Small business owners need to remember that profit, not sales is the most important budget concern. Many small business owners focus on sales, but do not realize how much the sales cost them. This leads to people crunching the numbers and finding out they are actually in the red. By focusing on profit, you can determine if your budget and business plans are actually sustainable. If they are not, it is important to know this to adjust your business model or exit the business prior to losing money.
- Many new business owners prefer the excitement and stimulation of sales over the necessary but dull chore of budgeting and crunching the numbers.
- It’s important to figure out early what each sale costs you to make, and to exercise fiscal discipline in good times so you’re prepared for leaner periods.
- If number crunching is something that you aren’t good at, take the time and effort early on to hire or otherwise secure the assistance of someone who is better at it.
“While it might sound like common sense, in my experience too many small businesses are so focused on sales in their early years, they don’t know how much those sales are costing them.”