Know Your Financial Numbers

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Too many small business owners don't have a grasp of their financial numbers. This can't be good for business. Dave Erickson, director and certified business advisor at Angelo State University’s Small Business Development Center in Texas, tackles this head on. SBDCs, an SBA program, are found throughout the U.S.

Dave begins:

It is important for a small business owner to know their numbers. This means being able to recall financial numbers that are crucial to the operation. Sales, amount of cash in the bank, labor costs, current accounts receivable aging, and average client ticket amount are all examples of financial measures that could be important for a business owner to know and quickly recall. These measures could be different depending on the business and industry.

One of the most important of these financial measures is gross margin, or top line margin as it is sometimes called. Basically, gross margin is the profit that is left over when you subtract your cost of goods (or service) from your sales. It is the profit used to contribute to covering fixed costs in order to have enough left over to yield a net profit, or bottom line profit as it is often referred to. —Dave Erickson, Go San Angelo

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