What is Your Cash Flow Ratio?

Another year is basically in the books. If you own a plumbing company, this should have been your best year ever! There was more work that anyone could handle. If only we could find a few more plumbers so we could capture all the jobs that were available. This was one of those years that even a bad owner with no systems or business acumen could make money.

I’m not concerned with how much you sold; how much did you get to keep? If your overall business and personal compensation did not exceed your wildest expectation, you need to get some help. If you can’t make money now, what will happen when the economy turns? And, you know that it will at some point. Now is the time to make the money, pay off debt, and put some in the bank to prepare for that time to come. That is all before you buy a new house, or new truck, or take some exotic vacation.

The Cash Flow Ratio Target is a minimum of 3 to 1; your cash on hand plus receivables should be a minimum of 3 times what you currently owe; or a minimum of 3 times your current liabilities. Long term liabilities like trucks and buildings can be sold to hopefully pay off their balance. What would your position be if you had to close the doors tomorrow? If you can’t make it now, you need to change what you are doing.

The companies who survive a downturn are the companies with good financial managers. Their plumbing abilities have nothing to do with it. They have to know the business and make great financial decisions to stay in business. Financial goals and key benchmarks that are monitored on a daily, weekly, and monthly basis will make all the difference. It takes a truly dedicated owner to make the changes now to prepare for the future.

If you need help with financials and benchmarks, contact me today at 727.451.9160 or KeithGlass@ThePlumbersCoach.com. This is what I do all day, every day and I can make a difference in your business.

The Plumbers Coach™ Detailed personalized business coaching and training for plumbing contractors. Like us on Facebook @ThePlumbersCoach, follow us on Twitter @T_PlumbersCoach and LinkedIn @KeithGlass1. More information is available at ThePlumbersCoach.com.

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