Part 2 | Math vs. Drama
One of the best things we’ve learned from closely watching our financial books is that there’s a big difference between the simple math of business and the emotional drama of how you feel about it. At The Life Coach School, we always teach our students to separate the facts from their feelings about their business. It’s a coaching technique that helps deal with so much of the disempowerment you feel when external circumstances put you in a bad situation. Of course, we also emphasize that feelings ARE important, and you should pay attention to them when you run a business. Feelings drive your actions and your actions are what drive success.
Here are some of the most important financial numbers we think you should pay the most attention to:
- Yearly revenue goal: This should stay consistent throughout the year. You need to really believe in this goal. The first time you say it out loud it might sound awkward, but the more you talk about it, the more real it will feel.
- Current revenue: Even if it’s lower than you want it to be, it’s important that you know what this number is at all times.
- Profit – This is sometimes referred to as your profit margin. It’s important to always know for two main reasons: to have a good sense of the health of your business, and to know how much you’ll be paying in taxes this year.
- Cash in the business: How much working capital you have right now. Being aware of this helps you avoid problems and to deal with any that come up before they get too serious.
- How long the cash will last: This helps you plan ahead, spotting any cash shortages that might come up or identifying when you have more than you need so that you can make good use of the excess.
Remember that all money, numbers, and reports are just facts and facts are always neutral. How you feel about them is up to you. When we start applying personal meaning to numbers, unconsciously or not, we make emotional decisions that might not serve our future goals. This is why so many entrepreneurs don’t look at their numbers, just focus on the service they provide, and hope the numbers take care of themselves. This is NEVER a good idea.
Make yourself aware of all the math once a week. It’s just like standing on a scale: you want to know what your goal is and where you are in relation to it. The only thing you ever want a number to mean is that you need to generate more revenue, cut back on expenses, or hold to the current course. That’s it. These numbers should not be used as a measure of your personal worth or a reason to beat yourself up, as this never creates any positive or worthwhile change.
If you’re having trouble dealing with the emotional stress of your financials, remember that the more you look at your financial details, the more neutral they start to look to you. Numbers represent the truth and the truth is always the thing you need most to create profit and growth. More businesses have lost great employees, customers, and money through lying and denial, than they have by facing the truth. When you consider the financial truth head on, this lets you make a forward finance plan to change and adjust as necessary. Pretending you don’t know your numbers is never the answer. If you don’t want to look at your numbers, it’s only because you’re afraid of what you might think, but you can control that. Don’t let that fear control you. Choose to think of numbers as math and simple facts. Any other thoughts in your mind are just part of the drama and completely unnecessary.
You might want to ask yourself a few keys questions to help focus your thoughts once you look at your numbers and reports. What are your thoughts about the numbers? Are those thoughts useful or helpful? If not, change them. It sounds simple, but it matters. Numbers aren’t personal. They’re just facts.