If you’ve ever wondered, “How do I know if my business is doing well financially?”—you’re not alone. Many entrepreneurs rely on gut instinct, but the most successful ones lean on two powerful tools: benchmarks and forecasting.
These tools take the guesswork out of your financial decisions and help you lead your business with clarity and confidence. Here’s how to use them effectively.
Step 1: Set Your Benchmarks
Benchmarks act as a financial report card for your business. They help you measure how you’re doing—whether that’s compared to past performance, specific goals, or industry standards.
Start with your internal benchmarks:
- Review your last 6–12 months of financials.
- Calculate your average monthly revenue.
- Identify typical expenses (e.g., payroll, rent, operating costs).
Then, define target benchmarks based on your goals:
- Increase revenue by 15%?
- Improve profit margins by 5%?
- Reduce overhead by a specific amount?
These targets help you make informed decisions and measure your progress.
Step 2: Build a Financial Forecast
Forecasting is your financial crystal ball. It helps you predict your income and expenses based on past trends and upcoming changes.
Here’s how to create one:
- Start with your current averages (from your benchmarks).
- Factor in known changes, such as a product launch, hiring plans, or seasonal fluctuations.
- Use a simple spreadsheet or bookkeeping software to keep track.
Pro tip: A forecast is only useful if it’s updated regularly. Make it a habit to review and revise your forecast monthly so you can stay on track.
Step 3: Use Benchmarks and Forecasts Together
The magic happens when you use benchmarks and forecasts side by side:
- Your forecast tells you where you expect to go.
- Your benchmarks tell you how you’re actually doing.
Comparing the two helps you:
- Identify red flags early
- Make strategic adjustments
- Stay focused on your financial goals
Rather than reacting to financial surprises, you’ll be anticipating them—and making proactive decisions to stay ahead.
Final Takeaway
Benchmarks tell you how you’re doing. Forecasts show you where you’re going. Together, they give you a clear, data-driven roadmap to help your business grow with purpose, not just react to challenges.
Need help setting benchmarks or building your forecast? I’m here for you! Reach out at 310-534-5577 or contact@abandp.com and let’s get your numbers working for you.
