Can you run a successful business if you aren’t good with numbers? Yes. There are a lot of entrepreneurs doing just that. But if you believe that you are good at running the business but bad at understanding its finances, think again. You’re probably better at numbers than you think you are.
That’s the message from Lynn Corazzi, fractional CFO, and “money tour guide” with 35 years’ experience in financial leadership, and Andy Weins, fourth-generation entrepreneur, veteran, and public speaker. They’re co-authors of the new book Stop Avoiding Your Numbers. The book helps entrepreneurs get over their own limiting belief that they’re not good at understanding numbers, so they can help their companies thrive and grow.
Too many entrepreneurs and solopreneurs, including me, will tell you that they’re good at what they do, but bad at analyzing the numbers from their own businesses. Weins says he can relate because he used to feel the same way about writing. “I no longer believe that narrative.”
“I struggled with English growing up,” he says. “I failed English four times in high school.” For a long time, he believed he was bad at writing, but eventually he managed to change that outlook. “I’ve written two books because I stopped telling myself I was bad at writing and reading, and I started figuring out what I could do to be successful. And I read, probably, more than 20 books a year because I no longer believe that narrative.”
In a the same way, he says, you can get beyond the idea that you’re bad with numbers. “When people start embracing their numbers, they realize there are some numbers they really like and appreciate,” he says. For example, they like getting places on time. And they like having money in their bank accounts. “Knowing how long it takes to get somewhere, or how much money you make, those are numbers,” he says. “You might not love math. But with the tools out there, there’s not a lot of math involved when it comes to understanding your numbers, especially your key performance indicators. It’s more the awareness people are lacking.”
That lack of awareness can make it hard to make financial decisions, Corazzi adds. “Every one of those, for a big company, gets subjected to a lot of analysis. What’s the upside, what’s the downside, what’s the expected return? But we often find smaller business owners are reacting to something without a whole lot of information. They start guessing, or delaying decisions.” “No one’s ever surprised when they run out of money.”
Avoiding those numbers means you might miss the chance to fix a problem before it’s too late. “No one’s ever surprised when they run out of money,” Corazzi says. “They can feel it. It happens gradually over time until one day it actually does happen.”
But if you are watching your numbers, you can see ahead of time when, for example, an upcoming payment that you owe could create a problem. That gives you the chance to take some steps. You can call your banker and ask to renegotiate the timing of that payment. You can work with your accounts receivable to try and bring in some needed cash. Or, you can ask a supplier for an extension on your terms. With that knowledge, Corazzi says, “You’re taking control of the situation.”
Both authors acknowledge that planning your company’s finances is more challenging in these days of economic uncertainty. For example, Weins owns a junk removal business. “I know what I normally spend each year on fuel,” he says. “Fuel has doubled in cost in the last six weeks, due to what’s going on in Iran. So I have two choices. I can either plan and adjust, or I can not plan at all, and hope. I’d rather plan and adjust.” Even with uncertainty, you’re better off having a plan in place, he explains, because you can measure against that plan. That will let you know when an adjustment is needed. “There’s always going to be uncertainty,” he says. You already have a system.
For some people, the thought of creating any sort of plan is daunting. So Weins recommends beginning in your comfort zone, wherever that may be. “Let’s start with something you’re comfortable with,” he says. “People have some system in place, whether they believe it or not.”
He recommends starting with common sense metrics, for example: What day of the week is busiest? If the answer is Tuesday, then how many customers come in on Tuesdays? If you don’t know, start counting the number of customers on Tuesday. “Really, it is that simple.”
Answering questions like those can help you reach your goals, he adds. If you made $80,000 last year, but you hoped to make $100,000, what can you do to increase those revenues? How have you been getting most of your business? Or, if you can never take a vacation, and you would like to take four weeks off next year, how can you get your business to earn as much in 48 weeks as it previously did in 52 weeks? These are simple, concrete types of questions. Answering them will give you the beginnings of a plan.
The numbers in your business tell a story, the authors say. Looking at those numbers will help you understand that story. It will tell you where your business has been. And it can help you create a strategy to get where you want it to go in the future.