Numbers are the foundation of every successful business. Whether you’re a small business owner or managing a growing company, understanding key financial metrics is essential for making informed decisions, improving profitability, and ensuring long-term success.
In this blog post, we’ll provide an overview of revenue, cost of goods sold (COGS), profit, and business efficiency—four critical areas every business owner should track.
Key Business Numbers Every Business Owner Should Know
1. Revenue: The Starting Point for Business Growth
Revenue, also known as sales or turnover, is the total income your business generates from selling products or services. While high revenue is a positive indicator, it doesn’t guarantee profitability. Understanding how much of your revenue turns into actual profit is key to business success.
Why it matters: A business with strong revenue but high costs may still struggle to remain profitable. Tracking revenue trends can help you spot growth opportunities and potential risks.
2. Cost of Goods Sold (COGS): The True Cost of Your Products
COGS includes all direct costs associated with producing or purchasing the goods you sell. This can include materials, labour, and manufacturing costs. For service-based businesses, COGS might include direct labour costs associated with delivering the service.
Why it matters: Lowering COGS without compromising quality can significantly boost profit margins. If your COGS is too high, you may need to adjust pricing, negotiate better supplier rates, or streamline production processes.
3. Profit: Measuring Business Success
Profit is the amount left after all costs and expenses are deducted from revenue. There are two key types of profit every business should monitor:
Gross Profit
Gross profit shows how much money is left after covering direct costs. A strong gross profit margin means your pricing strategy is effective and your production costs are well managed.
Net Profit (Bottom Line)
Net profit is the ultimate measure of business profitability. If this number is consistently low or negative, it’s a sign that costs need to be reduced, revenue needs to increase, or both.
Why it matters: Profitability is what keeps a business sustainable. Tracking gross and net profit helps you make strategic decisions about pricing, expenses, and opportunities for growth.
4. Business Efficiency – The Key to Maximising Profitability
Beyond financial figures, business efficiency plays a fundamental role in long-term success. Efficiency is about getting the most out of your people, processes, and products—something Kerry always emphasises in business coaching.
Ask yourself:
People – Do you have the right team members in the right roles? Are they working effectively?
Processes – Are your systems optimised, or are you losing time and money on inefficiencies?
Products – Are your products or services priced correctly? Are they delivering maximum value?
Why it matters: Improving efficiency reduces waste, increases productivity, and boosts profit margins. A business with streamlined operations can achieve higher profitability without necessarily increasing revenue.
Why Tracking These Numbers is Essential for Business Growth
Understanding these key financial metrics helps you:
Improve cash flow management
Make smarter pricing and cost-cutting decisions
Increase profitability and long-term sustainability
Identify inefficiencies and areas for business growth
What’s Next?
Over the next four weeks, we’ll be breaking down these topics further in a series of videos and blog articles designed to help you improve financial performance.
By the end of this series, you’ll have a clear understanding of how to track and optimise your business numbers for greater profitability. Stay tuned!
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