Financial awareness Archives | Numbers Knowhow

Customer Lifetime Value: How To Calculate It?

Mahmood Reza — Fri, 09 Feb 2024 08:32:30 +0000

Why Is Customer Lifetime Value Important? As a business owner, you need to cater to your customers. Having satisfied and loyal customers is extremely vital to the growth of all businesses since, at the end of the day, the gains, and the profit one makes are due to the customers. However, not all of your customers can be put in the same basket. Each has a different impact on your business i.e. has a different worth. In the business world, we refer to that as customer lifetime value. But, what exactly is customer lifetime value and how do you calculate it? Further on in this blog, you can find the fundamental details relating to this topic: what is customer lifetime value (or CLV) and how to calculate it. What is the customer lifetime value? Customer lifetime value is a metric that presents to you how the profitability of your business depends on your customers. It shows you how much income you can expect from your customers. Certainly, making a profit is the goal of any business, so knowing your customers, knowing their value can be rather beneficial for you. It can help you make better decisions about when and how […]

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Know Your Numbers & Financial Ratios

Mahmood Reza — Fri, 02 Feb 2024 09:28:52 +0000

Numbers are everywhere, and for the most part, we just ignore them. That is unless we’re forced to pay attention to them when it comes time to do our monthly taxes or budget. But, for most people numbers don’t seem interesting. And this is something I’ve seen over and over again. Know your numbers I can’t emphasise enough how important it is to know your numbers. In your business, your numbers are your best friend. Once you realise that you will become less anxious about them. The enormous benefit your business numbers give you is clarity about how healthy your business is. They will help you in the good and not-so-good times. Because numbers don’t lie to you. They will always give you that reality check. They’ll wake you up from slumber and prompt you to take action. Financial ratios Your numbers can be turned into financial ratios. Consequently, they can tell you a lot about your business’s health and where it could be headed in the future. Here’s a quick guide to how to know your numbers and how to use the most essential financial ratios. Subsequently, you can start using your numbers to make smart decisions for […]

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Product Grouping & Its Financial Power

Mahmood Reza — Mon, 08 Jan 2024 08:54:46 +0000

Have you ever thought about product grouping? Or has it been something you’ve put on the shelf and it’s been collecting dust? How does it get you a greater financial understanding of your business? How product grouping can help Above all by looking at your business in terms of product groups, you can gain powerful insights into: where your money is coming from, and where it’s going. This information will help you forecast for the future and make your business more profitable. So with this knowledge in hand, you’ll be able to take control of your business and propel it forward. In other words you’ll have a much stronger framework for making decisions that will benefit your bottom line. Watch this video to learn more about the financial power of product grouping! Key takeaways This short vlog will enhance your knowledge, specifically about: How to group your products How to use product groups to analyse your numbers With this in hand, whether you’re a start-up or established, you’ll be able to move forward in your business. You’ll get that essential information which will be the basis for your future decision-making. Because you’ll know which groups make money, and which […]

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Final Steps Of A Business Plan

Mahmood Reza — Fri, 01 Dec 2023 11:51:10 +0000

Each business plan needs to be meticulously constructed in order to be effectively used in the future. This blog will discuss the final steps of a business plan and give you an overall idea of what needs to be done. The three groups that encompass these final steps are the following: Management Financial forecast Presentation Final steps of a business plan: management One of the final steps of a business plan is defining the management roles within your team. You can achieve this by outlining the strengths and weaknesses of each team member as well as describing their background and experience. Consequently, you will have a clear overview of who in your team is suitable for a certain role, and make the allocation accordingly. Furthermore, you need to clarify how you intend to cover the key areas in your business, such as production, sales, marketing, finance, and administration. Lastly, you need to maintain your management information systems in good condition. This includes the management accounts, sales, stock control, and quality control. How committed are you? Businesses often further develop and prosper thanks to partnerships and investors. So, if your goal is to attract banks or potential investors, as a […]

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Manage Cashflow: Five Top Tips

Mahmood Reza — Mon, 21 Aug 2023 09:04:28 +0000

Wondering how to manage your cashflow? You’ve come to the right place. By the end of this blog, you’ll have read about top tips to manage your cashflow and you will be equipped with the necessary information to help you do a really good job at it. Cash and business But firstly, what is cash? It’s what gets paid into your bank account. It’s factual, and more importantly, is the lifeblood of your business. Secondly, why do we need cash? Your business needs it for a whole bunch of things. Typically, cash is needed for: So running out of cash, access to cash or poor cash flow is squeaky bum time. Your business will survive if your cash flow supports it. However, if you do a bad job at managing your cashflow, the cash will run out, or access to it will dry up. Unfortunately, it is the end of the business road if you reach that point. It’s not for nothing that the phrase “Revenue is vanity, profit is sanity, and cash is reality”, rings true. It’s good business practice to have a good cash flow management strategy. Here are the five key elements that you should include […]

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Cashflow Forecast Guide

Mahmood Reza — Tue, 11 Apr 2023 10:46:34 +0000

Building your cashflow forecast might seem unnecessary to some – at a first glance, that is. That’s why, this cashflow forecast guide aims to explain why you need one and how to build it. Because, you might be thinking, “I don’t need one of those. I’m not going out of business!” But if you’re like most people, your business is constantly changing and growing. And when it does change or grow, that’s the perfect time for a new forecast! It doesn’t matter what kind of business you have – retail store, restaurant, consulting firm – forecasts are important because they help keep your finances in order and on track. Why you need a cashflow forecast This cashflow forecast guide undoubtedly needs to start with the reasons why a cashflow forecast is your greatest ally. Firstly, it will help you make sure that everything is running smoothly with your money. If something happens unexpectedly (like an unexpected expense), then at least you’ll know about it ahead of time so that you can plan accordingly. Forecasts also give businesses a chance to see where their money is coming from and where it’s going; this helps them figure out ways to make […]

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How To Write A Financial Plan

Mahmood Reza — Tue, 11 Apr 2023 09:47:44 +0000

Are you a business owner who is looking to write a financial plan for your company? If so, you’re in luck! In this blog, I will be teaching you how to write a business financial plan that is both accurate and achievable. So, whether you’re just starting out or are looking to improve your current plan, keep reading for tips and advice. Your financial plan is an important document, as it is for any business, no matter its size. A good financial plan can help you make sound decisions about your company’s future and keep your business on track financially. But writing a financial plan can be daunting – especially if you’re not familiar with the terminology. So where do you start? This blog (and vlog) will walk you through the basics of writing a business financial plan. Why you should write a financial plan If you’re thinking about whether you can afford something for your company at the moment – things like: Investing in a course or business coaching you’ve just come across, Hiring more staff, Outsourcing a certain portion of your work, Starting a marketing campaign, etc. Then, you need to be familiar with your numbers at […]

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How To Use Your Financial Plan Effectively

Mahmood Reza — Tue, 11 Apr 2023 09:40:37 +0000

Creating and following a financial plan (your financial story) is an important step to taking control of your finances. If you’re like most business owners, you know that it’s important to have a financial plan in place. But do you know how to effectively use your financial plan? Keep reading for steps on how to put your financial plan into action! In this blog (and vlog), I’ll share four tips on how to effectively use your financial story. It doesn’t matter if you’re just starting out or have been working on your financial plan for a while. It’s always good to learn something useful or brush up on something you’ve perhaps not paid much attention to up till now. How to use your financial story effectively Here are my four golden rules to follow when it comes to using your financial plan. You’ll see that it all really has to do with being familiar with your numbers and continually going back to them to check if you’re doing a good job realising your business targets. So, let’s see what the four tips are. It’s about setting targets and sticking to them Use and access your data Decide how often […]

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How To Manage Your Business Risk

Mahmood Reza — Tue, 11 Apr 2023 09:34:19 +0000

Managing your business risk is something you need to know no matter what kind of business you run. Naturally, there will always be some inherent risk involved when running your business. There’s no way to completely eliminate the risk. But by understanding and managing it, you can minimise its impact on your bottom line. In this blog, I look at the following: Understanding what risk is, Looking at risk categories, How you can identify risk, Ways to manage your risk. Watch the video to find out more about managing your business risk, or simply read on. What is business risk? A business risk is any situation that is sure to make a company not reach its goals. For example, it may be something that will have an effect on the relationship or communication with your customers. Consequently, you’d lose sales, and make the desired profit. Another example could be some sort of natural disaster. This may also affect communication with clients, or distribution of products (if you’re a product-based business). It could also be loss of suppliers. This will then result in you not being able to deliver on time, or deliver as big a quantity as you had […]

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How To Be Financially Accountable

Mahmood Reza — Tue, 11 Apr 2023 09:03:35 +0000

Financial accountability is defined as being responsible for the way you use and manage your money. So, are you financially accountable? Or, maybe you’re finding it difficult? You’re not sure where to start, or you feel like you’re constantly falling behind. Don’t worry, you’re not alone! Being financially accountable There’s a reason why most businesses have accounting departments. Because being financially accountable is essential for success. But for small business owners and entrepreneurs, it can be challenging to stay on top of everything. In this week’s I Hate Numbers video, I look at reviewing your Financial Story Plan. You’ve heard the saying, “If you don’t know where you’re going, any road will get you there.” The same is true for your business finances. Not knowing your goals will result in you taking roads you never meant to take. Without a clear plan and goal in mind, it’s easy to lose track of your spending and make poor financial decisions. That’s why it’s important to review your Financial Story Plan regularly. Improving your financial accountability is a process that takes time and effort. Here are some tips that will get you started on the right foot. To summarise In this […]

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How To Use Financial Ratio Analysis

Mahmood Reza — Tue, 11 Apr 2023 08:46:28 +0000

Financial ratio analysis and how to use it is featured in your Numbers Toolkit. Business owners, analysts, as well as investors all use it. I have a vlog about what financial ratio analysis includes and how it’s used. In it, I talk about the four common areas used in financial ratio analysis, or quadrants as I refer to them there. They are: Profitability ratios, Liquidity ratios, Efficiency ratios, and Risk and return ratios. The video showcases and interprets those ratios with a worked example. So, if you want to find out more (and you’re a visual learner) click on the video below to really grasp this. Financial statements and their limitations Your financial statements, profit and loss and balance sheet show your profitability and financial position. These accounts record your performance. However, they are limited in use. This is because no indication is given as to whether the results are favourable or unfavourable. For example, you wouldn’t see anything in the profit/loss figures that will tell you if those numbers are what the firm in question is aiming for. Whether the figures are satisfactory for the company remains to be the subject of analysis which will have to take […]

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How To Make Financial Projections

Mahmood Reza — Tue, 11 Apr 2023 08:41:08 +0000

Do you want to find out how to make financial projections and how to do it realistically? Here’s an easy-to-understand guide about making financial projections. A financial projection – meaning A financial projection is a forecast of the revenue and expenses that you expect for your business for a given period of time in the future. It usually contains predictions of several outcomes within. So, you can make a projection for your business in the case of sales or certain costs increasing/decreasing. In a sense, it gives you a plan B, and C… It doesn’t necessarily mean that it will pan out. Despite lacking accuracy, as it is a projection, it’s still a necessary part of business planning and development that you need to do each year. The reason being that it helps tremendously to set your business on the right path. And what it also does is it prepares you for the future. So, how do you actually make financial projections for your business? Let’s have a look. Part 1: Forecast sales What’s probably the most exciting part of it is projecting your sales. This is usually the first step in the process, too. Forecasting sales for existing […]

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