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All About the Numbers

Getting a Handle on Your Financials


Quality financials are just as important as ensuring all of the quality touchpoints of your brand. In other words, the numbers are every bit as critical to your business as the products or services you sell. Getting a handle on your financials helps uncover opportunities for improvement and growth (and can put more cash in your pocket).


Whether you are looking to raise capital, sell your business or simply be more effective in running it, it is absolutely imperative that you have a firm grasp of your financials, high trust in the accuracy and defensibility of those financials, and a solid plan for how you will move your business forward based on what you learn from them.


Often, we encounter small business owners who are great at making their widgets but struggle to understand of how their business actually functions. It is completely understandable why. Their ability to make and sell the widgets is what got them into business in the first place and to where they are now. And as long as there was enough cash in the bank to pay the bills and take some for themselves, things were okay.


But that only gets you so far.


Make the investment of your time, and money if necessary, in going through all of the numbers that make up your financials and understand how each one relates to how your business operates. Engaging a firm with a strong financial and operation background (yes, like Fulham Partners) can pay huge dividends regardless of your ultimate aim. If you need further assistance in properly preparing your financial statements, consider using a CPA firm.


Diving into your numbers starts (somewhat) simply enough with your income statement. Review your revenue, cost of sales (also called cost of goods sold or COGS), gross profit (revenue minus COGS), operating expenses and net profit. Ask questions about what makes up those numbers. You should dive in to a myriad of topics, including:

  • Revenue, cost and gross profit by product or service

  • Revenue, cost and gross profit by customer

  • What drives the costs for producing and delivering each product or service

  • What items make up the operating expenses and their necessity

  • What opportunities exist for reducing costs without sacrificing quality

That is just a small sample of what to probe. While doing so, make sure that the answers you are getting offer assurances that the underlying data is true and accurate.


You'll need to go through a similar exercise with your balance sheet and cash flow statement. If you don't have a cash flow statement available, you will need to get one created. This, combined with your balance sheet and income statement, tells you exactly how your cash is being used in the business.


Once you have completed this deep dive into your financials, expect there to be a number of other questions related to your business operations. These likely will include such things as:

  • Inventory levels and costs

  • IT costs (lower is not necessarily better)

  • Processes and procedures

  • Individual productivity

  • Marketing effectiveness

  • Pricing

  • Product mix

  • Product/service quality

  • Customer service issues and related costs

You may have some suspicions about these things. Maybe even some indications. But it is only through understanding the impact each one has one your financials that you can make smart changes. Where should you make more of an investment? Where is there some waste you can cut? What are some areas where you can improve efficiency and productivity? What hires do you need to make?


Getting a handle on your financials so that you can better support your business and drive it forward is how you create real value. And working with an experienced advisor (like Fulham Partners) from outside the business will give you an unbiased perspective will help uncover multiple opportunities. We are able to leverage our experience across multiple industries to know what questions to ask. And because we are not working within your business already, we don't take anything for granted. Our only goal is your success.

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