The Top 3 Financial Numbers You Should Know in Your Business

Aug 3

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Knowing your business' financial metrics can feel super daunting. In today's episode, financial expert Stephanie Skryzowski simplifies what three metrics are most important to understand and how those numbers will help you make strategic, smart decisions for business growth.

Stephanie Skryzowski is a visionary Chief Financial Officer who helps purpose-driven leaders better understand and use their numbers to make smart decisions to grow their bottom line and impact. She is the Founder and CEO of 100 Degrees Consulting which provides financial strategy and bookkeeping services to businesses and nonprofits around the globe. Stephanie is passionate about educating leaders to understand, use, and communicate their numbers to create financial sustainability and increase their impact on the world. When she is not crunching numbers, Stephanie is exploring the world with her husband and two young daughters.

Website // Instagram // Profit Playbook

The episode:

Katrina Widener: Hello everyone, it's Katrina and I'm back with another episode of the podcast. Today I have Stephanie Skryzowski on and I'm really, really excited because we're gonna be talking about finances and especially financial metrics that you should be keeping your eyes on. So I think this is gonna be a really great episode. Thank you so much Stephanie, for joining us.

Stephanie Skryzowski: Thanks for having me.

Katrina Widener: So before we dive into all the nitty gritty details, would you mind first quickly just telling everyone who's listening, who you are, what you do and all of that magical goodness.

Stephanie Skryzowski: Yeah! Yeah. So I am a CFO, that's chief financial officer. And my business is called 100 Degrees Consulting and my team and I provide CFO and bookkeeping services to small businesses and to nonprofits. We focus on purpose-driven entrepreneurs who are in the online space, service businesses, course creators, that kind of thing. So we basically help you understand and use your numbers to make strategic, smart decisions to help your business grow.

Katrina Widener: I think that's something that's so helpful because I even know a ton of established entrepreneurs who are still like, "I think I know what I'm doing when it comes to finances. I think that this is the right decision, but I'm still not 100% sure." Or they just really rely on their bookkeepers, et cetera, to provide that information. So it's so important to people to get that help, right? That support.

Stephanie Skryzowski: Yep, absolutely. Yeah, for sure. I feel like knowing your numbers is one of the most important things in your business. It's either going to make or break you and we want it to make you. We wanna help you with your numbers.

Katrina Widener: Yes, exactly! Exactly. I like to think of the numbers aspect as like, "This is just another tool in your toolbox, to let you know what direction to move forward in. What's working, what's not working, et cetera, etcetera." So I absolutely love it. I know that we're talking about a lot of financial metrics to know today, and exactly what you're talking about. Paying attention to the numbers, knowing what to do with them, how to utilize that information.

So for everyone listening, what would you say is where we should get started or the first one that we should be paying attention to?

Stephanie Skryzowski: Yes. So there's like a whole bunch of financial metrics, and if you even are starting to feel kind of like itchy and scared and nervous just by the term financial metrics, let me tell you first of all: this is really not hard. There's not really very much math involved. This doesn't need to be anything very complicated. So stick with us. Don't be scared by the term metric, first of all.

Second of all these three metrics that we're gonna talk about today come from your profit and loss statement. Your profit and loss statement basically shows you all of your revenue, all of your expenses and your net income or your profit.

So if you're using a software like QuickBooks, you can very easily pull your profit and loss, often called a P and L. You can pull your P and L from QuickBooks or whatever other accounting software you're using. That's kind of the first element that we have to make sure that your numbers are somewhere in some sort of system and you're able to pull a P and L.

The first number that I like to look at is related to your revenue, and it's your revenue diversity. So what this is measuring is what percentage of your total revenue comes from each of your different revenue streams. So I would imagine that probably most of you listening, you're making money from like a couple different offers or maybe a couple different programs or something. There's different ways that you make money.

Looking at and understanding your revenue diversity, is just looking at what percentage of revenue is coming from each of those sources. The reason we look at this is because of the old saying, "you don't wanna put all of your eggs in one basket," right? You don't want to be making all of your money from one client or one particular thing. Because what if something happens to that thing, right? I think about business owners who sell online courses that are entirely driven by a Facebook ads funnel. Well, when Facebook changes something and then you're not getting the return and the conversions that you're normally getting? Well, your business is gone basically, and like I've seen it happen before.

So just making sure that you've got some diversity in your revenue streams, you're making money from a couple different sources is super important. So that's the first thing that I always like to look at is making sure that we've got some diversity there.

Katrina Widener: I love that. I think that that is so, so important for a lot of people listening. Also that kind of information you can really utilize when you're talking about marketing, when you're talking about where to put your energy, when you're talking about, "How do I want to have things set up?" I love the example you gave about Facebook, because you can even say, "Okay am I marketing this in different ways?" It's also like, say Facebook did go down. How could you market that? Maybe we wanna have diverse marketing schemes. Maybe we wanna have diversity in terms of the ways that we're connecting with potential clients. I think that that's so, so important. Honestly maybe one of those things that people don't always think about which is really, really helpful.

Stephanie Skryzowski: Yeah. I mean I know in my business, we do one-on-one services, right? Like done for you financial services for our clients. But I also had a membership cuz I thought that was the thing to do, right? I need to have some lower ticket, scalable offer, whatever.

So I had this membership and I looked at my revenue. What percentage of my revenue was coming from our one-on-one clients versus the membership? And the membership was like 2% and that might be being generous. It maybe was like 1%. So this tiny, tiny fraction. But I was spending way more than 1% or 2% of my energy thinking about and doing things for this membership. So I was able to use that information, that sort of revenue diversity metric. I was able to use that and decide, "You know what? I think I just need to shut this membership down. Because it's not really profitable, and my energy is best used elsewhere." So it can lead you to help make decisions like that in your business as well.

Katrina Widener: Yeah that makes so much sense. And I think that's something that people could really walk away and go and look at that right now and be like, "Oh I see where I can make some changes to make my business feel easier. I can stop working against myself, maybe." So that's awesome. Okay, so we have the income diversity. What would you say would be the second one to look at?

Stephanie Skryzowski: So the second one I like to look at, is we just talked about revenue. Now we're gonna talk about expenses and understanding your burn rate. Your burn rate is just your average monthly expenses. So how much money is going out the door every single month on average? And so I usually like to look back at maybe the past three, six, or even 12 months to get a nice average. Then you can use that number to then kind of set as a benchmark for yourself, right? Because there's no right number in how much money you should be spending in your business.

You might be spending $3000 somebody else might be spending $10,000 or $100,000 right? There's no right number in what your expenses should be. But you can sort of create your own benchmark. So if you looked at the last six or nine months, and you're like, "Okay my average monthly expenses were maybe $8,000 a month, but then this month they were 10 and next month they're 12 and then 14."

It's like okay, now you're sort of triggered to ask a question. "Why are my expenses going up so much?" Is my revenue also increasing at that same amount or that same percentage? Okay, well then great that probably makes sense. Or we're just kind of getting ahead of ourselves. Getting ahead of ourselves in terms of our expenses, and so maybe we need to back off a little bit.

So it's just a way to kind of keep yourself in line. And again, not necessarily following anybody else's rules or anybody else's model, but comparing yourself to yourself. And it's always important to know, "Okay, I know that I have $8,000 in expenses, so I need to make at least $8,000 every single month just to cover my expenses." So really understanding how much money is going out the door is super, super important in your business. And maybe... I was gonna say, "You'd be surprised." Maybe you wouldn't be surprised. But often when we start working with business owners and we have discovery calls, people just don't know. They have no idea how much money is going out the door in their business. So that's an important one.

Katrina Widener: Yeah. Wow. Yeah, that makes a lot of sense. Also just having that benchmark so you can track month to month. I was just like, "Yep, yep, yep, yep. yep" the entire time you were talking about it. I'm over here nodding my head so everyone listening can't see that but I'm just like, "Yes!" Because yeah if your expenses are increasing, hopefully your income is also increasing. Cuz otherwise every once in a while we might have that one added expense pop up or maybe we need to refresh a contract and pay a legal fee. Or we've been saving to do a new website and pay for a designer or something like that, those are more one-offs. But if we're signing up for subscriptions for software, or we're doing a networking community and our expenses are increasing, but we're not able to cover that? It also can be super helpful when we're making those decisions of, "Oh is this the right time to update my software and upgrade to a newer level?" or "Is this the right time for me to really be taking on another contractor or one of those situations?" And so yeah makes so much, so much sense.

Stephanie Skryzowski: Yeah. I feel like it's just an opportunity to ask yourself a couple more questions. I saw that in my business recently where I was like, "Oh boy our expenses have really increased, what is happening here?" And I knew we've grown a lot as a team, our revenue is also increasing. But I was looking at a couple other line items, like software I think, and I was like, "Man why is this so much higher than it was like six months ago?" So I asked myself the question, I was able to dig into the details and I found like three subscriptions that I'm like, "Okay. I don't really use that enough to justify 20 bucks a month. So I'm just gonna get rid of it."

This is nothing like sort of mind blowing, right? Like this is not anything new and novel. It's just spending a little bit of time with your numbers, asking yourself a couple questions and being able to use that to make decisions for your business. So, yeah.

Katrina Widener: Yes. Yep. Exactly what you were saying, right? Another tool in the toolbox to like just get you aligned with where you really wanna end up in your business, which is the whole goal.

Stephanie Skryzowski: Yeah, exactly.

Katrina Widener: So, what is the third one then?

Stephanie Skryzowski: Okay so we talked about revenue, we talked about expenses, and now we're talking about profit margin. So these are kind of like three basics, and I have a whole list of metrics. I could go crazy, but we're gonna keep it nice, short, and simple. So all of your listeners can go and look at these three things in your business. So the last one is profit margin.

And so basically this profit margin, we've probably all heard this term before. What is it really? It's the percentage of revenue leftover after all of your expenses have gone out the door. So understanding, knowing what your profit margin is, is super important. Because I mean the whole point of running a business and being in this for yourself is to have money left over for yourself for whatever your personal goals are.

So I get the question all the time, "What's a good profit margin?" That varies. I would say for my product businesses, e-commerce, they would be thrilled with like a 15 or a 20% margin. Because you know, they have to pay manufacturing and product and raw material costs and things like that. So they'd be thrilled with a 15% margin. A service business owner, maybe you're essentially like a solopreneur or a coach or a course grader, you're probably seeing more like a 40, 50, maybe even 60% profit margin and that's right for you. That's awesome. So it really depends, but it's important to know your number again, looking back perhaps at the last year or so, and using that as your own benchmark.

So I did that in my business. I knew what my profit margin was for like the last six months or so, and I'm actively working on increasing that because I know what it is and I know what I'm working towards. And as you continue to grow your business your profit margin, that percentage may go down. And that's okay if your profit margin goes down over time. But that number, like the actual profit dollar amount? That's probably gonna increase. But everything is just bigger numbers.

So even though the percentage is down, the dollar amount might be higher. So that's natural for it to change. But really having that as a benchmark for yourself it's a great target to hit. Because your business is not gonna be able to go on and serve you and have the impact that you wanted to have, if you've got nothing left over at the end of the day. So profit margin is my third one.

Katrina Widener: So for everyone listening, I also recorded a podcast episode for Stephanie on her podcast, which if you have not listened to that yet you should go listen to it. But it was just so interesting because we're both basically talking about the exact same thing, which is like taking stock in your business and being able to take a step back and look at things objectively in order to make plans for the future. I really appreciate that for each of these three different metrics, you're really saying, "Have this. Know it as a benchmark. Check in on it. Regularly see how you're evolving, how it's growing, how it might not be growing, if you want it to be growing, right, based off of which of the metrics it is." Just so that you can have a place where you know where you started, or have a goal post and then move forward in that direction.

Which I think is what every entrepreneur wants and really needs. Because I get people so often who are like, "I kind of feel like I'm just winging it every single day, or I don't have any set boundaries or set goal posts for myself." And I love that this is something you're talking about because it's pretty simple. Like you were saying, it's not like you're doing a ton of math or anything super complicated. It's just saying, "Here is where I am today. Where am I a month from now? Where am I three months from now? Where am I at a year from now?" Which is so, so helpful.

Stephanie Skryzowski: Yeah, I completely agree and I feel like really the power of just a few key numbers in your business can just help elevate you to that next level. And I loved our conversation earlier, where we were just talking about taking stock, because I just feel like there's so much information you can glean by literally just asking yourself questions about your business.

It's that combination between like, "How do you feel?" Like, "How is your business feeling? Does it feel in alignment with your goals and with your purpose and with the impact that you wanna have?" And also, "How is it doing in terms of numbers?" That combination of checking in on both the feeling and the metrics in your business. I mean if you do that on a regular basis, there's no way you won't be successful basically.

Katrina Widener: As you were saying that I literally was thinking in my head, I'm like, "This is basically just a more tangible, right in your face way to check on your alignment," which is what I talk about all the time here is alignment. How do we get aligned? How can we strategically get aligned? This is basically just one of those like highly implementable, highly tangible, highly strategic ways you can say, "Am I aligned with what my end goals are? Am I not aligned with what my end goals are?" Right? You're talking about profit margin.

It's so easy to say, "Am I aligned or not? And if I'm not aligned, how do I get aligned?" Right? So I think that that makes so much sense especially for all of those people out there who are like a little bit more logical rational, as opposed to maybe the creative side, right? It's something that's able to say, "Okay I know how to check these numbers. I know that I can just sit down and look at them." It's not quite as abstract or nebulous as this like, "Am I aligned with myself?" part.

Stephanie Skryzowski: Right, yeah exactly. So for the people that do feel like you're more logical and you're like, "I don't know what my business feels like. Like what does that even mean?" Okay this will help you. Looking at the numbers will help you get in check with things on that side of your brain.

Katrina Widener: Yes, exactly. Okay well thank you so much Stephanie, for sharing all of this with us. Before we kind of hop off I wanted to first ask you, where would you recommend people get started? Or do you have any resources for people that you would love to share with them?

Stephanie Skryzowski: Yes, I do. So in addition to looking at your profit and loss statement and looking at these metrics, I think forecasting, which is basically looking into the future and creating a financial plan for your business. I have a template for that because that is really gonna also help you in addition to looking at these metrics, but also help you really make super smart decisions for your business. Because you can basically see your profit and loss statement in the future. It may sound fancier or more difficult than it really is. It's really just mapping out your revenue and your expenses every month in the future. So you can grab our forecast template, it's our profit playbook, and it's over at 100degreesconsulting.com/profit.

Katrina Widener: Perfect. I can totally see how helpful that would be!

Stephanie Skryzowski: Yes.

Katrina Widener: Especially for people who are just like, "Oh if I've done this forecasting, then I can hopefully maybe avoid it. Having my business expenses go up," for example. So that's awesome.

Well, just last question is where can people find you after the call if they wanna follow up?

Stephanie Skryzowski: Yes, yeah! So I also have a podcast and you're gonna be a guest on it in a few weeks. I'm so excited, and that is 100 Degrees of Entrepreneurship. And then I spend lots of time over on Instagram, @stephanie.skry and then of course our website 100degreesconsulting.com.

Katrina Widener: Awesome, thank you so much for coming on today, this has been awesome!

Stephanie Skryzowski: Yeah. Thank you so much for having me.