Knowing your numbers… is more than an accounting exercise

Knowing your numbers is more than an accounting exercise.

As a COO, I used financial forecasts constantly - not just to see how we were performing today, but using it as a way to model potential strategic decisions in the future.

It helped me work out what strategy changes could do to the bottom line.

Sometimes it was enough to shape the strategy completely (some really good ideas just don't work from a cost perspective).

Get into the habit early on of creating a yearly plan or forecast – don't forget to include annual costs you have, subscriptions or monthly payments, and costs that you know are likely to come up, as well as your personnel costs.

These costs – your running or operating costs – tell you the basic minimum of income you need to bring in – therefore helping you to set realistic and effective income targets.

Businesses that factor in operating costs from the beginning scale much more effectively, as they have set their pricing strategy to cover them and leave a healthy profit margin.

And remember, if you as founder do something - it doesn't make it free!

You spending your time doing admin, or fulfilling orders or whatever may seem cheaper than paying someone to do it, but it takes you away from your core responsibility of building the business - which costs the company a whole lot more.