Ever wonder about the true importance of financial literacy in business? I had an enlightening conversation with Ellen Rohr, president of Zoom Drain Franchise LLC, about just that. One key takeaway – never ignore your numbers. Understanding them can make the difference between just getting by and truly thriving.
In this episode, we discussed:
- Discussion on the challenges of starting a podcast and the importance of perseverance
- Importance of financial literacy and the role of accountants in helping entrepreneurs understand their numbers and improve profitability
- Ellen’s experience in the plumbing industry and the importance of pricing strategies
- Need for tradespeople to stay up-to-date with pricing and not be afraid to raise prices
- Importance of understanding the costs of doing business and fully burdened labor cost
- Importance of having a good relationship with bookkeepers, CPAs, and other financial professionals
- Key performance indicators (KPIs) for businesses: cash flow, profit, and sales
- Concept of profit first and structuring expenses around planned profit
- Importance of building financial strength gradually and making smart financial decisions to improve cash flow
- Managing payroll and finding efficiencies in the trades industry
- Importance of truck inspections and addressing inefficiencies and unproductive hours
- Profit leaks in family businesses and the need to address underperforming relatives
The key moments in this episode are:
- [00:01:15] – The importance of financial literacy
- [00:03:42] – Overcoming fear and becoming visible
- [00:07:26] – The role of accountants as coaches
- [00:09:29] – The importance of pricing and transitioning from time and material to flat rate
- [00:11:32] – The need to update pricing regularly and understanding labor costs
- [00:14:12] – Overcoming self-esteem issues and valuing one’s worth in the trades industry
- [00:19:26] – The importance of a great relationship with bookkeepers and CPAs
- [00:20:15] – The owner’s responsibility for financial stewardship
- [00:22:26] – The significance of sales, profit, and cash flow in business
- [00:33:03] – Efficiency in Business Operations
- [00:32:05] – Managing Payroll Expenses
- [00:30:56] – Importance of Financial Tracking
- [00:37:51] – Truck inspection and efficiency
- [00:38:29] – Unproductive hours and profitability
- [00:41:26] – The common profit leak of keeping underperforming employees
- [00:47:08] – The importance of keeping profits
“But if you will hang in there, the hard part is the good stuff. That’s where the stories are, that’s where the songs are written.” Ellen Rohr
The Journey to Success
Ellen Rohr is not just a plumber’s wife; she’s a successful businesswoman who has mastered the art of fixing and growing businesses. She’s also an author, a podcast host, and a teacher of business planning and financial literacy. Her journey to success wasn’t easy, but it was certainly worth it.
The Importance of Pricing
Ellen shared her experience in the plumbing industry and how she learned about the importance of pricing. In the past, tradespeople would charge by the hour, leading to a race to the bottom in terms of pricing. However, her mentor, Frank Blough, taught her to change the way she structured her pricing by charging by the job instead. This shift allowed her to break through and become more profitable.
Ellen emphasized the need for tradespeople to stay up-to-date with their pricing and not be afraid to raise their prices. During the COVID-19 pandemic, prices were fluctuating rapidly, and it was crucial to update price books frequently. It’s important to understand the costs of doing business and the fully burdened labor cost of employees.
Building Financial Muscle
Ellen used an analogy of weightlifting to explain the concept of building up a business’s financial muscle. Just like you can’t immediately lift heavy weights when you start at the gym, a business may start with minimal profits and need to gradually increase its financial strength over time.
She shared her experience working with savvy business owners who believed in bootstrapping, using the business’s funds to fuel its growth instead of relying on external investments. Many businesses fail because they are undercapitalized or mismanage their finances. She stressed the need for discipline and careful monitoring of expenses, distinguishing between wants and needs.
Managing Payroll and Profit Leaks
Ellen and I discussed the challenge of managing payroll, which is often the largest expense for businesses in the trades industry. We highlighted the importance of finding efficiencies and plugging any leaks in productivity.
Ellen shared a unique profit leak she has observed in family businesses: the tendency to keep underperforming relatives on the payroll out of a sense of obligation. She believes it is unethical to keep someone in a position where they know they are failing. Instead, find a way to let them go or allow them to move on to a place where they can thrive.
About Ellen Rohr
Ellen nearly sank her husband’s plumbing company. It seemed like lots of money was moving through the company, but at the end of the month there was never any money left. With the help of great mentors, Ellen figured out how to fix and grow successful businesses. She teaches business planning and financial literacy, helping contractors make business simpler and more profitable.
Now, she is an owner and President of ZOOM DRAIN Franchise, LLC. a new franchise concept with 20 locations across the country. Ellen is the author of four un-fussy business books: Where Did the Money Go?, How Much Should I Charge?, The Bare Bones Biz Plan and The Weekend Biz Plan. She also hosts a regular podcast – Behind the Wall – for PHCPPros.com and Unclogged – a Zoom Drain Podcast.
Connect with Ellen
Websites: www.zoomdrainfranchise.com