As a financial advisor, one of the most important things you can do for your clients is help them understand their business finances. In today’s business world, entrepreneurs are constantly bombarded with opportunities to invest in their business, but how do they know which opportunities are worth pursuing? The answer is simple: by knowing their numbers cold.
In a recent episode of Know Your Numbers, the speaker emphasized the importance of knowing your numbers to make better business decisions. Entrepreneurs need to know their operating expenses, profit margins, and other financial metrics so they can make informed decisions about their business.
For example, if an entrepreneur is asked if they can afford to hire more people, the answer depends on how much money they have in their operating expense account. Without a surplus in that account, they cannot afford to hire more people. However, if they do have a surplus, they can hire more staff, which can help them grow their business.
Knowing your numbers also helps prevent financial leaks in your business. There are many ways that a business can lose money, and knowing your numbers can help you identify and plug those leaks. By keeping more money in your business, you can improve your profitability and cash flow.
In addition to understanding your operating expenses and profit margins, it’s important to know your cost of goods sold, material expenses, and subcontractor expenses. These expenses can directly impact your profitability, so it’s crucial to keep track of them.
Finally, being profitable is essential for any business, even if it means paying taxes. Entrepreneurs who operate at a loss to avoid taxes are only hurting their business in the long run. It’s better to be profitable and pay taxes than to operate at a loss.
In conclusion, as a financial advisor, it’s essential to help your clients know their numbers cold. By understanding their finances, entrepreneurs can make better business decisions, prevent financial leaks, and improve their profitability and cash flow. So, let’s get to work and help our clients succeed!