#41 Know Your Numbers: The Key to Smart Deals
Episode description
In business, investing, and deal-making, numbers are everything. If you don’t know your numbers, you’re gambling, not investing. A profitable deal isn’t based on emotion—it’s based on math, logic, and financial sense. That’s why you need to break down any deal quickly—on a napkin, scratch paper, or whiteboard—to see if it truly makes sense.
Before purchasing a business, real estate, or making an offer, you must understand the key financial metrics that determine whether a deal is profitable or a money trap:
✅ NOI (Net Operating Income): Does the business or property generate positive cash flow after expenses?
✅ Cash Flow: Are you making money every month, or just hoping for appreciation?
✅ Cost vs. Value: What are you paying vs. what it’s actually worth? Is there equity or upside potential?
✅ Profit Margins: After all expenses, what’s left in your pocket?
✅ ROI (Return on Investment): How long before your initial investment is paid back?
✅ Cap Rate & Multiples: What’s the true earning potential of the deal?
✅ Risk vs. Reward: What happens if market conditions change? What’s your downside protection?
If you can’t simplify a deal in numbers, you don’t understand it well enough. A smart investor or business owner can do a quick napkin analysis before diving into deep due diligence. If the numbers don’t work on paper, they won’t work in reality.
Knowing your numbers gives you leverage, negotiating power, and confidence to make profitable decisions. Before you buy, invest, or negotiate—do the math. It could save you thousands—or even millions.