Writing as part of our new contribution to The Entourage Blog, we look at what numbers do businesses need to show investors.
The first step any company should have is an understanding of what your product is and who the market is you are selling to. This is an absolute must before you even start chatting to anyone else. But when you start these conversations, what are some questions you will get asked by investors?
How do you acquire the customer and how much does it cost?
When acquiring a new customer, there are a range of costs that you have to think about. Google AdWords, Facebook advertising etc. How much are you spending on acquiring this customer?
What’s the lifetime value of a customer?
How much you make from a customer over their lifetime is critical to understanding what your future prospects will look like. The value of the data about your customers spending habits helps you and potential investors understand what your customer lifetime value.
What are your overheads?
That is, what are the costs that you have that aren’t directly related to a product sale. Staffing, rent, utility bills, IT costs, they all give a great understanding not only on what your cost levels are but how you run your business.
Why is it important for you to be able to answer these questions? It comes down to you owning the business numbers. And by doing so, you give potential investors confidence that you know what you’re talking about and know where your business is at.
You can read more about numbers for investors here.
Startup Daily today interviewed Xero about how its customers use its accounting software. And Emma Petroulas from Nudge Accounting gave her views in the article on how accounting software, including Xero, can help startups and small businesses.
So what were some of the things that Emma had to say about Xero and accounting numbers for businesses:
- “The thing about numbers is that they don’t lie,” she says. “What we generally find with startups is that they tend to overstate the financial health of their business, but when they have their numbers in front of them it forces them to make some difficult decisions.”
- When a client knows their numbers, they can make the best decisions for their business. Nudge Accounting says that they use Xero to process clients’ numbers each month, which means that they have almost real time financials at their fingertips.
- Many of our small business clients have found it difficult to use Xero payroll,” she says.“Setting up payroll in Xero is easy when clients have staff who are on annual salaries, but when our clients have lots of casual staff working different shifts or irregular hours, they find it hard to navigate their way around the different payroll calendars.” In saying this, Petroulas says that they still use Xero and “love it”.
- This is a vital tool in the startup environment and could very well prove an early indicator for founders that things are going pear-shaped long before that ‘closing down’ sign rears its head. Based on the numbers in a management report, clients can recognise inefficiencies in their business and improve many parts of their operations process.
- “Using the tracking function in Xero, they have also been able to isolate and understand the most profitable product lines of their business, and change their strategic direction based on this,” adds Petroulas.
To read the article in full from Startup Daily, click here.
Emma from Nudge is presenting at The Hub, Melbourne at the end of August about how small businesses can turn their business story into numbers.
Managing your businesses numbers is so important but many small business owners don’t know where to start. And even if they have their numbers, they don’t know what to make of them. This presentation is about helping you to love the numbers and understand how to use them to make better business decisions. Some of the key learnings that small business owners will take away are:
- How your numbers will help you run a better small business
- What are the key steps to preparing and forecasting your business numbers
- How to make sense of your business’ numbers
Small business owners also have the opportunity to bring their business story (such as how your business is tracking and where you want to be) and Emma will help turn this story into numbers.
The event will be held at The Hub, Melbourne on 30 August between 4pm and 6pm. Tickets to the event can be purchased here
When not managing Client Happiness at Nudge Accounting, Emma teaches at the University of Technology, Sydney in Small Business Accounting.
p.s. It’s great that the booking platform for this event is from one of our amazing clients, WeTeachMe.
Nudge has been chatting to start-ups over the last week and we wanted to let you know where we’ve been.
We started last weekend at The Entourage’s Scalable & Saleable program where I mentor some amazing business owners on their start-up finances.
Why? You can never get enough of your start-up numbers because they tell a story about your business!!
We started off the last day of the August program with a mentor’s motivational brief alongside Jack Delosa, Andrew Morello, Petar Lackovic and Clair Jennifer among others ….
Continue reading “Nudge has been talking to start-ups over the last week….”
I had a potential client call up this week and we spent a bit of time talking about the return on investment (ROI) of the work that Nudge does. Having only started her business in August, she wanted to get on top of the numbers. And she was interested in what Nudge could offer her business. But most of all, she wanted to understand what return her business would generate from one of our monthly Nudge packages.
It was a really good question. How do you assess the ROI on the work that your accountant does? From a Nudge perspective, we think about it as follows:
- Traditional accountants generally help you comply with your taxes. The return that you generate from them doing this work can be broken down into (1) you are not an expert in it so let them do it all and (2) the time you need to spend getting them the work. This work really can be viewed as something to help you stay on the right side of the ATO but does it really add any value to your business.
- On top of the cost of a traditional accountant, you have the following choices in getting your books up to speed. You can do it yourself, at a considerable time cost (time which you could spend getting more sales through the door) or you can hire a bookkeeper which is another separate cost.
- How do you track your income and expenses? Often you will need to go and buy some accounting software to help you manage the business finances and to do your invoicing. You need to pay for this on top of your accounting and bookkeeping costs.
- Then, because you bookkeeper and accountant work for different companies, you need to help them talk to each other and often when they have questions, you somehow get involved in answering them.
Is something missing here? With this complicated, timely and expensive process, have you noticed that no one is talking about how this helps your small business grow!
Continue reading “What is the ROI on knowing your numbers?”