I believe one of the most important roles of the small business executive is “Scorekeeper”. You make sure the score is being kept in your business and that your team members are seeing the numbers they need to see.
My experience is that many small business owners see monthly financial statements such as the Income Statement and the Balance Sheet and aren’t sure what to make of all the data. Hence, the reports get a quick look-over and then get filed in that big file folder in the cloud where they will never see the light of day again.
Using your most current financial statements, here are my top five financial numbers to track. How many are you currently tracking today?
#1. Sustainable Growth Rate.
I am often asked by clients, “How fast should I grow my company?” Tough question. There are lots of risks involved in growing too slowly or too fast. The Sustainable Growth Rate calculation helps us determine a “safe” rate of growth for our business given three sets of assumptions: net profit percentage, debt/equity mix, and the number of variable assets on our balance sheet.
This formula not only tells us what our Sustainable Growth Rate is currently, but it also allows us to do “what if” analysis to see how we might either speed up our rate of growth or possibly slow down.
