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For a business owner, there is never enough time. As a result, some things are easy to avoid – such as financial analysis.
Unfortunately, this can be a big mistake, especially in the current recessionary environment. In a way, success requires some level of CFO skills.
So, what can you do? Here' are some tips:
Profits: Monitor trends in gross profit margins (gross profits divided by sales) and operating margins (earnings before interest/taxes divided by sales). Measure these against your industry peers as well as your company's historical performance (often, you can get industry ratios from a trade association). If you see deterioration, then you need to be concerned. For example, your pricing may be too high or your costs are growing too much.
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