With banks failing and a recession looming, we have one piece of advice to make sure your business survives.
Amidst the influx of money and stimulus funds, it is easy for some of us to overlook the importance of assessing the sources of our income. It becomes crucial, particularly during challenging periods, to take the time to reevaluate our financial requirements. By doing so, we gain a comprehensive understanding of the origins and destinations of our business funds.
Although the initial setup may require some time investment, once established, the subsequent monthly check-ins become effortless.
- Go into your existing bookkeeping system and look at your profit and loss statement right now.
- Now ask yourself: What is your profit margin?
- Try and get it above 20%. This allows for a buffer through the harder times.
- Look at your attrition for the year with your customers.
- Now ask yourself: How quickly are you losing them compared to how quickly you’re gaining them? Are you marketing and hustling for clients enough to make up for the ones leaving?
- Using those numbers, get out your budget and make a new forecast.
Calculating the profitability of individual employees can be advantageous for business owners. It enables you to gain a comprehensive understanding of the specific contributions each employee makes towards the growth of your company. This analysis goes beyond direct impact, such as with sales personnel.
After completing this task, provide each employee with a distinct objective for the business and a target figure that must be achieved to retain their services. This not only offers a transparent overview of your personnel expenses, which often constitute the largest expenditure in a business, but also serves as a reminder that your endeavors extend beyond personal gains. You are both supporting others and being supported by your team.
Understanding the purpose behind the financial requirements of your business or personal needs can serve as a powerful motivator or drive to achieve them, as opposed to merely aiming for a profit target without any meaningful reason behind it.
If you have further questions, contact Paragon today!