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Two Tools To Help You Know Your Numbers

by Bill Collier

Here are two ultra-simple but also highly effective ways to stay on top of your numbers as you plan your year and as you navigate through each month.

NUMBER OF WORKING DAYS PER MONTH

It only makes sense that the more working days in a given month, the more revenue you can expect to generate. Of course, there’s much more to generating sales than this – such as seasonality, trends, marketing activity and sales efforts. But in the context of your business and everything you know about it, this is a variable that can help plan and predict your financial outcome – especially revenue.  

Let’s say you’re going into February. During your annual planning for this year, you budgeted $200,000 in sales for February. A quick check of the calendar reveals that there are 20 working days this month, so you’ll need to average $10,000 in daily sales to achieve your revenue target.

How to Use Working Days Per Month

Forecasting: Create a simple spreadsheet and enter each day’s sales. You’ll watch the month as it unfolds and will quickly see whether you’re on track or need to spring into action and do something to generate more sales … before it’s too late.

Big orders and talking about the numbers: Despite this concept’s simplicity, it can give your team a whole new “language” for analyzing and discussing the numbers. Let’s say your $200,000 in monthly sales is generally made up of a bunch of small orders, mostly in the $100 range. Out of the blue comes a $20,000 order. You might describe this order as two days’ worth of sales. So whether you were behind budget, on track or ahead, you just took a two-day step forward. I like this because it works even for number-phobic team members and gives you a common-sense, simple and practical way to analyze how you’re doing as you pursue your monthly target. I refer to this as the “Howard Approach,” for the person in one of my client companies who introduced me to the concept.

NUMBER OF PAYDAYS PER MONTH

Most companies use either a weekly or biweekly pay schedule, so some months have an extra payday. Since compensation is almost always your single largest expense, an extra payday has a very significant impact on your profit that month.

How to Use Paydays Per Month

For starters, it’s simply creating awareness that some months represent a bigger challenge than usual.

From there, you may choose to:
• Plan extra marketing or sales activities to boost revenue.
• Reduce other expenses or move some to adjacent months.
• Focus more on the quarter and less on each month: “It all comes out in the wash.”
• Do nothing and accept less profit in months with an extra payday,

You’ll have to decide how to use this information. I simply encourage you to create awareness so nobody is surprised at month’s end.

Start each year by posting the number of working days and paydays for each month. Then find ways to put this important information to good use.

Bill Collier owns Collier Business Advisors, LLC and is the St. Louis area head coach for The Great Game of Business. He works with organizations who want to improve financial results, engage their employees and create a winning culture. Bill can be reached at 314-221-8558, GGOBSTL.com or bill@collierbiz.com.



Submitted 7 years 184 days ago
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Categories: categorySmall Business Success
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