I love numbers. Always have. Numbers and me are kind of like Harry Potter and Parseltongue. We just hear each other. It’s also in my blood, with both parents holding graduate degrees in Math. (Oh yeah, that.)
Perhaps surprisingly, I’m not a finance guy. Not even close. I like to point out I can spell “GAAP” but know none of the regulations or legalities thereto. I can read financial statements well enough, but I’m not shy about requesting involvement from a proper accounting / finance expert.
I come at numbers from the vantage point of enjoying playing and shifting puzzle pieces around, eagerly developing informative analyses for managing the business. It’s fun!
Recently I was getting familiar with a new client’s business and I found myself thinking, “Will we have the money to fix this?” I asked the owner how they measure company performance. The owner responded by assuring me they kept a close watch on the bank balance.
I asked to look at the financials.
After downloading QuickBooks data into my beloved Excel, I started playing. At first glance, the data showed a company running a small profit, under-spending on Sales, Marketing, and employee development, and where the CEO / owner was not paying themselves enough.
Knowing my client wanted more financial breathing room and fewer hours at work, I dove deeper into the data, testing different assumptions, calculating ratios between expense categories, separating fixed and variable costs, looking directly at how much consultants get paid, and playing with pricing.
The resulting spreadsheet analysis showed, very simply, how much each billable consultant hour cost the company and how much the company was charging clients for those billable hours. It was a real eye-opener, as we saw right there how little margin was built into the company’s pricing. This small margin was also a key reason why funding into Sales, Marketing, and employee development was limited, and an even bigger reason why the owner felt great strain at keeping the business afloat!
Seeing the small margin caused me to ask the owner how often the business lost clients on price. The owner sat up tall and proudly replied, “Never.”
Possessing both the quantitative data from the analysis and qualitative data from conversation (as well as my repeatedly saying, “Really, it’ll be fine”) we started raising prices. That turned into a home run of a solution, as revenues grew by 50-60%, profits from sub-5% to mid teens (while paying raises, bonuses, and for a consultant), and client retention held strong at over 97% of existing.
To achieve the above took using the numbers that are captured through proper accounting and applying technology, enthusiasm for learning what numbers have to say, and asking questions and listening to responses from client associates.
Clients see better results, and I have fun. Numbers. Go figure.