Momentum Podcast: 417
3 Metrics For Financial Success
by Alex Charfen
If you've listened to my podcasts, you know that I'm obsessed with scoreboards, with cracking the right numbers, with making sure we have perspective around what's important in our lives and our business. One of the questions I get all the time is what are the right numbers to track to see if we are successful as entrepreneurs?
I'm gonna take this up to the 50,000 foot level and give you the numbers that every single entrepreneur, regardless of what business you're in, should be tracking all the time
Regardless of what business you're in, these are the numbers that you should be tracking constantly. Net Worth – How much value have you created for yourself in the world? Top Line Revenue – How much is your business grossing? Overall Profitability – This one may seem simple but I'm blown away by how many entrepreneurs do not track their profitability. Take every dollar you've made, minus your expenses and you're left with your profitability figure. I 100% believe that what you focus on expands.
When you're not giving your attention to your net worth, revenue, and overall profitability, your not focusing on the 3 numbers that you want to grow the most. If you want to have an entirely different year this year than you've ever had before, sit down now and make the plan to track your numbers.
Full Audio Transcript
Alex Charfen: If you've listened to my podcasts, you know that I'm obsessed with scoreboards, with cracking the right numbers, with making sure we have perspective around what's important in our lives and our business. One of the questions I get all the time is what are the right numbers to track to see if we are successful as entrepreneurs? I'm gonna take this up to the 50,000 foot level and give you the numbers that every single entrepreneur, regardless of what business you're in, should be tracking all the time.
I'm Alex Charfen, and this is The Momentum Podcast, made for empire builders, game changes, trailblazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future and instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world, because entrepreneurs are the only source of consistent, positive human evolution, and we always will be.
If you're looking to my podcast, you are an entrepreneurial personality type, an evolutionary hunter or you probably know and love one, and what that means is you are a physiologically sensitive momentum-based being that is highly reactive to constraint and we are those people who are driven to move forward, to create more, to do more, to put more out there and to make things happen, and we love to be in forward motion creating progress. Now here's one of the challenges for people like us. We need perspective. We are evolutionary hunters. We need to know if we are gaining on our prey. If the hunt is actually going to make anything happen, if we're gonna get out there and actually kill something, are we going to do it. When we lose perspective as entrepreneurs, it can be devastating. We can lose momentum, we can feel the chemical depression of constraint, we can get frustrated, upset, reactive. We can have a hard time creating progress moving forward and so one of the questions I get often is what numbers should we be tracking, what measurements should we have to make sure to ensure that we have success as entrepreneurs.
For me, it's simple. There's three. Three major metrics, financial metrics that entrepreneurs should track to make sure you're successful. I'm gonna make this as simple as I can for you because here's what I found after interviewing hundreds of entrepreneurs with six figure plus and million dollar plus businesses, is that a very small percentage track these three numbers. In fact, I'd probably put the percentage at under 5%. Under 5% of entrepreneurs are tracking the most important metrics for success. Let me share them with you. The first one is simple. I think it's the most important metric, financial metric in the life of an entrepreneur, period. Ready for this one? It's net worth. Net worth is the measurement of how much value we have in the world, how much are we worth in the world, how much value have we created for ourselves in the world. When I interview entrepreneurs, I would say one out of a hundred tracks their net worth and knows it on a monthly basis and knows where they stand. Here's why net worth is so critically important. When we track net worth, when we know the effect our business has on our net worth, when we look at our wealth on a monthly basis, we start making better decisions. We start creating a different level of perspective. We start seeing what the decisions in our business do to our bank account.
We start seeing what the momentum in our business does to our personal wealth, and here's something that I do when I'm speaking in front of large groups of entrepreneurs. I ask a simple question, "How many of you believe you will be wealthy someday?" Here's what happens, about 95% of the room's hands go up and 5% of the room's just not listening so they didn't put their hands up. Then I say, "Okay, keep your hands up. If you track your net worth on a monthly basis and you can tell me what it was on the first of last month." Probably 95 to 99% of the hands go down. Then I ask a simple question. "If you all believe you're going to be wealthy but you're not tracking your net worth, how will you ever know when it happens?" That's why this is such an important scoreboard, not just for your business but for everything that you do. If you are married, track net worth with your spouse.
Here's what it will do. It will eliminate one of the biggest arguments that you have over money because now you're having an active discussion around it, create a net worth goal with your spouse that both of you help pursue and you'll have an entirely different conversation around spending and budgeting and what you guys are doing with your money and how you're growing forward. If you want your spouse more involved in your business, if you want them more tied into the results that you're getting and understanding what's going on, track and discuss net worth, everything will start moving forward for you financially.
This is a discipline I use to train my teams. We would sit down and we would take our entire team through a net worth calculation so every person knew where they stood. Then we would help them build plans to either reduce debt or increase their savings so that they could improve their net worth. Here's what I know about financial momentum from tracking net worth. If you start doing this and you track net worth and it creates momentum for you in your finances, it will create momentum for you everywhere else in your life. Net worth is crucial.
Now the second metric to track as an entrepreneur is your top line revenue. How much is your business grossing? What is the total amount of dollars that your business is growing on a monthly basis and how much is your business growing in? I know this, I obsess over this. We look at it in our huddle every morning so my entire team knows exactly what we collected the day before. We look at it as a percentage of where do we really want to be. We know our run rate based on the goals we have right now. We know that if we didn't change anything in our business right now based on this morning's huddle, by the end of the year, we would have a $2.8 million company and our goal is three so we know we're so close, if we just make some minor improvements over the next couple months we'll hit that $3 million and exceed the $3 million, but I'm obsessed over it.
I look at it all the time. Shockingly there's a lot of entrepreneurs that are running big businesses that just aren't looking at this top line number, and there's so many reasons to track it. It's important because you want to know where you stand financially, how much money you're actually bringing in. You want to know on a monthly basis is your overall run rate that monthly number multiplied by 12, is it going up or going down. Sometimes you can have a lot of energy in a company, a lot of excitement in a company, it feels like a lot's happening in a company, you're getting a lot of attention, but if you're not moving the net worth bar what are you really doing besides ... Not net worth, sorry. If you're not moving the gross revenue bar, what are you doing besides really making a lot of noise? If you're moving that gross revenue bar, you know more people are working with you, you're having a bigger influence, more people are choosing to accept your contribution and to get into exchange with you, so tracking gross revenue is crucially important. Like I said, we do it on a daily basis.
Then the last number might seem so obvious, but I'm consistently blown away by how few entrepreneurs actually do this, tracking and clearly understanding your profitability on a monthly basis. You take your gross revenue, everything that you've made, and then the gross expenses, everything you spent to make it, every check that you wrote, and what's left is your profitability. What I found is that most entrepreneurs have an idea of their profitability, but they don't really know what the number is. Every month, they're running their business by feel. They don't really know how much money they've made. They're not really looking at the bottom line, and if that's the situation you're in, you're not making decisions with the right information and you're leaving yourself completely and totally exposed.
Now here's what I want you to think about, these three numbers. There's this statement that I believe is 100% law of the universe, what you focus on expands. I first learned it from Wayne Dyer ages ago and I remember him saying something like, "What most people do is they stack up their bills all month and then they look at them and they obsess over them but they never think about how much money they actually have or how much money they could have. What you focus on expands, and most people live in debt and have barely any savings. When you look at most entrepreneurs, when we're not focused on net worth ... Not net worth, gross revenue and profitability, we're not putting our focus on the three numbers that arguably we want to see expand more than anything. In fact, I would argue that if you're paying attention to numbers other than these without these, your picture of where you are as an entrepreneur is absolutely complete and dangerous. It's dangerous.
If you're making decisions without understanding these numbers, if you're making decisions without knowing where your profitability is, if you're making decisions without knowing what your margins are, here's one of the issues that you have. On a monthly basis if you're looking at your gross revenue, the total amount you take in, and you're looking at the profitability, the total amount left over and then what percentage that is, you can see are your margins going up or down on a monthly basis.
Here's what I've watched for years in my career. I've watched this over and over again. Entrepreneurs who have a fast growth business, where it's exploding, where the numbers are going up and they're hiring people and they're building the team and they're making a huge effect and they're making a massive contribution, their clients love them and they're getting attention and notoriety, but they're not tracking margin. What's happening on a monthly basis is their revenue's going up, they're making more money total, but their expenses are going up to the point where the percentage of what they're keeping is going down over time. If the percentage of what you're keeping in your business is going down month after month, and it continues that way, you will hit the month where you don't make any money. If you're not using that level of intelligence, the understanding of how much you're keeping out of what you're making every month to make decisions, everything will be more difficult for you as an entrepreneur.
If you want to get into momentum right now as an entrepreneur, if you want to have an entirely different year this year than you ever have before, if you want your business to grow, your contribution to grow, and your bank accounts to grow, sit down now and put together the plan to track net worth, gross revenue and profitability. Net worth, simple. Track your total assets and then any debt you have and you'll get a number. If it's a negative, that's great. You have more motivation to make it a positive. If it's a positive, congratulations, you're ahead of most of the country, and move that number every month. Gross revenue, start looking at how much money your company's bringing in on a monthly basis. Look at it for the last few months so it gives you perspective moving forward as to where you stand and drive that number up. Then look at what's left over every month and calculate the percentage of what that number is versus your gross revenue so you know what your margins are.
Track these on a monthly basis and you will see everything in your business change, you'll see the conversations you have in your life change, and you will see yourself get into an entirely new level of momentum, because when we track the right scoreboards so that we have perspective that things are going right as evolutionary hunters, that's when we become everything we can be. We get into momentum, we acquire the clarity, the confidence and the commitment to put the pedal down to the floor and go make a massive contribution. Track net worth, gross revenue and profitability and watch everything in your business change. Tracking these three items is a keystone habit that changes everything for entrepreneurs. It's actually part of an entire structuring system that we teach entrepreneurs to help you grow your business fast. If you know you're leaving money on the table, if you know you could be doing more with the right team, if you know you could be helping more people if you had better systems, better structure and better organization, reach out to us.
You do not have to do this on your own. Let us show you how we've helped dozens of companies grow faster than they ever thought possible without the owners and the entrepreneurs who are running them feeling like they had to do everything on their own. Go to BillionaireCode.com/Apply, answer a few questions for us and you'll end up on a call with a member of my team. Let us show you how we help entrepreneurs grow businesses fast, stop feeling like they're letting everyone around them down and make a massive contribution in the world. BillionaireCode.com/Apply.