One of the biggest holes in many business owner’s knowledge is a basic understanding of the key numbers. Not just Profit and Loss, Cash Flow and Balance Sheet, but the main drivers and levers within their businesses. Not knowing your numbers is a major handicap – you cannot plan or forecast effectively, you cannot manage cash flow (unless you always have a significant surplus) and you won’t know what products and services really make you money and profit!
There are some critical questions to ask about your business that only the numbers can tell you:
Is the Business Viable?
Almost the first thing you need to do with any business idea is to test it – test it to destruction! There is only one thing worse than an idea that doesn’t get implemented and that’s spending time and money implementing an idea that no one wants!
I’m sure you can remember more than one potential entrepreneur on Dragon’s Den or Shark Tank that was seriously deluded about the potential demand for their product. Equally, there have been amazing ideas that the inventor just hasn’t been able to articulate the value because they didn’t know or understand the numbers easily.
Sometimes that’s the pressure of being in front of both the TV cameras and 5 powerful, intimidating people of influence – more often, it’s a lack of attention to the information that is most important to a potential investor.
If you haven’t started, then a good place to start is with some basic viability questions and actions:
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