A business owner is looking at a couple dozen bank statements and months of P&Ls scattered across their desk. They've thoroughly read through every document multiple times, but the information still seems contradictory. How can the company be profitable but the bank balance hasn't changed?
Does this scenario sound familiar? Many business owners would say, "Yes, that's me." They may feel like no matter how many jobs they take, their business will never scale and grow.
But there's one thing these business owners may not understand: Busy doesn't mean profitable, and revenue isn't the same as clarity.
Yes, at the end of the day, there's profit on paper and they are busy, but under the surface, there are cracks/concerns. When owners finally see their numbers clearly, specific, concrete things change.
The "Before" State: What Life Looks Like Without Number Clarity
Some of what will be shared in this section was discussed more in-depth in some of our previous blog posts, but here are some of the things business owners do before they reach the transformation stage:
- They price based on gut feel or what competitors charge.
- They have no real sense of job-level profitability.
- Their cash flow feels random. Good months, bad months, no explanation.
- Their decision-making is reactive (hire when overwhelmed, cut when scared).
- They have quiet, persistent anxiety that something is wrong, but not knowing what.
The Turning Point: What "Seeing Clearly" Actually Means
When business owners are finally able to see their numbers clearly, they:
- Know their fully-loaded cost per job (labor burden, drive time, materials, overhead allocation).
- Understand which service lines make money and which ones just keep them busy.
- See their break-even number and know whether they're above or below it each month.
- Start understanding the context of their P&L (Profit & Loss statement).
How to Start the Change
They stop chasing revenue and start chasing profit. It is an accomplishment for a business to say "We surpassed $2M in revenue". However, what was the cost to achieve that goal? If it cost the business $2.1M to achieve that number, would it be worth celebrating? Context matters. Profitability matters. A $2M business running at 8% net is worse than a $1.2M business at 18%. The idea that revenue is the ultimate goal was discussed in "Does Sales Growth Improve Profitability?". Too often, the cost of sales compounds faster than the sales increase. For business owners to see if they are profitable, we created a calculator to help find out your margins.
Pricing becomes intentional, not emotional. Too often, the final bid is driven by factors other than profitability. However, pricing intentionally starts with understanding the cost of a project. Once the business identifies the job costs and desired profit margin, pricing becomes a calculation, not a guess. This allows the business to identify and avoid low or no margin jobs without the fear that money is walking out the door. This is one of the topics covered in our previous post "Inefficiencies That Are Killing Your Job Profitability".
Action steps: Take the next three jobs and carefully track all the costs that are incurred to perform them. Compare the costs with the invoice and see if the profit is close to the goal.
Confidence replaces anxiety. Business owners start sleeping better. They stop dreading the accountant's call. They start showing up differently.
Here are some questions business owners can ask themselves to determine if they're running their business from confidence or anxiety:
- "Am I able to calmly start the day? Or do I have to put fires out before the day even starts?"
- "Am I able to sleep at night? Or do I stay awake wondering what problem I'll have to solve the next day?"
- "Can I unplug at night?"
- "Am I able to be fully present when I'm with my family? Or am I distracted?"
A Brief Story or Example
Remember that business owner discussed in the beginning? Their business has made a full 180. They have clarity over their numbers and better understand the financial health of their business. How did they get there? They took several steps.
First, the business owner took a couple recent jobs and calculated the actual costs of them. Once the calculations were done, the business owner discovered that these jobs only made a 25% profit margin, while they'd like to make a profit margin of 40%.
The second thing this business owner did was they started pricing jobs carefully and intentionally. They took the information from the calculated jobs and used it to estimate job costs going forward, whether this meant increasing the cost for materials, increasing the hours needed to complete the job, or improving the systems to be more efficient on the job. With this information and their desired profit margin in mind (40%), they were able to submit bids that would be profitable.
The last thing this business owner did was ask themselves the questions listed above. They realized that, up to this point, they often had to put fires out before they even left their house for the work day, they weren't sleeping well, they were on their phone and computer working on the business well into the night, and they remembered their spouse saying several times that the business owner seemed distracted.
Fast forward six months later, and both the business and its owner are doing well. The business is making close to a 40% profit margin, pricing is intentional, and the business owner feels a significant weight was lifted off their shoulders. They feel lighter and are able to be fully present with their family, sleep better at night, have a more realistic work schedule, and can calmly start the day without rushing to the office.
Conclusion
The numbers aren't the enemy; the fog is. Most business owners are one honest look at their finances away from a very different business, and don't always realize it until they've spent a lot of time in frustration and confusion.
If you're ready to have a positive transformation in your business, follow this link to book a free consultation with Joseph.
Disclaimer: The information in this post is intended for general guidance purposes. For advice specific to your business finances or taxes, consult a licensed accountant or financial advisor.
