In the six steps of building a better business, Mastery is the foundation of the business. It’s the same as when you build a house, the foundation (the slab) is the first step of the process. You need a strong solid foundation before you go any further. This foundation of Mastery consists of four components with Money being the most important.
I can’t tell you how many business owners I have met that don’t know their numbers. They feel that’s the accountant’s job. Now I understand that as a business owner you have a lot on your plate. You are juggling the operations of the business and doing what you do best. You may have become involved in human resources, managing employee relations. And don’t forget about sales and marketing. But the one thing that can’t get lost in the day to day operations is having a pulse on the financials of the company.
Money Mastery means having an understanding of the financials and revenues that are crucial to the future success of your operation. I have broken them down into several areas.
Break Even Mastery shows that you understand that point in your business when you become profitable. What your operation costs are and how much of your products or services you need to sell each day to cover these costs. There can actually be several break evens in a business. If you have different units – you and the manager should know these numbers because once you do it can be very powerful in the reaching of your desired goals for that department.
Next is the Profit Margin Mastery. Knowing this allows you to know how many customers you need, and at what cost, to hit your revenue goals.
Once you comprehend how much you need to generate to cover your costs, the number of customers you need and at what rate, you will then focus on mastering your Cashflow. This one is a bit trickier because you will be observing the revenues that are coming in, plus maintaining your outgoing payables. You might even have to play bill collector here to ensure cash is flowing in.
Lastly you will be concentrating on Reporting Mastery. Tracking each one of these areas, including the costs, income, payables and profit margins will give you an overall understanding of the company’s revenues. This is necessary so that you can tweak your processes and procedures and recognize areas for improvement.
Remember that your business will be declared successful when it can work without you there, and that includes managing your financials. It comes at no secret that every client I coach that knows their numbers like the back of their hand just happen to have the best results in revenue and profit growth. Understand that having Money Mastery in your business will allow you to take that dream vacation and have peace of mind that the money is still rolling in, and being managed, even without you!