The Key Metrics Every Contractor Must Know
Summary
Linnea Blair has influenced and improved the health of several businesses owners, including your hosts David and Aaron. In this episode, Linnea Blair shares her journey of working with painting contractors, starting in 2002 when she created a coaching program for members of the PDCA (Painting and Decorating Contractors of America) where she immediately got 18 sign ups. She explains how understanding financials, particularly estimating accurately and knowing key numbers, was pivotal in helping contractors like Mike Chism (David’s father) grow and improve profitability.
She emphasizes the importance of business owners knowing their financials — even if they have help — and consistently reviewing budget-to-actual comparisons. In this episode we cover:
-How to set appropriate benchmarks that are realistic and growth minded
-What numbers are important and what numbers are misleading that could be ruining your profit margin
-What are optimal profit margins and what metrics do you focus on to get there
-How to build a budget that’s accurate and up to date
-What your standard operating costs should be if you’re scaling correctly
She outlines crucial financial metrics: revenue, gross profit margin (ideally 45-50% for painting contractors), and net operating profit (targeting 20-25% before owner’s compensation). Linnea defines gross profit clearly, separating direct costs from variable expenses and overhead for better benchmarking. She stresses that solid gross profit and financial literacy are key to both profitability and scalability.
Additionally, she discusses maintaining healthy cash reserves (three months of expenses) and gives a balanced view on business debt, advocating caution and readiness before leveraging it for growth.
The episode can really be summed up with this: owners don’t need to love financials, but they must understand and take ownership of their numbers to ensure their businesses thrive. Tune in to hear all the broken down ways Advisors on Target can help your business grow!
This Episode is Brought to You by:
Wooster Brush
A David Creation
Commercial Painting Industry Association
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