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Math Tricks for Entrepreneurs

BY Tami Brehse In Profitability On Aug 17, 2016 With 0 Comments

Some people are born with natural math skills. Those people go on to pursue the respected, honorable and highly impressive field of accounting (did we mention they’re also incredibly modest?).

The rest of the population, however, isn’t so mathematically inclined. For these folks, life without a calculator can seem daunting, even as they accomplish feats like starting and running a successful business.

If you’re part of the latter group, never fear. We’ve compiled a few of the most handy math tricks for entrepreneurs you can use on the fly to solve problems and answer questions.

Add large numbers in your head

3 + 3? Easy.calculator.jpg

342 + 269? Not so much.

To simplify the process of adding large numbers in your head, round up to make all the numbers a multiple of 10.

Let’s use the example we just mentioned.

342 + 229 becomes 350 + 230. That’s a lot easier to calculate in your head, right?

350 + 230 = 580

Now, to find the answer to the original problem, figure out how much you rounded up in the first place.

350 - 342 = 8

230 - 229 = 1

Add 8 + 1 for a total of 9. Subtract that from our “simplified” answer.

580 - 9 = 571  <-- there’s the actual answer.

Quickly calculate a percentage

There’s a funny little quirk about percentages that not many people realize: X percent of Y is the same as Y percent of X.

Huh?

84% of 50 is the same thing as 50% of 84. This is true for any set of two numbers.

The answer to both of the above is 42, but the second calculation is much easier to do in your head.

Keep this quick trick in mind next time you need to calculate a percentage; it may be easier to flip the two numbers around!

Here’s another percentage trick. We’re willing to bet you can probably calculate 10% of any number fairly easily: just move the decimal point over one place.

Example: 10% of 240 is 24.

Well, if you know 10% of a number, you can usually use that to find most other percentages. Here’s a table that explains how:

  • To find 5%, find 10% and divide it in two.
  • To find 15%, find 10%, then add 5%.
  • To find 20%, find 10% and double it.
  • To find 50%, find 10% and multiply by 5.
  • To find 25%, find 50% and then halve it.
  • To find 60%, find 50% and add 10%.
  • To find 75%, find 50% and add 25%.
  • ...and so on, and so forth.

 

Find out how long until your returns double

This is called the rule of 72, and every investor knows it. It’s a simple calculation to tell you how long an investment will take to double.

Just take the number 72 and divide by your expected growth rate.

For example, let’s say you’re considering an investment with a 7% projected growth rate.

72 / 7 = 10.2

The answer is the number of years your investment will take to double. So, in this case, 10.2 years.

 

Convert a salary to an hourly wage

salary.jpg

Let’s say you need to quickly figure out how much you’re paying an employee per hour.

For a rough estimate on the fly, take the salary, get rid of the last three digits, and divide the number in half.

$40,000 salary

Remove last three digits = 40

40 / 2 = 20

Their hourly rate is approximately $20/hour. Keep in mind this is approximate, so you’ll want to do the real math if there’s a contract or other important agreement involved.

 

Calculate profit margin

Ah, your all-important profit margin, the amount of money you take home after all your costs are accounted for.

It might sound complicated, but profit margin is actually super simple to calculate. Here’s the formula:

(Revenue - cost) / Revenue

Take your sales revenue and subtract your costs. This includes the cost of producing your product or service. Then, divide that amount by your original revenue. You’ll wind up with a percentage.

For a simple example, let’s say you sell a $25 T-shirt that costs $5 to make.

$25 - $5 = $20

$20 / $25 = .8, or 80%

Your profit margin is 80%--excellent!

You can also calculate your profit margin quickly if you know your markup. At the bottom of this page, you’ll find a handy chart for converting your markup into your profit margin.

Want more handy tips and tricks for running your business? Subscribe to our YouTube channel to get notified each time we post a video!

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Additional Reading

5 Financial Metrics of Your Company's Health

10 Money Making Habits

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