The Four Key Numbers to Measure in Your Business Through Record Inflation

Written By
Jon Mailer

CEO & Founder – PROTRADE United

Australia and the world are experiencing record inflation rates, reaching a 40-year high.  Many business owners are yet to have operated a business successfully through this type of economic environment. So, knowing your financial numbers together with making smart decisions, is essential to navigating these uncertain times. Below are four numbers that we feel are integral to staying ahead in the game of business.

RJM Builder with Jon Mailer

Ryan McMahon from RJM Builder with Jon Mailer, PROTRADE United’s CEO

Ryan McMahon from RJM Builder with Jon Mailer, PROTRADE United’s CEO

Before introducing you to these numbers, let’s delve deeper. You cannot improve anything that you’re not measuring already. The sooner you start measuring these key numbers, the sooner you will start to improve them, automatically.

It is also essential to have a target for each of these numbers based on where you envision your business to be.

The 4 Key Numbers:

Gross Profit Required

Now gross profit is what we label your ‘real income.’  After paying for the direct costs of delivering your product or your service, mainly your materials and labour, and the other incidentals around it, what are you retaining? Out of every dollar that you earn, how many cents do you allocate to continue operating your organisation while ideally making a healthy net profit?

Your total sales income is what we deem a ‘vanity’ number. Your gross profit is what you’re retaining, this is your ‘reality’ number.

Break Even Point

Your break-even is the total amount of income that you require to generate, to cover only the costs in your business. To calculate your break-even, you need two numbers: 1. The fixed overhead amount per month, and 2. you need to know your gross profit percentage. After which, take your overhead amount and divide it by your gross profit percentage. This figure is your total break-even amount. From here, you can calculate how many jobs you require to win, complete, invoice and be paid for, to cover this amount.

Written By
Jon Mailer

CEO & Founder – PROTRADE United

Article Continues

Who are PROTRADE United?

Australia and New Zealand’s #1 Business Coaching and Advisory Organisation, dedicated to the Trades and Construction Industry. With over 20 years of practical experience, we have a proven track record of helping more than 3900 business owners gain greater clarity, consistency and choice.

Are you next?

Who are PROTRADE United?

Australia and New Zealand’s #1 Business Coaching and Advisory Organisation, dedicated to the Trades and Construction Industry. With over 20 years of practical experience, we have a proven track record of helping more than 3900 business owners gain greater clarity, consistency and choice.

Are you next?

Article Continues

Forecast Net Cash Position

The Net Cash Position is your forecasted income from sales and completed jobs, minus your projected outflows/expenses, added to your current bank balance. We suggest projecting this for 8-12 weeks, based on project completion dates or regular weekly earnings.

Magic Number

The magic number we talk about at PROTRADE United is the number of inquiries/new leads you need coming into your business, based on the conversion rates from your quotes, through to winning the work to generate the income and profitability for the next 12 months. The Magic Number is a target that you, the marketing and sales teams can display to know whether they are on-track/off-track.

So, there you have it, four key numbers that will assist you to understand your current and future business position.

If you would like any support in the above, please connect with the team at PROTRADE United.

Forecast Net Cash Position

The Net Cash Position is your forecasted income from sales and completed jobs, minus your projected outflows/expenses, added to your current bank balance. We suggest projecting this for 8-12 weeks, based on project completion dates or regular weekly earnings.

Magic Number

The magic number we talk about at PROTRADE United is the number of inquiries/new leads you need coming into your business, based on the conversion rates from your quotes, through to winning the work to generate the income and profitability for the next 12 months. The Magic Number is a target that you, the marketing and sales teams can display to know whether they are on-track/off-track.

So, there you have it, four key numbers that will assist you to understand your current and future business position.

If you would like any support in the above, please connect with the team at PROTRADE United.

What you’ll get in the complimentary 60 min session

Diagnostic Tool

Use a powerful diagnostic business tool, to understand the current reality

Identify the Obstacles

Uncover the obstacles that may be holding you back from more profits, time and freedom

Action Plan

Craft a realistic action plan to produce results in the next 6-12 months

Recommendations

Gain recommendations specifically designed for trades and construction businesses operating in Australia & New Zealand

Let’s Hit the Ground Running with a Business Performance Session
Would you like to gain greater clarity and consistency in your trades business? Book a complimentary ‘Business Performance Session´ with a trades business specialist and uncover what may be holding your business back.