Why don’t people on Dragons’ Den know their numbers?

Anyone who’s seen an episode of the hit BBC2 show Dragons’ Den, in which entrepreneurs pitch to wealthy investors, will have heard a ‘Dragon’ explode in frustration as they encounter yet another small business owner who doesn’t know their numbers. Unsurprisingly, the rate of investment in these companies tends to hover around zero.

So why is it that some business owners simply don’t know this essential information? The most likely answer is that they’re using an outdated method of doing their accounts: one in which they have an annual meeting with their accountant to look at some numbers on a piece of paper which is promptly filed away and forgotten until the following year.

Whether you’re seeking investment or not, there are certain numbers you must know in order to build a strong and profitable business. They include:

• Sales revenues for each year you have been trading
• The raw cost of making those sales (i.e. production cost for a product, or labour cost for a service). This figure deducted from your sales revenue is your gross profit.
• The additional costs of running your business, such as salaries, utilities, computer costs, etc. This figure deducted from your gross profit is your net profit.

Unless you are an accountant you will no doubt want to spend as little time as possible compiling these figures, and as much time as possible getting on with running your business. That’s where online bookkeeping software such as Xero can really come in handy. You upload your transactions, and the software generates real time financial information. With the help of an online accountant, you can use this information to stay on top of your finances and plan your future business growth. Watch out, Dragons’ Den!