04/07/2013 11:09 EDT | Updated 06/08/2013 05:12 EDT

Bottom Line, You Need Math in Business


I never liked math at school. Growing up in the U.K., I managed to scrape by with an "O" level in the subject, but that was it. Math was definitely not my forté.

It's therefore ironic that I would end up throughout my career managing large budgets. I was forced to understand and overcome my aversion to number crunching, especially when a non-profit organization relied on me to keep the agency financially afloat. And when I worked for the government, I had to develop plans for budgets in the millions. Yet, truth be, as a small business owner, the bookkeeping was one of the first tasks I delegated to someone else.

Recently I was asked for advice from a couple of women -- a small business owner and a would-be entrepreneur and in each instance, the answer was the same -- they needed to do the math. In fact, it really was all about the bottom line.

If you are trying to decide whether to give up your day job to pursue your dreams, you need to know how much money you have to live on, how much you need to make and whether this leap into the unknown will generate the income you require to pay those bills, and if not, how long it likely will take.

Longer than you may think as we tend to overestimate the revenue and underestimate the costs involved in getting there. It is why so many people start their businesses part time, as then they have the cushion of a regular income coming in to pay those essential expenses like food and rent, while they build the business on the side.

Or perhaps you already have an existing business that is doing well and seems poised to go to the next level. Again, the number-crunching is crucial to your decision-making. It is important to know what your costs will be, how many clients/customers/sales you will need to cover the additional costs of expansion -- be it larger space, more staff, or new equipment.

Without doubt, if you don't do the math you could be in for a rude awakening, one that could jeopardize all that you have achieved to date. Frequently I see people lulled by their success and expanding too quickly. If the infrastructure is not in place to handle the increased business and they stretch themselves too much in terms of resources, business knowledge and financial commitment, too often they find themselves totally out of their depth and far removed from the part of the business that they loved and were good at. Bigger is not always best.

Sometimes going deeper not wider is the answer. What do I mean by that? Doing more for your existing clients, offering increased service to them might be a more effective growth strategy, than moving out further afield or totally diversifying what you offer. There can be more risks with the big unknown, whereas you could become the "expert" in your field and develop a niche market.

I believe it is far better to expand strategically. To work out what you can expect, what could go wrong and to build in a safety net to deal with areas that could backfire and not go to plan, because often that is the reality.

So no matter what your scenario, you have to look at the figures. This may mean that you have to involve an expert such as an accountant to help you to interpret what the numbers are saying and to help you develop a strategy to move forward -- be it starting, changing or growing your business.

What you don't want is to waste your time and money on a business that is going nowhere. Now that truly is expensive and to be avoided at all costs.