Since you’ve survived the recent chaos, you probably know your business better than anyone, but as you think about 2023 and beyond, I want to ask – do you truly understand the value of your business?
CNBC surprisingly reports that 98% of business owners don’t “do the math” on their business which means most leaders are failing to recognize the actual “worth” of their most valuable asset – the value of their business.
Of course, we’re not suggesting that CEOs and/or founders need to be accountants or expert data analysts. What we’re saying is that it is beneficial to start this season of strategic planning with solid direction and a focus on a few foundational metrics needed to not just grow your business, but to expand the valuation of your business.
And if you are knowledgeable on the numbers, I’d encourage you to dig even deeper. In times of economic uncertainty, we can never be too confident. And knowing where we stand in key areas leads to better decision-making, and in turn, a more solid path to profitability.
To determine your primary focus, set your intentions. For instance, do you want to:
- Grow net income
- Strategically analyze payroll
- Recognize and adjust for seasonal fluctuations and trends
- Remain in solid banking compliance
- Determine company valuation
The numbers may not lie; but the “why” can be nuanced.
It can be exhilarating when we see our net profit margins hit 5% and continue to climb.
Sometimes, offering customers a memorable experience while delivering quality products can be enough to push your restaurant or business to a higher level. But strategically analyzing business highs and lows can be critical when it comes to determining why you are seeing higher traffic, increased labor costs, or instabilities in inventory.
[STOP] Not sure who you can trust your franchise accounting and finances to? See why you should choose GSS
GSS uses best-in-class systems to recognize specific variables for customized reporting and up-to-date analysis. Individual analysis, complemented by industry benchmarks, can offer unparalleled insight into not only where your business stands now but provide data that can lead to more solid growth plans.
So what metrics are critical in the initial planning stages?
Key metrics can vary depending on your short and long-term goals. While GSS can help with higher-level metrics around customer acquisition costs, conversion costs, debt-to-equity ratios, and value of your business – we suggest starting with the following:
- Cash Flow & Revenue: For businesses, this is a crucial metric because a healthy cash flow brought on by solid revenue allows you to meet your existing expenses and plan for the future. If you are a business in a high-growth phase, this needs to be closely monitored and strategically managed.
- Profit & Loss: Is your revenue converting into actualized net income? With inflation driving all expense growth much faster, this is a major metric that every business owner should be aware of to determine if the business needs to streamline, re-negotiate, or innovate.
- Prime Profit: This is another metric that aligns revenue, labor and food costs. As an owner, you understand what it takes to run your business past the break-even point to profitability. Knowing these top-line calculations can help you make decisions that will lead to healthier bottom lines and increased cash flow.
Final Thoughts on the Value of Your Business
Running a successful business is complex and daily management of data and metrics can be challenging. Even if you understand the data and know which metrics to track, it can be more efficient and less risky to have expert resources and tools that increase performance and cut down on errors.
Thinking strategically about how to solve problems is the core mission of GSS.
If you need assistance with determining the most effective metrics for your short and long-term goals or need guidance on strategic planning, please do not hesitate to reach out.