Why you need to know your numbers
One of the essential things you need to have down pact for your business to be successful is your business numbers.
Knowing your numbers needs to be ingrained in the very lifeblood of your business and what you're doing. It's all about being in control of your business and understanding whether or not you're achieving goals and what your goals should be. If you're not in a place where you can understand what a realistic goal for your business is, you're not ready to achieve it.
When it comes down to the basics of running a business, you should know the following (especially in a product-based business):
Cost of Goods
Your business's cost of goods is the amount it costs to produce whatever it is you're selling. You need to know your cost of goods to fully understand how much investment is needed to keep your business running, as well as what gross profit you're taking home.
Profit Margins
Profit margins can be challenging to get your head around initially, but they're really quite simple. Your profit margin is a measure of how much money you've made relative to your revenue.
Profit margins can be calculated in several different ways depending on what information you'd like to know. The two most common are the gross profit margin (total revenue minus your cost of goods) and the net profit margin (total revenue minus all expenses including taxes).
How Much You're Willing to Re-Invest
This is different for all businesses. While it takes money to make money, you want to be smart about how much profit you are going to put in your pocket and how much you're going to use to grow your business. Whether you're expanding your team, scaling up your digital advertising, or building your brand assets, you will need to re-invest a portion of your profits back into growing your business.
Conversion Rate
For e-commerce businesses, your conversion rate is the percentage of sales your website has generated from the number of visitors received. It's important to know your conversion rate because it gives you a comprehensive understanding of your website's performance.
You need to know the above metrics if you're going to work with digital advertising because without these numbers you won't be able to understand if your advertising campaigns are successful or not. You won't know your baseline, so you won't know if your numbers are scaling up or going down. You could be selling yourself short by setting goals too low, or expecting too much from your digital advertising, creating disappointments and disheartening experiences that you could avoid.
Even if your revenue is growing, suggesting that your digital marketing efforts are working, without a grasp of your numbers, you're going to feel like you're blagging it— you're going to feel like you're not in control of what's going on. If you want to feel confident in running your brand, you need to know your numbers!
One of the main benefits of being in control and understanding your numbers is experiencing the highs and the lows of your business's journey. Without a solid understanding of your numbers, you won't know when your business is experiencing a high— something to be celebrated— or a low— something to learn from.
Experiencing the highs and lows is essential to growing your business because you need to understand what is working for your brand and what isn't. That is one of the basic principles of growth marketing: figure out what isn't working so you can make changes or stop, and figure out what is working well so you can scale it up to be even more successful.
If your brand is new to the market, you may not be established enough to have an exact picture of your numbers, and that's fine!— as long as you have a basic idea. Your numbers will change at every stage of your business; you just need a starting point to adjust from.
Actually getting your brand out there is critical. You need to start somewhere. Once you start getting data, you can see if your expectations are lining up with reality, and you can begin to compare your numbers with similar businesses.
It takes testing and learning to figure out your numbers solidly. At The Growth Guys, we work with new brands on our PILOT program to help entrepreneurs discover more about their businesses, including their business numbers.
For those businesses that may not have a good idea of what their numbers are going to look like, our 3-month PILOT program uses cross-platform digital marketing tactics to:
Determine what works for the nuances of your unique business online;
Prove the concept for your business;
Test new products and services against the market and create demand;
Explore digital routes for the first time; and
Understand your market better.
These tactics work to establish your business in your market and give you a better idea of your numbers, allowing you to see how you can grow your business effectively.
Understanding your metrics and knowing your numbers inside out at every point will be difficult. They're going to keep you on your toes because they're constantly changing, and when your numbers change, so should your goals. Budging up your conversion rate by even 1% can have a massive impact on your business, but without a keen understanding of your numbers, you may not realize it's possible.
It's worth keeping up with your numbers because when you are achieving success, and you can see that you are achieving your goals, that success will feel amazing. You're going to know that you worked hard, and your hard work has paid off. You're going to feel like you've absolutely crushed it, and what could an entrepreneur want more than that?
Don't know your numbers? Want help getting your brand onto the market for the first time? Interested in our PILOT program?
CLICK HERE to get started with a FREE consultation to see how an award-winning digital marketing agency can help grow your business BETTER, not just BIGGER.