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The Most Important Numbers Every Business Owner Should Know

As a business owner, there are many numbers and metrics that you need to keep an eye on in order to run your business effectively. While there are many different numbers you'll want to know, there are some that are particularly important. In this article, we'll discuss some of the key numbers you should be tracking to ensure your business's success.

The first important number is your margin. Your margin is the amount of money left over after expenses for any given job. For example, if your labor cost and expenses for a job are $50, then setting your price at $100 would give you a margin of $50. It's important to make sure that you have good margins in your products, especially if you plan on growing beyond yourself. Bringing on additional people will likely increase your expenses and lower your margins. If you're barely making any money working by yourself, you're not going to be able to sustain a team.

This leads us to the next number you need to track: profitability. You don't want to put a lot of time and effort into growing a large organization that doesn't make any money. If you're looking to increase your profitability, you may need to increase your pricing, increase sales, or reduce expenses where you can. One expense to manage very closely is your wage expense, as this is likely the biggest expense you will have if you have a team. The real estate media business can be a high-profit business, but only if you manage it properly. There have been years where I have intentionally had low profitability because I wanted to invest almost all the profits generated to fuel business growth. But if you have low profitability and it is not intentional, you need to review your profit and loss statement and see where you can save money or increase sales.

The next number you'll want to keep an eye on is your cash flow. Cash is the lifeblood of your business. If you operate on cash only, as we do, it's essential to make sure that you have money set aside for expenses. The last thing you want to happen is payroll to process and not have enough money in the bank to cover it. This situation could be disastrous for your business. Operating on cash holds you accountable for making sound business decisions. If you are cash-poor, you may need to increase your pricing, increase sales, collect money owed, or reduce your expenses.

If you have a sales team, keep an eye on new customer acquisition costs and the lifetime value of your customers. It's important to acquire customers at a fraction of the revenue you can expect throughout the lifetime of the relationship. Also, know your new customer acquisition costs related to vendor contracts to make sure you're getting a good return on investment.

Another number to keep an eye on is customer retention. The last thing you want to do is spend a lot of time building relationships and only have them use you once. If this is the case, they likely didn't enjoy the customer experience. It is also a good idea to keep track of where your new customers are coming from. From our experience, the bulk of our new customers are referrals from our existing customer base. So, we encourage referrals.

While there are many other numbers you should take a look at, these ones are very important. By tracking these numbers closely, you'll be able to make informed decisions about your business and ensure its success. If you have any additional questions, feel free to reach out. We wish you the best of luck in your business endeavors!