Sales, Revenue, Gross Income, Profit, Cash on hand…… Do you know what all of these are and the difference between them? Do you know that they can tell you what decisions you need to make in your business to improve its financial health?
In this episode, Ellen Rohr—a seasoned entrepreneur and franchise owner—reveals the critical mistakes that are silently sabotaging your bottom line and preventing you from achieving the financial success you deserve. You’ll discover practical, actionable strategies to plug profit leaks, optimize your pricing, and transform the way you think about your business finances.
By the end of this conversation, you’ll have a roadmap to not just survive, but thrive in the competitive world of home services, with insights that can potentially save—and make—you thousands of dollars.
What you’ll learn:
- Why financial literacy matters: Understanding numbers is crucial for business success.
- How to improve financial health by tracking and reducing unnecessary expenses.
- The one thing that will transform your business: Prioritizing profit before expenses.
- About the importance of pricing strategy in maintaining financial health.
- Why inefficient labor practices can silently drain your business’s profitability.
- How to support employees by placing them in roles where they can thrive.
- The critical role of mentorship in developing business and financial skills.
The key moments in this episode are:
- [00:02] Success and Persistence
- [11:30] Pricing Strategies for Service Businesses
- [22:50] Growing Business Through Sales, Profit, and Cash Flow
- [28:25] Profit First Methodology and Building Financial Muscle
- [33:30] Identifying Operational Inefficiencies to Improve Profitability
- [40:40] Unique Profit Leaks in Family Businesses
- [46:20] Business Planning and Personal Financial Health
Success and Persistence
Starting a podcast or any business venture requires tremendous courage and commitment. Many entrepreneurs give up too soon, abandoning their dreams before they truly begin. Your financial health depends on your ability to push through initial challenges and maintain consistency. For example, most podcasters never make it past their first episode, which means simply creating a second episode puts them ahead of 75% of competitors. The key is to embrace the difficult moments, understanding that these struggles create the most compelling stories and opportunities for growth in your own business.
Pricing Strategies for Service Businesses
Pricing your services correctly is fundamental to your business’s survival. Traditionally, service businesses would race to the bottom, competing on hourly rates that barely covered expenses. Your financial health requires a more strategic approach to pricing. Consider moving away from time and material billing to flat-rate or menu pricing. Calculate your true cost of doing business, including all overhead expenses, to determine a pricing structure that genuinely supports your company’s growth. Remember, you’ll likely be the most expensive option in your market, but that’s precisely how you create sustainable profitability.
Growing Business Through Sales, Profit, and Cash Flow
Understanding the hierarchy of business financial metrics is very important. Sales generate opportunities, but profit determines sustainability, and cash flow ensures your ongoing operations. Your financial health depends on prioritizing these elements strategically. Focus first on generating sales, then optimize your profit margins, and finally manage cash flow meticulously. This approach allows you to create a robust financial foundation that supports long-term business growth and gives stability during challenges.
Profit First Methodology and Building Financial Muscle
The Profit First methodology revolutionizes traditional accounting approaches by prioritizing profit from the start. Instead of hoping for leftover profits, you intentionally set aside a percentage of revenue before addressing expenses. Your financial health improves as you build this “profit muscle” gradually. Start small, perhaps with just 1% of revenue, and incrementally increase your profit allocation. This method ensures you’re always setting money aside, even when it feels challenging, much like building physical strength through consistent exercise.
Identifying Operational Inefficiencies to Improve Profitability
Operational inefficiencies can silently drain your business’s potential. Your financial health requires a critical examination of daily operations. Simple changes like optimizing morning routines, implementing systematic truck inspections, and tracking material usage can dramatically improve productivity. Consider conducting ride-alongs or detailed observations to identify time-wasting activities. Each minute of inefficiency translates to real monetary loss, and plugging these gaps can significantly enhance your bottom line without requiring additional work
Unique Profit Leaks in Family Businesses
Family dynamics can create unique challenges in business management. Your financial health might be compromised by keeping underperforming family members in roles they’re not suited for. While loyalty is admirable, retaining employees who consistently underperform can be more harmful than helpful. Consider compassionately transitioning such individuals to roles where they can truly succeed, either within your organization or elsewhere. This approach benefits both the business and the individual, creating opportunities for growth and reducing unnecessary financial strain.
Business Planning and Personal Financial Health
Effective business planning goes beyond simple number-crunching. It involves deep reflection on your motivations, goals, and long-term vision. Your financial health depends on asking fundamental questions about your business’s purpose, potential earnings, and sustainability. Develop a comprehensive plan that addresses not just financial metrics but also your personal and professional aspirations. This holistic approach ensures that your business serves your broader life goals, creating a sustainable and fulfilling entrepreneurial journey.
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
For those interested in Ellen Rohr’s books on business planning and financial literacy, her website is www.ellenrohr.com. Her books cover topics like basic business literacy and business plan creation.
Websites: www.zoomdrainfranchise.com
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