Small business owners are extremely busy and they often have to wear many hats. Most of them don’t have the luxury of an internal marketing, customer service or HR department. Many owners have to fulfill these roles themselves and therefore find it very difficult to stay on top of their business finances. But getting on top of the financial measures of your business performance is an important part of running a business, especially if it’s in a growth phase.
There are a few key numbers that all small business owners must know by heart. These numbers will provide valuable insight and act as early warning indicators if something is about to go wrong. Without these indicators you may never know if your business is heading for disaster or not.
These numbers are most useful when converted to ratios. There are many types of ratios you can use to measure the efficiency of your business operations. Financial ratio analysis is nothing more than comparing specific pieces of information taken from your company’s balance sheet and income statement. These are some of the most commonly used ratios: