3 Reasons Why Math Is Important In Business
When you run a business there will be times, especially at the very start, when you need to take on all roles. That means being competent in every aspect of business management, which is often a stumbling block for people. They might be excellent at design, but poor at time management. They might be wonderful communicators, but terrible when it comes to budgeting.
Until a time comes when you can hire more staff to take on the roles that you are not so confident in, or have the funds to outsource to a third party, it is vital that you learn as much as possible about all aspects of running a business. Something that will be of great importance is knowing math; this is part of many different areas of business. Read on to find out why.
The point of running a business is to make a profit. Profit comes when you sell something for more than you bought it for, or for more than it cost you to make. In regards to a service, the profit comes from working out your labor costs and ensuring that all materials you might need are also covered.
This all, of course, requires a reasonable level of math, and the better you are at this subject, perhaps even obtaining a masters in statistics online, the better for your business. Being able to work out what something has cost you and then calculate what price you are going to sell it at so that it makes a profit is crucial. It is also important to have an idea of the general cost of what other businesses are selling this product or service for, and ensuring that you fall inline with their costs too.
If you cannot make these calculations, you run the risk of making a loss, and if that happens for too long, your business will have to fold.
Every business needs to run in accordance with its budget. Budgeting means that you are able to keep your costs down, only spending what you know you can afford. Without calculating a budget, you can easily overspend, and that can leave you in huge financial difficulties.
You might have separate budgets for each department that add up to a whole amount that cannot be overspent on, or you might simply have one overall budget that you need to keep a tally of throughout the year. However you choose to do it, you will find that having a budget helps you to keep on track.
It is part of business to have to negotiate deals and lower prices. If you don’t understand your initial costs, it won’t be easy – it may even be impossible – to carry out any successful negotiations. You won’t know whether or not you are going to be making any money on the price you are agreeing to pay, and neither will you know what a good deal is when you reach one.
Your customers may also try to negotiate. They may want to haggle for a lower price, and unless you know your costings and your breakeven point, there is no way you can enter into discussions with them successfully.