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Your Numbers Are Talking: How to Conduct a Financial Performance Review · Profit Points Podcast

• 0:00
  SPEAKER_00: Hey, glad you're here.
• 0:01
  SPEAKER_00: This is Profit Points, and I'm Megan Schwann, your accounting sidekick and certified profit first professional and fix the snips advisor.
• 0:09
  SPEAKER_00: If you're a small business owner who wants to actually understand what is happening in your business financially, not just survive it, but genuinely get it, you're in the right place.
• 0:20
  SPEAKER_00: Every episode covers one concept, uses real numbers, and ends with something you can actually do.
• 0:26
  SPEAKER_00: That's the deal.
• 0:27
  SPEAKER_00: Let's talk about today's topic.
• 0:31
  SPEAKER_00: Most business owners think they're reviewing their finances, but they're not.
• 0:36
  SPEAKER_00: They're checking their bank balance.
• 0:39
  SPEAKER_00: And there is a massive difference between those two things.
• 0:43
  SPEAKER_00: Today I want to show you what a real financial performance review actually looks like and why it matters more than almost anything else in your business and how to start doing it, even if numbers have never been your thing.
• 1:00
  SPEAKER_00: I'm Megan Schwann, your accounting sidekick, and this is the Profit Points Podcast, where we turn financial confusion into financial confidence.
• 1:09
  SPEAKER_00: So let's do it.
• 1:11
  SPEAKER_00: Most business owners call a financial review the thing they do when they log into their bank app.
• 1:16
  SPEAKER_00: They look at their balance, maybe scroll through a few transactions and decide whether things are good or not great, quote unquote.
• 1:25
  SPEAKER_00: If the number is higher than last month, they feel okay.
• 1:29
  SPEAKER_00: If it's lower, they might feel anxious.
• 1:32
  SPEAKER_00: And then they close the app and go back to work.
• 1:35
  SPEAKER_00: And I hate to break it to you, but that's not a financial review.
• 1:39
  SPEAKER_00: It's more like financial anxiety on a loop.
• 1:43
  SPEAKER_00: A real financial performance review is a structured, scheduled look at the actual health of your business, not just your checking account.
• 1:52
  SPEAKER_00: It answers specific questions like is my revenue growing?
• 1:56
  SPEAKER_00: Is it shrinking?
• 1:57
  SPEAKER_00: Is it flat?
• 1:59
  SPEAKER_00: Is my profit margin healthy or is it eroding?
• 2:03
  SPEAKER_00: Are my expenses aligned with my goals or are they quietly consuming my profits?
• 2:10
  SPEAKER_00: How do I compare to where I was three, six, twelve months ago?
• 2:14
  SPEAKER_00: These are CEO questions.
• 2:17
  SPEAKER_00: And you can only answer them if you're looking at the right data.
• 2:22
  SPEAKER_00: So let's talk about what this actually can look like for you.
• 2:27
  SPEAKER_00: A comprehensive financial performance review covers three core areas.
• 2:33
  SPEAKER_00: The first one is revenue trends.
• 2:36
  SPEAKER_00: You're looking at total revenue month over month and year over year.
• 2:41
  SPEAKER_00: And you're asking, is revenue growing?
• 2:44
  SPEAKER_00: Is it consistent or volatile?
• 2:47
  SPEAKER_00: Is there a pattern, a slow season, a peak month that should be playing that you should be planning around?
• 2:54
  SPEAKER_00: And if you can answer these questions, you're already ahead of most business owners.
• 2:59
  SPEAKER_00: But taking a look at this data is really important.
• 3:02
  SPEAKER_00: The second core area is your profit margin.
• 3:05
  SPEAKER_00: This is the number that tells you whether your growth is real or if your growth is just busy.
• 3:12
  SPEAKER_00: We've talked about this before.
• 3:14
  SPEAKER_00: Um, just because you grow doesn't mean your profit grows.
• 3:18
  SPEAKER_00: So you want to take a look at your net profit, divide it by your revenue, and then multiply that number by 100.
• 3:25
  SPEAKER_00: That's gonna give you your margin.
• 3:27
  SPEAKER_00: Now I want you to compare it to the previous quarter and the previous year.
• 3:33
  SPEAKER_00: Is it moving in the right direction?
• 3:35
  SPEAKER_00: For a service business, just so you have kind of a benchmark, you wanna be working towards about a 20 to 30% net profit.
• 3:44
  SPEAKER_00: And if you're below 15%, you have work to do.
• 3:47
  SPEAKER_00: And this is your net profit, your overall profit, not your gross profit.
• 3:51
  SPEAKER_00: We've talked about both in the past.
• 3:52
  SPEAKER_00: Net profit is after everything of account of four what's left over.
• 3:56
  SPEAKER_00: 20 to 30% net.
• 3:58
  SPEAKER_00: If you're below that, you really have work to do and you really need to pay attention.
• 4:02
  SPEAKER_00: The third core area is expense trends.
• 4:05
  SPEAKER_00: You want to take a look at your expense categories, look them over for the past 12 months.
• 4:11
  SPEAKER_00: Which categories are growing, which categories are shrinking?
• 4:15
  SPEAKER_00: Are there any surprises?
• 4:17
  SPEAKER_00: A category that may have spiked in a specific month that you never investigated.
• 4:22
  SPEAKER_00: Did you check into that?
• 4:24
  SPEAKER_00: This is where those profit leaks can often hide.
• 4:27
  SPEAKER_00: And this is where a real review separates itself from just a general bank balance check.
• 4:34
  SPEAKER_00: So let's always put some real numbers and examples to this.
• 4:38
  SPEAKER_00: Let's say you do a review and you find the following information.
• 4:44
  SPEAKER_00: Let's say your revenue grew 18% year over year.
• 4:48
  SPEAKER_00: That's great.
• 4:48
  SPEAKER_00: It's amazing.
• 4:50
  SPEAKER_00: But your profit margin dropped from 24% to 17% over that same period of time.
• 4:58
  SPEAKER_00: What does this mean?
• 4:59
  SPEAKER_00: It means that your expenses grew faster than your revenue.
• 5:03
  SPEAKER_00: You dig into the expense categories and you find out that the contractor cost went from$1,200 per month to$3,100 per month.
• 5:12
  SPEAKER_00: That's a$1,900 increase that was never formally evaluated against the revenue it was supposed to generate.
• 5:21
  SPEAKER_00: That's the conversation, a real review surfaces.
• 5:25
  SPEAKER_00: And without it, you'd have no idea why the growth didn't feel as good as it should.
• 5:30
  SPEAKER_00: And remember, sometimes our feelings aren't accurate, which is why the data is so important.
• 5:37
  SPEAKER_00: And trust me, I've been there too.
• 5:40
  SPEAKER_00: I know that this example and these uh scenarios are just a bunch of random numbers, and it might feel a little overwhelming, but something I can't stress enough about doing this with your own numbers is that they are going to make more sense to you.
• 5:54
  SPEAKER_00: And the more you do this consistently, the more you are going to understand your business and how your decisions affect your coins.
• 6:03
  SPEAKER_00: Being a CEO is all about growth, and growth comes in the uncomfortable.
• 6:08
  SPEAKER_00: So if this conversation, if doing this kind of thing, if doing a real financial review versus just taking a look at your bank's bank account or just side-eyeing the PL and balance sheet reports that your bookkeeper sends over, if this kind of stuff makes you feel like it's not your thing or like you're not equipped, that's just you growing and stepping more into your CEO role.
• 6:34
  SPEAKER_00: And so the more you lean into it, the better you're gonna get at it, the more you're gonna understand your business and your decisions, which ultimately is gonna make you a better owner and pay off in creating a more successful and sustainable business.
• 6:49
  SPEAKER_00: So let me step off my soapbox and get to your action step of the day.
• 6:54
  SPEAKER_00: The action step here is simple, not necessarily easy, but it is simple.
• 7:00
  SPEAKER_00: I want you to schedule your first real financial performance review this week or next week.
• 7:08
  SPEAKER_00: Block in the next two weeks for sure.
• 7:10
  SPEAKER_00: Block 45 to 60 minutes.
• 7:12
  SPEAKER_00: Pull your PL for the last 12 months by month.
• 7:16
  SPEAKER_00: I want you to be able to see what your income and your expenses by categories have been over the last 12 months.
• 7:24
  SPEAKER_00: If you are using an accounting software, this is gonna be really easy to do.
• 7:28
  SPEAKER_00: And if you're not an accounting software, hit me up.
• 7:31
  SPEAKER_00: I have some options that may be good for you to go in without having to spend a whole lot.
• 7:37
  SPEAKER_00: Um, okay, so then pull that PL for the last 12 months, month by month.
• 7:42
  SPEAKER_00: Answer these three questions.
• 7:44
  SPEAKER_00: Is my revenue trending up, down, or is it flat?
• 7:48
  SPEAKER_00: Is my profit margin improving or is it eroding?
• 7:53
  SPEAKER_00: Which expense category has grown the most in the last six months?
• 7:58
  SPEAKER_00: And then I want you to write those answers down.
• 8:01
  SPEAKER_00: That's gonna be your starting point.
• 8:04
  SPEAKER_00: And just start there.
• 8:06
  SPEAKER_00: Okay.
• 8:07
  SPEAKER_00: A financial reveal is not an audit and it's not a punishment, it's a conversation with your business.
• 8:13
  SPEAKER_00: One that your business has usually been trying to have with you every single month because the numbers and the data are there every single month.
• 8:23
  SPEAKER_00: The key is to start listening.
• 8:25
  SPEAKER_00: The numbers have a lot to say, and they can give you a lot of great information.
• 8:31
  SPEAKER_00: If you would like some help with setting up a quarterly review process that actually works for your business, please book a strategy call with me at Sidekick Accounting.
• 8:40
  SPEAKER_00: You can go to chatwithmeg.com.
• 8:42
  SPEAKER_00: That's gonna take you to my website, chatwithmeg.com.
• 8:47
  SPEAKER_00: Um, and we can set up a time to chat through what your business needs so that you can continue to be successful.
• 8:53
  SPEAKER_00: In the meantime, thank you so much for listening.
• 8:56
  SPEAKER_00: Please subscribe, share, and I will see you on the next episode.
• 9:01
  SPEAKER_00: Have a good one.
• 9:02
  SPEAKER_00: All right, that's your episode this time.
• 9:04
  SPEAKER_00: Don't forget your action step.
• 9:06
  SPEAKER_00: I want you to actually do it, not just add it to the list.
• 9:10
  SPEAKER_00: If this episode was helpful, share it with a fellow business owner who needs to hear it.
• 9:14
  SPEAKER_00: And if you're ready to go deeper on your specific numbers, book a strategy call with Sidekick Accounting.
• 9:19
  SPEAKER_00: Go to chatwithmeg.com, and I'll see you next time on Profit Points.