3 Financial Benchmarks that Measure Your Company’s Success

Cash is the lifeblood of your business. If you don’t have paying clients, you don’t have a business, you have a money pit. It’s incredibly easy to spend money you don’t have in business – so maintaining control of your finances is crucial to your business’ success.

If you aren’t an accountant or financial planner, maintaining your company’s finances probably isn’t your most favorite activity. Sure, you like to see sales coming in, but keeping track of all your expenses and balancing all financial accounts probably isn’t at the top of your “most fun business activity” list.

Do you have financial goals for your business? If you’re just starting out, you may dream of paying off debt or being financially stable. If you’ve been in business longer, perhaps you dream of reaching a specific sales goal. Here are three key numbers to measure your company’s financial success.

Benchmark #1 – Break-Even Financial Goal

How much will it take for you to move from the red to the black in your business? Most businesses initially run in the red because when you start out, you have a lot of expenses and not many sales. How do you calculate your break-even number?

• Look at how much money do you need to pay all your bills, debts, memberships, insurance, taxes (federal, state, and local) and marketing costs.
• If your business is your only source of income, add your personal living expenses to this list – your rent or mortgage payments, utilities, your car payments, credit cards, food, gas, pet care, medications and other costs of living.

Now, add up your total monthly expenses and multiply it by 110 percent because, chances are, you probably forgot something.

Benchmark #2 – Mid-Level Financial Goal

Once you hit your break-even number, the next goal is probably a set amount of sales per month to sustain your growing business and to keep three months or so of cash in the bank in case of emergency. How many sales you need depends on where you see your business heading.

• Do you want to hire employees, vendors, assistants, or virtual assistants? How much will you need to pay them?
• Do you need to make any major purchases to grow your business?
• How much cash do you need on hand in case of emergency? How much would you need to run your business for three months if you had no cash coming in?

It should also take into consideration your own salary. How much do you need to meet your basic living costs and be comfortable (meaning have enough to spend on entertainment like dinner outings, theater, concert or sports tickets or maybe new purchases like that new HDTV you want or a nicer car or a better wardrobe)?

Benchmark #3 – Long Term Financial Goal

What is your benchmark number for annual revenue? For instance, that may be consistently making $100K, $500K or $1 million within a certain amount of time, like within three years.

Benchmark numbers give you a way to analyze the success of your business on a day-to-day basis. They provide focus so you can see if you’re on target to make this month’s sales numbers and where you might need to cut costs or increase revenues to reach your financial goals.

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