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The only number that really matters

Posted by Bernard Dietz | Feb 13, 2014 | 0 Comments

When you're operating your business there's almost a limitless amount of different numbers, ratios, percentages, and measurements available to you (assuming you keep good books and records, which you should of course).  Gross revenue, net revenue, total costs, percentage annual growth, total number of customers, etc. etc. etc.  But at the end of the day, for all businesses, sooner or later, there is only one number that really matters: profit.

I define profit as simply the amount of money that remains for the owners after all of the expenses of the business have been paid.  If you don't have a positive number for your profit then it doesn't really matter what your gross revenue is (you can bring in a million dollars a day but if it costs you two million dollars a day to do so, you won't be in business long) or what your customer growth rate is (a fast growth rate when you lose money on each customer is just accelerating towards bankruptcy), or anything else.  The fact is that if you can't generate a profit before you run out of your available capital then you only have two options: (1) raise more capital, either through investments or loans, or (2) shut it down.  So while certain metrics and number trends may be exciting, don't forget to keep your eye on the one number that matters. And make sure you're always taking steps to improve it.  It's what will allow you to stay in business and thrive.

About the Author

Bernard Dietz

Bernie Dietz is a Virginia lawyer and Virginia business attorney with more than 15 years of experience as both an attorney and a business executive, which gives him a unique view into the special needs of small to medium sized businesses. He has worked in business development, sales, and marketin...

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