Do you know your magic number?

by Griselda K Togobo | Follow me on Twitter HERE

 

Magic NumberDo you know off the top of your head how much it really costs to keep you in business?

If you took all the costs in your business (every single cost over the course of the year), added your salary (most business owners just leave their salaries out – that won’t help you) and divided that by 365, 52 or 12 that would give you an idea of how much you needed to earn every day, week or month to keep your doors open.

This is what I call the magic number.

The more you earn above your magic number, the more you’ll have to bank as excess. The magic number is not about revenues. I stopped being impressed by revenue long ago.

Businesses don’t run on revenues or profits but on cash so for me, cash in the bank is a better indicator of success. Cash pays the bills and cash keeps the doors open. Your magic number must be banked each month to keep business sweet otherwise it can very quickly turn into a nightmare.

Most people don’t know this number. They are running their businesses blindingly using whatever comes in to pay for whatever goes out. A bit like a game of Russian roulette. I’ve worked with businesses owners who have accountants and financial directors on their payroll but still have no clue what their magic number is. So please don’t feel bad if you don’t know yours. It’s a common and easily made mistake.

You, the owner needs to know your magic number and aim to keep it as small and lean as possible to give your business the chance to succeed without the burden of a high cost base.

Earn any less than this and you know you are heading for trouble.

So my question to you: what’s your magic number?

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