So You Want to Be a Consultant?

“The following letter was written by sales trainer and industry consultant, Charlie Greer. He sends this to people who approach him about working with him as a consultant. Since it seems that more people in the industry want to be consultants, we thought this might be a good message to share. So if you want to be a consultant or sales trainer, you are encouraged to first read the following by the great Charlie Greer…” – Matt Michel

So you want to become a business consultant/sales trainer. If so, read on. I’m going to try to give you a clear picture of the romantic life of a field trainer working on the road. I hope you realize the odyssey in which you are volunteering to embark.

Take a job as an on-the-road consultant and life, as you have come to know it, ceases to exist. 

Sounds poetic, doesn’t it?

This job is not for everyone. In fact, you could say that this job is not for anyone but a very, very small few. 

This job is not for the squeamish.

Odds are, you won’t make it.

What is your purpose in seeking this position? What is it about spending the next twenty years or so on road, with no friends and no family around you, in unfamiliar surroundings, and being lost most of the time, that appeals to you? What do you seek to gain by doing this?

It’s far easier to start your own shop than it is to be a field trainer living on the road.

The following is a description of the challenges facing a consultant who is living on the road the vast majority of the time. It’s not a pretty picture. My purpose in this is not to discourage you, but to be certain you have a very clear understanding of what you’re volunteering for because I know you don’t. 

You think you do, but you don’t.

Everybody thinks they want to do this. They don’t. 

They think they do because they don’t know what life on the road is like.

There is no hiding:

Every single thing you do will be held under a microscope. You can’t blow anyone off. You can’t walk away from a customer that’s irritating you. You can’t walk away from or tell off a tech who’s irritating you. You have to be able to be productive no matter what. 

You have to be able to get along with people who are going to deliberately try your patience. You will have to be perfect in behavior, appearance, workmanship, language, and sales results one hundred percent of the time, and be separated from your family and friends.

Once you arrive on the scene, you’re stuck there. At least half the time, you will want to walk away after the first or second day, but you can’t. There will never be an escape. 

You will finish the week. What’s more, you WILL make the week a success, no matter how impossible that is.

The techs you work with be a “wild card.” If you’re going to do ride-alongs with them, they’ll open their big mouths and blow the sale every chance they get, and you’ll have to recover it. When you do make a sale, they’ll bitch because it will just mean more work for them.

By the way, when you sell a job, you don’t stand around while the tech does the work. The tech will do most of the work, but you will assist. You won’t work as hard as you do now, but you’ll get dirty if you’re smart. One of the comments techs that ride with me make to me regularly is that they’re glad to see that, in addition to insisting on sales efforts, I also insist on a work ethic and in doing quality work. You do that by setting the example.

Believe me, it’s much, much easier to be successful every week in familiar surroundings.

And when they do, there is to be no yelling, no temper tantrums. This is a job for an impossibly patient, tolerant, and tactful person. People will try your patience nearly every day, and you can’t lose your temper once. This will go on for years. Can you imagine going twenty years without losing your temper with ignorant, often antagonistic people, even once?

Again I ask, how long do you think you can do this?

You know how it is. People will bitch about anything, and when you’re working with a client, as far as they’re concerned, they own you for the week. You will not be permitted to take or make personal phone calls during the day. Not even during lunch. For what I get for five day’s work, if I make one personal phone call, I’ll hear about it. 

They’ll complain. I have a helluva time just finding the time to make enough business calls to keep this company going.

You can hardly even stop to buy cold medicine if you’re sick. They’ll bitch if they think you use the restroom too much. They watch every little move you make; what and when you eat and drink, your language, every word that comes out of your mouth, your shoes, everything… no kidding.

Also, there’s no quitting early. You work a full day, every day. A lot of clients try to overwork you. I had one client run me for 25 hours straight. You’ve got to handle that with a lot of finesse.

Being a field trainer is like being a rock star, an actor, or maybe a United States Ambassador, with regards to your work attendance. Once you set a date, you can’t miss it. You schedule a week with someone, and YOU WILL SHOW UP! There is only one reason to cancel a date, and that’s a funeral–your own. 

That’s not a joke, and it’s not funny. 

No kidding. No excuses. Period.

I’ve been on the road since 1990 and have NEVER missed a date. That includes making it to an excruciating week-long tour through the state of Texas ten days after an accident that landed me in the hospital for four days. In other words, five days after I was released from the hospital with a shattered collar bone, six broken ribs, and acres of road rash, I was on a plane to Dallas for a series of one-night stands and being on my feet for day-long seminars. 

Think you’re up to that?

 No one is going to let you off the hook because you’re having legal problems, problems with your wife, problems with your children, problems with your children’s health, your own health problems, or really anything at all.

Problems at home:

There will be problems, hassles, and details at home that you will be taken away from and will be unable to deal with ̶ ever.

You will lose touch with all your friends. You will never have enough time to spend with your spouse, your significant other, or your children. Any issues unresolved when you leave home will either have to take care of themselves or remain unresolved. If you’re single, you’ll find it difficult to establish a new relationship with someone.

What about your children? 

I have no tolerance for someone saying to me a few years down the road (if you even make it that long), “I looked at my children and I realized they were growing up without me.” Why? Am I heartless? No, I’m not. But I already know that’s what’s going to happen. Take a job working away from home most of the time, and your children are going to grow up without you. Come and tell me you “just” realized that, and I’m going to think you’re pretty stupid. 

You have to walk into this already knowing that’s what’s going to happen.

Again I have to ask, why would you even want to do that?

Also, be aware that your spouse is going to have to run the entire household and be the only one available to deal with every problem that arises, from car trouble to the eventual trouble your children’s teenage years will cause. That could cause trouble with the relationship.

 How much money do you plan to make working with me?

That depends on how many weeks per year you plan to spend on the road. Plan on at least thirty, but probably closer to forty. That means you’ll be away from home, leaving the raising of your child and the entire management of your home to your wife or girlfriend for two to three weeks at a time. You’ll come home for approximately six days, then leave again for another two to three weeks. Hope your spouse is up to it. If so, that’s an unusual person, because very few people are.

Here’s what your schedule will be like:

Most of the time, you’ll work at a shop from Monday through Friday. Every night will be a hassle just getting your dinner. If you want to make any money at this, you’ll be away from home two to three weeks at a time, which means you’ll spend most Saturdays traveling.

You’ll spend Saturday night in a strange town in a hotel room, too tired and too lonely to go out and see the town. Besides, going out and seeing the town gets very old in a very short period of time.

You’ll then sit around all day Sunday wondering where your life is going and what your family is doing. 

You’ll be all alone with your thoughts and your loneliness. There will be problems at home. They will need and want you there, but you won’t be there. You’ll be sitting in a hotel room biding your time. You’ll probably have a few crying jags. You might become depressed. The weekends are like being in a state of suspended animation, only you’re awake the whole time.

You’ll take at least one week per month off. Actually, it will be six days at home. After being home for six days, you’ll spend all day Saturday preparing for your next trip. 

You’ll then spend all day Sunday traveling.

Finally, after two or three weeks, you’ll travel home on Saturday. You’ll get up early, you’ll get to the airport early, and then you’ll sit around with absolutely nothing to do during the ever-present airport delays. 

You do realize that most flights are late, don’t you?

By the way, have you sat in an airline seat lately? They’re making them smaller than they used to.

If the isolation, being away from your family, and the constant pressure to be perfect at every given moment doesn’t force you out of consulting, the airlines just might. No kidding. They will try your patience every time you fly, which will be weekly. 

They lie to you constantly. They pack us in like sardines and force us to sit on the runway for hours with no explanation, no refreshments, and you’re not even allowed to get up to use the restroom. The flight attendants are very rude and control-freaks. Have you heard about the increasing frequency of what they’re calling “air rage?” Take this job and you’ll know why it’s happening.

 

CHARLIE GREER was recently voted “Favorite Industry Sales Trainer,” was also voted “Consultant of the Year” twice, is a “Service Roundtable Servant Leader,” and was recently inducted into the HVAC Hall of Fame. He’s best known for “Tec Daddy’s Service Technician Survival School on DVD,” and “Slacker’s Guide to HVAC Sales.” For more information on Charlie’s products and services, go to www.charliegreer.com or call 1-800-963-4822.

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

Am I Priced Right for COVID-19?

Ever find yourself wondering, “Am I priced right?”

As my attorneys like to say about everything that I ask them, “Well, that depends,” as I roll my eyes and say, “Will somebody give me a straight answer please?”

The CEO of Ferrari was once asked how many of a certain type of model he was going to produce. His response? “Exactly one less than the market will want.” Now, isn’t that interesting? We all know Ferrari is a high-end luxury racing beauty, and yet they price based on what their market will bear. And they know exactly what their market will bear.

What will your market bear, and is COVID-19 changing how you are priced?

Are your customers questioning their bill?

Our team has been running service calls in the field all across the United States over the past few months, and when presented with a menu of options, homeowners are still buying the level of service they want…and let me tell you, to no one’s surprise, COVID-19 is not turning these homeowners into cheaper buyers.

We are finding that now is the perfect time to continue on providing great service to your customers, presenting your prices with options, and when applicable, even offering new services such as air sanitization and fogging throughout homes and businesses.

On a resume I reviewed earlier this week, I was amused by the candidate’s creative liberty, as they stated, “Here are my accomplishments pre and post COVID-19.” I hit a hard stop; there was a lot of truth in that. How many of us, if not all of us, have been forced to change and change for the better? Have your processes in the home changed? How about how you greet your customer? That has certainly changed.

Have you adjusted your prices to meet the demands of your customer’s current health and safety needs?

Your company is most likely now using more products in the field for cleaning, sanitizing, and safety and many materials and parts have been much harder to get your hands on. So, have your costs gone up? Maybe to question with more emphasis, HAVEN’T your costs gone up?

We change our prices for what the market will bear; we do not price gouge, but our costs as an industry are currently much higher. Running a business is expensive, and we are in business to serve our customers while turning a profit. So, it’s important to recognize the costs that are happening; don’t ignore them.

I’m ready to extend my neck on the guillotine, so might as well jump all in with this one:

Pre-COVID-19 vs. Post-COVID-19

Our circumstances have changed, and our field presentations have changed. But if we aren’t raising our prices to match the costs and needs of the business, are we at least watching our closing rates?
A low closing rate cancels out all the good you could possibly do. Service should close over 95% of every opportunity you run. If your closing rates are low, especially when customers are stuck at home and noticing all the problems in their homes and they have time to fix them, something about your presentation is communicating that your expertise isn’t worth it; something about your presentation is presenting your company as a commodity instead of as a solution.

We have been hearing lately that some technicians are nervous about giving options to the customers because they know times are hard and don’t want to make anyone uncomfortable.

It’s important to listen to your techs and listen to your team and course-correct accordingly. But don’t believe for one second that people aren’t spending money—Amazon would beg to differ; it’s their super bowl right now with everyone sitting at home. Online shopping is no longer the new rage. It has even bypassed the new norm and has become a new family member. People are buying, and they’re even buying more because they WANT health and safety – if you don’t offer it, they can’t buy it!

If they’ll spend money on new paintbrushes and paint at The Home Depot for a DIY home project, they’ll invest in having their systems working properly. And if they’ll spend $8 for a bottle of hand sanitizer right now, they’ll look at pricing options and swing what they can do. No, we don’t want to overcharge; that’s never been the idea. We just want your customers to be given the option to buy. Really, on every call, you give your customer an option whether you mean to or not: Buy from you or buy from your competitor. So, you might as well give them some options to choose the service they want, so they are more likely to remain your customer.

Don’t prejudge your customers and decide for them how this pandemic has affected them. For you, it might be your wallet affected, but for them, it might be a family member. Let them decide what’s important to them and spend accordingly. In a time where we have lost so much of our power, let your customer have the power to purchase.

Written by Danielle Putnam, President of The New Flat Rate and Immediate Past President of Women in HVACR

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

Leadership Sustainability

Is leadership success sustainable?

Riffing on my Comanche Marketing article titled “Authentic and Caring Leadership”, Steve Mores penned an insightful Comanche Marketing article himself titled “Leadership and Sustainability”.

Steve mentions that my article reminded him of authentic and caring leaders who he both worked and works with. So I am going to return the volley and continue the conversation on leadership sustainability. 

Steve introduces Currie Gauvreau’s expertise. Instead of motivating coworkers, Currie believes in inspiring them.

 I think we should be focused on INSPIRING our teams instead. The difference is simple in concept: ‘Motivation is lighting a fire UNDER someone, while inspiration is lighting a fire WITHIN someone!’

I agree! Inspiration courses through the various elements that lead to leadership sustainability.

Vision

The North Star of successful long term leadership is a compelling, clear, and inspiring illustration of the company’s future. It needs to not only answer the following questions, but it also needs to magnetize desired fellow travelers. 

  • Why would someone buy-in?
  • Why would they care?
  • Is it inspirational?
  • Is it clear?

Purpose

Richard J. Leider on purpose:

  • It’s the essence of who we are and what makes us unique
  • It’s an active expression of the deepest dimension within us – where we have found a profound sense of who we are and why we’re here
  • It’s the aim around which we structure our lives, a source of direction and energy. Through the lens of purpose, we can see ourselves and our future more clearly
  • It gives life meaning

Simon Sinek tells us in his book Start With WHY, a company owner’s business and personal purpose (WHY) should be the same. Think about that for a second. Who you are shouldn’t change depending on where you are or what you’re doing.

A compelling purpose draws people in. And most people want to be a part of something bigger than themselves. Sustaining energy and commitment evolves when coworkers believe what the leader believes. The company then becomes a vehicle for coworkers to express and live out their values and beliefs. 

One final note on purpose. Leider suggests using the default purpose of To Give and To Grow if you haven’t hammered out your own. In over 40 years of research work on purpose, he’s discovered that true purpose consists of these two components.

Passion

While purpose is the WHY, the reason for existence, the driving force, passion brings it to life with energy and emotion. Energy and emotion are oxygen to a fire. As Jessica Lauren DeBry says,

“If you wanted to start a campfire with passion and purpose, you’d start with a foundation of wood (your purpose), and start the flame with a match (your passion).”

Positivity

Positive emotions arise from how we interpret ideas and events as they unfold. Positivity flows when the leader finds and continues to find good in the people and experiences that surround them. 

Positivity flourishes in the workplace when emotions like gratitude, joy, hope, inspiration, and love, to name a few, are present. Leaders who continue to practice these emotions and recognize, celebrate, and encourage them in their coworkers, keep a strong beam of energy and light on the road ahead.

Core Values

Core values are the pillars upon which a company is built. They reflect how an organization behaves while in pursuit of the purpose on the way towards fulfilling its vision. 

When a coworker shares common core values with a company, as with purpose, the company becomes a vehicle to express those values. When we have the opportunity to live and express our core values, we have a tendency to stay with the entity that is giving us the chance to be who we are. 

As long as the leader continues to be true to the core values and supports coworkers in their efforts to express them, it becomes a perpetuating environment.

Daily Disciplines / Practices

Why are so many companies barely eeking out profits, if even making them at all? Because their leaders are either ignorant of and or refuse to follow the practices successful leaders perform day and day out!

What are these disciplines and practices? I like to say they reside in those VHS and cassette tapes and binders covered in dust and piled up in your closet. Consultants like Charlie Greer, Ben Stark, Ron Smith, and Ruth King have educated us for years on these disciplines and practices. Their common challenge? “If only our clients would implement…”

The disciplines, practices, and information are readily available. Check in with industry coaches and consultants. Check in with Service Excellence Training, The Go Time Success Group, and the Service Nation Alliance!

Once you check in and engage, take massive action! The fruit of your consistent effort is the growth and development of your people and company. 

People

As Jim Collins famously said, “First who, then what – get the right people on the bus and the right people in the key seats before figuring out where to drive the bus.”

An expedition to cross the south polar continent in 1914 demonstrates the nature of Collins’s advice.

Englishman Ernest Shackleton set out to explore the Antarctic and cross the continent. 11 months into the expedition, the crew’s ship sank. Shackleton took some men, leaving most behind, and journeyed 800 miles for help. Under conditions that would kill most, not one life was lost. Why? Because Shackleton got the right people on his bus. Here’s his recruitment ad:

“Men wanted for hazardous journey. Small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful. Honour and recognition in case of success.”

For sustainable success, it’s critically imperative to enlist people who share your values and beliefs! 

Leadership sustainability is like a flywheel building momentum. 

From Jim Collins’s book Good to Great:

Picture a huge, heavy flywheel—a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Now imagine that your task is to get the flywheel rotating on the axle as fast and long as possible. Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn. You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. And on and on…

Then, at some point—breakthrough! The momentum of the thing kicks in in your favor, hurling the flywheel forward, turn after turn … whoosh! … its own heavy weight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster. Each turn of the flywheel builds upon work done earlier, compounding your investment of effort. A thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward, with almost unstoppable momentum. 

The elements we discuss today are the equivalent of each push on the flywheel. It’s impossible to determine which push caused the disc to go so fast. But they’re all necessary.

It really does come down to inspiration. As Steve Mores concludes:

“Inspirational leadership leads to excellence and team members that are “Authentic and Caring”, just like their leader, in all aspects of their personal life, career, AND client interaction!”

For further exploration:

The Power of Purpose by Richard J. Leider

Start With WHY by Simon Sinek

Find Your WHY by Simon Sinek, David Mead, and Peter Drocker

Good to Great by Jim Collins

The Vision Drive Leader by Michael Hyatt

Good Leaders Ask Great Questions by John C. Maxwell  

 

Dave Rothacker is an author and specializes in Idea Cultivation for Go Time Success Group.

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

Leadership and Sustainability

As I was reading Dave Rathacker’s June Comanche Marketing article titled “Authentic and Caring Leadership“, it brought to mind many of the people that I have worked with in the past and currently. Those that are authentic and caring leaders, as well as those that lead by threat and intimidation. These two styles of leadership can both get desired results, yet only the authentic and caring leader can get sustainable results.     

Ironically, a week before Dave’s article, I had a conversation about this very subject with Currie Gauvreau, an industry friend of mine, who specializes in leadership training. To pull a bit from his bio, Currie is an experienced trainer and educator having taught for more than 26 years and has served as an adjunct faculty member and guest speaker at a variety of universities since 2006. He holds a master’s degree from the University of South Florida and is a graduate of the prestigious JW Fanning Institute of Leadership Development Program from the University of Georgia. Currie is a very engaging speaker and sought-after expert in the field of leadership and business coaching. Dave’s last article on leadership, along with his previous article, “The Transformational Leader”, concurs with many of Currie’s thoughts and ideas as well.

I lead a team of nine individuals, and like many leaders, I thrive to hone and improve my leadership skills to the benefit of all. I learn from reading articles like Dave’s, which usually refer to other sources, to further research and improve on what you have already accomplished. I have had several conversations with Currie as well on the attributes of great leaders, and it is a subject that he is very passionate about. You may be wondering why I’m bringing the subject up again? Well, I believe that great leaders run great organizations with great sustainable results, and it is always good to learn as much as we can about how to lead from many sources. You never know you may pick up another “transformational” idea.

So, to that end, I’d like to share some insight from Currie about leadership. I find it very interesting during conversations with Currie when he mentions that to understand leadership today, you need to understand its evolution:

“Most people think leadership became a hot topic in the last quarter-century because of the brutal working conditions and treatment of workers through the Industrial Age. For instance, 100 years ago, managers did not care if you were motivated, happy, satisfied, etc., all the things that make up true leadership. All they cared about was if you were productive. And if you weren’t, they found someone who was. What many people don’t realize is if you go back to ancient times, leaders of the day were writing about leadership concepts that today are embraced by the experts. Sun Tzu, Cicero, Lao Tzu, and even Jesus all talk about Servant Leadership as opposed to Dominion Leadership. They talk about humility, role modeling, and inspiring your people. It wasn’t until Machiavelli wrote The Prince in the 16th century that the hard-line manager came to be. He discussed maintaining power at all costs, by force or deceit, and we have been trying to recover for 400 years! But that’s a story for another day.”

As I mentioned upfront, you can get results by threat and intimidation (or as Currie mentions, “…by force or deceit”). 

Yet are those results sustainable, and will people want to continue to follow you? Employee retention comes to mind here! No one is suggesting that you become a push-over boss. Inspiring people also involves setting goals and holding them accountable to achieve these goals for the benefit of the entire team.        

Currie continues: “So if we study the ancient wisdom on leadership, we grow to appreciate some of the simplest concepts in leadership today. Things like open communication, being authentic, role modeling behavior, and knowing your team on a deeper level. Dominion (because I said so) Leadership started to change around 50 years ago, primarily due to the work of psychologists and academics like Abraham Maslow, Douglas McGregor, Frederic Herzberg, and Peter Drucker. Although they are categorized as “Management Experts”, they were truly the modern-day leadership pioneers. Through their work, leaders realized that they could get more production out of their workers by enticing them and started to focus on worker motivation. This is still the standard today, but I contend there is a better way. I think we should be focused on INSPIRING our teams instead. The difference is simple in concept: ‘Motivation is lighting a fire UNDER someone, while inspiration is lighting a fire WITHIN someone!’ Maybe, we should be inspiring our people rather than trying to motivate them! I can’t think of higher praise than for someone to tell me that I inspired them! There is a higher level of achievement and getting production out of your team, and that higher level is an inspiration. If you strive to inspire rather than motivate, you will reach levels in life you never dreamed were possible.”

“Leadership is a choice, not a position.” —Stephen Covey

So, once you choose to lead, lead with inspiration! Inadequate leadership leads to mediocrity and team members that are just going through the motions. This comes across in the workplace, as well as with their interactions with your clients. 

Inspirational leadership leads to excellence and team members that are “Authentic and Caring”, just like their leader, in all aspects of their personal life, career, AND client interaction!

Thanks to Dave for the inspiration to write this article and to Currie for another expert’s insight.   

 

Steve Mores is the Vice President of Training and Sales at Dynamic Air Quality Solutions

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

Rip Off the Band-Aid!

Being a business owner has always been stressful. Now, it can be overwhelming. You can’t help but think about the health of those around you. The health of your employees, your customers, your family, but what about the health of your business? You would do whatever is needed to keep your family, employees, and community safe and healthy. But when is the last time you looked at your business and its financial health? You probably look at your P/L Statement monthly or maybe quarterly. When is the last time you sat down and really looked at your Balance Sheet? Do you glance at it, make sure it balances, breathe a sigh of relief, and move on?  

Your Balance Sheet is an often-underutilized tool to measure the health of your business. The strength of your Balance Sheet is instrumental in your ability to survive an economic downturn. It is more than a list of what your business owns and owes. 

It provides you with a basic overview of your financial health and your company’s stability. You may think the Balance Sheet isn’t an important document to review, but your loan providers and potential investors will say otherwise.

I want to discuss a few numbers that will help get you comfortable looking at your balance sheet and understand what it is telling you. First, a few comments about your Balance Sheet and P/L Statements. View your business health the same way you view your health. The quality of nutrients you put into your body is comparable to the quality of data you input into your accounting program. Just like in your personal life, make small changes that you can commit to. Get comfortable with the numbers and ratios we are talking about today. Don’t try to look at every ratio or calculation just yet. 

It is easy to get overwhelmed and fall back into unhealthy habits.

Ready to rip off the Band-Aid and look at the health of your business?

Current Ratio = Current Assets ÷ Current Liabilities

Your current ratio is an important measure of a business. It tells you how easy and quickly you can get cash. Does your company have enough cash and short-term assets on hand to pay bills in the short term?

I suggest keeping your Current Ratio above 2.0. If the current ratio falls below one, this is the first sign that your business may be sick, and you may struggle to meet your short-term needs. If you notice your Current Ratio decreasing month over month, this could mean your profitability is decreasing. Step in early to make the changes needed.  

Quick Ratio = Current Assets – Current Inventory ÷ Current Liabilities

At first glance, you may not see the value of looking at both the Current and Quick Ratios. This ratio takes inventory out of the mix. Selling inventory takes time, so removing inventory gives you a more cautious view of your company. Comparing your Current and Quick Ratios also gives you an idea of how much you have tied up in inventory. For the Quick Ratio, a number over 1 is considered financially healthy.

Debt to Asset Ratio = Total Liabilities ÷ Total Assets

The debt to asset ratio shows you the percentage of assets that were purchased through debt. If the ratio is high, it means you are growing your business by going into debt. 

Your creditors and loan providers use this to check your ability to repay your debt. It can significantly influence your ability to receive loans. The lower the ratio, the lower the risk.  

 

Net Working Capital = Current Assets – Current Liabilities

Simply put, your Net Working Capital tells you how much money you have easily available to meet current expenses. Comparing this number to previous months will show you month-to-month changes and will help you understand the trends of your business. 

The numbers above are a great first step to monitoring your business’s health. They are an easy way to give your business a monthly check-up. Just like with your health, it is important to listen to what your business is telling you. Be aware, willing to make changes, and know when to reach out for support. Stay on top of your business and keep moving in a positive direction. You’ve got this!  

 

Lynn Wise is the Founder and CEO of Contractor in Charge.

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!