5 Key Financial Metrics Every Business Owner Should Know: Insights from the CFO2GO Program
5 Key Financial Metrics Every Business Owner Should Know: Insights from the CFO2GO Program
Running a successful design business isn’t just about your creativity, service, or product quality—it's about understanding the financial health of your business. For many entrepreneurs, particularly creative business owners, the financial side of the business can feel daunting. However, stepping into the role of CEO means mastering your numbers. During my 6-week CFO2GO program, we don’t just skim the surface—we dive deep into the numbers that matter most. To give you a head start on your financial success, here are the five key financial metrics I would want you to learn first as part of my CFO2GO program. These are essential to move from designer to CEO and can make the difference between just getting by and thriving.
1. Total Revenue: The Vanity Metric
Your total revenue reflects how well you’re selling. It’s the sum of all your sales— and the number that often gets the most attention. Seeing that high total can feel satisfying, but it’s important to remember that this number alone doesn’t tell the full story.
Revenue can be a "vanity metric" because, on its own, it doesn’t account for the costs you’ve incurred to generate those sales. It’s an important starting point, but far from the whole picture. As a business owner, your goal is not just to increase revenue but to ensure that your revenue supports profitability and sustainable growth.
Why It Matters: Total revenue is the foundation of your financial statements. It gives you an idea of your business’s overall scale but needs to be analyzed in conjunction with other metrics to assess true performance. In the CFO2GO program, we’ll break this number down further to understand what it really means for your business.
2. Cost of Goods Sold (COGS): Are You Buying Smart?
Cost of Goods Sold (COGS) refers to the direct costs associated with producing the goods or services you sell. This number reveals how well you’re managing your purchasing power. Are you getting the best value for what you’re spending on supplies, materials, and production? Or could your buying practices use some adjustment?
This metric helps you see if your production and supply chain processes are efficient. If your COGS are high, it could indicate that you’re overpaying for materials, not managing production costs well, or It could also mean that you are not charging for items that you are paying for.
Why It Matters: Understanding your COGS helps ensure that you’re not overspending to deliver your product or service. During CFO2GO, we’ll evaluate if you’re maximizing your purchasing power, identifying areas where you can cut costs without compromising quality.
3. Gross Profit: The Key to Pricing and Customer Strategy
Your gross profit is one of the most critical numbers in your financial toolkit. It’s the difference between your total revenue and COGS and reflects how well you’re pricing your products and services. A strong gross profit means you’ve got solid pricing and are targeting the right customers who see the value in your offerings.
If your gross profit margin is low, it could indicate that your prices aren’t aligned with the true value of your work, or perhaps you’re not reaching the right audience. As we dig into this metric in the CFO2GO program, we’ll look at whether adjustments to your pricing model are needed or if you need to rethink your customer base.
Why It Matters: A healthy gross profit margin shows that your pricing strategy is on point, and you’re generating enough income from your sales to cover other operational costs and still make a profit. This is where we’ll assess how well you’re balancing what you’re charging with the cost of doing business.
4. Operating Expenses: Where is Your Money Going?
Operating expenses are the day-to-day costs of running your business. These include everything from rent, utilities, and payroll to marketing and office supplies. This metric is crucial because it shows you exactly where your money is going.
Are you overspending in certain areas? Are there unnecessary expenses that could be cut? Understanding your operating expenses allows you to keep your budget in check and ensure you’re not leaking money in non-essential areas.
Why It Matters: Operating expenses tell you if you’re managing your business efficiently. By analyzing these numbers in CFO2GO, we’ll look for ways to trim unnecessary costs while maintaining the quality of your operations.
5. Net Profit: The Final Word on Business Success
Net profit is the ultimate bottom line—it’s what’s left after all your expenses, including COGS and operating expenses, have been deducted from your total revenue. This number tells you if your business is truly profitable or if you’re just treading water.
A strong net profit means you’ve mastered the balance between selling, buying, and managing your business. It also gives you the funds needed for growth, bonuses, and owner’s pay. If your net profit is lower than expected, it’s time to take a closer look at your Profit & Loss statement to identify where things might be going off track.
Why It Matters: Your net profit is your company’s financial pulse. We’ll use this metric to gauge how well your business is performing overall and to set future growth goals during the CFO2GO program.
From Designer to CEO: The Financial Journey
Graduating from a creative entrepreneur to a CEO requires more than just artistic vision—it requires a solid understanding of where your business stands financially. Many business owners get caught up in the day-to-day operations and overlook the importance of these key financial metrics. However, by mastering your numbers, you’ll gain the clarity needed to make strategic decisions that lead to sustainable growth and long-term success.
During my CFO2GO program, we take a deep dive into these financial elements, creating a clear financial plan and Key Performance Indicators (KPIs) tailored to your business. You’ll leave the program not only knowing where your business stands but also with the tools and confidence to plan for the future.
What Past CEOs Are Saying
Business owners who’ve completed the CFO2GO program often experience significant transformations in their financial understanding and business performance.
One designer CEO shared, “My biggest takeaway from the CFO2GO coaching was the push and guidance to finally get my bookkeeping in order. It helped me properly categorize my items with COGS and gave me incredible insight into how to read the financial temperature of my business.”
This kind of insight is invaluable. By focusing on your financial health, you’ll have the confidence to make smarter decisions, invest in growth, and ensure that your business is on the path to success.
Ready to Take the Next Step?
If you’re serious about stepping into the role of CEO and mastering your business finances, now is the time to enroll in the CFO2GO program. With limited slots available for 2024, don’t wait to take control of your financial future. Schedule your discovery call today and let’s get started on building a financial strategy that works for you.
Understanding these five key financial metrics is just the beginning. With the right guidance, you’ll not only understand your business numbers—you’ll use them to build a thriving, profitable company.
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