Whether you like it or not, all businesses are ultimately a set of numbers. At the end of the day, we make a profit or we make a loss. We own some things. Customers owe us money, we owe money to other people. We write it down on a few pieces of paper and hey presto – that’s the business right there.
I’d be the first to agree that having a higher purpose, creating value for customers, being a big happy work family, etc are all fantastic and laudable aims in any business.
But when you’re sitting in front of the bank manager (ok, you may need to use your imagination for that bit these days) begging him or her to extend your overdraft facility for the next 6 months, all that fluffy stuff becomes oddly irrelevant.
I’m not saying that the (for want of a better phrase) airy-fairy aspects don’t matter; they do, and if you don’t get those things right, then you won’t have a business for long. At least, not one that most normal people want to be associated with, or one that you can proud of.
What I’m saying is that the end result of that effort is measured in financial numbers. Cold, hard numbers. And results are what matter. The bank manager may listen politely to your mission statement, but all that he or she is really interested in is:
- Does this business now or will it in the future make sufficient money to pay back what it wants to borrow?
- If it didn’t, does it or its owners own sufficient stuff that we could get our hands on to get our money back?
Now, think what you like about banks (careful now) but with a few notable exceptions that hard-nosed focus on the meat of businesses has served them extremely well. Bankers know that it’s the financials that define the business. Everything else the business does just contributes positively or negatively to that end result.
THE NUMBERS ARE THE BUSINESS
THEY TELL THE STORY OF WHAT HAS HAPPENED TO NOW
DON’T LIKE THE ENDING? CHANGE THE NUMBERS
TO CHANGE THEM YOU NEED TO UNDERSTAND WHAT DRIVES THEM
UNDERSTAND WHAT DRIVES THE NUMBERS AND YOU CONTROL THE FUTURE
Do you understand your numbers? Where they come from? Why they are what they are? What you could do to change them?
Get a grip on them and you start gaining control.
Chris Martin is a chartered accountant and business advisor and has been helping franchisees create and grow wonderful businesses for over 20 years. He is a published author and has written extensively on franchisee tax issues. He passionately believes that whilst franchising is a deservedly successful business format, franchisees are often let down by their franchisors’ failure to offer support and guidance regarding the financial side of running the business. This leaves franchisees frustrated, overwhelmed and unable to grow their businesses to the extent they should. Chris has developed simple systems, support and guidance to ensure franchisees create businesses that provide them and their families the lives they so richly deserve.