In business, whether you were a good math student or not, you must know your numbers. Follow the money trail is a common catchphrase that many consultants use in business – I don’t disagree, but I do say that there are a few sets of numbers that you need to stay on top of to be a successful business owner and consultant.
Your happiness pay
Some business owners don’t pay enough attention to this number. We’ve all read the books that tell you not to expect to make a profit in your business within the first few years. Are you kidding me? With that kind of mindset, I see many business owners not taking advantage of opportunities because they really don’t expect to profit at this time anyway.
How much money do you need to earn to be happy and live easy without feeling of stress and being overwhelmed? What’s your happiness salary figure? You can always upgrade it to the multi-million mark (or that may be your number range now). Either way, the point is to have this number.
I think it’s worth noting that economists say that a person can live comfortably without worry once they reach at least $70,000 a year. Of course, that depends on how well you manage your personal finances.
Overhead and monthly expenses
You need to figure out and know (like the back of your hand) how much money you need to bring in every month to cover your overhead expenses. Don’t skimp or underestimate in this area. It’s far better to overestimate a little to be sure that you are covered than to underestimate and fall short.
Your conversion rates
If you spoke to 100 prospects (however you communicate with prospects), how many of them would become customers? Tracking these numbers is advantageous to you because you can then set your goal to speak to 10 prospects per week – if your conversion ratio is 50 percent, then you would have 5 new customers. This helps big time with goal setting and your daily activities. Some business owners get lost in non-money-making activities because they don’t have the right goals set.
The average worth of your customer
Over a year’s time, what is the average worth of each of your customers? In other words, how much money are they likely to spend with you over the year. This is a good number to know. For instance, when working with a Gutter Cleaning Service, we determined that their average customer was worth $2,000 over a year’s time. Once we knew that number, we could then determine that we needed 125 customers to reach his quarter-million-dollar goal.