CAN YOU ANSWER THESE QUESTIONS?
Paul DelFino
After decades of evaluating small businesses I have come to the conclusion that I can judge the success potential in one brief interview with the owner/entrepreneur. It comes down to one overriding question; does he or she know their numbers?
There is a big difference between knowing how to successfully raise and level concrete or stabilizing an environment with Deep Foamjection and successfully running a business. When you raise concrete you have measurable goals and metrics. You’re trying to level, pitch, or stabilize. Each of these has a numeric goal of height, angle or soil density/compressive strength. With polyurethane you are judging which foam based on PSI and you are monitoring pressures and temperatures continuously. Generally speaking all these disciplines becomes mechanical and automatic in day to day operation. Most often an experienced concrete repair specialist can tell me exactly where he or she is against most of these measurements at any point in a job. However, too often they stutter a bit when I ask:
- What is your cost of sale?
- What is your percentage of sales from referral?
- What is your most efficient marketing source in terms of volume, margin and profit?
- What is your closing ratio?
- What is your inventory turn?
- What is your working capital?
- What is your gross margin by type of work?
- What is the mix of your business (residential, commercial, and governmental)?
- What is your Current Ratio?
- What is your lifetime value of a customer?
- What is your break-even?
- How fast can your grow without borrowing?
DATA IS USELESS UNLESS YOU USE IT
The answers to all these questions and MORE are in your Estimate Rocket CRM and in your monthly financials from Quick Books or whatever financial software you use. Not using this information is equivalent to never checking your pressures or temperatures when doing a polyurethane lift. Too many entrepreneurs are “visual flyers!” That is – they fly their plane/business based only on what they see. Would you fly a plane at night without instruments? Too often your eyes are deceiving and what you do not know can be your demise.
WATCH FOR THE TRENDS
Spot inspection is good but it is just that a moment in time. Often the real story is in the trends and comparisons. Good business people:
- Continuously compare financial and sales metrics to prior month and prior year.
- Graph performance of the above so even the most subtle trends are obvious.
Your data is not for your accountant, it is for you!
SOME TOOLS TO GET STARTED
For those who are intrigued by the above below are some tools you may want to experiment with. Ratios are how analysts evaluate businesses and how you may wish to consider evaluating yourself?
