“Your business is constantly communicating through its numbers, telling you what’s working, what’s not, and where change is needed. The key to success is learning to listen and respond to those insights.”
– Roger Knecht
In today’s competitive business landscape, understanding and leveraging the power of numbers is crucial for growth and profitability. To delve into how numbers can shape the success of a business, we sat down with Roger Knecht, president of Universal Accounting School. Roger has dedicated his career to helping accounting professionals and business owners make sense of their financial data, develop effective business strategies, and build profitable enterprises. With extensive experience in coaching and training, Roger offers practical, actionable insights that guide entrepreneurs in using their financial information to make informed decisions and achieve their goals.
In this enlightening conversation, Roger shares his expertise on the critical role of accounting and financial indicators in business success. He explains why every business owner, whether a solo entrepreneur or the leader of a large organization, should establish key metrics to track progress, make data-driven adjustments and maintain a clear path to profitability. Roger’s approach goes beyond just crunching numbers; it’s about translating financial data into a language that empowers business owners to drive sustainable growth. Whether you’re just starting or looking to refine your operations, Roger’s insights offer a roadmap to elevate your business through the power of numbers.
Thank you so much for joining us, Roger! Our readers would love to get to know you a bit better. Can you tell us a bit about your backstory?
Absolutely, Stacey. My journey in business has been anything but straightforward. Over the years, I’ve had the privilege of working across a variety of industries, from finance to business development. Along the way, I developed a real passion for helping entrepreneurs and small business owners realize their potential. This ultimately led me to my role as President of Universal Accounting Center. Here, our focus is on equipping small business owners, particularly in accounting, with the resources and tools they need to build successful, sustainable careers. I’ve always believed that understanding and managing finances is the foundation of any thriving business. By working closely with these business owners, I can help them overcome common financial hurdles and guide them toward achieving greater profitability and growth.
That’s fantastic! Let’s dive right in. When you talk about “numbers,” what exactly do you mean, and why are they essential for business success?
When I mention “numbers,” I’m referring to the financial metrics that help shape and direct a business’s strategy and decision-making. Accounting is often seen as something you only deal with during tax season or as a necessary evil for running a business. However, in reality, it’s the language of business, revealing insights that can either propel you forward or alert you to issues before they become crises. By understanding these numbers, you can make informed decisions that impact every part of your business. Rather than guessing or acting on gut instinct, numbers provide clarity and a roadmap for sustainable growth. This insight allows you to see the health of your business in real time, helping you to pivot and adjust your strategy as needed.
What are some of the foundational metrics every business owner should focus on?
One of the most important metrics to start with is revenue expectations. Understanding how much revenue you need to bring in each month or quarter to cover your expenses, pay yourself, and maintain profitability is essential. This clarity allows you to set actionable sales goals and cost-management strategies. From there, you can break down that revenue target into more specific metrics – for instance, how many sales or clients you need each week to hit your monthly goal. This creates a kind of reverse-engineered blueprint for success, enabling you to focus on the core drivers of revenue and profitability. Understanding the difference between cost of goods sold (COGS), gross profit, and net profit is crucial, as it lets you control expenses while maximizing profitability.
How do leading and lagging indicators help a business stay on track?
Leading indicators are proactive – they’re metrics that predict where you’re headed based on current actions. For instance, if you’re tracking the number of new leads or customer inquiries daily, that data can signal how your revenue might look in the near future. By keeping a close eye on these metrics, you can adjust your actions before issues arise. Lagging indicators, like monthly revenue and expenses, provide insight into past performance and allow you to see how your previous actions translated into results. Reviewing both types helps you create a balanced approach, where you’re not only reacting to what’s already happened but actively shaping what’s to come.
Many business owners struggle with prioritization. How do you help them set effective priorities?
The key to setting effective priorities is separating emotion from decision-making, which can often cloud judgment. Numbers allow you to assess what’s truly impactful versus what “feels” important but may not drive results. With a solid business model, you have benchmarks to measure against, which makes it easier to identify and pursue the tasks that genuinely contribute to growth. For example, if your model shows that sales drive most of your revenue, you can focus more on marketing and sales activities and reduce time spent on less impactful areas. When priorities are guided by metrics, there’s less ambiguity, and you’re able to direct resources where they matter most.
What are some of the common mistakes you see business owners making with their numbers?
One common mistake is neglecting to create a detailed business model. Without a clear financial plan or projections, business owners may make decisions based on gut feeling rather than data, which can lead to overspending or misallocation of resources. Additionally, many business owners don’t revisit their financials often enough. Numbers shouldn’t only be reviewed at tax time; they should guide everyday decisions. Small adjustments can make a big impact. For example, lowering certain expenses by just a few percent can add up over time, positively impacting your profitability without drastically altering your operations.
How frequently should business owners be reviewing their numbers?
While the frequency depends on the nature of the business, I generally recommend reviewing key financials at least weekly. Some companies, particularly those with high transaction volumes, may even check metrics every day or every few hours. The important thing is consistency. Regular reviews allow you to catch issues early and adapt quickly to changing circumstances. For businesses with longer sales cycles, a monthly review might be more feasible, but even then, tracking key metrics weekly can be beneficial. Ultimately, it’s about staying proactive and informed so that you’re always one step ahead.
What role does benchmarking play in understanding a business’s performance?
Benchmarking allows you to see where you stand relative to others in your industry, which can be incredibly insightful. If you know what your industry peers are spending on payroll, marketing, or overhead, you can evaluate whether your costs are in line with industry standards. Benchmarking isn’t just about keeping up with competitors; it’s about spotting areas where you may be overspending or underperforming. Armed with this knowledge, you can make targeted adjustments to improve efficiency, cut costs, or increase profitability. Benchmarking gives context to your financial data, turning numbers into actionable insights.
How can businesses effectively compare themselves to competitors?
It’s about a combination of internal reflection and external comparison. First, assess your past performance – are you growing, stagnating, or declining in key areas? Then, look at industry standards. Often, business owners think they’re unique, but in reality, there are industry norms that apply to nearly every business. By studying these norms, you can see where you’re excelling or falling short and make adjustments accordingly. Competitor analysis doesn’t mean copying others; it’s about learning from what works and adapting it to your strengths and strategy.
For businesses that have been around a long time, how do you advise them to adapt to modern practices?
Long-standing businesses sometimes get set in their ways, believing that what worked once will continue to work. However, the market and consumer expectations evolve, so it’s crucial to be open to change. I advise businesses to regularly evaluate their operations, marketing, and sales strategies. Staying relevant might mean embracing new technologies, shifting to digital platforms, or simply reevaluating your customer engagement approach. This willingness to adapt often separates thriving businesses from those that stagnate over time.
How important is it to delegate accounting tasks to experts, and what roles do these experts play?
Delegating accounting to professionals is crucial for a growing business. A bookkeeper records day-to-day transactions and maintains accurate financial records. An accountant, on the other hand, interprets these records to provide strategic insights and help you make data-driven decisions. A tax expert ensures compliance and helps you navigate complex tax laws, while also suggesting ways to legally reduce your tax burden. Together, these professionals provide a comprehensive view of your financial health, allowing you to focus on growth rather than getting bogged down in numbers.
What advice would you give for making impulsive business decisions?
It’s natural for entrepreneurs to get inspired by new ideas, but acting too quickly can backfire. I recommend running each new idea through a pro forma, a financial forecast that shows how it might impact your business model. This allows you to weigh the costs and potential benefits objectively, reducing the risk of impulsive decisions that could drain resources. The pro forma acts as a buffer, helping you test ideas in a controlled way before implementing them fully.
How can a business avoid pitfalls when trying new marketing strategies?
Testing is the cornerstone of effective marketing. I recommend maintaining four proven marketing methods that you know work for your business. At the same time, always have a fifth method in testing. This approach allows you to innovate without putting your core revenue streams at risk. Marketing is constantly evolving, and what worked last year may not work today. By continuously testing new strategies, you can stay agile and adapt to market shifts.
How does focusing on cash flow benefit a business in the long term?
Cash flow management is the backbone of business stability. Keeping a close eye on inflows and outflows ensures you can meet obligations, reinvest in the business, and weather downturns. It’s about maintaining a healthy balance – you want enough coming in to cover your expenses and enough left over to fuel growth. Many profitable businesses struggle due to cash flow issues, so regular monitoring helps you stay solvent and resilient in the face of unforeseen challenges.
Why should businesses compare themselves to previous results and industry norms?
Self-comparison shows your progress and highlights areas for improvement, while industry benchmarks provide a broader context. For instance, you might feel satisfied with a 10% growth rate until you realize your industry peers are achieving 20%. By looking both internally and externally, you get a fuller picture of your standing and can set more ambitious, realistic goals.
What is Universal Business Center, and how does it help businesses?
Universal Business Center provides CFO and advisory services designed to improve profitability and build business value. We use proven business principles, many of which we’ve discussed today, to help business owners implement effective strategies for growth. By focusing on core accounting and financial practices, we aim to transform small businesses into thriving assets with lasting value.
How does working with a business coach enhance success?
A business coach offers an external perspective that helps business owners see their challenges and opportunities more clearly. Unlike team members who are often too close to daily operations, a coach can offer objective insights and strategic advice. This guidance enables business owners to stay aligned with their vision, set achievable goals, and navigate obstacles more effectively.
What resources does Universal Accounting offer for those interested in understanding their business’s financial health?
We provide several valuable resources, including a free e-book called In the Black: Nine Principles to Make Your Business Profitable, available on our website, universalaccounting.com. Another resource is Your Strategic Accountant, which is designed to help business owners make data-driven decisions. These resources are full of actionable steps to increase profitability and understand the numbers that drive success.
How can business owners measure their performance using a SWOT analysis?
Our business score questionnaire is an excellent tool for conducting a SWOT analysis. It’s a quick, 15-minute assessment that evaluates your company’s strengths, weaknesses, opportunities, and threats. The resulting report provides actionable insights, helping you target specific areas for improvement and build a strategic plan for growth.
Why is knowledge of numbers crucial for entrepreneurs?
Knowing your numbers bridges the gap between a passion project and a successful business. Financial metrics allow you to see what’s working, where resources are being wasted, and how to scale sustainably. When entrepreneurs know their numbers, they’re not just busy; they’re building a profitable, data-driven enterprise.
How can our readers further follow your work online?
The best place to connect with me is on LinkedIn, where I regularly share insights on accounting and business strategies. Our website, universalaccounting.com, also offers a wealth of resources, including our free e-books and training programs. I encourage readers to explore these resources and start applying the Universal Business Model to unlock their business’s full potential.
Thank you so much, Roger, for sharing your expertise with us today. Your insights into the importance of numbers, strategy, and consistent evaluation are incredibly valuable for any business owner looking to grow and thrive.
Tune in to this insightful podcast episode with Roger Knecht as he shares practical strategies for mastering financial metrics to drive business success. https://www.spreaker.com/episode/how-to-boost-your-business-with-financial-numbers–61256131
President, UAC
Roger Knecht is the president of Universal Accounting School, where he dedicates his expertise to helping accounting professionals and small business owners succeed. With a focus on practical strategies, Roger guides entrepreneurs in understanding financial metrics, optimizing operations, and achieving long-term profitability. Through his training programs and advisory services, he empowers individuals to build stronger, more profitable businesses. You can learn more about his work and resources at universalaccounting.com.