A lot of emphasis is put on financial statements.  A critical question for a business is this: 'Based on the information in the financial statements, what should be done differently in the future?'

To determine what action to take owners need to know things like:

- Why is there less profit this year?

- Is this good, or bad?  How am I, compared to others?

- How much should the gross margin be?

- Am I spending enough on marketing?

- What is the average cost per day?  (or per metre, per employee, etc.)

- Are there changes that would improve the business?

- Could I borrow using these financials?

- Do I need more people on my team?

However, financial statements are not enough for questions like these;  there are no actionable strategies just from the financials.

So, more information is needed to help owners understand the connection between actions and financial results.  There are accountants who can interpret the results using benchmarks and analysis tools (ahem!), and there is software available too.

What we are looking for are insights that lead to changes in behaviour and actions and to improve results.  These help us develop leading indicators (not lagging, like financials); such as daily number of visitors or calls, average daily sale, number of responses to advertisements, etc.

Using software (because it's faster), we can interpret and explain complex data.  Then we can compare to Benchmarks, which exist for many industries (even from overseas – the currency may be different, but the percentages/relationships are often the same).  It also helps to analyse the changes to be made with the "Growth/Profit Equation".  This tells us that to achieve revenue targets and positive operating cash flow the business must generate a profit, which can be accomplished by increasing prices, and/or obtaining more customers, and/or having those customers purchase more or more often, and reducing both direct (cost of goods) and indirect (overheads) costs.

Financials are just the first step in responding to the key questions that need to be answered.  Thirty minutes with "The Growth Equation" will provide the strategies to improve any business' profit and cash flow.  It costs very little to work through a comprehensive profit improvement plan but the value can be immense.