Do you know your business inside out? Five things every owner should know

Most owners know their business well. They know the customers, the people, the work. Ask them how things are going and you get an answer straight away. And usually that answer is right.

Until something shifts that you do not see. A cost that slowly rises. A customer who orders a bit less every month. A job that looks profitable but is not. Feel works as long as everything stays the same. It fails exactly when it matters.

Knowing your business inside out does not mean knowing everything. It means knowing which five things determine whether it is going well, and seeing them in time. Whether you have shops, run a construction company, sell wholesale or provide services.

One: where you really make money

Almost every owner knows his total margin. Few know where it comes from.

• In retail it differs per shop. And the shop with the best margin is rarely your best shop.
• In construction it differs per job. The quote says one thing, the hours and materials actually used say another. Without post-calculation per job you never know which kind of work earns money and which costs money.
• In wholesale it differs per customer. A large customer with many small deliveries can earn less than a small customer who orders well.
• In services it differs per client or project. The hours that are not invoiced are the cost nobody sees.

You often do not need extra software for this, but a different way of booking. Using analytical dimensions instead of extra ledger accounts lets you see margin per shop, job or client without making your accounts more complicated.

Two: what drives your costs

That a cost rose, you see in your accounts. Why, you usually do not.

Payroll is the clearest example. It rises every year, and many owners assume that is seniority or pay rises. Often it turns out to be mostly indexation, which you did not cause and cannot stop. See your payroll rose by nine percent. The difference matters, because you steer on one and not on the other.

Absence is the second. It is not a separate line in your accounts, but it costs you everywhere: replacements, overtime, delays, work that does not get done. See what an absence really costs.

And for anyone with a field sales team or crews on the road: kilometres. Two appointments in the same week, an hour and a half apart, is a cost no invoice shows. See planning field sales by location.

Three: what runs ahead

Revenue and profit tell you what happened. You also want to know what is coming.

• In retail: footfall. Fewer people coming in shows up in your revenue weeks later.
• In construction: the order book. How many weeks of work are in the schedule? And how many quotes are still open?
• In wholesale: order frequency per customer. Customers rarely leave slamming the door. They order a little less, then a little later, and then no longer.
• In services: outstanding invoices and how old they are. See the due dates on your customers are wrong.

These numbers rarely come out of your accounts. They come from the till, the planning, the sales package. That is exactly why they are so often missing.

Four: what stopping costs

This is the question almost nobody asks, until it is too late.

In my own shops, the seniority of my staff built up over the years. Fine for the people, but it also meant notice periods became so long that closing a loss-making shop became very expensive. Because of that I kept one open far too long. Every month it cost money, and every month stopping became more expensive too.

That applies to every sector. A long-term contract with a customer who does not pay enough. A lease that runs for years. A type of job you keep doing out of habit. Whoever knows what stopping costs, knows when to decide. Whoever does not know, decides too late, or not at all.

Five: you know it every week, not every year

All of the above is worth little if you only see it once a year when the annual accounts come in. By then the year is over.

Knowing your business means you see those numbers at a fixed moment, every week. Not forty numbers, but a handful. Which ones, is in the five numbers an owner should see every week. And if that feels far away right now, start with where to start if you have no grip.

What you can automate

Almost everything. Margin per shop, job or client can be calculated automatically once the bookings carry the right dimension. Footfall, order book, order frequency and outstanding invoices can be fetched daily from the till, the planning and the accounting package and put next to each other. Alerts can tell you when a customer orders less, a job runs over or absence rises. What stays human is the decision about what to do with it.

The claim

Knowing your business inside out is not about knowing everything. It is knowing where you make money, what drives your costs, what runs ahead, what stopping costs, and seeing it every week. Feel tells you how things are going. Numbers tell you in time.