Tradies Need to Know Their Numbers
Do I need to keep good records of my business transactions?
How do I better understand where I make a profit and where I make a loss?
You cannot hope to keep a trades business on track for success unless you have a reasonable understanding of the key numbers in your business. As mentioned before construction is a hard, risky business. It is also rather “lumpy” in its cash flow and sometimes difficult to read what the underlying trends are. Because of these features it is even more important to develop a regular reporting process, so you are better able to take some corrective actions sooner when things are trending the wrong way. By the time your accountant gets round to completing your end-of-year accounts, it may be too late.
You need to know how much monthly revenue you need, what Gross Margin you need to be hitting on projects, how “liquid” the company is, how efficient your labour is and how are you running against budget. I would guess that less than 20% of tradies have a really good handle on their numbers on a regular basis. Guess what? These 20% are probably making the best profits.
So, what are the key areas of your business that you would like to have more up to the minute information on? Do you have some SPECIFIC targets you are aiming at on an annual basis? Put some measuring processes in place and then get in the habit of looking at the numbers on a regular basis so you can better control your business and therefore your life.
For more information about how you can develop key metrics for your tradesman business, contact Andy Burrows from The Trades Coach. For help in reviewing your business numbers and direction reach out for a complementary strategic review session. Email andy@tradescoach.co.nz or call 027-6886721.