Stop Guessing!
5 Numbers Every Business Owner Should Know Before Making a Big Decision

Should you hire another employee?

Is it time to buy that new piece of equipment?

Can your business afford to take on a larger lease?

Should you open a second location?

As a business owner, you make decisions like these all the time.

And if you're like many entrepreneurs, you may start by checking your bank account.

If there's enough money sitting there, you feel comfortable moving forward.

If the balance looks low, you wait.

Your bank balance is certainly important. But it shouldn't be the only number guiding your decisions.

When you have accurate, up-to-date bookkeeping, you can look beyond today's bank balance and get a clearer picture of what's actually happening in your business.

Here are five numbers you should understand before making your next big business decision.

1. Revenue

Revenue tells you how much money your business is bringing in.

But looking at your total revenue isn't enough. You also want to understand where that revenue is coming from and how it's changing over time.

Is revenue growing consistently?

Are certain services or products responsible for most of your income?

Are there seasonal fluctuations?

Is your growth coming from more customers, higher prices, or simply doing more work?

Revenue can tell you whether your business is growing, but it doesn't tell you whether that growth is profitable.

That's why you need to look at more than just your top-line sales.

2. Net Profit

Net profit is what's left after your business expenses have been accounted for.

This number can help you answer an important question:

Is my business actually making money?

A business can have impressive revenue and still struggle to generate a healthy profit.

For example, increasing sales may look great on paper, but if your expenses are increasing just as quickly—or faster—you may not be improving your bottom line.

Knowing your net profit can help you evaluate whether your business has the financial strength to support your next move.

3. Cash Flow

Profit and cash flow are not the same thing.

You can have a profitable business and still experience periods when cash is tight.

Maybe customers haven't paid their invoices yet. Perhaps you made a large equipment purchase, paid down a loan, or had an unusually high payroll period.

Understanding your cash flow helps you see how money is actually moving through your business.

Before making a major financial commitment, you want to know more than how much money is in the bank today.

You want to understand:

  • How much cash is coming in?

  • How much is going out?

  • Are there predictable patterns?

  • Are there large expenses coming up?

  • How much cash does the business need to operate comfortably?

That information can make a big difference when you're deciding whether you can safely take on a new expense.

4. Operating Expenses

Your operating expenses are the ongoing costs required to run your business.

These might include:

  • Payroll

  • Rent

  • Insurance

  • Software

  • Marketing

  • Utilities

  • Professional fees

  • Office expenses

  • Vehicles and equipment

Knowing your monthly operating expenses gives you a better understanding of your business's financial baseline.

For example, if you're considering hiring a new employee, you need to know more than the employee's salary.

You'll want to consider payroll taxes, benefits, insurance, equipment, and any other costs associated with the position.

Understanding your current expenses can help you determine whether your business can comfortably absorb those additional costs.

5. Your Cash Reserve

How much money does your business actually have available for unexpected expenses or future opportunities?

This is different from simply looking at your bank balance.

Some of the money in your accounts may already be committed to payroll, taxes, upcoming bills, or other obligations.

Your available cash reserve gives you a better idea of how much financial breathing room your business has.

A healthy cash reserve can also give you the flexibility to take advantage of opportunities when they come along—without putting your business under unnecessary financial pressure.

The Numbers Tell You More When You Look at Them Together

One number by itself can be misleading.

A business with $1 million in revenue sounds successful.

But what if expenses are $950,000?

A business with $100,000 in the bank sounds like it has plenty of cash.

But what if $75,000 is needed for upcoming payroll, taxes, and vendor bills?

A business with strong profits sounds healthy.

But what if customers are taking 90 days to pay their invoices?

This is why your financial reports are so valuable.

They allow you to look at the bigger picture instead of making decisions based on one number—or one moment in time.

You Don't Have to Become an Accountant to Understand Your Numbers

You don't need to spend hours studying spreadsheets or become an expert in accounting to make better financial decisions.

You just need access to accurate information that you can actually understand.

Your bookkeeping should help you answer questions like:

Can I afford to hire?

Can I take on this new project?

Is it time to purchase that equipment?

Can I afford to open another location?

Which areas of my business are most profitable?

Am I growing in a healthy way?

The goal isn't to drown you in numbers.

The goal is to give you the right numbers so you can make decisions with confidence.

Stop Letting Your Bank Balance Make Every Decision

Your bank account is one piece of the financial puzzle.

But your bank balance alone can't tell you whether you're ready to grow, whether an investment makes sense, or whether your business is truly profitable.

When your books are accurate and up to date, you can replace some of the guesswork with information.

Instead of asking, "Do I have enough money in the bank?"

You can start asking better questions:

"Can my business afford this?"

"What will this decision do to my cash flow?"

"Will this investment increase my profitability?"

"What does the data tell me?"

You built your business through hard work and determination.

Your financial information should help you build it with confidence, too.

The next time you're facing a big business decision, don't just check your bank balance. Take a look at the bigger financial picture.

That's where the real story is.