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Stop Operating by Feel: Why Knowing Your Numbers Is Critical

December 15, 2020 / by Mike Gammarino, Bluprint Partners

Note: This blog first appeared on the Bluprint Partners website.

Success in ecommerce or consumer packaged goods requires a great product, a focus on people, process and technology — and bookkeeping on the back end.

Two-women-presenting-to-investorsOne of my favorite reality shows on TV has it all …

Intrigue! Drama! Mystery! Cliffhangers! Joy! Heartbreak!

No, I'm not talking about "The Bachelor." I'm talking about "Shark Tank."

Keeping Your Head Above Water
"Shark Tank" not only is one of the most entertaining 41 DVR'd minutes on TV, but also teaches you about business, finance, invention, pricing, sales, negotiation, winning, losing and perseverance. And if there's one thing entrepreneurs on the show must know, above all else, it's THEIR NUMBERS. Don't know your margins or sales or costs? This is, without question, the quickest way to be eaten alive in the Tank.

Why is this? Isn't it enough that I tell a great story about my amazing product that is flying off my virtual shelves?

While that's certainly important, it's more important to know that your business can make money over time. The only way to know this is to KNOW YOUR NUMBERS. You can create the most incredible product in the world, but if your gross margins are stuck at -10%, you'll never make a profitable business out of it. And yet modeling and knowing your numbers is one of the most neglected aspects of building and running a startup.

A Good Product Doesn't Guarantee a Good Profit
Why is this aspect of business so difficult? Because it's an imperfect, never-ending process, and probably not a skill that many new founders of product companies have honed. It also might have to do with being in love with what is, most certainly, the greatest idea in the world. How could this NOT make money?

Product ideas don't need to be profitable. But the companies built to sell them most certainly do.

If you're going to raise outside money from angels or professional VCs, you must have a financial model that shows, at least in theory, that this is a viable product you can sell to a large enough market to make money. But frankly the majority of new product startups don't fit that description. Most of them are bootstrapped and don't have the luxury of time that comes with outside money — time that allows you to make mistakes, learn and improve. So, while a financial plan isn't required for a bootstrapped startup, it's of the utmost importance to ensure you understand the numbers behind your idea.

How to Keep a Startup Going
Once you've begun selling and your customers are buying, it's important to review and revise, on a monthly cadence, how your business is tracking towards your forecasts. Is the product you thought was a bestseller really the one? Did you anticipate all of your production costs correctly? Are your shipping charges in line with your predictions? Are your margins improving with volume?

With all the moving parts of a high-growth business, it can be challenging to find the time to track these critical numbers. Hire an obsessive bookkeeper and a CPA who sweats the details. And find an experienced operator who understands how to build a smart and stable foundation to support your growth.

Great ideas don't become successful businesses just because people are buying what you're selling. If your merchandise will never turn you a profit, your wonderful idea will fizzle out before you even have a chance to not know your numbers on The Tank.

Mike Gammarino is the Founder of Bluprint Partners, a team of experienced operations professionals designed specifically to help high-growth brands.

We Know Our Numbers (and Yours)
At Supporting Strategies | Los Angeles, we don't just crunch numbers — we interpret them. Our experienced bookkeeping professionals and seasoned finance leaders offer the kind of sophisticated financial insights you'll need to ensure your ecommerce or CPG business is destined for "Shark Tank" rather than being left to swim with the fishes …

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At Supporting Strategies, our experienced, U.S.-based professionals use secure, best-of-breed technology and a proven process to provide a full suite of bookkeeping and controller services. Are you ready to learn how you can move your business forward? Contact Supporting Strategies today.

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