Understanding ratios is essential to unlocking deeper insights into your enterprise’s well being and driving smarter decision-making
Think about you’re a farmer with two apple orchards. Someday, you resolve to rely the apples in every orchard. Orchard A has 1,000 apples, whereas Orchard B has solely 500. At first look, it looks like Orchard A is the clear winner. However what if I advised you that Orchard A has 10,000 bushes, whereas Orchard B has solely 500? All of a sudden, Orchard B doesn’t look so dangerous, does it?
That is the facility of proportions. In enterprise, as in farming, uncooked numbers could be deceiving. To actually perceive the well being of your enterprise, it’s essential to have a look at proportions.
You might be in all probability absolute numbers day-after-day, e.g. your enterprise has made $10K in income this week. There are 250 clients who positioned orders as we speak, whereas it was 200 yesterday and 100 on the identical day final week and so on.
Proportions, alternatively, are just like the superb print. They may not be as instantly eye-catching as absolute numbers, however they supply a extra correct image of your enterprise’s well being.
Take revenue margin, for instance. It is a proportion that compares your revenue to your income. A excessive revenue margin signifies…