Data, Not Drama: Why Tracking the Right Numbers Drives Profitability

Humans are emotional beings. We often react to uncertainty—something that’s become the norm in today’s climate—based on trauma emotions such as fear and uneasiness. Because of that, it’s not realistic for even the savviest business leader to make decisions that are entirely data-driven. 

However, having the right data ready to guide you through the inevitable ups and downs of your journey will help you curb the drama in favor of objective choices that can mean the difference between profitability and panic.

For example, say you take a big upfront payment for a 90-day program and log that as one lump sum. Your cash flow will look great in the beginning, but it’ll get worse as the months pass. That lack of visibility into monthly gross profit percentage makes it difficult to make logical decisions on whether to persist, pivot, or pause what you’re doing. To avoid the drift toward drama, you need to break down how much came in and the cost to deliver (in time, money, and talent)—every single month.

Will general bookkeeping show you gross profit percent? Kind of, in profits and loss (P&L). The problem, however, is that a P&L will obscure the whole story unless you break apart the cash flow to see which offerings are more profitable than others.

To see what’s really going on, you need to track recurring-payment clients and project/program-payment clients separately. Why? Because something that comes in every month is stable cash flow, so when you’re evaluating where you are, you know that money is there. Whereas with a package, it’s planned income but not necessarily steady money. As we all know, timelines often get pushed out due to issues on the client side. Your projection for which month a payment will hit will be wrong nine times out of ten. Tracking both payment types separately will tell you in which months you’ll have extra money to spend or when you may be at a deficit.

Consistently tracking—and evaluating—the right details does more than help you get a handle on profitability and cash flow. It also helps you determine how to expand the lifetime client value. In other words, how much a client is worth to your business over the lifetime they’re with you. To do that, you need to watch for behaviors that may require a change in approach (pause or pivot): 

• Is it taking longer to get a “yes”?
• Is it a fluke or a pattern?
• Is it a trauma response, and therefore temporary, or is this the new normal?
• Is it seasonal or cyclical?
• Is it unique to one client or are several behaving similarly? 

You can only know these answers, and tweak your offerings, if you have monthly (and yearly) visibility.

Note the word “tweak.” Building a new offering from scratch to combat a cash flow crunch is the last thing you should do. It’s a high-risk, high-cost move, and if things normalize just as a you finish, you’ve just wasted your resources.

The data on your financials doesn’t lie and sometimes what you find may be uncomfortable for you. But the devil is in the details. Resources like Snap Savvy’s KPI Seminar and Worksheet and Toggl for timekeeping, where female founders leak the most revenue, can help keep you on the right track (literally).

Book a “Laser” session with Nikkie to review your cash flow.