The Ultimate Guide to: Knowing Your Numbers

You’re grinding it hard, you’re proud of the work you’re doing for your clients, you’re growing, and…

…you know you should get a handle on your numbers, and graduate from the “I just check my bank account balance” phase.

But you’re not sure how to start knowing your numbers?

But… the brain’s natural response to learning things like this that you dread is to delay and excuse.

“I’m not a numbers guy.”

“My bookkeeper does everything for me.”

“I am not even sure what knowing your numbers even actually means.”

Well, clarity brings focus and melts those delaying excuses.

So, let’s throw a light into that dark corner of knowing your numbers, you in?

Let’s go!

Regardless of whether you estimate on pen and paper, spreadsheets, or in an app, the principles to knowing your numbers are the same.

Spreadsheets are just easier than pen and paper.

An app is easier than a spreadsheet.

As you go up that chain it just gets easier, faster, and more automated, with less mistakes.

But again, the principles, or “what you need to do” to know your numbers do not change.

Knowing your numbers boils down to 3 things

• ensure your hourly rates have overhead expenses correctly calculated into them
• tracking time & expenses to the job
• comparing your estimated vs actual expenses at the end, i.e. job costing.

If you do those 3 things, you’ll “know your numbers”, as cliche as that is.

Why those 3 things?

Calculating overhead into hourly rates

What this means is that you come up with your cost for labor (hourly wage + overtime + payroll taxes).

Then you come up with your total overhead expenses for the year and divide the overhead expenses by the total amount of hours you work in a year.

example: $200,000 in overhead divided by 6000 hours worked on payroll in a year = $33.33 that you need to add to your hourly rate just to recover overhead.

Add that $33.33 for overhead to your hourly labor cost, and now you have your break-even.

Take your break-even and add your desired net profit margin, and bingo, you have your hourly rate.

I made a quick easy hourly rate calculator that you can use right here to find your own hourly rate.

This method is required to know your numbers.

Your hourly rate must be based on actual math, not what you think you’re worth.

Or said another way, this math dictated your hourly rate floor, you can’t charge less than what this calculation gives you, but you can always charge more.

The only thing that dictates your ceiling is the market.

You can keep raising your rates until the market says no.

You just can’t go below your hourly rate calculations as described above, or you’ll lose money.

Or “pay for the privilege to do the job”. 😅

I don’t know about you, but I prefer for the things that cost me money to be my hobbies, not my work. 😜

Tracking time & expenses to the job

The second thing required to know your numbers is to track every hour of payroll and every expense to a job.

If you’re just paying 40 hours to your employee but have no idea which jobs that time was for, then you’re flying blind.

Why?

Because you may have estimated that job would take 150 man-hours, but it actually took 210 man-hours, you just don’t know it because you’re not tracking.

I mean you may know in your gut that it took longer than expected, but you don’t actually stop to count the actual cost of overrunning on those man-hours.

What is the cost of running over by 60 man-hours?

(That’s only 2 days for a 3 person crew btw.)

Let’s say your breakeven on your man-hour is $70.

70 x 60 = $4,200 in just straight cost for that labor overrun.

And that’s before we count the cost of losing those 2 days of production to go on to the next job.

Not only do you delay collecting final payment on that job by another 2 days, but you also lose the opportunity to use those next two days to get the next job done.

Running over by 2 days on a job once a month doesn’t sound like the end of the world, does it?

But you do that once a month, and you have a 10-month working season, that means you lose 20 days in a year.

That’s an entire month of working days.

So you pay for the cost of the labor for an entire month, ($42k for those 20 days using my math above) and get to bill no one for that lost opportunity…

See the cost?

Labor overruns crush you.

That is why it is so critical to track your labor to every job.

Why?

So you can look reality square in the eyes, learn from it, and avoid repeating that same estimating mistake next time.

If you never stop to look, because you’re not tracking time, you’re essentially dragging a lead ball chained to your ankle.

You could be doing everything else right, but this ball and chain on your ankle could sink you.

Comparing estimated vs actual = job costing

Comparing estimated vs actual hours and expenses on every job is called job costing…

If you don’t compare your estimated vs actual hours and expenses on every job, you won’t be aware of estimating or production mistakes.

And if you aren’t aware of those, the first thing you will be aware of is….. cash flow that is drying up.

Your bank account balance will be empty.

So, ignore job costing at your own peril.

There will come a time that you’ll be forced to reckon with it – when you run out of cash.

Yes, it’s a pain.

Yes, it takes effort and discipline.

Yes, it takes getting your team to track their hours to the job.

But the alternative of not tracking isn’t an option if you want to make money.

And the solution really isn’t complicated.

It just takes discipline, and a refusal to accept anything less.

Track every hour your team works to a job, or if they aren’t working on a job, track it to a “unbillable shop time” category.

Track every receipt and material usage to a job.

It’s that simple.

Then at the end of the job just add it all up to compare estimated vs actual hours and expenses, review it together with your team, ask for their input when there are overruns, and rinse and repeat.

Job costing isn’t hard. Collecting data to job cost with is hard.

That’s why we built SynkedUP, an app to make all that easier and give you real live job costing reports that you and your entire team can see in real time.

The power of knowing about overruns in real time is incredible.

You’ll be able to respond and react while there’s still time to lessen the blow.

At Tussey Landscaping where I worked for 15 years, if we saw we’re going over hours, we’d sometimes add a few extra crew members to the crew to get the remainder of the job done in less days.

This didn’t necessarily help in man-hours, but it helped us get the job done sooner and free up a production day or two for the next job.

We still paid the cost of the labor overruns, but lessened the blow of the opportunity cost.

Anyway, make sure your hourly rate is based on actual math and recovering your overhead, track labor and materials to a job, and do job costing, and you’ll effectively “know your numbers.”

If you’d like to see how SynkedUP makes all of that easier, book a call with us and we’ll show you how it works.

Cheers!

Weston Zimmerman

SynkedUP CEO and founder