“Keep an eye on the bottom line. You can have all these dreams and all these ideas, but if it’s not sustainable financially then there’s no point in making a business.” – Denise Celdran, Owner, Edgy Veggy
Denise had a very quotable quote in our ‘entrepreneur story’ video. When we shot it a couple of years ago, I nodded my head in agreement as she said it and went on with my day. A year and a half later, I heard Denise’s voice echo in my head. The reality hit that passion is really not enough to keep a business alive.
Profit or Loss?
So I began to examine what it really meant to keep an eye on the bottom line. The last line in a profit and loss statement of a company is the indicator of its health. If it’s positive, how much so? Are you in survival mode, or in times of plenty and ready for expansion? If it’s negative, how much time do you have to turn it around? ‘
Basically, it means taking care of the money (not to mention time and energy) that you have invested in your own company, and possibly the money of other people who also believe in your vision. The role of the business owner is to really be aware of everything. You have to be both the dreamer and the guardian of those dreams.
In the last few years, I have been witness to companies who have closed when they could no longer sustain their business. It’s actually very heartbreaking. From what I see, they plan well, with business plans and projections, but somehow in the end the idea doesn’t pan out, or they are simply unable to make enough money to cover these expenses.
Projections and Actual Numbers
I have found that projections only take you so far. The key is to start with them, use them as a guide to your goal, then get creative with your approach to revenue generation. Observe how your clients are responding and try to react quickly. If you see that something is not selling, try to understand why. Then you either stop selling it or tweak it to answer their real needs. If you see that something is selling more, then figure out what it is about it that works and try to replicate it, or push that offering more (think: 80/20 principle, one small thing could actually be your bread and butter).
The best way to monitor this bottom line is to really have visibility of your numbers, whether you care for it or not — find a way to make it understandable and interesting for yourself. Because they tell a story of your business that no salesperson can embellish. I actually look at historical data a lot, and try to compare my memory of what happened in a month to the numbers that I see on the screen. This makes it more real to me than looking at future projections, there’s an actual connection between three-dimensional reality and two-dimensional numbers.
My most successful clients at Full Suite are always on top of their numbers. They have cultivated good habits like paying bills on time, studying their financials, and scrutinizing our work because every peso counts and they want to maximize our service.
Don’t Hide it, Let it be Known
Another way to ensure that you keep an eye on the bottom line is to make sure everyone in the company is aware of your financial position — it really takes the weight off your shoulders when you’re not the only one worrying about it. I’ve had experiences where we bleed because team members simply don’t care about cost. Just look at how your people treat your office space or the equipment you give them to use for work. If they’re careless, it says something, and vise versa. You want to work with people who care enough about the company to make a conscious effort to save when they can and get creative with how they work. Frugality can actually be a good thing.
The simplest way to keep an eye on the bottom line is to check where you are in relation to your goal and vision — has the company grown too big for itself? Are you straying from your purpose? Because if so, then you may be spending money where you don’t need to.
I’ve had my share of staying up late, negotiating with suppliers for payment terms and forgoing my own salary so that I can pay my team first. It’s ok to do so as part of the learning and experience, but I pose this scenario to you readers: decide on your threshold for this. And also be ready to see when it’s time to close shop. Because your own personal bottom line is at stake if you are unable to live a healthy and fulfilled life.
Originally posted at Homegrown.Ph