It’s that time of year again when we begin to close the books on the year and look ahead to what the new year might bring. The assumptions you use are critical to your profit and loss and balance sheet forecasts. This is especially true if you will use these projections to attempt to obtain financing or attract an investor.
I’m a big believer in managing your business using your balance sheet first, then your income statement. However, simplifying that by using KPI’s (key performance indicators) can help you get a quick view of your financial landscape and determine your financial health at a glance. Here’s 5 KPI’s that every business owner should use. These are in no particular order, but they cover profitability, liquidity and leverage.
John D. Rockefeller was a famous industrialist and philanthropist. He founded Standard Oil Company and became the world’s richest man controlling 90% of all in the US at its peak. His fortune at his death was $23 billion in today’s dollars. He was also well known for his generosity and donated over $500 million to charities with medical and educational focus throughout his lifetime.
Our two most recent posts, we’ve discussed that there are 4 critical items to understand your financials. 3 come from the balance sheet (asset quality, liquidity and leverage) and the 4th comes from the income statement (profitability).