How to Determine Your Financial Data & Get Back On Track
It’s Half Time. Do you know the score?
We are at the end of the second quarter. The first half of your year is behind you and half the year is in front of you!
The good news is even if you are not on track, it’s not too late to make some corrections to meet all of your financial goals this year.
If you are on track, then you are in a great place to improve on an already great year.
My name is Scott Lollar and I am a DYB Coach and want to talk with you today about looking at your financial data and assessing your operations to determine if you are ahead or behind and what steps you need to take to finish the year off with a big W!
The first step in looking at your halftime score is your financial data. I suggest looking at your financial data in three ways:
The first area is to look at your profit and loss statement, your P&L, run on an accrual basis. I would look at this two ways.
I would first analyze your P&L for the first 2 quarters and analyze what you budgeted to your actual year to date.
Now I need to pause here and acknowledge that many contractors don’t have an actual budget so it is difficult to determine if you spent more or less than you had planned for year to date.
What I hear most often is a wish or hope for increased revenue or sales in a given year.
The problem with revenue being the focus is you are not planning or controlling your expenses so even if you grow your business by 25%, you might decrease the overall profit due to undisciplined spending or investment as you grow, If this is you, it is not too late. Create one for the year so it can guide you for the rest of this year and beyond.
The second area I like to compare is a P&L for the first two-quarters year to date compared to the previous year.
You can run this report in Quickbooks. Run your p&L through June 30th. Then customize the report and include the previous year and percent change and run this report.
This will give you a very accurate picture of your income and expenses as compared to last year same period. You will see if there are any expenses out of whack and will also give you a snapshot of your general trends.
The second analysis is your above the line data or Gross Profit. What I mean by that is your revenue and the Cost of goods.
The cost of Goods Sold should include all of the items that were required to produce a painting project. They include labor payroll, taxes, and insurance, rented items, subcontractors, paint and other materials.
This will give you your gross profit. Your gross profit is one of your critical numbers.
A healthy painting contractor should be achieving a minimum of 40% gross profit and be working towards a 50% gross profit.
If yours is less than 40%, you should be asking why and make the steps to increase Gross Profit immediately.
The third area is to look at all of you other expenses. These categories will encompass everything required to run your business except for the costs of goods sold.
You should be looking at areas you may have overspent compared to your budget. Also look for spikes or decreases in expenses compared to last year the same period.
Are there good reasons for them? Or is there just poor fiscal discipline and you spent too much money?
Look at this data, determine if you need to make some modifications either way.
For instance, you could be more careful when determining to buy additional small tools and equipment.
Is it really required right now or could you get by with what you have? Do you need to be more watchful of your marketing spend or the other way, since you have been so busy have you neglected your marketing and underspent?
This will most likely come back to haunt you in your softer season. Do not fail to invest in an area that will return its investment to you just because you have not analyzed the data or ignored the process of marketing.
This is the time to make these adjustments. Talk to your management team and convey any tweaks in how they should be determining what to spend money and what maybe they should be taking a second look before moving forward on an expenditure.
Of course, out of the financial data, you need to make some decisions about the second half and get after making these adjustments. These are questions like:
Do you have sufficient A and B leads at your historical close ratio to meet the revenue requirements for the next 6 months?
If the answer is no, then you may need to boost your marketing or invest in additional web or SEO support.
Do you have sufficient manpower to meet your revenue goals?
Business is math. If you are trying to achieve a revenue goal that requires 10 painters but you have 7, you will fall short of your goal.
Put extraordinary time into solving the manpower problem if this is your situation.
This has to change unless you want to change mathematics which will be difficult. Actually impossible.
Look at your personal pace. Do you need to add some self-improvement time?
Read more business books. Listen to podcasts. Attend a conference or retreat?
Get some coaching. Set some goals for yourself as an owner for the second half. It is a long game and you need to keep yourself sharp.
Reveal to your team the scorecard for the first half and cast a vision for the second half.
This may be a stay the course. This may be a course redirect.
Or this may be some small tweaks but we are headed in the right direction. Your team needs to hear the score.
And lastly, this is the time to start planning for next year.
I would carve out time to start planning for your next season. It seems so far away but it will be here quickly and it is not too soon to start planning.
So no matter the score at your halftime, the good news is the game is not over.
There is always room for improvement and correction but there can be none without the careful analysis of your data and without some reflection and then the courage and determination to take action.
My name is Scott Lollar and as always, you can reach out to me at Scott@DYBCoach.com if I can answer any questions or help you in any way. And I am cheering for your second half!