WEBVTT
00:00:00.239 --> 00:00:01.679
Hey, glad you're here.
00:00:01.840 --> 00:00:09.599
This is Profit Points, and I'm Megan Schwann, your accounting sidekick and certified profit first professional and fix the snips advisor.
00:00:09.839 --> 00:00:20.399
If you're a small business owner who wants to actually understand what is happening in your business financially, not just survive it, but genuinely get it, you're in the right place.
00:00:20.559 --> 00:00:26.719
Every episode covers one concept, uses real numbers, and ends with something you can actually do.
00:00:26.960 --> 00:00:27.760
That's the deal.
00:00:27.920 --> 00:00:30.160
Let's talk about today's topic.
00:00:31.039 --> 00:00:36.320
Most business owners think they're reviewing their finances, but they're not.
00:00:36.560 --> 00:00:39.119
They're checking their bank balance.
00:00:39.359 --> 00:00:43.439
And there is a massive difference between those two things.
00:00:43.679 --> 00:01:00.479
Today I want to show you what a real financial performance review actually looks like and why it matters more than almost anything else in your business and how to start doing it, even if numbers have never been your thing.
00:01:00.719 --> 00:01:09.120
I'm Megan Schwann, your accounting sidekick, and this is the Profit Points Podcast, where we turn financial confusion into financial confidence.
00:01:09.280 --> 00:01:10.719
So let's do it.
00:01:11.040 --> 00:01:16.319
Most business owners call a financial review the thing they do when they log into their bank app.
00:01:16.560 --> 00:01:25.280
They look at their balance, maybe scroll through a few transactions and decide whether things are good or not great, quote unquote.
00:01:25.439 --> 00:01:28.959
If the number is higher than last month, they feel okay.
00:01:29.120 --> 00:01:32.400
If it's lower, they might feel anxious.
00:01:32.560 --> 00:01:35.439
And then they close the app and go back to work.
00:01:35.760 --> 00:01:39.760
And I hate to break it to you, but that's not a financial review.
00:01:39.840 --> 00:01:42.959
It's more like financial anxiety on a loop.
00:01:43.280 --> 00:01:52.640
A real financial performance review is a structured, scheduled look at the actual health of your business, not just your checking account.
00:01:52.799 --> 00:01:56.400
It answers specific questions like is my revenue growing?
00:01:56.640 --> 00:01:57.519
Is it shrinking?
00:01:57.680 --> 00:01:58.719
Is it flat?
00:01:59.040 --> 00:02:02.719
Is my profit margin healthy or is it eroding?
00:02:03.040 --> 00:02:09.520
Are my expenses aligned with my goals or are they quietly consuming my profits?
00:02:10.000 --> 00:02:14.639
How do I compare to where I was three, six, twelve months ago?
00:02:14.960 --> 00:02:17.599
These are CEO questions.
00:02:17.919 --> 00:02:22.479
And you can only answer them if you're looking at the right data.
00:02:22.960 --> 00:02:27.520
So let's talk about what this actually can look like for you.
00:02:27.919 --> 00:02:33.599
A comprehensive financial performance review covers three core areas.
00:02:33.919 --> 00:02:36.479
The first one is revenue trends.
00:02:36.639 --> 00:02:41.360
You're looking at total revenue month over month and year over year.
00:02:41.599 --> 00:02:44.560
And you're asking, is revenue growing?
00:02:44.800 --> 00:02:47.199
Is it consistent or volatile?
00:02:47.439 --> 00:02:54.159
Is there a pattern, a slow season, a peak month that should be playing that you should be planning around?
00:02:54.400 --> 00:02:58.960
And if you can answer these questions, you're already ahead of most business owners.
00:02:59.599 --> 00:03:02.080
But taking a look at this data is really important.
00:03:02.319 --> 00:03:05.439
The second core area is your profit margin.
00:03:05.680 --> 00:03:12.400
This is the number that tells you whether your growth is real or if your growth is just busy.
00:03:12.560 --> 00:03:14.560
We've talked about this before.
00:03:14.800 --> 00:03:18.719
Um, just because you grow doesn't mean your profit grows.
00:03:18.960 --> 00:03:25.120
So you want to take a look at your net profit, divide it by your revenue, and then multiply that number by 100.
00:03:25.280 --> 00:03:27.199
That's gonna give you your margin.
00:03:27.520 --> 00:03:32.960
Now I want you to compare it to the previous quarter and the previous year.
00:03:33.120 --> 00:03:35.520
Is it moving in the right direction?
00:03:35.840 --> 00:03:43.840
For a service business, just so you have kind of a benchmark, you wanna be working towards about a 20 to 30% net profit.
00:03:44.000 --> 00:03:47.439
And if you're below 15%, you have work to do.
00:03:47.520 --> 00:03:50.879
And this is your net profit, your overall profit, not your gross profit.
00:03:51.199 --> 00:03:52.800
We've talked about both in the past.
00:03:52.960 --> 00:03:56.400
Net profit is after everything of account of four what's left over.
00:03:56.560 --> 00:03:58.240
20 to 30% net.
00:03:58.319 --> 00:04:02.080
If you're below that, you really have work to do and you really need to pay attention.
00:04:02.319 --> 00:04:05.120
The third core area is expense trends.
00:04:05.280 --> 00:04:10.879
You want to take a look at your expense categories, look them over for the past 12 months.
00:04:11.120 --> 00:04:15.280
Which categories are growing, which categories are shrinking?
00:04:15.520 --> 00:04:17.439
Are there any surprises?
00:04:17.759 --> 00:04:22.319
A category that may have spiked in a specific month that you never investigated.
00:04:22.560 --> 00:04:23.920
Did you check into that?
00:04:24.399 --> 00:04:27.680
This is where those profit leaks can often hide.
00:04:27.839 --> 00:04:34.399
And this is where a real review separates itself from just a general bank balance check.
00:04:34.720 --> 00:04:38.639
So let's always put some real numbers and examples to this.
00:04:38.959 --> 00:04:43.920
Let's say you do a review and you find the following information.
00:04:44.240 --> 00:04:48.079
Let's say your revenue grew 18% year over year.
00:04:48.240 --> 00:04:48.800
That's great.
00:04:48.959 --> 00:04:50.000
It's amazing.
00:04:50.319 --> 00:04:58.079
But your profit margin dropped from 24% to 17% over that same period of time.
00:04:58.319 --> 00:04:59.439
What does this mean?
00:04:59.680 --> 00:05:03.439
It means that your expenses grew faster than your revenue.
00:05:03.759 --> 00:05:12.639
You dig into the expense categories and you find out that the contractor cost went from$1,200 per month to$3,100 per month.
00:05:12.800 --> 00:05:20.399
That's a$1,900 increase that was never formally evaluated against the revenue it was supposed to generate.
00:05:21.040 --> 00:05:25.279
That's the conversation, a real review surfaces.
00:05:25.600 --> 00:05:30.079
And without it, you'd have no idea why the growth didn't feel as good as it should.
00:05:30.319 --> 00:05:37.040
And remember, sometimes our feelings aren't accurate, which is why the data is so important.
00:05:37.360 --> 00:05:39.600
And trust me, I've been there too.
00:05:40.879 --> 00:05:54.480
I know that this example and these uh scenarios are just a bunch of random numbers, and it might feel a little overwhelming, but something I can't stress enough about doing this with your own numbers is that they are going to make more sense to you.
00:05:54.639 --> 00:06:03.120
And the more you do this consistently, the more you are going to understand your business and how your decisions affect your coins.
00:06:03.360 --> 00:06:08.720
Being a CEO is all about growth, and growth comes in the uncomfortable.
00:06:08.959 --> 00:06:33.920
So if this conversation, if doing this kind of thing, if doing a real financial review versus just taking a look at your bank's bank account or just side-eyeing the PL and balance sheet reports that your bookkeeper sends over, if this kind of stuff makes you feel like it's not your thing or like you're not equipped, that's just you growing and stepping more into your CEO role.
00:06:34.079 --> 00:06:49.279
And so the more you lean into it, the better you're gonna get at it, the more you're gonna understand your business and your decisions, which ultimately is gonna make you a better owner and pay off in creating a more successful and sustainable business.
00:06:49.600 --> 00:06:54.639
So let me step off my soapbox and get to your action step of the day.
00:06:54.879 --> 00:07:00.079
The action step here is simple, not necessarily easy, but it is simple.
00:07:00.319 --> 00:07:07.519
I want you to schedule your first real financial performance review this week or next week.
00:07:08.079 --> 00:07:10.240
Block in the next two weeks for sure.
00:07:10.480 --> 00:07:12.480
Block 45 to 60 minutes.
00:07:12.959 --> 00:07:16.560
Pull your PL for the last 12 months by month.
00:07:16.720 --> 00:07:24.720
I want you to be able to see what your income and your expenses by categories have been over the last 12 months.
00:07:24.879 --> 00:07:28.560
If you are using an accounting software, this is gonna be really easy to do.
00:07:28.800 --> 00:07:31.519
And if you're not an accounting software, hit me up.
00:07:31.600 --> 00:07:36.800
I have some options that may be good for you to go in without having to spend a whole lot.
00:07:37.120 --> 00:07:41.680
Um, okay, so then pull that PL for the last 12 months, month by month.
00:07:42.000 --> 00:07:43.759
Answer these three questions.
00:07:44.079 --> 00:07:47.600
Is my revenue trending up, down, or is it flat?
00:07:48.720 --> 00:07:52.879
Is my profit margin improving or is it eroding?
00:07:53.839 --> 00:07:58.560
Which expense category has grown the most in the last six months?
00:07:58.879 --> 00:08:01.040
And then I want you to write those answers down.
00:08:01.439 --> 00:08:03.680
That's gonna be your starting point.
00:08:04.720 --> 00:08:05.920
And just start there.
00:08:06.720 --> 00:08:07.040
Okay.
00:08:07.439 --> 00:08:13.519
A financial reveal is not an audit and it's not a punishment, it's a conversation with your business.
00:08:13.839 --> 00:08:22.879
One that your business has usually been trying to have with you every single month because the numbers and the data are there every single month.
00:08:23.199 --> 00:08:25.040
The key is to start listening.
00:08:25.360 --> 00:08:31.040
The numbers have a lot to say, and they can give you a lot of great information.
00:08:31.519 --> 00:08:40.639
If you would like some help with setting up a quarterly review process that actually works for your business, please book a strategy call with me at Sidekick Accounting.
00:08:40.799 --> 00:08:42.639
You can go to chatwithmeg.com.
00:08:42.799 --> 00:08:46.480
That's gonna take you to my website, chatwithmeg.com.
00:08:47.039 --> 00:08:53.440
Um, and we can set up a time to chat through what your business needs so that you can continue to be successful.
00:08:53.679 --> 00:08:56.080
In the meantime, thank you so much for listening.
00:08:56.240 --> 00:09:00.960
Please subscribe, share, and I will see you on the next episode.
00:09:01.120 --> 00:09:02.080
Have a good one.
00:09:02.399 --> 00:09:04.399
All right, that's your episode this time.
00:09:04.559 --> 00:09:06.240
Don't forget your action step.
00:09:06.480 --> 00:09:09.759
I want you to actually do it, not just add it to the list.
00:09:10.000 --> 00:09:14.080
If this episode was helpful, share it with a fellow business owner who needs to hear it.
00:09:14.240 --> 00:09:19.519
And if you're ready to go deeper on your specific numbers, book a strategy call with Sidekick Accounting.
00:09:19.679 --> 00:09:24.240
Go to chatwithmeg.com, and I'll see you next time on Profit Points.
00:00:00.239 --> 00:00:01.679
Hey, glad you're here.
00:00:01.840 --> 00:00:09.599
This is Profit Points, and I'm Megan Schwann, your accounting sidekick and certified profit first professional and fix the snips advisor.
00:00:09.839 --> 00:00:20.399
If you're a small business owner who wants to actually understand what is happening in your business financially, not just survive it, but genuinely get it, you're in the right place.
00:00:20.559 --> 00:00:26.719
Every episode covers one concept, uses real numbers, and ends with something you can actually do.
00:00:26.960 --> 00:00:27.760
That's the deal.
00:00:27.920 --> 00:00:30.160
Let's talk about today's topic.
00:00:31.039 --> 00:00:36.320
Most business owners think they're reviewing their finances, but they're not.
00:00:36.560 --> 00:00:39.119
They're checking their bank balance.
00:00:39.359 --> 00:00:43.439
And there is a massive difference between those two things.
00:00:43.679 --> 00:01:00.479
Today I want to show you what a real financial performance review actually looks like and why it matters more than almost anything else in your business and how to start doing it, even if numbers have never been your thing.
00:01:00.719 --> 00:01:09.120
I'm Megan Schwann, your accounting sidekick, and this is the Profit Points Podcast, where we turn financial confusion into financial confidence.
00:01:09.280 --> 00:01:10.719
So let's do it.
00:01:11.040 --> 00:01:16.319
Most business owners call a financial review the thing they do when they log into their bank app.
00:01:16.560 --> 00:01:25.280
They look at their balance, maybe scroll through a few transactions and decide whether things are good or not great, quote unquote.
00:01:25.439 --> 00:01:28.959
If the number is higher than last month, they feel okay.
00:01:29.120 --> 00:01:32.400
If it's lower, they might feel anxious.
00:01:32.560 --> 00:01:35.439
And then they close the app and go back to work.
00:01:35.760 --> 00:01:39.760
And I hate to break it to you, but that's not a financial review.
00:01:39.840 --> 00:01:42.959
It's more like financial anxiety on a loop.
00:01:43.280 --> 00:01:52.640
A real financial performance review is a structured, scheduled look at the actual health of your business, not just your checking account.
00:01:52.799 --> 00:01:56.400
It answers specific questions like is my revenue growing?
00:01:56.640 --> 00:01:57.519
Is it shrinking?
00:01:57.680 --> 00:01:58.719
Is it flat?
00:01:59.040 --> 00:02:02.719
Is my profit margin healthy or is it eroding?
00:02:03.040 --> 00:02:09.520
Are my expenses aligned with my goals or are they quietly consuming my profits?
00:02:10.000 --> 00:02:14.639
How do I compare to where I was three, six, twelve months ago?
00:02:14.960 --> 00:02:17.599
These are CEO questions.
00:02:17.919 --> 00:02:22.479
And you can only answer them if you're looking at the right data.
00:02:22.960 --> 00:02:27.520
So let's talk about what this actually can look like for you.
00:02:27.919 --> 00:02:33.599
A comprehensive financial performance review covers three core areas.
00:02:33.919 --> 00:02:36.479
The first one is revenue trends.
00:02:36.639 --> 00:02:41.360
You're looking at total revenue month over month and year over year.
00:02:41.599 --> 00:02:44.560
And you're asking, is revenue growing?
00:02:44.800 --> 00:02:47.199
Is it consistent or volatile?
00:02:47.439 --> 00:02:54.159
Is there a pattern, a slow season, a peak month that should be playing that you should be planning around?
00:02:54.400 --> 00:02:58.960
And if you can answer these questions, you're already ahead of most business owners.
00:02:59.599 --> 00:03:02.080
But taking a look at this data is really important.
00:03:02.319 --> 00:03:05.439
The second core area is your profit margin.
00:03:05.680 --> 00:03:12.400
This is the number that tells you whether your growth is real or if your growth is just busy.
00:03:12.560 --> 00:03:14.560
We've talked about this before.
00:03:14.800 --> 00:03:18.719
Um, just because you grow doesn't mean your profit grows.
00:03:18.960 --> 00:03:25.120
So you want to take a look at your net profit, divide it by your revenue, and then multiply that number by 100.
00:03:25.280 --> 00:03:27.199
That's gonna give you your margin.
00:03:27.520 --> 00:03:32.960
Now I want you to compare it to the previous quarter and the previous year.
00:03:33.120 --> 00:03:35.520
Is it moving in the right direction?
00:03:35.840 --> 00:03:43.840
For a service business, just so you have kind of a benchmark, you wanna be working towards about a 20 to 30% net profit.
00:03:44.000 --> 00:03:47.439
And if you're below 15%, you have work to do.
00:03:47.520 --> 00:03:50.879
And this is your net profit, your overall profit, not your gross profit.
00:03:51.199 --> 00:03:52.800
We've talked about both in the past.
00:03:52.960 --> 00:03:56.400
Net profit is after everything of account of four what's left over.
00:03:56.560 --> 00:03:58.240
20 to 30% net.
00:03:58.319 --> 00:04:02.080
If you're below that, you really have work to do and you really need to pay attention.
00:04:02.319 --> 00:04:05.120
The third core area is expense trends.
00:04:05.280 --> 00:04:10.879
You want to take a look at your expense categories, look them over for the past 12 months.
00:04:11.120 --> 00:04:15.280
Which categories are growing, which categories are shrinking?
00:04:15.520 --> 00:04:17.439
Are there any surprises?
00:04:17.759 --> 00:04:22.319
A category that may have spiked in a specific month that you never investigated.
00:04:22.560 --> 00:04:23.920
Did you check into that?
00:04:24.399 --> 00:04:27.680
This is where those profit leaks can often hide.
00:04:27.839 --> 00:04:34.399
And this is where a real review separates itself from just a general bank balance check.
00:04:34.720 --> 00:04:38.639
So let's always put some real numbers and examples to this.
00:04:38.959 --> 00:04:43.920
Let's say you do a review and you find the following information.
00:04:44.240 --> 00:04:48.079
Let's say your revenue grew 18% year over year.
00:04:48.240 --> 00:04:48.800
That's great.
00:04:48.959 --> 00:04:50.000
It's amazing.
00:04:50.319 --> 00:04:58.079
But your profit margin dropped from 24% to 17% over that same period of time.
00:04:58.319 --> 00:04:59.439
What does this mean?
00:04:59.680 --> 00:05:03.439
It means that your expenses grew faster than your revenue.
00:05:03.759 --> 00:05:12.639
You dig into the expense categories and you find out that the contractor cost went from$1,200 per month to$3,100 per month.
00:05:12.800 --> 00:05:20.399
That's a$1,900 increase that was never formally evaluated against the revenue it was supposed to generate.
00:05:21.040 --> 00:05:25.279
That's the conversation, a real review surfaces.
00:05:25.600 --> 00:05:30.079
And without it, you'd have no idea why the growth didn't feel as good as it should.
00:05:30.319 --> 00:05:37.040
And remember, sometimes our feelings aren't accurate, which is why the data is so important.
00:05:37.360 --> 00:05:39.600
And trust me, I've been there too.
00:05:40.879 --> 00:05:54.480
I know that this example and these uh scenarios are just a bunch of random numbers, and it might feel a little overwhelming, but something I can't stress enough about doing this with your own numbers is that they are going to make more sense to you.
00:05:54.639 --> 00:06:03.120
And the more you do this consistently, the more you are going to understand your business and how your decisions affect your coins.
00:06:03.360 --> 00:06:08.720
Being a CEO is all about growth, and growth comes in the uncomfortable.
00:06:08.959 --> 00:06:33.920
So if this conversation, if doing this kind of thing, if doing a real financial review versus just taking a look at your bank's bank account or just side-eyeing the PL and balance sheet reports that your bookkeeper sends over, if this kind of stuff makes you feel like it's not your thing or like you're not equipped, that's just you growing and stepping more into your CEO role.
00:06:34.079 --> 00:06:49.279
And so the more you lean into it, the better you're gonna get at it, the more you're gonna understand your business and your decisions, which ultimately is gonna make you a better owner and pay off in creating a more successful and sustainable business.
00:06:49.600 --> 00:06:54.639
So let me step off my soapbox and get to your action step of the day.
00:06:54.879 --> 00:07:00.079
The action step here is simple, not necessarily easy, but it is simple.
00:07:00.319 --> 00:07:07.519
I want you to schedule your first real financial performance review this week or next week.
00:07:08.079 --> 00:07:10.240
Block in the next two weeks for sure.
00:07:10.480 --> 00:07:12.480
Block 45 to 60 minutes.
00:07:12.959 --> 00:07:16.560
Pull your PL for the last 12 months by month.
00:07:16.720 --> 00:07:24.720
I want you to be able to see what your income and your expenses by categories have been over the last 12 months.
00:07:24.879 --> 00:07:28.560
If you are using an accounting software, this is gonna be really easy to do.
00:07:28.800 --> 00:07:31.519
And if you're not an accounting software, hit me up.
00:07:31.600 --> 00:07:36.800
I have some options that may be good for you to go in without having to spend a whole lot.
00:07:37.120 --> 00:07:41.680
Um, okay, so then pull that PL for the last 12 months, month by month.
00:07:42.000 --> 00:07:43.759
Answer these three questions.
00:07:44.079 --> 00:07:47.600
Is my revenue trending up, down, or is it flat?
00:07:48.720 --> 00:07:52.879
Is my profit margin improving or is it eroding?
00:07:53.839 --> 00:07:58.560
Which expense category has grown the most in the last six months?
00:07:58.879 --> 00:08:01.040
And then I want you to write those answers down.
00:08:01.439 --> 00:08:03.680
That's gonna be your starting point.
00:08:04.720 --> 00:08:05.920
And just start there.
00:08:06.720 --> 00:08:07.040
Okay.
00:08:07.439 --> 00:08:13.519
A financial reveal is not an audit and it's not a punishment, it's a conversation with your business.
00:08:13.839 --> 00:08:22.879
One that your business has usually been trying to have with you every single month because the numbers and the data are there every single month.
00:08:23.199 --> 00:08:25.040
The key is to start listening.
00:08:25.360 --> 00:08:31.040
The numbers have a lot to say, and they can give you a lot of great information.
00:08:31.519 --> 00:08:40.639
If you would like some help with setting up a quarterly review process that actually works for your business, please book a strategy call with me at Sidekick Accounting.
00:08:40.799 --> 00:08:42.639
You can go to chatwithmeg.com.
00:08:42.799 --> 00:08:46.480
That's gonna take you to my website, chatwithmeg.com.
00:08:47.039 --> 00:08:53.440
Um, and we can set up a time to chat through what your business needs so that you can continue to be successful.
00:08:53.679 --> 00:08:56.080
In the meantime, thank you so much for listening.
00:08:56.240 --> 00:09:00.960
Please subscribe, share, and I will see you on the next episode.
00:09:01.120 --> 00:09:02.080
Have a good one.
00:09:02.399 --> 00:09:04.399
All right, that's your episode this time.
00:09:04.559 --> 00:09:06.240
Don't forget your action step.
00:09:06.480 --> 00:09:09.759
I want you to actually do it, not just add it to the list.
00:09:10.000 --> 00:09:14.080
If this episode was helpful, share it with a fellow business owner who needs to hear it.
00:09:14.240 --> 00:09:19.519
And if you're ready to go deeper on your specific numbers, book a strategy call with Sidekick Accounting.
00:09:19.679 --> 00:09:24.240
Go to chatwithmeg.com, and I'll see you next time on Profit Points.
