The idea of Dothenumbers is to help your client improve their profit. There are all sorts of feel good items to discuss with a client but it all comes down to profit. If there is a decent profit in the business the business owner can pay themselves a commercial wage, achieve a return on the money they have invested in the business, pay employees appropriately, pay their suppliers on time and sleep well at night. And also create an asset for themselves.
Without profit nothing else happens no matter how much the business owner wants it to. Have your business client aim for at least 10% net profit after paying a commercial wage to themselves for the hours they work.
Everything you do with Dothenumbers revolves around the business being more profitable and the 12 month rolling trendlines show you how the business is performing.
My client is making losses, how do I help them?
Sometimes businesses face a downturn and hopefully Dothenumbers has indicated early that this is happening and gives you time to help. What we do is write down the current P&L which should be the last 12 month Rolling P&L from Dothenumbers then write next to it what we wish to achieve and calculate the difference. Hard decisions have to be made.
Here is a real life example:
Example one: Machinery wholesaler. The first example is an experienced, astute business owner who would be good at running any type of business. However, through rising costs and during fairly stagnant growth, he found himself making losses.
The business owner was turning over $2.1 m, and after wages of $660k and fixed costs of $340k made a loss of $93k – and it was going to happen again. His turnover was fairly consistent so we assumed it would remain the same, but he could maintain his margins so Gross Profit was the same percentage.
We went through fixed costs and thought we could reduce them by $60k. We aimed for a net profit of $150k. Not 10% but good enough for us. Once he agreed with these figures there was only one variable – wages. Wages had to be $477k or he wouldn’t achieve his profit.
Laying someone off is the hardest thing small business owners have to do, but when keeping the business alive – or even keeping your house depends on it – it must be done.
One salesman who was a very good employee left; the owner took a pay cut for 6 months; and other staff reduced hours. We culled redundant advertising spend and a business coach expense. Total savings were less than we aimed for, but the client was profitable again. Since we did this six months ago he has achieved more profit than we forecast. His sales are actually growing through better marketing. From our business re-model, if I divide GP of $907k by wages of $477k I get $1.90. I now have an important KPI to help manage his business – for every dollar of wages he needs to make $1.90 of gross profit.. This is one of the numbers Dothenumbers measures quarterly
EPILOGUE.
Two years later the business is profitable and the client has opened a second location.
For more information on how Dothenumbers can help your business clients, visit https://dothenumbers.au/
