Your Financial Statements are Talking and It’s Time to Listen.
When I first looked at a set of financial statements, I was overwhelmed by a sheet of numbers that I didn’t understand. It wasn’t until I really understood what they were telling me that I began to look past the numbers. This is very common for anyone reading financial statements without a deeper understanding of their purpose. You don’t have to fear them.
Think of it this way: they are telling you a story, and when you take the time to learn what that is, the financial health of your business will grow exponentially.
How often do you hear someone talk about how they scaled to a 6, 7, or 8-figure business? I hear this all the time, and I ALWAYS want more information. Not that I don’t believe them, but because I know that’s not the whole story.
Take 6-figures for a minute; “6-figures” is between 100,000 to 999,999 in revenue. I assume most people are talking about annual revenue or what they did within a 12-month time frame, but sometimes that’s also unclear.
Let’s pretend you’ve made $500,000 in revenue in 12 months. CONGRATULATIONS! That’s an accomplishment, so be proud of yourself.
AND… what does that mean? Do you have debt? Were you able to pay yourself? Did you raise equity financing? Are you profitable?
One scenario:
You made $500K in revenue (total sales).
You paid yourself $150K,
Spent $250K on other expenses and cost of goods sold combined,
You ended the year with $100K left at the end of the year. That’s amazing - you should be so proud. You have money left to reinvest in the following year and give yourself or your team a bonus.
A Second scenario:
You made $500K in revenue (total sales).
You didn’t pay yourself
You borrowed $400K
You spent $750K in expenses and cost of goods sold combined
You ended the year with a loss of $250K and still have $300K in debt.
Your business is struggling even though you made the same revenue as the 1st business.
Both scenarios had the same numbers of 500K in revenue, but see what I mean? The numbers matter, but the story matters more.
These examples focused on revenue, but this can be applied to anything that focuses on just one number: how much money you raised, your monthly or annual recurring revenue, your headcount, and your gross profit. All of these can look great on their own and still be missing a larger picture.
What story do you want for your business? And what story do you want for yourself?
If you’re struggling with your story and nearing $1M in annual revenue, you might consider looking for a fractional CFO. A fractional CFO can take your numbers and tell that story to you on a regular basis, and together you can strategize to meet the goals of your business. Interested? Email me at natalie@copper8strategles.com
