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Episode #12

The 3 Numbers Every Business Owner Needs to Know to Grow

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Hey! I'm Jeri!

I'm a financial educator and speaker known for simplifying complex credit and funding strategies. I've helped thousands of individuals and small business owners get the credit they deserve.

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Summary

Your business can be making money and still be in financial trouble.

You can have strong sales, a packed client roster, and even show a profit on paper—while still struggling to cover payroll, expenses, or your next big move.

In this episode of The Smart Credit Experience, Jeri sits down with Sharlese Peoples, founder of Pathway to Profit Group, to break down the three numbers every business owner needs to understand to grow and thrive.

More Resources:

⏰ Get the Sales Script Book: https://profitpathwaygroup.com/scriptbook

Transcript

[00:00:00] Speaker A: Welcome to the Smart Credit experience, the place where financial clarity, strategy and transformation begin. I'm your host, Jeri Toliver, CEO of Smart Credit Solutions and the creator of the Smart Credit method. Every week, I break down the truth about credit, funding and building a financially abundant life and business. So if you're ready to learn what lenders actually look for, how to build a fundable business, and how to move forward with confidence and clarity, you're in the right place.

Hello, wonderful people, and welcome back. Today, I actually have a special guest for y'. All.

The reason for the special guest is because one of the main reasons why I've seen business owners get denied for funding is because they don't know their numbers. They don't know the numbers that drive the growth of their business. And I figured instead of me talking about it, I figured I bring in one of the expert people that I know that can give you a breakdown of what you can expect and what you should expect and what you should focus on when you're looking to grow your business the right way. Because here's the deal. I can help you get funding. You know, I can help you get hundreds of thousands of dollars, millions of dollars even.

But the problem is, it's not about how much money you make. It's not about how much money even get. What matters is what you do with it. What matters is how you manage it, how you grow it, how you leverage it. And so today's topic is going to be all about the three that every single business owner needs to know if you really want to grow.

And so I want to bring y' all one of my. My, like, one of my closest friends. I've known this person, like, forever. Her name is Sharlese. In fact, she's actually worked with me here at Smart Credit before. We were Smart Credit to help her with understanding where to get started with personal and business credit. And she's taken that that knowledge herself and started her own business. And now she's help small business owners with improving their revenue, with growing their cash flow, and with increasing their profits. And so if that's something that you want to do today, I want you to take out a pen and paper, listen in really closely, because you're not going to want to miss any of the nuggets that Sharlese is going to be really dropping today. And so I've got Sharlese here at Path Pathway to Profit, and she's going to be giving you a breakdown of the three numbers that every business owner needs to know if you really want to grow, listen up and enjoy.

[00:02:35] Speaker B: Thank you so much for having me. I'm Sharlese Peoples, founder of Pathway to Profit group where I help establish service based business owners understand what is actually happening with their revenue, cash flow and profitability.

We create strategies to help keep more of your money in your business.

A lot of people don't understand those three words, revenue, profit and cash flow. So that's what we're going to talk about today. A business can generate strong revenue, show a profit on paper, and still struggle to make payroll or pay his bills on time.

Why is that? A lot of people may want to know. And it's because these three words are separate numbers that every business owner should understand.

One, revenue tells you what your business is bringing in.

Profit tells you what the business is keeping. And then cash flow. That one tells you whether the money is actually available when you need it.

So the numbers, although they are connected, they still tell you three very, very different things.

So let's break it down, right?

Let's start with revenue.

Revenue, of course is the total amount that your business earns from like selling products, services before expenses are deducted. We all know that that is one word that we have all been taught.

So for instance, if you sold $20,000 worth of services this month, your revenue is $20,000.

But that does not mean you personally made $20,000.

And it definitely does not mean that you have $20,000 sitting in your bank account.

This is where business owners sometimes get caught up in celebrating that top line number. It's a great celebration to have, but it's not the end all, be all.

You may hear a lot of people say, I run a six figure business, but six figures in revenue doesn't tell us how healthy or profitable that business actually is. You definitely want to dive a little bit deeper. So if the business generates $100,000 but spends 95,000 to operate, that's a completely different business from one generating $100,000 and keeping $40,000. Get where I'm coming from.

So revenue matters because it tells you whether people are buying. It also helps you measure demand, sales, performance and growth.

But revenue alone does not tell the entire story for your business.

Profit is the next margin that we should all measure. Profit is important because it's the money that you get to keep.

It's what remains after the business pays its expenses.

Because every business has its own expenses.

So if the business generates 20,000 in revenue and has 15,000 in expenses, then of course your profit is $5,000, right?

That's the money that you get to claim as your own.

Now, expenses when it comes to business can include a plethora of things.

It might include payroll, contractors, we're talking software, advertising, rent, those merchant processing fees. Oh my goodness, the merchant processing fees. Gotta count those taxes and the cost of delivering the service.

So profit helps you determine whether the business model is actually working, right? So you can be busy every single day, have clients coming in and out, and still be operating with a very small profit margin.

That usually means that the business needs to examine its pricing.

Do you offer discounts? Do you offer payment plans? Are people paying their payment plans expenses?

Are you using everything that you're paying for?

Do you have subscriptions out there that you haven't used in years?

Offers? Do you offer tiered programs?

Do you have a top tier, middle tier and lower tier program?

Or cost of delivering a service?

Do you have to use mailing supplies?

Do you have to pay for software to have a member's account?

These are all things that have to come into mind when it comes to your expenses to see just how much profit you are making.

This is also why I always tell my business owners, being booked and busy does not automatically mean that you are profitable. You have to remember that being busy does not mean you're making money. Being busy does not mean that you are saving money.

So you have to definitely take a look at what those numbers look like on, I do a weekly basis and a monthly basis, and then of course, quarterly basis.

You can sell more and still create a bigger financial problem if every sale costs too much to fulfill. So revenue always asks you, how much did the business earn? Right?

Profit ask you, how much did the business keep after paying the cost of doing business?

And these are two very, very, very, very important numbers that our business owners should know.

Last but not least, of course, is cash flow. Cash flow is the actual movement of money into and out of your business.

This is where things become real, right?

So let's say you may have completed $20,000 worth of work and recorded that revenue you were supposed to, right? You may even expect to make a profit from it.

But if $8,000 is still sitting in unpaid invoices, that money is not available to cover today's payroll, rent, advertising, or operating expenses.

You do want to count your invoices into revenue, but you can't always count them into cash flow. Because how long have you as a business owner allowed an invoice to sit unpaid?

Think about what your process looks like, right?

How long do you let unpaid invoices sit.

That's cash flow within your business. You're expecting them to pay the invoice at some point.

But we have to set boundaries within our business and make sure that those invoices get paid.

So on paper, the business may look profitable in the bank account. The business may be struggling.

That is the difference between profit and cash flow, Right? Profit measures financial performance over a period of time.

Cash flow measures whether the money is actually coming in and going out at the right time. This is where those boundaries come into place, because a profitable business can still experience a cash flow shortage. And this normally comes when clients pay late. Deposits are not collected before the work begins. Deposits are important.

Invoices are sent late. You have to take accountability for where you fall short as well.

Leads are not followed up with. There is fortune in the follow up.

How much money do you have sitting on your books right now?

Past clients are never invited to return. If they bought with you before, they will buy with you again.

I'm sure. We have so much money sitting on our books because we're scared to open up our mouths and ask for the sale.

We don't want to ask for a testimonial.

We don't want to see how well the product is working. You have to follow up with your leads. You have to follow up with your past clients.

Business expenses are due before the customer payment arrives.

If you have consistent cash flow, that money's always coming in. So you don't have to worry about having the payments available for the expenses of your business.

So remember, revenue may tell you that the business is selling.

Profit may tell you that the business model works. But cash flow determines whether the business can continue operating comfortably from day to day.

Now, let's put all three numbers together. Right, imagine a consultant closes four clients at $5,000 each.

That is $20,000 in revenue.

That consultant spends $12,000 on contractors, software, marketing, and other operating expenses.

So then that leaves an expected profit of $8,000. But only two clients have paid so far, so the other 10,000 is still outstanding. Hmm.

So the business on paper shows $20,000 in revenue and an $8,000 profit. But there may not be enough cash available right now to cover the next round of expenses. This is what we call a cash flow problem. The work was sold. The business should be profitable, but the company does not have the money yet. The money has not arrived. This is why business owners need to track all three. You shouldn't just be tracking how much reven have coming in, how much profit you made based off your expenses, but also the cash flow. How much money do you expect on a monthly basis? On a weekly basis? On a daily basis.

When business owners only watch revenue, they can mistake sales activity for financial health. When they only watch profit, they may not notice that payment timing is creating pressure on the bank account. And when the only thing that's watched is the bank balance, you can make decisions without understanding upcoming expenses, unpaid invoices, or whether the business is truly profitable.

So you need all three numbers because each one answers a different question, right?

With revenue, are we generating enough sales?

With profit, are we keeping enough after expenses? And then with cash flow, is the money available when the business needs it?

Knowing these numbers help you make better decisions about hiring, advertising, pricing, expenses and growth.

It also helps you identify the real problem.

If revenue is low, you may need more leads, a stronger offer, or a better sales process.

If revenue is strong but profit is low, you may need to examine pricing, expenses or delivery costs.

And if revenue and profit look healthy, but the bank account is constantly tight, you may have a collection, payment, timing or follow up problem.

This is all to do with your cash flow.

So this is always the part that people don't want to talk about. Because cash flow doesn't always struggle because the business is bad, right?

Sometimes it struggles in the silence. It happens when a new lead responds and nobody follows up quick enough to keep that lead's attention.

It can happen when a prospect says, I need to think about it and the conversation ends without uncovering the real concern.

Maybe it happens when an invoice becomes past due, but the business owner feels uncomfortable about asking for the payment.

What about when a client has a great experience but nobody wants to ask for the referral?

It can also happen when a past client could use the service again, but nobody reaches out. You don't stay on the forefront of their mind.

So these may seem like small communication gaps, but every one of them can have a dollar amount attached to it. Don't leave money on the table because you may not see those missed opportunities listed as a line item on your profit and loss statement. But they still show up in your cash flow.

So sometimes the issue isn't that the business owner doesn't know what needs to happen.

They know they need to follow up.

The real problem is that they don't know what to say without sounding pushy, awkward, desperate, or even overly corporate.

So this is exactly why I created the Cash Flow Script Book.

The Cash Flow Script book is an 18 page digital guide containing 12 ready to use scripts for the conversations that help keep cash moving through a service based business.

So it covers moments such as responding to a new lead, booking the discovery call, following up after the consultation, responding when someone says I need to think about it, following up after sending an invoice, requesting those deposits, addressing a pass through payment or declined card, requesting your referrals, and reactivating past client and quiet leads.

The scripts are warm, they're conversational and direct because you want to still hold the power.

So they're designed to help you get an answer, set a clear next step, and even protect the relationship without avoiding the money conversation.

Because we have to Speak the Money Conversation if there's one thing I want every business owner listening to take away from this conversation today, it is this.

Do not measure the health of your business by revenue alone.

Know what the business earns, know what the business keeps, and know when the money is actually reaching the bank account.

Then look at the conversations happening between those numbers. Right, because sometimes improving cash flow doesn't require a new product, a larger audience, or even another complicated strategy. Sometimes you just need to respond to the lead, send the invoice, ask for the payment, request the referral, or just reopen the conversation.

The money may already be connected to an opportunity inside your business. The next step is having the right words to move it forward.

So if you have ever stared at your phone wondering how to follow up, ask for the payment or move a potential client towards a decision.

That's why I created the Cash Flow script book for you.

Go ahead and get that 12 ready to use scripts and a bonus follow up schedule so you'll have time frames available as well. Just so you know what to say and when to say it.

The script book is available at an instant digital Download. It's only $13.97 and you can find the scriptbook at profitpathwaygroup.com Scriptbook Again, that's profit pathwaygroup.com Scriptbook.

Your cash flow is only as strong as your follow up and this scriptbook gives you the words to follow through.

Thank you again for having me and I'll see you guys on the other side.