To help your business survive and thrive during these uncertain times, you need to understand your numbers.

The numbers, your financial reports, are about keeping score of how your business is going.  And if you don’t know the score how do you know how you are going?

That’s why you need to understand the numbers!

And unfortunately, there are many systems used by small business such as Xero and MYOB, which just record things in alphabetical order, which has no relationship with what the cost actually relates to.

Instead of getting reports in alphabetical order, you need to modify your profit and loss so it focuses on your business activities and you need to record and measure key performance indicators (KPI’s) against these business activities.

Start thinking in Buckets

To start thinking of activities, the simplest way is to start putting your costs in different activity buckets.  And those buckets will differ for each business, but generally the activities are:

1. Customer Acquisition – being all the costs you incur to acquire a customer. This is not just marketing but could include sales people’s salary, commissions you pay to someone for referring the customer.
2. Direct costs of sales – the direct cost of selling / delivering something. For example, you resell something, the cost of buying, storing and delivering this would go here.
3. Customer Retention – the costs you incur to retain a customer. It could be customer service / care.  It could be account management.
4. Overheads and administration costs.

And these buckets could be split into separate products or product groups; sales or distribution channels; location or geographies; or whatever else is important to you.

Once you have these cost buckets you can start to determine the KPI’s for your business.  For example, you can determine:

1. Contribution per customer / product / channel.
2. Lifetime value of a customer.
3. Acquisition costs per customer.

The benefit of this is that you can now work out if you are profitably growing your business.  If you are doing profitable customer acquisition, the lifetime value of your customer is more than the acquisition cost per customer.  If the acquisition cost per customer is more than the lifetime value of the customer, you are not adding new business profitably and you need to change your strategy.

Doing this gives you peace of mind as you gain more insight into the performance of your business.

Look out for more strategies from my Business Survival Guide to ensure your business can survive and thrive during these uncertain times.

Need help to prepare easy to digest monthly reports?  Use the below form to contact me or call me on 0412 227 052

Contact Wayne Wanders for your FREE Business Survival Session

To ensure I help your business specifically, the best approach I have found is to have an obligation free session with you.  In this session we will review your current business in a factual and objective manner, to better understand the challenges that you face.  And this session does not need to be face to face.

At the end of this session, you will have multiple ideas on how your business can survive and thrive in these uncertain times.

Simply fill in the contact form below or email me at wayne@aRealCFO.com.au or call me on 0412 227 052 to organise one of these obligation free sessions.

To get help you successfully navigate your way through your financial challenges so your business can survive and thrive in these uncertain times, simply use the contact form on the left to email Wayne or call him on 0412 227 052.

Let Wayne Wanders, a fully qualified and experienced CFO, help you successfully navigate your way through your financial challenges so your business can survive and thrive in these uncertain times.

Wayne Wanders, A Real CFO

wayne@aRealCFO.com.au