If growing your business is your top priority, pause and ask if you know your numbers.
The number of leads coming in. How many leads you’re closing. Your return on investment for marketing. Break even numbers. Profit margins. Any number that gives you a concrete understanding of what’s going on in your business.
You need to be on top of these metrics. But so few business owners actually are.
I think it’s the nature of the home services business. Many of us transitioned from tradesperson to business owner with no formal business education and limited guidance. I’ve worked with so many restoration business owners who genuinely believe it’s enough to know that they’re in the black and revenue is growing. No one ever told them they had to analyze the entire system.
If I’m describing you, let me tell you now: you miss countless opportunities and risk unnecessary losses when you neglect the numbers.
Whether you’re trying to sustain a new and vulnerable enterprise or scale a business that has already seen some success, here’s everything you need to know.
Why You Can’t Really Move Forward if You Don’t Know Your Numbers
I’ve found that a lot of business owners rely more on instinct than they think they do.
Let’s say your territory covers a new and thriving neighborhood. The population is growing swiftly. You see the opportunity for your business to grow with it, so you throw more money at marketing.
Ultimately, you do book a few more jobs than usual. But you’re not bringing in the revenue you’d hoped.
This is the point where a lot of business owners make an assumption instead of analyzing their data. They think they’re bad at marketing or blame the problem on tough competition. But if they look at the metrics, they might discover:
- More leads but a poor lead close rate, suggesting that the issue is in the sales department or reception.
- A lot of money invested in a marketing channel that’s yielding poor results, while a more successful strategy is underfunded.
- A high click-through rate among Baby Boomers, but a low CTR for Millennials, suggesting that the marketing strategy isn’t connecting with new homeowners.
The most important thing to recognize in this not-even-remotely-comprehensive list is that each number reveals a problem…
…and a possibility.
These metrics show 1) how to stop wasting money on what’s not working and 2) how to adjust the strategy to get better results.
The opportunity to cash in on this booming neighborhood still exists.
The Numbers to Know
So, what numbers should you be looking at?
Honestly, that’s too broad a question to address in one article. There are countless metrics behind every strategy within your business. The “most important numbers” are the ones that will give you clarity on whatever issue you are currently facing.
That said, here are the most basic considerations. These metrics come into play for almost all your major business decisions. You also need this information to create a solid business plan.
You’ve got to know what it costs to do business. This includes:
- Office supplies,
- And about a million other things.
And when I say “costs,” I don’t just mean what it costs to run your business now. You also have to know what it will cost to grow.
If you double the number of jobs you book this year, what will that mean for payroll, trucks, equipment, and operations? How much will you have to add to the marketing budget to hit that target? What will it mean for your tax liability?
How many leads do you have coming in right now?
This number is really important because it helps you gauge growth, especially when you look at it alongside your…
3. Lead Close Rate
What percentage of the leads that come into your business actually result in a job?
If you’re not getting the volume of work you’d like, your LCR helps you determine where the problem is. Are you not getting enough leads in the first place? Or is something turning people off when they reach out to your team?
This number also helps you plan for the future. If you want to get x number of jobs this year, your LCR tells you how many leads you need to get in order to reach that goal.
4. Breakeven Numbers
I cannot tell you how many business owners have no idea what their breakeven numbers are. And yet, these metrics are crucial for both the growth and the survival of your business.
Breakeven numbers tell you how many jobs you need to do in order to make up for your costs. This helps you avoid the all-too-familiar scenario of struggling to make payroll every month.
It also helps you plan for the future. Can you afford to hire right now? Can you invest in that extra truck? Are you really ready for a second location? How long can you cover the cost of growth before these new investments must start paying for themselves?
Your breakeven numbers have the answer.
5. Profit Margins
This is another number that helps you determine what it takes to survive and thrive. It’s also good for identifying waste and discovering opportunities to scale and innovate.
How could you make those profit margins wider? Is there a way to cut out redundancy in your process? Does your team have the most efficient tools for communicating with one another and with the client?
Do you notice anything when you look at your numbers over the course of a year? What about when you look at the addresses you serve? The demographics?
Take note of trends connected to the season, locations, and clients. When you discover patterns, you find opportunities to tap into new markets or double down on successes.
Does the demand for non-emergency services like mold remediation seem to die down during the winter holidays and rush back in around April? Great! Now you know when to throw more advertising money at mold services and when it’s less likely to pay off.
All these other data help you arrive at your target numbers.
What kind of profit do you want to make this year? Based on your costs and profit margins, how many jobs do you need to book to make that happen? How many leads do you need to reach that goal?
When you know your target numbers you have a powerful tool for engaging your team. These are the people you’ve hired to help you reach your objectives; let them know what they’re shooting for! This gives them ownership in the mission and allows them to better manage themselves.
And If You’re Bad with Numbers…
Get help. You can hire someone to crunch the numbers and explain them to you. Or you lean on a peer to help you improve your skills. Whatever you do, don’t give into the myth that you can succeed on instinct.
Successful business owners are all about the scientific method.
They make an observation, do some research, and present a hypothesis. Then they test that hypothesis, analyze the resulting data, and allow that data to inform their next steps.
By all means, let your gut lead the way when it comes to establishing your company values, your sense of purpose, and your long-term vision. But for the sake of that beautiful vision, strategize by the numbers.
Be true. Be you. Be great.