As you may have noticed, Marcus is a numbers guy.
The problem is that the owners he meets in about two-thirds of the episodes are clueless about theirs and can’t answer even the most basic financial questions about their businesses.
The three numbers Marcus wants you to know are:
1. Annual sales revenue, based on a trailing 12 months, not the calendar year.
Why? Think of it this way, if it’s now December 2016 seeing the 2015 financials isn’t very helpful is it? More recent data is required by both management and financiers to make decisions.
2. Gross Profit Margins.
Not to be confused with Gross Profit.
Gross Profit is a $ amount whereas Gross Margin is a percentage figure:
Gross Margin (%) = (Revenue – Cost of goods sold) / Revenue
3. Expenses as a percentage of Gross Profit not revenue.
Why? It’s because Gross Profit is the money you have left over to cover expenses after you have paid for all the things needed to produce your products and the labor costs involved.
It’s also one of the most common mistakes — and not just for small business owners. “I’ve met plenty of Fortune 500 company CEOs that don’t know their numbers,” Lemonis told CNBC. “They say, ‘Oh, I have other people to do that,’ or, ‘My CFO knows that.'”
That doesn’t cut it. If you want to run a successful business, you have to know your revenue, gross profit and expenses”inside out,” Lemonis said.
Learn the basic numbers and ratios here.