I failed some businesses too

Like many people, I also failed in my previous businesses for different reasons.

Sometimes, it is very convenient to lie to myself about the success of my previous businesses. I found out that most entrepreneurs are liars.

But it's really hard to lie and hide behind the sales when the numbers that matter in a business are being ignored.

Until we get to a point that we can be honest to ourselves as entrepreneurs, our business won't be able to take off.

Why this matters to you

In today's newsletter, I'm going to share why knowing the numbers in your business is super important especially if you plan to start a business or is running one today.

I'll also share with you the critical metrics you need to watch out for especially when you're new in the business and has plans to grow and scale it.

Why most people fail

Most people fail within 2 years of doing business when they forget to keep an eye on their financials.

They can be selling a lot or generating so much sales, but forget to watch out those nasty expenses that's making the business sink slowly.

Or they grow too fast and too soon that the overhead grew soooo much, the gross profit is not even enough to cover everything.

Or they are selling so much but still find the business running out of available cash to run operations.

Where did all the cash go???

Sales will not fix everything

While most marketers and sales people will tell you that if you need more profit, you just need to sell more, I tell you this: Sales will not fix everything.

Numbers don't lie

An entrepreneur can lie all he want with his friends about the status of his business, but his financials will not.

Knowing the numbers critical to your business success will keep you grounded. In my experience, these basic metrics are the most important:

1. Gross profit
2. Net profit
3. Cash runway

Gross profit tells me if the product I am selling is profitable. If I am selling a service, gross profit tells me how efficient I perform the service. Gross profit is sales minus all the costs directly related to make the sale happen. My goal is to have so much gross profit so that it can cover my other expenses in running the business.

Net profit tells me that if after deducting all other business expenses from the gross profit, I still have some left then I am profitable. Business is winning. There's no point running a business if it can't pay you the bills.

Lastly, cash runway tells me how long in terms of months will my business remain alive until it runs out of cash. Cash is king, and if I run out of cash, it's time to roll my sleeves up or else, we'll die.

Don't just rely on your accountant

It's funny that I am telling you this as an accountant and finance person myself.

But I have this belief that understanding your numbers as a business owner is your responsibility too.

Most of the time, accounting will fail or even deceive you if you don't understand how each number on your financial statements relate to each other.

(More about this on the next newsletters!)

Sometimes, I win. Most of the time, I learn. So here are some hard truths I learned as I learned (failed) and succeeded in doing business:

• Sales will not fix everything
• Numbers don't lie
• Don't just rely on your accountant

If this newsletter helped you, let me know so I know what topics to write about in the next issue.

Whenever you're ready, there are 3 ways I can help you:

1. Work 1:1 with me for your business finances here. (45+ clients helped)

2. Setup a business in the Philippines with my team's help here. (25+ new businesses setup)

3. We are building the finance stack for Filipino freelancers here. (580+ beta users)