Once you begin trading, you’re faced with a new challenge – successfully managing the course of your brand-new business and making sure it’s a profitable enterprise.

It’s easier to manage your startup’s sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you’re performing against your targets – so you can take action to improve performance, sales, growth and profitability.

But which KPIs should you be tracking?

Sales and conversion rates

An obvious metric to track is the number of sales you’re making each month. You’ll have set a target for these sales in your business plan, so it’s important to record each sale and see how the startup is performing over the first six months of the business.

It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns, and is this engagement leading to interest in your products and/or services.

The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods.

Looking for more? Join us for our free Know Your Numbers webinar on 22nd December

Sales revenue and other revenues

When customers buy your goods, that creates income (or revenue) for the business. Ultimately, no business can succeed unless it’s generating enough revenue to keep the wheels turning in the business. So, tracking your sales revenue is a vital measure of your financial health.Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets. You can forecast how much working capital you’ll have at a future point in time. And you can see if there’s enough cash in the bank to fund your projects and growth plans.

Cashflow and ongoing cash position

Good cashflow management is all about balancing the process of cash coming INTO the business and cash going OUT if the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there’s no excuse for not tracking your cash position.

Ideally, you want the business to be in a positive cashflow position (with more cash coming in, than going out). But to achieve this, it’s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cashflow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed.

Debtor days and aged debt

When customers fail to pay your invoice on time, that creates an aged debt – money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven’t paid, and the total size of this debt.

Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow – and that can quickly start to impact on the day-to-day running of the business.

Gross profit margin

Generating a profit is crucial to the continued success of your startup. Having metrics to measure your profitability is an important part of managing your finances.

One common way to do this is to track your gross profit margin. This metric shows the amount of profit made BEFORE you deduct things like overheads and the cost of goods sold (COGS), shown as a percentage. The formula for calculating your gross profit margin looks like this:

Gross Profit Margin = Gross Revenue minus COGS, divided by Net Revenue, multiplied by 100

• Deduct your COGS value from your gross revenue to find your gross profit.
• Divide this gross profit by your revenue.
• Multiply the resulting number by 100 to get a percentage.
• This is your gross profit margin as a percentage of gross profit
• A percentage of 50% to 70% is healthy, but aim for a big a margin as possible

By keeping a close eye on these financial metrics and KPIs, you have the best possible insight into the performance of your new startup – and that’s invaluable as your startup journey unfolds.

If you’re at the early stages of planning out your business idea, please do get in touch. We’ll help you set up a custom KPI dashboard to manage the future path of your business

Still not sure how to get started? Join us for our free Know Your Numbers webinar on 22^nd December.

Would your business still thrive, or would it suffer a catastrophic failure if you suddenly stepped away?

It’s tough to remove yourself from the day-to-day operations when you’re passionate and busy. However sudden accidents, illnesses, or family emergencies can – and will – happen and you need to be able to step back knowing your systems are robust enough to cope.

For your business to work for you, you need to make yourself replaceable. Large corporations have plans in place to mitigate what’s known as ‘Key Person Risk’. But when you run a small entrepreneurial venture, who is the backup?

The more you can train and empower your team to perform the business’s essential daily functions without micromanagement, the easier it will be to take the time to enjoy the rewards from what you’ve created.

Establish repeatable and scalable support infrastructure to run the daily operations and create a great team that you can lean on. Your staff need a common purpose – knowing why what they’re doing matters – as well as clear expectations around their roles. By creating a suitable work environment, where employees both individually and as a team are more efficient and likely to enjoy what they do, you’ll breathe easier knowing they have your back (and your business) in an emergency.

Finally, it’s important to know what the business looks like without you. An exit strategy is often thought of as the way to end a business — which it can be — but in best practice, it’s a plan that moves a business toward long-term goals and allows a smooth transition to a new phase. That may involve re-imagining business direction or leadership, keeping financially sustainable, or pivoting for challenges.

A fully formed exit strategy takes all business stakeholders, finances and operations into account and details all actions necessary to sell or close. Strong plans recognise the true value of a business and provide a foundation for future goals and new directions.

Top Tips:

1. No one is irreplaceable – Challenge yourself to step away for a week. Which systems fall over? Which procedures get left hanging? Which duties get ignored? Go cold turkey as a test case for the time you may have to leave your business in the hands of others.
2. Embrace innovation – Get systems that are simple, streamlined, effective and can be used by multiple key team members. Make sure anyone can log in and see exactly what’s needed for what reason at any time.
3. Recognise the value you’re creating – A business that doesn’t rely on its owner is worth a lot more when the time comes to sell or pass the reins to someone else.

Talk to us about your business.

Once you begin trading, you’re faced with a new challenge – successfully managing the course of your brand-new business and making sure it’s a profitable enterprise.

It’s easier to manage your startup’s sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you’re performing against your targets – so you can take action to improve performance, sales, growth and profitability.

But which KPIs should you be tracking?

Sales and conversion rates

An obvious metric to track is the number of sales you’re making each month. You’ll have set a target for these sales in your business plan, so it’s important to record each sale and see how the startup is performing over the first six months of the business.

It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns, and is this engagement leading to interest in your products and/or services.

The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods.

Sales revenue and other revenues

When customers buy your goods, that creates income (or revenue) for the business. Ultimately, no business can succeed unless it’s generating enough revenue to keep the wheels turning in the business. So, tracking your sales revenue is a vital measure of your financial health.Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets. You can forecast how much working capital you’ll have at a future point in time. And you can see if there’s enough cash in the bank to fund your projects and growth plans.

Cashflow and ongoing cash position

Good cashflow management is all about balancing the process of cash coming INTO the business and cash going OUT if the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there’s no excuse for not tracking your cash position.

Ideally, you want the business to be in a positive cashflow position (with more cash coming in, than going out). But to achieve this, it’s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cashflow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed.

Debtor days and aged debt

When customers fail to pay your invoice on time, that creates an aged debt – money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven’t paid, and the total size of this debt.

Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow – and that can quickly start to impact on the day-to-day running of the business.

Gross profit margin

Generating a profit is crucial to the continued success of your startup. Having metrics to measure your profitability is an important part of managing your finances.

One common way to do this is to track your gross profit margin. This metric shows the amount of profit made BEFORE you deduct things like overheads and the cost of goods sold (COGS), shown as a percentage. The formula for calculating your gross profit margin looks like this:

Gross Profit Margin = Gross Revenue minus COGS, divided by Net Revenue, multiplied by 100

Deduct your COGS value from your gross revenue to find your gross profit.

• Divide this gross profit by your revenue.
• Multiply the resulting number by 100 to get a percentage.
• This is your gross profit margin as a percentage of gross profit
• A percentage of 50% to 70% is healthy, but aim for a big a margin as possible

By keeping a close eye on these financial metrics and KPIs, you have the best possible insight into the performance of your new startup – and that’s invaluable as your startup journey unfolds.

If you’re at the early stages of planning out your business idea, please do get in touch. We’ll help you set up a custom KPI dashboard to manage the future path of your business

Raw data describes the facts and figures that a business processes every day. Over time, every business hoards a certain amount of data and it only becomes meaningful to a business after it has been processed to add context, relevance and purpose.

For example, in a restaurant, every order will be recorded. However, a restaurant won’t learn much by looking at each one in isolation. However, analysis of the orders will reveal trends and patterns, such as peak dining days or biggest-selling menu or bar items. Knowledge of the business comes from the relationship between the singular pieces of information. That restaurant owner may know to do their biggest stock order on a Wednesday by analysing their covers and establishing that sales increase by 38% on Thursdays.

The pace of business in today’s technological times requires businesses to be able to react quickly to changing demands from customers and environmental conditions. The ability to be able to compile, analyse and act on data is increasingly important. In some instances, a high volume of data may need to be accumulated and analysed before trends and patterns emerge.

When you aren’t compiling accurate business data, you can only rely on gut feel and assumptions about past performance to inform your future business decisions.

If your business is already using cloud software for accountancy, project management system or CRM, it’s likely that you’re sitting on a goldmine of data. If properly utilised, this data can greatly aid running a successful business. You’ll have valuable insight into your sales, expenses, profit and staff efficiencies that can help you answer critical questions and drive smart business decisions.

Every business is unique, but here are three quick tips to help you drive data in your business.

1. Data is only powerful if there is context – can you stop to answer these questions?

• What is your primary objective (business or personal)?
• What is happening in the business?
• What isn’t happening?
• How can you influence what happens?

Figure out what you’re currently trying to achieve before anything else. It’s important to periodically go back and ask yourself these questions and what goals develop from the answers, as answers evolve over time. You may have started out with your primary objective as running the best restaurant in your area. However as time has passed, your primary objective might now be to take time away from the business to spend more time with your children.

2. The only way your data can help you drive your business is if it’s accurate and organised appropriately – ask yourself:

• Are your financials up-to-date?
• Do you have any unreconciled transactions?
• Are you tax compliant?
• Are your staff trained on what systems and processes to use for different parts of your business?
• Are your cloud systems being correctly utilised?

The worst thing you can do is to attempt to analyse incorrect data and attempt to make decisions for the business based on it! Tools like Spotlight Reporting can help you with the reports you need for business decisions.

3. Understand what the data necessities are and what the niceties are.

• What would you most like to understand about your business?
• What figures pinpoint success for you?
• What are your objectives over the next six to twelve months, and two to five years?

Remember, to focus on what truly matters and build from there. If you want help with the process, we can accumulate, analyse, report and advise on your data; or show you the tools to use.

A business budget is one of the essential tools in managing your business finances and actively building your business.

A budget shows what you plan to do with your cash over the next year.

For a complete picture of your business health, you need to review the profit and loss statement, the balance sheet, the cash flow forecast and the budget. Taken together, these reports allow you to make informed business decisions and monitor performance.

Why have a Budget?

• Forecast sales and expenses according to monthly or quarterly variations.
• Evaluate performance over time, including changes or patterns.
• Get really familiar with where your money goes and where it comes from.
• Clarify targets and goals and use the budget to help you focus and achieve those goals.
• Comparing actual figures to budgeted figures allows you to see potential problems early and plan for unexpected costs.
• A budget will help you to see the big picture and stay motivated over the long term.

Where to start

A basic budget takes known income and expenses, then makes certain assumptions about the timing of income and planned expenditure. The basic budget is based on cash in and out of the business.

Over time, as you start to see the benefits of using a budget, your budget should evolve into a more sophisticated version that includes non-cash elements such as provisions and depreciation.

Most businesses will start with one budget but soon move to having three budgets.

1. Business as usual – the next year’s budget is based on current year income and expenses, with perhaps a small adjustment for consumer price index increases.
2. Worst case – budget is based on a pessimistic view of next year’s performance.
3. Best case – budget is based on an optimistic view of performance over the next year.

A budget is usually for a financial year, but you can also set up budgets for two to five years.

Once you have one budget (or more) set up, you can then run your current financial reports against the budget to see how you are tracking. This allows you to make rational business decisions in real time to adjust accordingly.

Your can run your financial reports monthly and adjust your budget as needed.

What Next?

Now is a great time to put a budget into place for the coming financial year. Book a time with us to help you create a meaningful budget in your accounting software so that you can use it as a proactive part of your business management, strategy and your success.

Success in sport is all about playing your ‘A game’. Being the best you can be through preparation and training leading up to the game, as well as through your actions during and after the game – showing modesty and humility in success and graciousness in defeat.

If everyone on the team plays their ‘A game’ the results are impressive. So, how do we apply the ‘A game’ mindset from sport to the workplace?

Three A’s that bring it:

Appraise: work out who will make up your dream team. Consider individual strengths and determine what your players want to achieve.

Allow: empower your team to deliver on your plan. Just as the coach sits on the sideline and stays out of the game, allow your team to demonstrate why they’re on your team.

Acknowledge: reinforce the great work they’re doing with support and encouragement. Celebrate their successes to build confidence and momentum.

Sounds easy, right? Yet some leaders inadvertently play their ‘O game’ by demonstrating ‘O behaviours’ that impact the whole team and breed ‘O results’.

Three O’s that will undermine performance:

Obstruct: standing in the way by seeking to control the game or allowing your structure to bottleneck at you will slow your team down.

Object: blocking the growth of your team in the belief they’ll never do the job as well as you do. Often, with your support, they’ll end up doing it better if given the chance.

Obliviousness: carrying on blissfully working in the way you are, unaware of the impact your approach is having on your team.

Take an honest look in the mirror and focus on eliminating your ‘O game’ behaviours. Don’t think you have any? Ask your team for an honest appraisal, allow them to action their improvement ideas, acknowledge the results, and commit to further developing your self awareness.

“If you’ve had a good time playing the game you’re a winner even if you lose.” – Malcolm Forbes