“If you don’t know your numbers, you don’t have a business. You have a hobby.”
I heard this from another entrepreneur years ago, and it was like a slap to the face. For years, I was the sales guy. I could sell, and market and promote, but I was bad at the numbers. I always figured that if I could increase sales enough, everything would take care of itself. “I just needed to sell more,” and that would fix our cash flow.
Of course, I was wrong.
Selling more can often create a short-term solution to cash challenges. But it doesn’t fix the problem. And to be honest, sometimes it makes it harder. Now you have more to leverage, more promises to keep, or more debt to pay. More sales is only a “solution” if you already have a strong enough foundation to manage it.
That is why I talk so much about the book “Profit First.”
I first listened to Profit First in audio and, I swear, I thought that author Mike Michaelowicz was following me around. He talked about challenges that entrepreneurs had in business when it came to managing their money. And they were the challenges that I felt like I had every week! At one point, I was driving to the office and said “That just happened Tuesday!” He was speaking directly to my soul.
But what Profit First really gave me was a system to understand the finances in my business. I still don’t have an accounting degree, but it made me feel much less inept when it came to the company’s money. When I did not feel dumb, I was more inclined to lean in and ask questions. As I asked more questions, I learned. And of course, as I learned about my company’s financials, I really knew my company.
I went from having a hobby to a business.
And here’s the thing, it became more fun too. While it took some time to get my arms around it all, having a business that is profitable is more fun. We are able to get the tools we need, hire the people we want, and give back.
So if you are avoiding the finance conversation around your business, it’s probably time to lean in. Understanding the numbers of your business can not only give you more “profit first,” but it can also make it a lot more fun.