Get rid of your fear of numbers once and for all!

  photo by lrargerich 

When you get some quiet time, when you have a few minutes to yourself and you think about your business, do the numbers scare you?  Whether it’s your bank account balance, your taxes, your profitability – are those financial numbers scaring you?

Do you ever wake up in the middle of the night sweating because of the numbers?

While that may or may not be true for you, it is sadly true for a lot of business owners.  They love their business, their clients and even their employees but they don’t have a good relationship with the financial numbers around their business.

The good news is there are ways to deal with the fear (and the numbers) and if you can get past this issue you will find your self in a position of power and control that is probably hard to imagine right now.

The first thing to figure out is if it’s really a fear (or lack of understanding) on how the financials of your business work, or is it a fear that it will be bad news.  That knowing the actual details might confirm a significant problem with you business.

If it’s a lack of understanding, then you will need to invest at least a minimal amount of time in some targeted education.  You don’t need an accountant’s level of understanding – but you have to understand the basics of money in and money out.  From there, the end result of next steps is the same – once you have a basic understanding of what’s actually going on, even if it’s bad news you’ll at least have the data you need to start fixing it.

3 Things you must do to get comfortable with the numbers

1.  Find a finance person who gets you and gets business!

There are a lot of accountants, bookkeepers and finance folks out there and most of them are pretty good at numbers.  However many of them aren’t necessarily good at business (some are strictly tax focused, some just aren’t very sophisticated).  The other problem with lots of the finance support out there is they aren’t very good with the people element.  If spending time with your accountant is painful, then you’re probably not getting much help there.

The good news is there are finance professionals out there who are great at what they do and enjoy working with people.  I know quite a few of them, so if you’re looking I’d be glad to make some introductions.

One accountant who I would highly recommend from personal experience to any small business owner (especially those who are growing and/or new) is Mike VandeBrake from VandeBrake and Baker CPAs.  Within a few minutes of meeting Mike you’ll be struck by a couple of things – what an overall great guy he is and how quickly he understands what you’re doing and what needs to be done when it comes to financial issues.  He does taxes, but he also helps business owners understand the financial fundamentals.

2.  Create a profit plan

A profit plan is similar to a financial forecast or a budget – essentially you lay out revenues and expenses that you plan to incur over the course of the year.  The kicker is, in addition to the numbers, you also lay out the assumptions behind each line item. 

For revenues, break it down into your different products / services and where you expect that money to come from.  It could be as simple as expecting to grow 10% (4 new clients) in the next 3 months selling X. 

Expenses are typically a little easier to project (once you have actuals), but make sure they match up with the assumptions you list for revenue (i.e. if you’re adding 4 new clients, what are the typical costs associated with delivering to new clients…and you should also include costs for marketing and sales to get those new clients).

A profit plan isn’t something you can throw together in a few minutes, but it is a very tangible planning tool that brings together most components of your business into a sharp focus.  A profit plan is also a perfect way to honestly assess your opportunities – if you’re showing a 50% jump in revenue, but you don’t know how you’re going to get there, then you’ve got some work to do (or you need a new plan).

3.  Get a handle on your cash flow

This overlaps a bit with creating a profit plan and having a finance person you can count on.  However for many business owners it’s worth having a specific 90 day cash flow forecast that not only projects how much money is going in and out, but when that money is going in and out. 

There are a lot of business owners who are struggling to make monthly obligations (payroll, paying vendors on time, etc.).  The first step is to have  a clear picture on how things really stand (how bad is it) and then if needed, look into strategies that can help you address the cash flow side of things.

If you have outstanding receivables and you need cash now, one strategy to look into might be factoring (selling your receivables to a 3rd party) – if that sounds like it could be a fit for you, I’d recommend contacting my friend Jerry Becnel at Magnifunding Capital to learn more about it.  He’s a good guy and factoring can be a great way to give yourself some breathing room.

For more on how to really get started on controlling your cash flow – check out the discussion on starting with cash as your first priority that I wrote a while back.

You’re not alone if you’re struggling with the numbers!

It’s common to be uncomfortable with the numbers of your business…very few people got into their business because they wanted to work on the financials.  However if you want to succeed in the long run, you have to know exactly what’s going on and your numbers are the best way to do that.

Do you struggle with your financials?  Do you know of someone who does?  Share your thoughts here on any resources or ideas on working with numbers that you’ve seen before.

Shawn Kinkade  Kansas City Business Coach