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Host Scott Lollar is a 35-year veteran of the painting industry and founder of Consulting4Contractors. The 'Success Beyond The Brush' Podcast serves as a touchpoint to painting contractors who have hustled, sacrificed, and worked hard to get their business to where it is today. Now, you need the guidance, expertise, experience, and team to make it into the multi-million-dollar company of your dreams. You'll hear stories and interviews from "Brothers of the Brush" and "Sisters of the Sprayer" who have been where you are and are charting a new course for their company's success. Listen in and go beyond $1,000,000!
SBTB Ep. 4 | Cents & Sense - KPIs That Matter: Using Data to Run a Smarter Contracting Business
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[00:00:00]
Introduction: Emotions vs. Data in Business Decisions
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Mark: You actually are a highly emotional guy, but you regulate your emotions through data and you make good decisions based on real-time information.
Scott: Yeah. A lot of entrepreneurs, probably most of them, run more emotional. "I feel like we're doing great."
"That marketing spend was fantastic."
"We, made a lot of money on that job."
And those are emotional statements and, what I'd like better is that we could prove those statements.
Did we really make money?
Mark: Most of us don't like the word 'emotion'. We don't want to say we made an emotional decision. What we say is "We trust our gut."
"My gut tells me we need three more guys. Let's bring them on."
And, there is some truth in the fact that as entrepreneurs, we're often high performers and we have been our whole lives.
And so we learned to trust our instincts. We learned to trust our gut feeling about things, and that likely is what has gotten us to the point that we're at. But the trouble with that is once you're running an organization with systems, and there are so many things that are affected by our gut-felt decisions or our emotional decisions that we have to start [00:01:00] building systems.
Welcome to Success Beyond the Brush
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Welcome to Success Beyond the Brush, powered by Consulting4Contractors, the show where contractors go beyond busy and start building truly profitable businesses. In today's episode, Mark and Scott take a deep dive into one of the most critical tools every business owner needs, but few fully understand: key performance indicators. And we're unpacking how real data, not just gut instinct, guides stronger decisions, stronger profit margins, and sustainable growth.
If you've ever wondered which numbers truly matter and how to actually use them, this episode is for you. Let's dive in.
Deep Dive into Key Performance Indicators (KPIs)
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Mark: Welcome back everybody. We have a great podcast today with one of Scott's favorite topics: KPIs.
Scott: Yes, sir.
Mark: This is from our financial pillar. We will be discussing key performance indicators. Now, most people have heard this term before. They kind of know what that means, but we want to do a little bit [00:02:00] of a deep dive into what those metrics are.
What metrics should we be reviewing daily, weekly, monthly, quarterly, and yearly as owners? What data should we have at our fingertips in order to make educated and non-emotional decisions for our businesses? Welcome Scott.
Scott: Thank you. KPIs, data, I love it.
Mark: You were kind of built for this topic. Everybody kind of has a thing. I'm creative. You are the data guy though.
Scott: I am, and I'm not creative.
Mark: I think you're more creative than you give credit for, because you have definite opinions about how things should look.
Scott: There you go.
Mark: ...definitely an aesthetic side to you, but I have grown to appreciate over the years the way that you actually are a highly emotional guy, but you regulate your emotions through data and you make good decisions based on real-time information.
Scott: Yeah. And the reason why is because a lot of entrepreneurs, probably most of them [00:03:00] typically can run more emotional. "I feel like we're doing great."
"That marketing spend was fantastic."
"We, made a lot of money on that job," and those are emotional statements.
And what I'd like better is that we could prove those statements.
Did we really make money and did we really?
Mark: True, but most of us don't like the word emotion. We don't want to say, you know, we made an emotional decision. What we say is we trust our gut. My gut tells me we need three more guys. Let's bring them on. And we've learned to trust. And there is some truth in the fact that as entrepreneurs, we're often high performers and we have been our whole lives.
And so we learned to trust our instincts. We learned to trust our gut feeling about things, and that likely is what has gotten us to the point that we're at. But the trouble with that is once you're running an organization with systems, and there are so many things that are affected by our gut-felt decisions or our emotional decisions that we have to start building systems, [00:04:00] which is what Consulting4Contractors is excellent at, in building reporting systems that actually give us the data.
So I want to talk about a little bit of that. How we first gather the information and then how do we interpret the information to make better decisions.
Scott: Yeah, that's a great one. Let's go.
Common KPIs and Their Importance
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Mark: All right, well, let's review some of our common KPIs. Most people are tracking this really in any size business from a lemonade stand to a multimillion dollar painting company, we're probably tracking our revenue, right?
And our expenses, those seem to be fairly easy. Although you and I both know some contractors who aren't even good at that.
Scott: Yeah, I think your premise that most people are tracking is, I'm like, some people are tracking!
Mark: obviously revenue and expenses will, leave us with our gross profit and eventually our net profit. Are you finding that most people can at least give us that?
Scott: Our world is in QuickBooks Online these days. And I think that it's [00:05:00] pretty common that people don't have a chart of accounts set up in an orderly fashion, right? So if you sign up for QuickBooks Online and just enroll, they will give you I believe they will give you a boilerplate,
some a template, right? Some stuff it's already built in there. Office expense, this and that and the other. And what we do is we actually rename some, add some, move some around, into a more organized fashion. We need to organize revenue, like we already talked about.
Now we can break out revenue to service items. I like that because I'm a "visual". Now, that's not a class, it's just a revenue. But if you have residential exterior, residential interior, commercial, say you have a cabinet painting division. I'm going to track that in several different ways.
You can track it easily on your P&L or you can just bundle all into one category called sales or revenue and track it differently. But it's an easy place to track it right there just to get a feel for your percentages [00:06:00] of your revenue stream. Then your cost of goods sold.
How much does it cost you, what do you spend money on, exactly, to get that work done? And that's your cost of good sold. There are some variances, which I'm okay with. Some people will throw commissions and all sorts of stuff up there, marketing even. I don't think marketing's a cost of good sold.
I think marketing's an expense.
Mark: Sure.
Scott: My basic belief is the cost of goods sold is pretty clean. It's labor, subcontract, and then any other direct cost, you know, if you traveled or you had to buy a permit or a dumpster or lift or you know, whatever, right? That's your cost of good sold and then you, that gives you your gross profit.
What amount of money do we have left to run this business and then pay the owner, the ROI.
Mark:
Tracking Job Profitability and Cost of Goods Sold
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Mark: It's amazing to me how many contractors then are not actually tracking, not only from a total business standpoint, our actual gross profit, cost of goods sold, but even on the individual projects. I talked to dozens of contractors who don't [00:07:00] actually track job by job, and I think that's another KPI you like to know is our actual job profitability.
Scott: A hundred percent. Yeah. We need to know our bid to our actual with every job. Every single job needs to be analyzed and tracked. Some of these things are easier with the advent of sub-only models. You know, it can be typically pretty clean and not that complicated, but I still would do job costing for every job.
We have actually a spreadsheet that we export a lot of data to, so we can track profitability by crew leader, by job type, by lead source, by salesperson, even by territory. So a lot of different metrics that we can measure. But in QuickBooks using projects, you should be able to code your cost of goods sold and labor and subcontractors right there and get a pretty accurate dollars and cents of how much you charge, how much it cost you, what you had left over, right inside of your accounting system. If you're not doing that, you need to ask your bookkeeper or your bookkeeping professional, how come or how do we do it?
Mark: [00:08:00] For those that are not using subcontractors and are W2 contractors, you say it's important to track billable versus unbillable hours.
Scott: Yeah. And we see that a lot with people that have employees. We'll talk about this later today, I know, but if the job's bid at a hundred hours and your amazing staff knocks it out in 130 those 30 hours that they went over don't really count as far as our profit, goes. It's going to be a cost.
Yes, we're still going to pay them, but if you need to generate a hundred hours of billable time in a week, those 30 hours don't count. And that's one of the real common disconnects I see people have, which is like, well, I have 20 painters. How come I didn't produce this much money? It's because your 20 painters did a portion of that work that we literally couldn't bill for.
We did bill the client, but our bill rate shrunk. It got diluted because it took you [00:09:00] longer to do the work than we proposed.
Mark: That actually took me a long time to understand as we started scaling up through the teens and eventually hit 20 people in the field was, you know, we're producing 2,400 hours worth of work. It felt like a large number to me, but the truth was we were overproducing most of our jobs, and I didn't quite understand that became a negative once we passed our threshold of our bid number that it was taking away.
Scott: Yeah, and one of the numbers we track on the employee side when if you're having any employees or if you do a project with employees, is we're tracking the bill rate. So I don't really care what your bill rate is. You could tell me it's a hundred, you could tell me it's 60. That's not a number that I....
It's important, but your number's your number, right? Not everyone's number is going to be the same. But if we're bidding, say, $80 an hour, I want to know that we actually recovered $80 an hour without the materials, right? So that's a number that, I don't care what you say. [00:10:00] You're an influencer going to get on social media.
Tell me you charge $80, but I see you only made $65 because of the overproduction of that project. So making sure we hit the number that we need to hit. No matter what, we typically are selling hours of time. So one way or the other, even though we don't always pay in hours, we pay in, in, in contracts to our subcontractors, it's still a measurement of time, isn't it?
Mark: A week long job, a two week job. Sure. Um,
The Role of Headcount in Business Growth
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Mark: Another common KPI that you like to uh, measure in your system is headcount. Why is that important?
Scott: This has been a long time coaching, but a lot of people talk about growth. I like growth, but I don't think it's the only, you know, it's not the be all end all, but they say, I'd like to grow a million dollars this year.
Nice number like it. Um, What does that mean? It doesn't mean anything to them.
It means a million dollars. So a million [00:11:00] dollars requires some things, which is people to produce it, whether it's a sub crew or an employee. It takes marketing to get your phone to ring. So let's take a simple example. You're at a million now and you want to do 2 million in 2026 next year.
Mark: Sure. Sure.
Scott: That's great.
What do you need to do? Well, my guess is every time the phone rang this year, you answered it, or you know what I'm talking about is a lead. You went and did the lead, and you got a yes or a no, and you did the work. So if you want to double next year, you need double the leads, right? Okay. So that's one thing.
So there has to be a plan there. Secondly is how many painters, bodies, headcount, do we need to produce 2 million? And so going back to your intro is entrepreneurs are I say more emotional, but business is science. Business is math. If a painter works 2000 [00:12:00] hours a year or 1900 hours a year or whatever it is, and you charge this much money for that painter, your revenue projection is a certain amount of money.
So say a painter generates $150,000 a year and you want to grow 900, you can do the math. So you need those painters. And by the way, the year starts January 1st, not like June 1st. So if you don't hire that extra painter until June, you have to make up for the other months that you didn't have those.
So it's really about math. So this many painters generates this much revenue, that's pretty simple. And then this is our marketing need: We need the phone to ring this many times at this bid rate to close this many jobs, to get, you know, this, and it just adds, it just builds on itself. And anytime you miss any one of those components, it's a three legged stool.
And anytime that one of the legs short, the stool falls right over. If you, say, Hey, I don't have enough leads, so therefore I didn't close enough work, your stool [00:13:00] falls over. If you say, I sold a ton of work, I'm amazing, my marketing person is amazing, I don't have any painters, your stool falls over, right?
So it, you know, you have to get lead flow, close ratio, and manpower equal. And that's, it's a tide, right? It has to rise together anytime. And when, you feel chaotic or out of balance, it's most likely because one of those legs is just not level and you're feeling like you're going to tip over because you are.
And that's, the biggest challenge is to get your growth established with a plan to say, how are we going to hit this number? When are we going to hit it? And I find that's why we advocate for a annual budget or projection, broken down monthly of course, because it's really a lot easier to run 12 short races than one long race. Because if you're off a little bit, in a one year race, you, could be in a different time zone by the time you're done with the race. But we can self, we can correct, we can modify, we can run a little faster next month. We can we can plan for these, you [00:14:00] know, misses. But if we don't have that plan, if we're not literally looking at that plan to actual, then we're going to be in trouble.
Building a Data-Driven Business
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If today's episode is making you think differently about your numbers, there's a reason and there's help available. Consulting4Contractors helps business owners build real reporting systems, clean financials and data-driven scorecards that actually guide your day to day decisions.
So if you're tired of guessing and ready to see exactly where your money's going, visit Consulting4Contractors.com. That's Consulting4Contractors.com and schedule a call with Scott today. Let's get back into the episode.
Mark: It's a very good point. I think that this problem is prevalent in our industry because so many of us came up, not all of us, I understand there, there's people who chose this industry and are very smart, educated people. But a lot of us grew up through the trades. We are craftspeople first and then we [00:15:00] morphed into being business owners. And one of the particular struggles with that is we are very work minded. It's simply all we need is more work, and the money will come. And we don't understand that the work is part of a larger system. To your point, that there's a lot more things that ride on another million dollars in revenue.
And most of us don't run our businesses that way either. To your point earlier, we don't like the word emotion, but we trust our gut and I see an opportunity or I've got a new potential client that's going to bring us another half a million dollars in revenue. I'm going to go get it.
Right, but what are your reporting mechanisms for these KPIs? And that's where I find a lot of businesses, you mentioned, not even all your businesses you talk with, even track revenue and expenses well.
So talk about what offerings do you have through Consulting4Contractors that might help people with their reporting?
How in the world are we even getting this [00:16:00] data, let alone interpreting it?
The Importance of Accurate Financial Data
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Scott: So the data comes out of your QuickBooks and all your financial data should be in one place. There's a lot of people using estimating systems and processes where they want you to bill through there because you know all your information's there. I think a good estimating program should be a good estimating program.
It's not an accounting program. Okay, I, just want you to get all your financial data into QuickBooks. Now, there's lots of ways we can do it. I'm flexible in a lot of ways. At the end of the day, when you invoice someone, it has to be in your accounting system, please. And then your expenses and all the costs have to be there.
So I would run everything through there and that's where I'd get my data. Now, oftentimes actually we like to look at the data in different ways, more than just what QuickBooks will give us.
Now, QuickBooks is getting better and better at giving us some different things, but we use a scorecard where we've done a 12 month projection.
We do this with all of our clients. Actually, most everyone's done by now in November, where we already have a plan for next year. And [00:17:00] it includes a revenue section, a cost of goods sold section, all your expenses, and then there's net profit. We want to see if the plan will make you money. If we make a plan and there's not enough money left over, we're going to have to change the plan, right?
And so, a lot of people focus on expenses. Expenses are good to look at, but the truth is revenue typically is the more important avenue. But we create this projection and then we monitor, through a scorecard, how have we done or how are we doing based to our projection? Now, it includes a lot of things. We're looking at how many leads did you get? How many closes did you get?
We're looking at the number of bids and the size of the bids, the number of the wins, and the size of the wins, right? We want to make sure you're not winning the little ones. How come you're not getting the big ones? So, a lot of people just say, Hey, my close ratio is 40%. Yippy-i-yay! What's your dollars close?
Oh, 23%. Eh, ah, I'm not going to get you your gold star, because really I want those to be pretty darn close. So this idea of tracking all this data in multiple ways because [00:18:00] of what I just said, right? You get a rock star that says, I closed 45% or 55%, but they're all $1000 jobs, eh, we need to know that early.
Then we're tracking our head count if we need 18 painters, but we have 15, it's math, right? So you're not going to win. So what do we need to do? We need to, your goal, your big rock for right now is to go hire three painters, and then I'll tell you over hire, because just when you get to your 18, someone's going to get fired or quit or whatever, right?
So this idea of, Hey, your plan needs 18 painters, do you have them? Yes or no? If the answer is no, it's going to be a big deal. We're going to look at your marketing, we already talked about that. And then we're going to look at your productivity or your cost of goods sold. Your, gross profit, your job costing.
So you, charge this much money, you spent this much money, did you hit your target? Whether that's 45, 50, 40, whatever your number is in internally, did you hit it, yes or no? And that number needs to be brought out to your team. [00:19:00] You know, biweekly for sure. Just quickly, right? Hey we, struggled on this one.
Is it, what's the reason? You know, there's only three reasons in my book for a bad GP, gross profit. It's a bad bid. Sales. It's a bad customer. Lots of reasons for that. Or, the crew screwed it up. Right? So that's the reason. And so we need to figure out what happened. Did we miss some red flags?
When the customer was crazy and had all these demands, but the salesperson said, no, I need a sale. I'm going to go ahead and do this anyhow. Did we go through some yellow lights there? Did the salesperson, were they sloppy and miss something? Or did we straight up not produce it well?
So we just need to do a quick debrief on all these things because that data can give us some information. Hey, when we go to this area and do this type of job, this amount of revenue, we struggle. It's not so good. We need to think twice about it. So the data speaks to us, but if we're not looking...
So you know that to me comes out of your data from your accounting system. Now the other thing we look at is, what are [00:20:00] our most profitable kinds of jobs? And you're not going to know that unless you track job profitability, or do your job costing by kind of service that you offer, whatever those are. Also we can track, you know, how are different salespeople doing. This person is better than this person.
We can track your crew leaders. Which ones are your rock stars, and have the highest gross profit? Which lead sources give you the highest gross profit.
And then if you have some geography things where you travel a little bit farther than you wish, you could track some geography there and go, Hey, you know, when we drive here in this area or this pocket, you know, those are typically tough to sell and tough to produce, and maybe we should think twice about it. But the lead source, for instance, is a really good one to track because when you get a vendor, a marketing vendor that calls you and says, Hey, I really think you should spend more money with me in this category.
We can go, well, let's go take a look. Oh gosh, we only did a hundred grand this year from that category. Quite frankly, it's one of our hardest ones to sell and produce, and we're not going to do that. [00:21:00] Or, Hey, I think you're right. we can allocate a little bit more money. And same token, when your crew leader, you know, when you have your review and they're looking for the big, you know, bump in their pay, and yet you can show them, through data that, hey, you know, you really are struggling. The other ways some of this data can help us is this.
True story, I have a client who had a rockstar crew leader that we just noticed in a certain time period was a quarter that his gross profit started just really taking a nosedive. And so we, actually went and talked to them and they said, well, the owner's son came into the company, young man and got put on his crew and was struggling a little bit, but the crew leader was afraid to say anything.
It was the owner's son. And we brought it out, talked about it. Turned out the crew leader wasn't the right fit to help onboard this young man. switched the painter to a different crew. They thrived and the crew leader that was high performing, his gross profit crept right back up.
We had that conversation because we saw data that was unusual to [00:22:00] us. And instead of just making a decision of firing someone or doing whatever, we were able to have a conversation about it. And that came out of numbers. Okay. Not out of your gut as you call it, right? So, it can be so useful to look at this stuff and spend some time in it.
You don't have to spend all day in it, but you need to spend some time in it and go, Hey, why did this job go 20% over in hours? Why do we spend 30% too much material? Do we have a problem in our bid, you know, rate for this, you know, substrate or. You know, that only comes from reviewing and analyzing components of the job.
Mark: That's true. We're another success story. I think being a C4C client at Men In White, I'm definitely that business owner who ran things by his gut and I just kind of felt things, feels like we need another guy and I would hire, because I, you know, met a neat guy. Not that we shouldn't always be hiring, I'm simply saying I ran things on emotion.
When you introduced your scorecard system, [00:23:00] our chief financial officer, Nicole, loved the data and she started tracking everything with hashtags and subcomponents, and she tracked everything.
I had little pet things that I loved like popcorn ceiling removal. It was an easy sell, everybody in our region has it. They all wanted to get rid of it.
So a lot of our marketing was geared towards that. Well, guess what? Once we started tracking the data and tracking those jobs in particular, we found out we made less than nothing. We were losing money on this particular service or wallpaper removal, or a bunch of drywall repairs. Like we just didn't make good money on those things.
Once we started tracking it, we changed our marketing, we changed our strategy. Our whole business feels different from those years because we had the data to prove it.
Scott: Yeah. Another thing that we track is, break even, right? So, a lot of people think that if there's a zero in net profit, you [00:24:00] broke even and you didn't, because what this says is there's money that you're going to spend that's not on your income statement. Now we look at balance sheet income statements, running your business,
we look at it all year round on an accrual basis. We don't ever look at it on a cash basis internally here. Cash basis to file your taxes. We look at your business in accrual. So if you're an LLC, you need to take a draw. That's how you're going to get paid as an owner.
So if you have zero of net profit, there's no money for you. So you're going to need money to pay yourself. If you're an S corp, then you're going to have some money in a check as an expense. Some money is going to come out and draw, I would imagine as well. That's what we would advocate. So, also, you might have some debt or car loans or you know something, right?
And you need to bank those principal payments. The interest is on your income statement as an expense, but not your principal. So what other things do you need to pay, you know, in addition to your expenses. Now, I'm not saying every month you need [00:25:00] to take out 50 grand as an owner's draw, but you should demand money from your business for owning it and running it.
And I don't think it's excusable or prudent to ever not demand it from the company. There might be seasons you take less, there might even be months you take none. But doesn't mean we shouldn't account for it. So that's a break even analysis that we say, what do we need to do just to pay the bills, to pay our cost of goods sold, to pay our debt and to pay the owner?
That is what is required in sales just to get it through the winter or through this season or whatever. Sometimes it's not gangbusters. Sometimes people struggle and they're like, I just, I can't get my head around this. And so we can get our head around it. Hey, 125,000 a month is all you need to make your life happen and happen very well.
So don't get stuck on the $200,000 revenue goal. Let's, focus right today on $125,000, because that's the [00:26:00] number. And so this idea of growth versus actual... Stretch goals are great. I'm fine with it, but you can't make a plan that's based on, I'm going to do a trillion dollars this year.
I'm like, well, I just don't think that's going to happen. Can we, do something that is realistic, maybe a little stretching so that we can hit it? Because if we can't hit it, then it's really not a very good plan.
Mark: Yeah. So I can imagine that some of our listeners would be thinking, I'm not against data. I'm not against, you know, making good data -backed decisions, but they might be scared of how much work it's going to require to collect the data.
Weekly and Monthly Data Tracking
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Mark: So tell us a little bit more, you mentioned that a lot of this data is coming out of QuickBooks.
How much time do your clients, as they're filling out their scorecard, how much time is it taking to put those numbers in there? Or is it automated?
Scott: There's lots of it that we can automate. We design and implement Monday.com for clients, but there are some things that are manual. We're not dropping six figures on technology [00:27:00] and you know, we're not Amazon. So you can automate a lot of things and there are some people out there that will do more than others for a fee.
But I would say, we would push this into administrative type of role. Someone to do this for us weekly. Couple hours a week tops. You can get all the information that we're talking about. We organize our clients' data in a way that gets us the, output we're looking for, right?
So we know what we're looking for. So we design it to give us the information. We're looking for employee models, we're looking at hours and dollars that we spend on those hours, where they spend them, you know, which job, right? So that's pretty simple to do in QuickBooks. We're using QuickBooks Payroll.
If you can get through setup, sometimes it's bloody and people will die. But if you can get set up then that tracks all those jobs, all that labor cost right into the project. Scorecard comes out of QuickBooks. And then there's some information that will come out of your accounting program, or in our case Monday.com
So [00:28:00] it's really only about three different places to harvest some data. It's clean and we combine it into a couple of different places where you can see what your projection was, how you actually did the projection. Then, you know, do you have enough leads and sales to support your projections?
Do you have enough manpower to support the projections? And it's just really about keeping you on this slow and steady or fast and steady pace so that when you get to December 31st, you're like, you know, I would love for you to be in the bullseye. I for sure want you on the target. And what we see is without a plan, you don't even know where the target is. It's so far gone that you don't have a clue.
So we're really trying to get people staying focused on this target so that they have a chance of hitting that bullseye. And you know, there's neuroscience that says that when you create a plan and follow the plan and read the plan, talk about the plan, the plan happens.
[00:29:00] And that's actually activated in your brain. So, you know, people that just go from their gut, Mark, as you're saying, the gut's not a really good place to stay if you're going to run a successful business. It's great, there's parts of it that are great, but more on the vision.
Mark: As you and I started coaching, earlier in my career, you would talk about some of these KPIs and some of these metrics that I need to be talking about, and I would think to myself, oh yeah, I could, you know, talk to Nicole and get that number or sales number. I'm like, yeah, I could look at the books and I could figure out what that number was like.
I had a way to retrieve every bit of information that you were talking about was important, but there was no way in hell that I was actually going to do that on a daily or weekly or monthly basis. It wasn't that I didn't have access to the info, it's that the info was not arranged neatly, and that's what I think I love most about the scorecard that you've developed is it's like a [00:30:00] dashboard.
It's, all in one place, on one Google sheet that I can access all of these major metrics in my company in a 15 to 20 minute meeting with my CFO. It's just right there and it's so pivotal to have that information handy and organized in a way that I'm actually going to use it to interpret.
Scott: Yeah. And in fact we've been drilling down a little bit deeper with a few of our clients who are highly like ADHD, where they need small bits of data. So we actually can look at, we look at this weekly.
So the key components that we are asking them to look at weekly is projected revenue to actual revenue. Number of bids, both bids and dollars of bids projected to actual. Closes, bids to actual, both dollars and number. And then we're also tracking head count and backlog. So, one of the things that I think people don't really have a good handle on is how much work do we have? They use say stuff like, we have three weeks of work, or we're booking into January.
And [00:31:00] when you challenge them on that, they can't really back that up with data. They're like, it's just kind of like, eh, it's on the whiteboard. It's the, but we can actually do this with data, which is we know how much a person, theoretically, can produce on budget. And we know our bill rate and we know how much materials we use generally as an average, right?
That all comes out of our accounting system. So then we can say, we have 10 painters and we have this much work, so this is how many weeks exactly we have for those 10 painters, so that if it gets really crazy or really low, someone need to hustle. So there's a lot of components there. There's a production component for those that run production.
There's a sales component that those that run sales. Marketing. So we're looking, you know, you have to be holistic about your business. You can't just be a sales guy, like, I love marketing. Woo-hoo. Like, okay, well, who's going to get the work done? We don't worry about that. Well, you better worry about it, because if you don't have enough people to get, you know, to do the work, then you're not going to get to your 2 million, you're going to be stuck at 1 million.
It's [00:32:00] math. You gotta have to do the math and make a plan. Even when you are a person that prefers to go from their gut, someone on your team needs to go from their brain. They both are helpful, but they both are necessary.
Mark: That's right. And recognizing that we have lots of personalities and lots of giftings differently as business owners, but there is no well-run business that doesn't look at this holistically and have to run their systems and have the need for data-based decision making.
Scott: Yeah, so let me just hit on a couple things that I would be looking at and I look at often. Is I look at revenue, look at cost of goods sold, which gives your gross profit, look at expenses and net profit. Those are kind of my five, I think just high level things. We're looking at all different times.
Now there are cycles. To take it to the absurd you're working on a hundred thousand dollars job and you haven't billed it fully. So June looks terrible, but July is going to look fantastic because you know, we finished, right. We see those cycles and we understand them. [00:33:00] So it's, at any given time, you're taking a picture, right?
Sometimes the picture is someone's got their eyes closed or whatever, you know, it's that it's a picture. But I just don't want people to lie about the picture, right? And then that's comes from our income statement on accrual basis. I'm always really looking at the net profit because that's really what's left over?
That's the money, right? That's where that's the most important number of all the numbers. a lot of people talk about revenue. I'm a million dollar company. I'm a 10 million. Like, I don't really care what you are until you show me what you took home, right? What did you put in the bank?
Now, on the balance sheet side, it's a lot more mystical, right? But there's still things we're looking at, which is your cash. How much money do you have in the bank? What are your receivables? Sometimes for some clients, we're really looking often about their accounts receivable detail, like, who owes you money for a long time?
Getting that money in, so we're looking at accounts receivable. Then we're looking at your liabilities. How much do you owe people right now? So you could say, Hey, I've got 200 grand in the bank, but your liabilities are [00:34:00] 180. Well, if you paid all your bills today, you'd only have 20 left. So, you know, you gotta be careful about how much you know, you gotta really pay attention to your credit and your credit lines, your credit cards, your paint vendors.
And then we do have some long-term liabilities that we look at your, debt, the long-term debt or vehicles. The short term is stuff you're going to pay within the next 30 days, right?
You're going to have to come up with the money to pay that stuff. So we want to just balance your cash to your liabilities, make sure that you're playing with your own money and you have enough money to sustain you. A lot of people ask, how much money do you need? I'm like, that's a tough one, but, you know, we're, saying three to six months of expenses would be great.
And then we're, look, I'm always looking at the owner's draw. did you take some money out of this business? Is this business making you money in your pocket? Not in this business. I'm talking taking it out and put it into your personal life to work for you. So those are kind of the balance sheet items.
We're looking to cash the receivables, the liabilities short and long term. And then the [00:35:00] owner's draw. I.
Mark: All very important things. Scott, we appreciate your time. This is a heavy subject with KPIs. If you're struggling with this in your business or not sure either how to access it or would like to access it in a very easy way, you should definitely be having a conversation with Scott at Consulting4Contractors.
Scott: Thanks, Mark, it's good to chat with you as always.
Mark: Appreciate your time, sir.
Conclusion: Control Your Business with Data
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Well, that wraps up our episode for today. When you understand your numbers, you control your business, not the other way around. Today's conversation proved that success isn't about working harder, it's about working smarter with the right data guiding your every move. Thanks again for tuning into Success Beyond the Brush.
If today's episode helped you, be sure to subscribe, leave a review and share this with a business owner who might need a clearer financial picture. Or if you think that you are that business owner, please visit Consulting4Contractors.com. That's Consulting4Contractors.com so you can schedule your [00:36:00] discovery call with Scott today.
We'll see you in the next one.