Bobby sits down with Mark Whitmire, a CFO with more than 35 years in finance and accounting, to close out the Know Your Numbers series. Part one was the mindset. Part two was the math. This is the practitioner.

Mark's father was a CPA and president of the Georgia Society of CPAs, and Mark grew up watching him drop tax returns at the post office at midnight. He has the accounting gene and deliberately did not become an accountant. What he has instead is 35 years of being the person who finds the financial problem in somebody else's business.

His verdict, after decades of counselling owners: there has never been an instance where somebody was doing better than they thought. Not once.

The conversation covers why a builder reading a tax return may be looking at a business eighteen months old, the spec house that did not sell and why nothing in an income statement will ever reveal what it cost, the warranty money that leaves after the closing, and why you should raise three times what you think you need and raise it while you still do not need it.

Then it turns, as these conversations do, from money to people. Hiring to your weakness, the way Charles Schwab and Richard Branson both did. Why effective partners tend not to be friends. Why most business plans are simply "more," and what a finish line should look like instead.

"Engineers will build something nobody wants. Salespeople will sell something they can't produce."

"My to-do list tends to be one item."

Chapters:

0:00 The house you didn't sell

1:13 Why owners struggle with the numbers

3:29 Mark's father, and the adding machine

7:19 Advice for a new owner: triple it

9:57 Raise money before you need it

11:28 Your tax return is 18 months old

13:13 Regular reporting, and the discipline it takes

16:45 Warranty, and the cash that leaves after closing

17:47 Nobody was ever doing better than they thought

19:02 Hire to your weakness

21:00 Most business plans are simply more

23:34 Don't hire your best buddy

29:09 Go think

31:39 Your to-do list is one item

38:16 Homes where families create memories

41:02 Write your eulogy

42:01 Close

Learn more: ChoiceConsultingMan.com/Podcast

Bobby's books, Choices and Clarity: ChoiceConsultingMan.com/books

A video version of this episode is on YouTube. Search Choices Create Change.

Last week was why to measure. This week is how to read what you are measuring.

Bobby opens with two houses: same plan, same community, sold for the same price. On paper, at the moment they sold, they were the same job. One closed at 31% gross margin and the other at 17%. On a $500,000 house that is $70,000, and it was not created at the closing table. It was created in a hundred small decisions across six months, and not one of them felt like a $70,000 decision at the time.

From there it is a profit and loss statement in plain English, section by section, with the one test that tells you where a cost belongs: would this cost exist if you had not built that job?

Then the part that is quietly costing people money right now. Markup and margin are not the same number. Add 25% to a $100,000 cost and you sell at $125,000, which is a 20% margin, not 25%. To actually earn 30% you have to mark up almost 43%. A leader who confuses the two is not making an occasional error, they are underpricing every job by the same amount forever, and there is no bad month that makes them go look.

Also in this episode: the six places margin leaks and why not one of them is a market condition, why growing companies are the ones that run out of cash, and break-even, which is your annual overhead divided by your gross margin percentage. Drop five points of margin and a company with $1,200,000 of overhead has to build an extra $800,000 of work to end up exactly where it was.

"A number without a target is trivia. A number with a target is a decision waiting to be made."

This is part two of three. Next week a longtime CFO joins the show.

Chapters:

0:00 Two houses, identical on paper

0:33 Welcome

1:32 You were never taught this

2:26 Reading a profit and loss statement

5:45 The targets: 30, 18 and 12

6:54 Gross margin, where the money is won and lost

8:16 Two houses that look identical

9:25 The six places margin leaks

11:50 Not one of them is the market

12:15 Markup versus margin

13:52 Now do it the right way

15:07 To get 30 you have to mark up 43

16:03 Budget versus actual

17:25 How forecasting actually works

18:15 The monthly review: three columns

18:41 Variance analysis: get to why

20:09 Cash flow, the one that ends companies

20:40 Why growing companies are the ones at risk

21:38 Draws, inventory, receivables, payables

23:28 Break-even, and what a slow month costs

24:40 What five points of margin does to break-even

26:03 Leading versus lagging indicators

28:07 Building your weekly dashboard

29:39 The four questions

32:50 This week's challenge

34:33 Call your CPA and ask

35:49 Close

Learn more: ChoiceConsultingMan.com/Podcast

Bobby's books, Choices and Clarity: ChoiceConsultingMan.com/books

A video version of this episode is on YouTube. Search Choices Create Change.

Most owners can tell you their revenue instantly and have no idea what they kept. This episode is about the eight numbers that tell you the truth about your business, and why smart, hardworking leaders end up flying blind anyway.

Bobby opens with a builder who had 24 houses under construction, the most work he had ever had going at one time, and who was putting personal money into the business to make payroll. They costed out his last five closed houses. Two made money, one broke even, two lost real money. He was not having his best year, he was having his busiest year.

From there it is the airplane test. A pilot watches altitude, airspeed, fuel against distance, oil pressure, engine temperature, weather, wind, cabin pressure and navigation, and makes corrections so small that nobody in seat 14C ever feels one. Then the question: what is actually on your dashboard, and what did you look at with your own eyes in the last seven days?

Bobby walks through eight gauges, one at a time, and what each one warns you about before anybody else notices: cash, gross margin, sales pipeline, backlog, cycle time, warranty, employee turnover and customer satisfaction.

The part most business content skips is the second half. If measuring is this obviously valuable, why do so many good leaders not do it? Fear, embarrassment, never having been taught, being too busy, a CPA who was never asked to teach, a report with forty lines on it, and nobody owning the number.

"Volume without margin is not growth. It's just a faster way to find out you have a problem."

"Companies do not go broke because they lose money. They go broke because they run out of cash."

Chapters:

0:00 Two of the last five lost money

0:35 Welcome

1:05 Forty years, and one question

2:17 Why smart people make bad business decisions

2:45 A feeling wearing a business suit

3:02 Activity is not progress

3:44 Busy and profitable are not the same thing

4:04 The builder with 24 houses

4:51 Putting personal money in to make payroll

5:14 Costing out the last five houses

5:36 His busiest year, not his best year

6:07 Volume without margin is not growth

6:24 He had no instruments

6:44 Feelings versus facts

7:31 Your instinct is a hypothesis

7:53 Restaurants, coaches and doctors all measure

8:52 So do Amazon and Chick-fil-A

9:27 Awareness, decisions, results

10:06 The airplane dashboard

10:19 The captain who flies by feel

11:01 A feeling is not knowing

11:28 What a pilot actually watches

13:18 Small corrections, not heroics

14:09 You are the pilot

14:32 What is on your dashboard this week

15:27 That discomfort is information

15:54 Pilots crash because they ignore it

16:28 The reports nobody opens

17:29 Let us build the dashboard

17:52 Gauge 1: Cash

18:27 Growth eats cash

19:09 Gauge 2: Gross margin

20:09 Gauge 3: Sales pipeline

21:11 Gauge 4: Backlog

22:20 Gauge 5: Cycle time

23:12 Gauge 6: Warranty

23:58 Gauge 7: Employee turnover

24:55 Gauge 8: Customer satisfaction

26:02 Why leaders avoid their numbers

26:42 Fear

27:04 Embarrassment, and nobody ever taught you this

27:55 Too busy, and a CPA who was never asked to teach

28:41 Forty lines on a report, and nobody owns it

29:28 What you avoid controls you

29:58 This week's leadership challenge

30:29 Pick five numbers

31:14 Look at them every Monday

32:07 Say them out loud to your team

32:30 Back to the builder with 24 houses

32:57 Fewer houses, more money

33:22 What is coming next week

34:37 Close

Learn more: ChoiceConsultingMan.com/Podcast

A video version of this episode is on YouTube. Search Choices Create Change.