Mathematics is fundamental to business. You will use it every day as a business owner – working out profits, losses, revenue, and more. This article will take a look at 6 reasons that maths is important in business.
Decision-making in business is all about working out how much money you’ll make, and the costs involved in getting there. There will be a lot of numbers to crunch when you’re making a decision, and it’s very important that your maths is up-to-date and correct. Even if you have an accountant who runs the numbers for you, you should know what they’re doing and be able to explain it so you can make changes if needed. If your numbers are inaccurate, then that’s going to impact the decision-making process, and ultimately your business profits or losses.
You can’t manage what you don’t measure. Metrics are simply numbers that tell you how well your business is doing, and understanding them means that you can make informed decisions about what to do next. Three metrics that are very important in almost every industry are Customer Lifetime Value (CLV), Customer Acquisition Cost (CAC), and Customer Acquisition Rate (CAR).
Managing costs is a big part of running a profitable business, and you need to make sure that your calculations are accurate. For example, when you collect quotes for international delivery and international shipping, you need to know how this is going to affect the profit-per-unit. With accurate numbers, you can work out if it’s even worth doing this or not.
Your accountant may calculate your taxes for you, but it’s important that you know what they’re working off. They use mathematics to make sure that you don’t pay any more tax than necessary – because anything over and above the legal requirements is, of course, illegal. You may be able to claim certain expenses as tax deductions if they are directly related to your business.
For instance, a supermarket may choose to put certain products near the front of the store so that they are on the way as you’re walking in and more likely to be purchased. This is really simple maths! If people pick up something as they’re walking into the store, then it makes sense that more people will buy it than they would have if the product was at the back of the store.
Sometimes, people will ask you what your business is doing to ensure that you’re attracting good employees, but really they’re asking how much maths is involved in making sure that you’ve got a great staff. You need to be able to check that you’re offering the correct wage for the job and that this is more than what they’d get elsewhere. You may even want some employees to start off at a lower rate, and then move up through the company over time. Being able to work out how long it will take for them to pay back their employment expenses is a vital part of this.