The other night I was watching the show “Shark Tank.” If you are not familiar with “Shark Tank,” entrepreneurs come looking for funding for their businesses from a group of five millionaires. If the millionaires like their business they will invest. If not, the entrepreneur goes home.
So the other night this woman comes on to pitch her business. Whatever it was. Can’t remember, but it’s not important.
Long story short; she gives her spiel. The sharks ask her questions (most of which she could not answer), they criticize her for not knowing the answers, no one wants to invest and she leaves. Afterwards, she’s shown crying and says “I don’t care what they say, they’re not going to destroy my dream.”
While the crying and obvious play for sympathy may make good drama, the sharks were right. She comes on this show to ask for money and can’t even answer basic questions about her finances.
This is business finance 101
“What were your sales over the last quarter? What is your cost of acquisition per customer? What is your profit margin on each product?”
Unfortunately, not being able to answer these questions seems to be the norm. I am amazed at the number of people running businesses, not just small businesses, who cannot answer these same questions. How do they stay in business?
But I get it. You are running your company, putting out fires, being pulled here and there. I was the same way at one time. The eye opener for me was the day we sat down and figured out that an entire product line we were carrying was losing us money. And it wasn’t the material cost; it was the time to create the product, which were weren’t measuring well (at all). We assumed we were making money because it was pretty consistent seller.
There is old saying
“That which is measured, improves.”
The antithesis to that is
“That which is not measured,____________.
What would you say – worsens, declines, decreases?
How do you know if you aren’t measuring it!
The point is you cannot run a business without knowing your numbers. You cannot make decisions about buying materials, inventory, marketing, sales, etc. You need to do it.
If you either don’t have the time or don’t understand it, find someone to help you. It could be the difference between having a long, successful business and a short, disappointing hobby.
