This morning I filled in for a friend at his BNI meeting (Business Networking International) and the “Education Nugget” was about measuring. The point is, you don’t know how you’re doing, nor can you improve, until you can measure it. And you can’t make smart decisions about your business unless you measure what you’re doing.

Follow the money

First, you need to measure your money. Are your books up-to-date? Bookkeeping isn’t just for tax time. You need to keep them current so you can predict cash flow and see what products and services are profitable.

Cash flow is obvious, but looking at what areas are profitable is just as important. I knew one business owner who upon looking closer at his books, realized his best selling product was actually losing him money.

While the direct cost of the product was less than the selling price, the cost of servicing it meant he actually lost about $100 per unit. By eliminating that one product, although his total sales went down, his profits shot way up.

Do you know what products or services are most profitable? Look at your books. If you’re not sure how to determine profitability, ask your bookkeeper or accountant. Read More→