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Business Math: 20% of 10 is a lot less than 20% of 1,000

business math

Business math is an everyday job of an entrepreneur. However, different viewpoints bring different results and different conclusions about possible directions.

The same percent of something is a lot less than the same percentage of something more. However, different business elements make different math that makes one entity more successful than another.

Let’s play with simple business math.

Business A is on the market with 100.000 people with a 10% market share. This is not the same as a Business B that is on the market with 1.000.000 people with a 10% market share. Business A has 10.000 customers, and B has 100.000 customers. It is obvious from this math that business B is in a better position than business A.

However, what’s going on if in our business math we include customers spending? If average customer spending in one year for A is $5.000, and for B is $100. In this case, A will have $50.000.000 in annual income, and B will have $10.000.000 in annual income. Obviously, in this case, business A is better than business B.

Let’s include in our business math the profit margin. What if the profit margin for A is 5% and for B is 35%? In this case, business A will have $2.500.000 profit, and B will have $3.500.000 profit. Who is better? Obviously, B is much more profitable.

What can I say? Only that:

  • Everything in the business starts from market and customers.
  • The business math you are making and how you interpret the results is very important for the decisions you will make.
  • Everything in business is based on elements that differentiate one business from another.
  • Everything you do must be evaluated to the end or to the finish line.

So, start playing with the business math, numbers, and different factors that affect that numbers. Use different viewpoints to look at different aspects. You will be surprised how different things around your company are.

What do you think, how numbers can impact you?

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