Know your numbers (or you don’t know your business)

earningsI didn’t appreciate the real reason I retrained from Engineering to becoming a Chartered Accountant until many years later.  I thought I wanted to ‘learn about finance’.

What I didn’t realise is that the numbers are the language of business.  I’d always liked ‘playing’ with numbers (in fact I am dyslexic and find words challenging).

I was told a truism by the Head of Commercial Banking when I was seconded to work alongside him whilst I was at PricewaterhouseCoopers, that has stuck with me ever since

“If an Entrepreneurs do not know their numbers, they do not know their business”

Its a starting point for me when I work with Entrepreneurs – I ask for the numbers AND ITS NOT JUST (OR EVEN) accounts.  The business manifest in numbers across the whole operations whether its marketing, sales, employee performance, operations, finance … the numbers (if they are assembled correctly) do not lie!

When it comes to a value of a business, Earnings are the ultimate measure of value (whether that is the current earnings stream or the future potential earnings streams from new start ups).  If you do not believe this go to a bank or an investor and see what questions they ask (watch the Shark Tank!)

  • What’s your business?
  • What’s your numbers?
  • How will I get a return?

Its all about the numbers!.

The numbers in isolation are not that interesting to be frank, its the trend that matters more than the absolute figures.

If you’re not focused on your numbers and using these as a performance tool, then you really do not know your business.