HOW TO AVOID BEING SAVAGED BY DRAGONS
When faced by the Dragons in the den, how would you fare? Many entrepreneurs fail miserably as they stumble over their figures when pitching to the fearsome panel.
Research from Nucleus Commercial Finance revealed that when it comes to the crunch one in five small businesses wouldn’t know their key financial figures.
Simon Willmett, financial director, Nucleus Commercial Finance, says: “During the hit TV show, we’ve all seen hopeful entrepreneurs walk away empty handed because they don’t have a firm grasp on their business finances. Understanding the financial health of your business is essential for driving growth.”
Here Simon outlines the top five figures business leaders need to have a firm grasp on: SALES Knowing how much you’ve sold over the last week, month, quarter and year will enable you to spot the trends driving your success. Peaks and troughs are often seasonal and knowing when they’re coming will help you to plan and prepare for the year.
COSTS If you’re running a small business, you should be able to recall the costs of everything you’re purchasing. Knowing your costs thoroughly helps you to negotiate with suppliers for bulk purchases or recognise whether they’re increasing their prices.
MARGINS This is the difference between the price you’re paying for your stock and overheads, and the price you need to sell your product or service at in order to make a profit. This impacts all businesses, but is particularly crucial for those such as retailers, manufacturers and restaurants who need to understand their overheads to find their true price point.
(NET) PROFIT Take your income and subtract all of your expenses, such as salaries, taxes, rent, utilities and the purchasing of stock from it, and you’re left with your net profit. This lets you know whether your business is profitable.
P&L The profit and loss statement represents expenses subtracted from your income over a period of time, usually quarterly, every six months or yearly. Tracking these numbers through the year is vital for forecasting and planning ahead.