Increase Profit and Cashflow Using 7 Simple Business Numbers
Increase Profit and Cashflow Using 7 Simple Business Numbers
Watch the full explanation: YouTube Video - 7 Numbers Every Business Owner Must Know
Listen on the go: Podcast Episode - Mastering Your Business Numbers
Introduction – The Power of Knowing Your 7 Numbers
Look, I get it. You're drowning in spreadsheets, overwhelmed by financial reports, and honestly? You're probably making decisions based on gut feel rather than actual numbers. But here's the thing: running a business without knowing your key numbers is like driving blindfolded. You might get lucky for a while, but eventually, you're going to hit something.
After running multiple businesses from startups to 8-figure companies, I've learnt that success isn't about knowing every single number in your business. It's about knowing the RIGHT numbers. And there are exactly seven of them that will transform how you make decisions and grow your profit.
These seven numbers form what I call your profit formula. Once you know them, you'll never look at your business the same way again.
What Are the 7 Numbers? (2 income + 5 expense drivers)
Let me break this down really simply. Your profit comes from one basic equation: Income minus Expenses. But we need to go deeper than that if we want to actually DO something about it.
The 2 Income Numbers:
1. Average Price Per Transaction This is exactly what you charge per sale, per client, per member – whatever your transaction looks like. For a hospitality venue, this might be $25 per customer. For a fitness studio, it could be $250 per month. For a consultancy, maybe $5,000 per project.
2. Number of Transactions (Volume) This is how many sales, clients, or members you have. The café might serve 10,000 customers per month, the gym might have 500 members, the consultant might have 10 clients.
See how this works? Price times Volume equals your Income. Simple.
The 5 Expense Numbers:
1. Cost of Goods Sold (COGS) The raw materials, the stuff you buy to sell, the direct costs of making your product or delivering your service.
2. Team Costs Everything related to your people: wages, contractors, super, insurance, annual leave. All of it bundled together.
3. Marketing & Growth Investment What you're spending to grow the business: advertising, coaching, sales activities, lead generation.
4. Property Costs If you're a bricks-and-mortar business, this is your rent, utilities, everything location-related.
5. Overheads The catch-all bucket. If it doesn't fit in the other four categories, it goes here.
How to Calculate and Track Them
Here's the practical bit. Don't overthink this.
Take your last three months of trading and calculate the average for each category. Why three months? Because business can be up and down month to month, and we want to see the real picture, not just a good month or a bad month.
For your income numbers, just divide your total revenue by the number of transactions. For your expense numbers, look at what you actually spent in each category and work out the average.
Some of these will be percentages (like COGS might be 30% of sales), others will be fixed dollar amounts (like rent at $20,000 per month). Both are fine, we just need to know what they are.
The Traffic Light System: Assessing Performance at a Glance
This is where it gets exciting. Once you know your seven numbers, you can assess any month's performance in about 30 seconds using what I call the Traffic Light System.
Let's say your normal numbers are:
COGS: 30% of sales
Team: 40% of sales
Marketing: $10,000 per month
Property: $20,000 per month
Overheads: $20,000 per month
When your monthly results come in, you just compare:
Green Light: COGS came in at 29% – you're under target, that's great, move on.
Red Light: Team costs hit 45% instead of your usual 40% – stop right there. What happened? Why are team costs higher?
Orange Light: Marketing was $11,000 instead of $10,000 – close enough, but worth a quick look.
Green Light: Property was $20,000 as expected – it's fixed, so no surprises there.
Red Light: Overheads jumped to $30,000 from your usual $20,000 – what's going on in this bucket?
In 30 seconds, you know exactly where to focus your attention. No more getting lost in pages of financial reports.
Real Examples: Hospitality, Fitness Studio, Consultancy
Let me give you some real-world examples using my three business:
Hospitality Venue:
Average transaction: $25
Monthly customers: 10,000
COGS: 30% of sales
Team: 40% of sales
Marketing: $10,000/month
Property: $20,000/month
Overheads: $20,000/month
Fitness Studio:
Average monthly membership: $250
Active members: 500
COGS: 5% of sales (minimal product costs)
Team: 35% of sales
Marketing: $15,000/month
Property: $25,000/month
Overheads: $15,000/month
Consultancy:
Average project value: $5,000
Monthly clients: 10
COGS: 10% of sales (minimal direct costs)
Team: 25% of sales (lean team)
Marketing: $8,000/month
Property: $5,000/month (smaller office)
Overheads: $12,000/month
Notice how different these businesses are, but they all have the same seven-number structure? That's the beauty of this system, it works for any business!
How to Use These Numbers to Identify Bottlenecks
Here's where this gets really powerful. Each of these seven numbers represents a leverage point in your business. Some are bottlenecks holding you back, others are opportunities waiting to be unlocked.
Think of it like a lever and fulcrum. Some numbers take massive effort to move but only give you small improvements in profit. Others (with the right focus) can give you huge returns for reasonable effort.
For example, if you're locked into a property lease, changing that rent is going to be a massive exercise with legal costs, finding new premises, fit-out costs... lots of effort for potentially small gain.
But marketing? If you're doing effective marketing, putting more energy and dollars there can bring in lots of new clients and massively impact your profitability.
The key is looking at each number and asking: "Which of these can I actually change? Which ones should I focus on to get the biggest impact?"
Tools: Using The Profit Calculator ™
This is exactly what my Profit Calculator™ tool does. You plug in your current seven numbers, then you can model what those numbers would look like when you hit your target profit level.
Maybe rent stays the same, overheads stay the same, but you can see that with more customers, you can afford to invest more in team or marketing. Or perhaps you can see that better cost control on your COGS would free up significant profit.
The calculator shows you exactly what profit is waiting for you on the other side of solving each bottleneck. It gives you the confidence to focus on the right things i.e. the things that will actually translate into improved profitability.
Know Your Numbers, Grow Your Profit
Look, at the end of the day, if you're struggling to see results or feeling overwhelmed by the numbers side of your business, it's probably because you're looking at too many numbers instead of focusing on the right ones.
These seven numbers are all you need to understand how your business makes profit and where your opportunities lie. Once you know them, you can quickly assess performance, identify bottlenecks, and focus your energy on the changes that will actually move the needle.
The businesses that thrive are the ones where the owner knows their numbers and uses them to make better decisions. It's not about being a finance expert… it's about having clarity on what actually drives profit in your business.
Book a Free Clarity Call
Ready to identify your seven numbers and unlock the profit potential in your business? Book a free clarity call with one a Profit Analyst. We'll help you get clear on your numbers and show you exactly where your biggest opportunities lie.
Don't let another month go by flying blind. Let's get your business thriving without the overwhelm.
