How Essential Business Coaching helped Jackie to gain financial control of her business
The situation
Jackie had been operating for six years providing cleaning services to homes and commercial sites. She employed 20 people, including a bookkeeper. While she received a profit and loss (P&L) statement sporadically she had never been concerned, as there was always ‘enough’ money in her business account to pay current bills and payroll costs. She really had no idea how to ‘read’ her P&L statement other than to assure herself that there was money remaining in the business.
About 10 months ago, business slowed slightly and worse, her bookkeeper came to her with a warning that cash flow was drying up. Her bank notified her that she had dipped into her overdraft account and Jackie didn’t know where to begin to correct her cash flow problem.
Developing the right skills
Essential Business Coaching provided Jackie with processes for using the profit and loss statement to diagnose the source of the problem and she learnt how to use the important financial formulas for key business ratios, such as Return on Revenues, Gross Profit Ratio, Break Even Revenues and Operating Expense Ratio.
The outcome
Jackie was able to take the most effective actions to bring her business and cash flow back into a positive position. She also had gained financial confidence, since she could answer questions like ‘How much am I making on every sale? How much do we need in sales to cover all our expenses? Do we need to raise prices? Are operating expenses excessive?’
How would you benefit from coaching?
Answer these questions to rate yourself as a person who knows the meaning behind the numbers and how they connect to the effective management of your business operation.
1. How often do you receive and read the two key financial reports (Income and Expenses and Balance Sheet) on your business operations?
2. Do you know how to interpret your Income and Expense (profit and loss) Statement?
3. Do you know what the profit margin is on each product or service that you offer?
4. Do you know what your Return on Revenues is? (Also called return on sales or net profit ratio, this is an indicator of the profit dynamics of your business.)
5. Do you know what your ‘break-even revenues are? (The pound amount of revenues that exactly covers all your variable costs and all your fixed costs with nothing left over for profit.)