Why are numbers important and how to use them in business

Tackling the finance workflow of your business can give you a lot of power to improve, grow and communicate its value proposition sustainably.

Investing time into this support function can be a valuable intervention in the circular process of planning and running any operation, whether it is a social enterprise, for-profit or non-profit. Between running your business operations and planning for its future, fit in the time and processes for performance management and budgeting functions.

What is performance management?

This function involves deliberate action to question how your business is doing and understanding why. As leaders in the business, you gather information to assess the performance of your business and drive future decision making to transform and grow.

As you manage your business, take note of what went well and what did not go well. Your finance records can give you a lot of information about this, starting from a review of whether your cost levels met your expectations or not? Why? Always ask why! Identify sources of income loss or inefficiencies i.e. the leaks that are weakening your business model’s impact and profitability. Do you know what they are? Such knowledge can give you a lot of power to maintain and replicate the good results and change up the tasks that were not as successful.

A key measure to make sure you know is how much does it cost you to support one beneficiary? To serve one customer? How will that change as you grow? This is the biggest question to address when it comes to sustainability from a financial perspective and an impact lens. Also, this is an important answer that impact-focused funders want to see.

Just as important as the financial measures are non-monetary statistics. Number of customers and beneficiaries, employees retained, how many days does inventory sit in storage, units of waste in operation…sky’s the limit! The exercise to measure, report and analyze these performance measures is different for every business model and can be easy to neglect or delay because it does not interfere with day-to-day operations, especially when there are minimal human resources to dedicate to this process. For any organization’s leader, it is highly recommended to take time off at least on a monthly basis to check in on your performance and factor into your upcoming decisions.

Budgeting

Now, you have all this information and a better understanding of your operation’s performance and capabilities. Take that back to the drawing board for some strategic planning on where you are headed next. And that should be paired up with a robust budgeting process. Here are a few examples of the thought process to transition from reviewing your past performance to setting standards for your future performance:

  • Know the reasons e.g. if you are investing in more expensive raw material to make sure it is environmentally friendly and ethically made, factor that pricing into your budget and then make sure you target customers that also share your values. Can you sustainably afford these measures?
  • Compare, compare, compare: period over period, see how your performance is changing. Compare what you offer for beneficiaries versus the impact of other programs. Compare where they started off and where they are at after participating in your programs or using your products. What level do you ideally want to perform at? Does your strategic planning and budget show how you plan to reach that?
  • What is your break even point? Have you considered the difference between variable costs (costs that increase with each additional unit of production/service generated by the operation) and fixed costs? When do you reach this point?
  • Managing direct production and program costs vs administrative costs: this is a key issue to highlight for non-profits and social enterprises. Where funders, donors, and impact investors want to invest in the impact you are making for your community, they don’t want to see an exorbitant portion of that going towards paying administrative fees or large overhead costs. How do you balance having sufficient support functions while keeping the costs low?

Armed with this process, you can better plan what is happening in your business and avoid surprises when it comes to performance. Check out our member resources for support on how to dig deeper into this process, conduct it effectively, manage the operations better, and what to share with your stakeholders. Have any other questions that we can help with? Leave a comment below or reach out to our program coordinators.

Explore more resources

Share:

LinkedIn
Twitter
Facebook
WhatsApp
Email

Related Posts

Social enterprises are an up-and-coming business form and are a remarkable fusion of entrepreneurial spirit and social responsibility.

An Introduction to Social Enterprises

Social Enterprise 101 In a world where profit maximization often takes the front seat, a quiet revolution is underway – combining the power of business with morals and compassion. Social enterprises

By incorporating sustainability practices into your social enterprise in 2024 can make a significant positive impact on the environment and your business

Sustainability For Social Enterprises

Sustainability For Social Enterprises: 10 Easy Ways to Green Your Business In today’s world, sustainability isn’t just a buzzword – it’s a necessity. As a social enterprise, adopting sustainable practices isn’t

"A social enterprise is an organization or program that is mission driven, aiming to sell goods or services to earn revenue while also helping to achieve positive social, cultural, or environmental objectives." “it's a balance of profit and purpose and depending on what's the problem you're trying to solve what industry you're operating in that balance can actually look very different you might have to operate with more characteristics of a non-profit you could legally be registered as a non-profit or you could be doing it more as a business but you have to you have to find that” "Aside from earning profits, you're aiming towards connecting back to serving a particular community or environment." "Social enterprises can have various legal structures, reinvestment models, and levels of involvement from employees versus volunteers." "Social enterprises fit in between traditional charities/non-profits and for-profit corporations, balancing profit and purpose." "The importance of social enterprises lies in addressing increasing worldwide challenges and diminishing funds and resources, resulting in an emerging social deficit." "Issues such as poverty, food insecurity, and lack of essential health services highlight the need for social enterprises to target social, economic, cultural, and environmental problems." "We don't have enough funding, enough resources coming our way to be able to address these issues." "Many non-profits and charities are constantly struggling for financial stability." "Financial sustainability continues to be an issue when you don't have a sustainable model and long-term relationships for acquiring resources." "A local producer of textiles is a for-profit organization focused on manufacturing ethically made products and donating a portion of profits to charities." "Social enterprises can be structured as for-profits or non-profits and operate based on various business models such as employment-based, mission-based, profit-based, or cooperative." "We're always looking to balance social impact and revenue and profits, which can be quite challenging." "There's no right answer to how closely purpose and profit must be related; it depends on the social enterprise's goals and the issues they aim to solve." "When designing a social enterprise, it's important to differentiate between social impact and business frameworks and consider core values." "Core values for a social enterprise may include transparency, community engagement, and a focus on bringing about systems change." "Social enterprises can have various degrees of overlap between purpose and profit, depending on their model and the social issues they address." "Key steps in designing a social enterprise include conducting research, engaging with the community, developing sustainable models, and seeking opportunities for growth." "Innovation in social enterprises can involve various aspects such as profit models, product and service design, environmental impact, accessibility, brand building, and customer engagement." "Diversifying business models can help implement solutions for similar problems in different communities, not just expanding geographically." "Scaling up involves influencing decisions like federal budgets, launching social finance programs, and promoting investment in women-owned businesses." "Impact measurement is crucial for balancing purpose and profit, demonstrating a commitment to stakeholders, aiding decision-making, and preventing greenwashing and social washing." "There are various models for impact measurement, including the United Nations Sustainable Development Goals, local community reports, and custom frameworks like the Common Approach to Impact Measurement." "Impact measurement involves planning intended changes, setting performance measures, collecting beneficiary feedback, assessing impact, and reporting results to stakeholders."

Watch: The Fundamentals of Social Enterprise

This virtual workshop hosted by Social Venture Circuit explores the definition of social enterprise and how their operating models can beset up to empower communities, protect the environment and redesign societal

Try our social enterprise model canvas!

Subscribe to get access to a template of our canvas for planning your social enterprise strategy. 

You will also get first access to spots in our coaching program and other events! Keep up with resources and insight from the social impact sector and receive updates on our events and programs right in your inbox.

Social Venture Circuit is a community of changemakers offering resources, support and connections for leaders who are looking to do business with heart.
Linkedin Instagram Twitter Facebook Youtube

Land Acknowledgement: We would like to acknowledge that the land we operate on is the traditional territory of several Indigenous nations, including the Anishinaabe, the Haudenosaunee Confederacy, the Wendat, the Métis, and the Mississaugas of the Credit First Nation. Social Venture Circuit is grateful to have the opportunity to work on this land, and by doing so, give our respect to its first inhabitants.

Privacy Policy

Copyright 2024 Social Venture Circuit