Direct Labor Hours

The most important information needed to properly manage a company in the trades is tracking direct labor hours.

By knowing direct labor hours all types of insightful metrics can be calculated.

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

With direct labor hours you can figure out all of your hourly costs, including material labor and overhead costs per hour.  You can also calculate labor efficiency metrics. So if you are a business owner in the trades who feels they need more control over their business and really needs to hone in on what their services cost, track direct labor hours.

And remember, the most successful business owners know their numbers.

Bookmark and Share

Inspiration

It’s often said that leaders are ordinary people with extraordinary determination.  As leaders, the main challenge that today’s business owners have is keeping themselves inspired, because when the business owner is inspired their employees are inspired.

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

Because of the vicissitudes of owning a business it is really difficult for the business owner to stay inspired.

One of the things I have to do with some of my clients to try to keep them inspired is to have them reflect back on the excitement they felt when they first started their business, because it is likely that those fundamental opportunities that they saw then still exist.

And remember, the most successful business owners know their numbers.

Bookmark and Share

Franchises

If you are looking to buy a franchise, you need to produce a realistic 3 year business and cash flow forecast projection so you have a much better idea of how much start-up operating capital you really need.

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

The franchisor will tell you how much money you need and so will other franchisees, but at the end of the day, everybody’s situation is different and the #1 reason why a franchise fails is a lack of startup capital. 

The forecast will also be able to tell you how much working capital you will need for multiple what if scenarios. For example, what will happen to cash flow if sales are off 20% from what the franchisor is telling you? 

What is the cash required then?

Because remember, the most successful business owners know their numbers.

Bookmark and Share

Cash Flow Problems

Let’s face it; if a company is not properly capitalized it is bound to have cash flow problems.  

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

Most all business owners and entrepreneurs underestimate their cash needs because there are so many contingencies and factors to take into account.  

Having a professionally prepared business and cash flow forecast will allow you to know with great certainty how much cash you will need because a professionally prepared business and cash flow forecast will cover the contingencies.  Plus you will be able to do a variety of what if scenarios at different levels of sales to cover even more contingencies.  

And remember, the most successful business owners know their numbers.

Bookmark and Share

The Cash Conversion Cycle

The Cash Conversion Cycle is the time period between the outlay of cash to make a product and the collection of cash from the sale of that product.  The objective is for the cash conversion cycle to be shorter than your trade vendor credit terms. 

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

Put another way, if you convert the production of your product into cash before you pay for the raw material you are going to be in good shape.  

Calculating the cash conversion cycle is a quick way to discover the cause of a cash flow problem.  

Remember, the most successful business owners know their numbers.

Bookmark and Share

Gross Profit

Understanding your gross profit and how to improve it is critical to maximizing profitability. Gross Profit is sales less cost of goods sold and cost of goods sold are all of the costs directly related to your product or service.

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

Finding ways to increase your gross profit can have an exponential effect on profitability because your overhead expenses are basically fixed and don’t change much with increases in gross profit.

And remember, the most successful business owners know their numbers.

Bookmark and Share

Working Capital

Most business owners think of “working capital” as the cash needed to operate their business.  In the financial world the words working capital means something a little different.

My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.  

In the financial world working capital is actually a financial metric.  Working capital is defined as current assets less current liabilities and is a measure of a company’s liquidity.  

If current liabilities exceed current assets there is a working capital deficiency.  Use of this simple metric can identify the reason why a company is making money but has poor cash flow.

Remember, the most successful business owners know their numbers.

Bookmark and Share

Make Your Business More Valuable!

If you want to make your business more valuable, take this advice: work on your business, not in it!  You can’t be in the midst of small, everyday activities and still be able to bring more business into the company (which is what you’re meant to be doing as the business owner).  Long term, if you stick to what you’re supposed to be doing your company will not only be much more profitable, it will be more valuable! Valuable as in: if you ever sell your company, the buyer will be more interested in taking over a position that’s working on a business, not working in it. Make this the standard for your business practices now to make your business more valuable!

Bookmark and Share

Expand Your Horizons, But Proceed With Caution!

There’s no doubt about it—one of the best ways to grow a business is by keeping an eye out for new and exciting oppurtunities like a new product or service you can provide. But we business owners need to remember that if we can’t be great at it, we shouldn’t be doing it.  If you can’t perform a new service correctly, or if your employees don’t have the proper skillset to carry it out, the new idea that seemed like it would lead to big bucks will only lead to big loss for you and your business. As long as you keep an eye out, new oppurtunities that fall under your own skillset will present themselves in time, don’t try to force things that just don’t fit into existance. Instead, you should invest your time and effort in doing what you already do well, and doing it better.

Bookmark and Share

What’s the Number One Reason a Business Fails?

Don’t fall prey to the number one threat to businesses everywhere! What is the number one reason businesses fail? It’s bad decision making! How do you escape the trap of poor decision making? Clearly it’s done with the power of GOOD decision making! Always take care of customers, always know your customers, add value to your products and services at a consistant rate, have a strategic growth plan, and pay attention to financial management. These basics should guide all decision making in your business, and no decisions you make for your business should contradict them. The right decisions make all the difference between your  business failing and your business succeeding!

Bookmark and Share
« Older Posts