Don’t Crash The Plane! Learn To Fly With Confidence

I spent ten to twelve years in business without really making any money. I didn't take the time to understand the profitability of individual jobs, didn't have P&L statements, and didn't hire a bookkeeper. Don't make the same mistakes I did—know your numbers! Take the time to delve into the details of your business because they are crucial. If you want to make money, you must dedicate time to analyzing your numbers.

So, what does “knowing your numbers” really mean? I could elaborate endlessly on this, and I'm sure everyone has their own definition. However, for me, it consists of two main aspects: 1) understanding the profitability of individual jobs and 2) evaluating the overall profitability of your company. First things first, do you have a CRM? Somewhere to store job details, customer information, invoicing, and payment details? Do you have a system to track all this information without relying on numerous sticky notes scattered everywhere? Personally, I use Yardbook, a free CRM that provides everything I need. Additionally, I use QuickBooks in conjunction with Yardbook because it helps me track costs and expenses, allowing me to assess my profitability. For about ten years, I didn't utilize any program to help me understand my numbers, and that was a major mistake. I had no idea how much I was earning, how much was being reinvested into the business, or how much I could take home. When you're broke, you're well aware of it. There's no question about it. You know you're making peanut butter and jelly sandwiches instead of ordering steak. However, when you start making money, many people lose track of what they're earning versus what they're spending. You can't afford to be lazy or merely satisfied with making money; you need to know where it's coming from and how to sustain or even increase profitability.

Let's consider an example. Suppose you have a $3,000 landscape job with $1,500 in expenses. Your gross profit would be $1,500. Keep in mind that net profit and gross profit are not the same. Gross profit is what remains after deducting job expenses, while net profit is what's left after deducting all business expenses, including the owner's salary. Now, let's look at a broader example. If you generated $100,000 in revenue last year and had $50,000 in expenses, you would be left with $50,000. However, considering you drew a salary of $40,000, your company's net profit would actually be $10,000. It's crucial to factor in your hours spent on a job because if you weren't working on that job, you would have to pay someone else. The labor cost is still an expense for your company, so your $40,000 salary is not part of the profit.

One of the best investments I made for my business was a stopwatch. With that stopwatch, I could determine how much money I was making down to the minute. I could calculate our earnings per acre. A simple stopwatch empowered me with information. Armed with that knowledge, I delved deeply into my numbers during the off-season with the help of my bookkeepers. I received monthly P&L statements, allowing me to assess the costs and profitability of our jobs. When you know your numbers, you can improve them. I've said it before, and I'll say it again: knowledge is power. Being an entrepreneur means creating a business as a tool to generate income and achieve the lifestyle you desire. With knowledge, you can enhance that tool, ensuring it works for you to accomplish the goals you've set.