When a business owner wants to scale, or attract investment or sell their company, one of the challenges they face is the lack of solid, financial information.
The purpose of financial information, and what potential investors or buyers want to know, is that your business model as advertised works.
There are five key pieces of financial information a business owner should have (I have used a B2B SaaS software company as an example, but these principles apply to companies in any industry).
WHAT DOES IT COST TO PRODUCE A PRODUCT?
The cost of sales should be fairly burdened. The gross margin will show whether there is pricing power.
WHAT DOES IT COST TO ACQUIRE A CUSTOMER?
With this information and the gross margin, the business owner will know the long-term value of a customer
The most important of these is the growth and composition of ARR and MRR.
RELIABLE GAAP FINANCIALS
For a SaaS company these mean that revenue is recognized according to US or international reporting standards and that main expense categories are classified in a way that allows comparison between companies in the same industry.
The business owner should ideally have three years of annual and monthly budgets, compared to actual results, with evidence of review.