means money is moving constantly. Clients are paying you, bills are being paid, employees are getting paid, supplies are being ordered, subscriptions are renewing, and taxes are coming due.

It's easy to look at your bank balance and think, "We're doing pretty well."

Your bank balance, however, doesn't tell the whole story.

Here are some of the numbers you should know if you want a better understanding of what's really happening in your business.

1. Revenue

Revenue is the money your business earns from selling products and services before expenses are taken out.

It's one of the easiest numbers to get excited about.

If you made $30,000 this month compared with $22,000 last month, that's certainly worth noticing. But revenue is only the beginning of the story.

Keep an eye on it. Ask questions: Are sales growing? Have they leveled off? Are certain months consistently slower? Are particular services or products driving most of your sales?

Those patterns can tell you a lot about your business.

2. Profit

Profit is what's left after your business expenses are paid. Imagine your business brings in $20,000 this month. Sounds pretty good, right?

Let's say you then pay out $18,000 in expenses leaving a profit of $2,000.  Party's over!

Revenue tells you how much came through the door. Profit tells you what was left after everything else took its share.  A very good thing to know...

3. Expenses

Do you know where your money is going? Smart business owners take a look at their expenses regularly—not just when tax season arrives.

You might discover that supply costs have been creeping upward, advertising is costing more than expected, or you're still paying for software nobody uses anymore.

Small expenses have an insidious way of becoming large annual expenses when they're repeated every month. However, regular review can help you nip those leaks in the bud while they're still small.

4. Cash Flow

This is the number that can cause some serious headaches. Cash flow tracks the money moving into and out of your business.

You can have a profitable business and still have a cash crunch. Maybe several clients haven't paid their invoices yet. Meanwhile, payroll is due Friday, your rent is due Monday, and your quarterly tax payment is sitting on the calendar.

Your Profit & Loss statement may look perfectly healthy but your bank account may tell a very different story.

That's why it's important to pay attention to when the money is coming in—not simply how much you earned.

5. Money Your Customers Owe You

If you invoice customers, keep an eye on your unpaid invoices.

Money you've earned isn't particularly useful if it's sitting in someone else's bank account.

Review your accounts receivable regularly and follow up on overdue invoices. The longer an invoice sits unpaid, the easier it is for everyone to forget about it.

Getting paid on time makes managing your cash flow considerably easier.

6. Money You Owe

The other side of the equation deserves attention too.

Keep track of upcoming bills, loan payments, payroll obligations, taxes, and other amounts your business needs to pay.

Knowing what's coming allows you to plan for it.

Finding out about a large payment three days before it's due is a much less enjoyable experience.

7. Profit Margin

Here's a number that's particularly useful when you're deciding what to charge for your services.

Your profit margin tells you how much of your revenue remains as profit after expenses.

For example, if you generate $10,000 in revenue and have $7,500 in expenses, you've made $2,500 in profit—a 25% profit margin.

This can be especially helpful for skincare businesses with multiple services and products.

A service might be incredibly popular but have surprisingly little profit left after supplies, labor, and other costs.

More sales are great. More profitable sales are even more useful.

8. Taxes

Taxes shouldn't be a December surprise. Throughout the year, you should have a reasonable idea of how much you'll owe and how much money you've set aside.

Your exact tax situation depends on your business structure, income, deductions, and other factors, so your tax professional should help you determine what you need to plan for.

The important thing is having the conversation before the bill arrives.

You Don't Need to Become an Accountant

You don't need to spend your evenings studying accounting textbooks... but you do need to know enough about your numbers to make informed decisions.

How much are you selling?
How much are you keeping?
Where is the money going?
What's coming in?
What's going out?
What do you owe?
And what do your numbers suggest about where your business is headed?

Accurate, up-to-date bookkeeping makes answering those questions much easier.

If your books are behind, your reports don't make sense, or you're simply tired of wondering whether your business is actually making money, we'd be happy to help you get your numbers organized and easier to understand.