Running your business without financial feedback is like driving on the freeway wearing a blindfold. This comparison may be a little extreme, but one of the most common problems I encounter in small businesses is not using financial tools. By this I mean that the business owner either does not have current accurate financial statements or, if they do, they are not using the information to run their business.
In fact, most of clients who come to me with a business that is losing money are also not keeping or using their financial feedback. Considering most small businesses are not started or run by financial managers, but by roofers, physical therapists, chefs and artists, this problem is understandable. That does not make it OK. I can not tell you how many times I ask a new client for their profit and loss statement and get a rather sheepish look. It is the same look I give my dental hygienist when she brings up flossing.
So here is the upside of learning to use financial statements: Many of the clients I see who learn to read and use current accurate financial statements become profitable very quickly. Why? It is just like the last time you took your eyes of the road and wound up driving on the shoulder. Then looking back to the road, you correct without even thinking about it. If you are a builder or a restaurant owner, I can understand why you pay more attention to blueprints or menus, but if you want to have enough to pay yourself at the end of the month, learn to use your financial statements.
I’ll give you my easy method in next week’s blog.