Several months ago, I was introduced to a business owner. She has had her company for more than 25 years and was looking to sell the business. The person who introduced us thought I might be able to share some insights, since I sold my company almost 3 years ago.
So, we set up a Zoom meeting and after some greeting niceties, I dug in.
What are your annual revenues and your revenue goals for this year? <She didn’t have a firm answer.>
What is your profit margin in percentage and dollars? <We don’t really make a profit, as we run a lot of our expenses through the business.>
How many employees do you have and how do sales “happen” at your company? <It’s just me, my partner and a few technicians and it’s mostly referrals.>
Of course, this is an extreme example of a “lifestyle” business. However, based on my experience, many business owners don’t have their arms around their key numbers and frankly just check their bank balance at the end of the month or year, to have a sense of how they are doing.
When engaging with a new client, these are the kinds of numbers questions I ask, to quickly assess the profitability and viability of an entity:
- Top line revenues for this year, compared to the last 3 years and the plan for the upcoming year.
- Company operating income (margin dollars) and profit percentage plus profitability percentage for all clients, for the last 3 years.
- Top to bottom ranking of all clients by revenue, profits and units sold (last 3 years).
- Top to bottom ranking of all products sold by revenue, profits and units (last 3 years).
- Top to bottom ranking of compensation for all employees, with titles included.
- How often do you get financial statements and how many days after the period are they completed?
- Who files your tax returns?
Whether you are interested in running your business or selling your business, as a company CEO or organizational leader, you must know your numbers, and how you perform against the rest of the industry you’re in. It doesn’t matter if you run a billion dollar company, a $100 million company, or a non-profit. Keeping current on your company performance and being able to discuss with confidence, is a must-have skill.
Oftentimes, during my first conversation with clients I will ask if they have ever watched the show “Shark Tank”? Watching that show for the first time more than a dozen years ago was a wakeup call for me. After you watch an entrepreneur being grilled by Mr. Wonderful (Kevin O’Leary), Mark Cuban or Barbara Corcoran and they stumble through their numbers, you can reflect on your own knowledge of your company’s numbers.
So, ask yourself, how would you do on Shark Tank? How well do you know your numbers? Fluffy, inexact numbers won’t do.
ward and upward,
Executive Coaching and Consulting for business CEOs, Owners and Presidents
If you are looking to grow your business or amplify your personal leadership skills, I would love to have a conversation with you. You can email me at [email protected] for a no obligation conversation.
