Tunde sat across from Babs, his stomach in knots. He had been working 16-hour days, yet his bank account was always empty. According to a 2023 study, 82% of small businesses fail due to cash flow problems. Tunde was determined not to become part of that statistic—but he didn’t know where to start.
Babs looked at him thoughtfully. “How much profit do you actually make, Tunde?”
Tunde blinked, surprised by the question. He had been tracking sales, sure—he knew how much money came in—but profit? The idea of truly understanding the financial health of his business hadn’t even crossed his mind.
“I… I don’t really know,” Tunde admitted. “I just know money comes in, and money goes out. It’s been like this for months. But I’m still struggling to stay afloat. My sales are growing, but… I’m not sure where all the money is going.”
Babs nodded. “Tunde, there’s a big difference between running a business and simply managing cash flow. If you don’t know your numbers, you’re just surviving—not growing. And that’s the biggest trap most small business owners fall into.”
Understanding the Financial Reality: Tracking the Numbers
Babs showed Tunde a simple way to track his numbers. Together, they started with his monthly revenue. Tunde listed out his sales for the month: how much money he made from each of his customers, how much was owed, and how much had been collected.
Next, Babs walked him through the expenses: rent, utilities, stock purchases, transportation costs, marketing, and any other business-related outgoings. Finally, they calculated his profit margin—the money left over after all expenses were subtracted from revenue.
It wasn’t a pleasant conversation.
Tunde’s profit margin was far lower than he thought. He had been focusing so much on sales that he hadn’t realized how much was being eaten up by unnecessary overhead. But instead of being discouraged, Tunde felt a sense of relief. He finally had clarity. He wasn’t going broke because his sales were bad—he was just spending too much on things that weren’t giving him the right returns.
The Hidden Danger of Not Knowing Your Numbers
The harsh reality is, without financial clarity, many business owners are simply treading water. They work hard, day in and day out, but they’re caught in a cycle of financial confusion. As long as you don’t know your profit margin or track your expenses properly, you’re setting yourself up for stress and failure.
But here’s the good news: knowledge is power. Once Tunde begins tracking his numbers, he will feel more in control than ever. He will be able to pinpoint where he’s losing money and identify the areas that need improvement.
This newfound clarity will allow him to make informed decisions, whether it’s cutting unnecessary costs, adjusting his pricing strategy, or reallocating resources more effectively. He’ll no longer be in the dark, constantly scrambling to make ends meet. Instead, he will have a clear path forward, confident that every decision is backed by real data.
What If You Don’t Know Where to Start?
What if you don’t have time to track your numbers?
Start small. Dedicate just 10 minutes a day to track your income and expenses. You don’t need to analyze everything at once. Start with one area—maybe just track your sales for the next week. Over time, as it becomes a habit, you can expand to include every part of your business.
What if you’re afraid of what you’ll find?
It’s normal to feel uneasy about facing the reality of your finances. But here’s the thing: when you know where you stand, you can make better decisions. Ignorance is the real enemy. You might discover things you don’t like, but that’s the first step toward making things better.
What if you don’t know how to analyse your numbers?
You don’t need a degree in finance to get started. There are simple apps and tools available that can help you break down your income, expenses, and profits in clear, easy-to-understand terms. The most important thing is to take that first step toward gaining clarity.
What if your profit margin is negative?
If you find that your profit margin is lower than you expected—or even negative—don’t panic. It’s an opportunity to make changes. Start by reviewing your biggest expenses: Can you negotiate with suppliers? Cut back on inventory costs? Improve your pricing? Small tweaks can have a big impact. The goal is to make incremental improvements over time, not to turn everything around overnight.
Actionable Steps to Start Tracking Your Numbers
Let’s break this down into simple steps so you can start today:
1. Track Your Revenue: Start by recording all sources of income. Include everything from sales, repeat customers, and any special deals you offer. This gives you an idea of how much money is coming in.
2. Track Your Expenses: Write down every expense—don’t leave anything out. Rent, utilities, marketing costs, stock, software subscriptions—everything. Categorise them so you can easily see where most of your money is going.
3. Calculate Your Profit Margin: The formula is simple:
Profit Margin = (Revenue – Expenses) ÷ Revenue x 100
This will give you the percentage of each dollar that you actually keep as profit.
4. Analyze and Adjust: Once you see the numbers, take action. Are there areas you can cut back on? Can you raise prices or tweak your product offerings? By regularly reviewing your profit margins, you can make adjustments to increase profitability.
What’s Next?
You’ve tracked your numbers. Now what? It’s time to turn those insights into action. The key to growth is not just focusing on getting more sales—it’s about understanding where your money is going and making smart choices with it.
Next time, we’ll dive into why more sales alone won’t fix your financial troubles—and how to create a sustainable growth strategy without overworking yourself. This is the next step you need to take control of your business. Don’t miss it!
Key Takeaways
• You’re not just managing cash flow; you need to understand your true profit margin.
• Start by tracking simple numbers: income, expenses, and profit margin.
• Knowledge is power: confronting your finances head-on will empower you to make informed decisions.
• Don’t be afraid to start small—track one day at a time, and you’ll build momentum.
Take Action Today
You’ve been working hard. Now, let your numbers work for you. Take control of your finances today and start tracking your real profit. It’s the first step toward business freedom. Are you ready?
