0:00:00 Ben Wright: I’ve been trying and you know, I’ve been tested.
0:00:06 C: Welcome to the Friends in Business podcast with your hosts, Ben Wright and Jemima Ashley. Ben, known as the sales strategist, and Jemima, our resident visibility expert, are here to share their wealth of knowledge and experience with a little fun along the way. Whether you’re a leader, entrepreneur, or aspiring business owner, this is the podcast where we share everything we know about business to help you succeed.
0:00:31 Jemimah Ashleigh: Let’s get started. Welcome to the Friends in Business podcast.
0:00:44 Ben Wright: Welcome back to another positive, energetic build run of friends and business.
0:00:51 Jemimah Ashleigh: So, the number of life.
0:00:54 Ben Wright: The number of life.
0:00:54 Jemimah Ashleigh: Yeah.
0:00:55 Jemimah Ashleigh: What is the meaning of life?
0:00:56 Ben Wright: 42. Oh, I thought you were going to say that’s my age. I am 42.
0:01:00 Jemimah Ashleigh: Yes, you are.
0:01:00 Ben Wright: So I’m right. I am in the meaning of life right now. Is that what I’m.
0:01:04 Jemimah Ashleigh: Yeah. The meaning of life is this. Speaking of life, I’ve just been. We’re obviously recording in our normal podcast studio. I was pretty sure that I saw a snake earlier and I was very grateful that I didn’t. I did have a moment of. And it turned out to be one of your daughter’s balloons. Just having to go past the door in a way that scared me. How many animals do you get here? Cause I know you get snakes, obviously. Like Queensland definitely has a few carpet pythons, ones hanging around. What else have you got?
0:01:33 Ben Wright: Funny. So what do we get? In the last kind of six months, we’ve had probably four or five red bellies, a couple of pythons, kangaroos, red belly, immediately.
0:01:42 Jemimah Ashleigh: Red belly, immediately no. Pythons, being a farm girl from Victoria, don’t like snakes, but I know they can’t hurt me. Yeah, kangaroos. Yeah, that’s fine.
0:01:50 Ben Wright: Kangaroos sitting outside my office are really nice. Goannas, lots of goannas. Ducks, certainly have plenty of ducks. Geckos galore.
0:01:57 Jemimah Ashleigh: Yeah, they’re everywhere.
0:01:59 Ben Wright: Bloody cane toads. Boy, are they everywhere. Yeah, yeah. And do you know what happened actually, two nights ago? The night before we got here was I came out in the morning and my wife said, ben, come here, Shaina. She said, come here. And I said, what is it? And Amali’s bathers had been pulled off the fence and they’d been dragged down under the roots in one of the trees. So something had taken a liking to her bathers.
0:02:22 Jemimah Ashleigh: And there’s a mine now. Thank you.
0:02:23 Ben Wright: And they’re down. And we could just see the edge of the bathers. And she said, what are you going to do to get them out? And I said, well, I’m going to put my hand in and I’m going to get them. And as my hands going into this cold to get these baited down, I realized it probably wasn’t the greatest move.
0:02:34 Jemimah Ashleigh: But we need the tongs.
0:02:35 Ben Wright: Yeah, no, the bathers came out, my hand came out. But yeah, we get some great wildlife. Sharks. There’s actually quite a few sharks around here. I swam over one. Not all that long ago. In fact, after I swam over it, I then ran on water. Yeah, I’ve ever done that.
0:02:47 Jemimah Ashleigh: Great. Excellent. What kind of shark was it? I’m not worried about sharks that much. I’m in their home. We’re chill. That’s okay. More worried about snakes.
0:02:56 Ben Wright: Well, do you know what? You show me a snake and you can have the sharks. sold.
0:02:59 Jemimah Ashleigh: Sold. Done. I mean, I mean, half heart swaps.
0:03:01 Ben Wright: But yeah, we certainly had to control the cane toad population the recent time, so we, we removed them from the property.
0:03:07 Jemimah Ashleigh: And yeah, yeah, you know, you can.
0:03:08 Ben Wright: Read into that however you want.
0:03:09 Jemimah Ashleigh: Right.
0:03:10 Ben Wright: But they’re no fun to have around. So today’s topic is actually about the importance of numbers. I did know that it is rare that I will come across a business owner or a sales leader who is on top of their numbers. And it staggers me, right, that there are so few leaders who are on top of it. And normally the feedback that I receive is I’m not on top of them because it’s not my strength.
0:03:38 Jemimah Ashleigh: Oh, so dangerous. Okay. Because numbers are the lifeblood of a business no matter what. How you look at this, it’s either you’re dying or it’s your lifeblood and it’s the oxygen. And you need to know both.
0:03:50 Ben Wright: They very much are a scorecard as to how the business is going. Some numbers are vanity metrics. That is how many leads you’re generating is a vanity metric unless you can tie them to other numbers. Which how many leads are generating equals how many quotes. Which has a pipeline gestation period of this timing results in this many conversions. Right. Then those numbers are impactful. Other numbers are purely black and white. Your profit, your cash flow, and they’re ones you need to know.
So today what we’re going to focus on is we’re going to start as a business leader around metrics that you need to know. And we’re actually going to funnel down into some of your key sales metrics. And we don’t talk a lot around operational delivery in this business. I’m certainly happy to do so. But I think business metrics into sales metrics are the most impactful that I can see in businesses because all the other metrics tend to flow from those two or those two categories. So I think I’m in. I’m in the hot seat today again.
0:04:43 Jemimah Ashleigh: You are. I’m looking forward to this actually. So let’s start with what kind of numbers do we.
0:04:48 Ben Wright: Sales. Yeah, yeah. So for me, the number one set of metrics that you need to know is around your P and L. You have to have a budgeted or forecasted profit and loss statement.
0:05:01 Jemimah Ashleigh: Yeah.
0:05:02 Ben Wright: If you don’t have one of those, you are simply aiming for. She’ll be right about that. However it goes, I love that you’re aiming for.
0:05:12 Jemimah Ashleigh: She’ll be right. And a P and L is one of those things that most businesses have access to immediately or can get and can ask for it very, very quickly.
0:05:22 Ben Wright: Yeah, yeah. Certainly a retrospective Pand L was easy to get.
0:05:24 Jemimah Ashleigh: Right.
0:05:24 Ben Wright: You’d be using Xero, you’re using Moab, using some other form of system, an ERP system. Right. That’s where you know something enterprise level.
0:05:30 Jemimah Ashleigh: Right.
0:05:31 Ben Wright: Fantastic. But that’s all looking backwards. What I’m talking about here is your forward forecast budget. I build them with most business owners in between one and three hours.
0:05:39 Jemimah Ashleigh: Perfect.
0:05:40 Ben Wright: That’s how long it takes to do it. Once a year, between one and three hours. And then what we do is we get to line up all of our activities around that. I don’t think you need to memorize your P and L, your budgeted P and L, but you certainly need to know what you’re targeting and then measure yourself against it each and every month for the majority of businesses. Right. Your books, small businesses, 100,000-200000-500,000, a million dollars. Your books are updated pretty promptly. If you, particularly if you’ve got an external bookkeeper, as you get bigger and bigger right up through. I’ve got billion dollar businesses that still have their accounts pulled together within 14 days by the end of the month.
0:06:16 Jemimah Ashleigh: Yeah.
0:06:16 Ben Wright: So if you’re taking longer than that. Then there’s complexities that I think are significant and you know, you probably, I would suggest you want to work through those. But having real time data where you can assess your performance against is critical because what you then know is if what you’re doing is working, if you’re overspending, if you’re underspending, if you’re driving the right amount of revenue, if you’re making the right amount of profit. If all that work you’re doing is being measured As a scorecard. What gets measured gets managed. I think you say what gets measured gets done is what I say. Right. So the first one is to have a budgeted P and L that you then review each and every month against your actual performance.
0:06:48 Jemimah Ashleigh: Your P and L that you’re the forecast one that you’re doing. Do you break that into monthly or do you break that in just to an annual?
0:06:55 Ben Wright: Annual budget with monthly.
0:06:57 Jemimah Ashleigh: Amazing. Sorry, there’s no excuse to not be looking at that.
0:07:00 Ben Wright: Yeah, yeah, yeah. And then from there was such a loaded question.
0:07:03 Jemimah Ashleigh: Was such a loaded question. I knew the answer to that.
0:07:04 Ben Wright: But I was gonna ask the next piece. To me though, are the metrics you then need to know off by heart.
0:07:09 Jemimah Ashleigh: Yes.
0:07:10 Ben Wright: And here’s. Here’s how it goes as a business owner. You need to know what your target revenue is per month. And clearly that will scale off in businesses or growth rates. You need to know that minimum baseline level of revenue that makes the business your profit target. Right. So if you’re targeting 10% and you need $100,000 in revenue or $800,000 in revenue per month, you need to know that number. It’s your profit target. You need to know your gross profit number. So for every dollar you sell, what’s the percentage that should be coming into your pocket?
0:07:39 Jemimah Ashleigh: Yes.
0:07:39 Ben Wright: So if you’re a $200,000 a month business and you have a gross profit of 40% that you’re making $80,000 at GP Line.
0:07:46 Jemimah Ashleigh: Yes.
0:07:47 Ben Wright: You need to know those two off by heart. So every time you look at a P and L or any type of transactional deal, you know. Right. Here’s my target revenue. Here’s my target dollar.
0:07:55 Jemimah Ashleigh: Yes.
0:07:56 Ben Wright: GP per revenue dollar or cents GP per revenue dollar. The last one is the overheads to run your business every month
0:08:02 Jemimah Ashleigh: Knowing in the numbers of what it actually costs to do all of this.
0:08:08 Ben Wright: Exactly Right. So if you’re at $200,000 a year business, that makes a 40% GP so $200,000 in revenue, you’re banking $80,000 in gross profit. And you know that it costs you $60,000 a month to run your business.
0:08:22 Jemimah Ashleigh: Yeah.
0:08:22 Ben Wright: They’re the numbers you need to know.
0:08:24 Jemimah Ashleigh: Right.
0:08:24 Ben Wright: Which leads you to your fourth one, which is your net profit target. Right. $200,000 in revenue, $80,000 gross profit, $60,000 in expenses. That brings you down to $20,000 in net profit. So. So they’re the four numbers you need to know my revenue target, my gross profit target, my monthly expenses, and my net profit for me. Fundamentally, right. If you can’t memorize that, get a post it note, put it on your computer, type it into your phone, tattoo it on your forearm. I don’t mind. Whatever works for you. Tattoo.
0:08:55 Jemimah Ashleigh: Do not get the tattoo
0:08:57 Ben Wright: Cause you keep your numbers change. You don’t have a lot of things.
0:09:00 Jemimah Ashleigh: Just get the lines and then you can fill it in daily as it goes up.
0:09:04 Ben Wright: I have a little temporary tattoo on my chest for my daughter as we speak today. So they’re at a, a topical point. But for me, you’ve got to know those numbers. Because when you start to make decisions and someone comes to you and says, hey, we’ve got an unexpected expense here, it’s going to be $24,000 and it’s going to impact the business. What do you want me to do? Your brain straight away goes, well, hang on, $24,000 is just over a month’s profit.
0:09:26 Jemimah Ashleigh: Yeah.
0:09:26 Ben Wright: What am I doing? What levers am I pulling to offset that?
0:09:29 Jemimah Ashleigh: Yeah.
0:09:29 Ben Wright: Do I accept that? Or do I need to go and look into ways that we can work through it? But how can I turn that $24,000 into more revenue? Whatever it may be, they are the key levers that as a business owner you simply need to be across.
0:09:41 Jemimah Ashleigh: Yes, Agreed.
0:09:42 Ben Wright: Everyone I work with knows that I’m absolutely savage. And I don’t use that word lightly. I’m savage around understanding some of your key metrics for your business because otherwise you are flying by the she’ll be right mate clause.
0:09:57 Jemimah Ashleigh: And so dangerous because like you and I have both been in business long enough. You have had multiple businesses, you know how close people can be to the edge without even realizing. You can be trading insolvent and maybe not even realize at that point. It’s because there’s always cash coming in. So it looks like there’s money there. And it is one of those really dangerous things if you don’t know.
0:10:16 Ben Wright: Yeah, yeah, yeah. And that leads me to the next metric that’s really good to know. And that’s what your safety bank balance is.
0:10:22 Jemimah Ashleigh: Yes. Love that.
0:10:24 Ben Wright: For me, with businesses, I always say if you can get to three months expenses, if you can have three months of expenses in the bank. So if you’re a $60,000 a month business run, $180,000. If you can build towards that, that’s fantastic. If you can’t do that, at least get to three months worth of wages in your business. So you know, in this instance, if you $60,000 a month of Expenses. It might be, it might be $40,000 on wages. Right. To get yourself to 120,000. And if you can’t get to that, then you need to be really clear on what your fallback line is around cash. Right. If you can’t get to three months of wages in your bank account. That $120,000 mark in this example, you need to have access to that money. Short term loan facility, personal loans, overdraft, whatever it is. But that is a number that for me, you know. And look, ideally we aim for six months, but an absolute minimum, we’re covering three months wages, if not three months expenses.
0:11:20 Jemimah Ashleigh: Yeah. I think really important to know where that, what your safety net is. Like if all goes wrong right now, what do I need to have.
0:11:30 Ben Wright: Yep, yep. Absolutely. Okay, so we’ve got, do a budget, measure it each month. We’ve got your revenue, gross profit expense and net profit target. And then we got knowing your bank balance.
0:11:38 Jemimah Ashleigh: Yes.
0:11:39 Ben Wright: Two more. We got one that’s related around debtors and payables. Always understanding or being able to quickly access your debtors and payables. You don’t need to know these off by heart, but you certainly need to be able to understand what they mean.
0:11:49 Jemimah Ashleigh: And also where they are, how to get the contact details and how to get the numbers.
0:11:53 Ben Wright: Yeah, yeah. And the key way I look at that is we want to make sure that our debtors are larger than our payables. But people often stop there and still get caught out. We want to make sure that our short term debtors are greater than our short term payables and our long term debtors are greater than our long term payables. And what I mean by that is zero to 30. Say you’re on 30 day terms. You’re zero to 30. If your payables are significantly higher than your debtors in zero to 30, you’re going to fall short. At the same thing in the long term pieces, but that’s less impactful. I tend to focus more on the short term. But right when you’re looking at the long term, generally those debtors start to fall more towards bad debt. So we need to make sure that they’re really proactively being chased up.
0:12:33 Jemimah Ashleigh: Yeah, understood.
0:12:34 Ben Wright: So few metrics so far.
0:12:37 Ben Wright: Next piece I’ll lean into is around sales numbers and I work with teams of what I call the three box model. So three boxes we need to tick and they are knowing what your targeted sales numbers are. Right. For each and every week. Or month. That actually lines up perfectly with the key metrics of your business. That’s your final box. And for me, I would say, is if you can get these three sales metrics right, you have all the power in the world to be able to dive down. And I’ll explain that briefly in a moment. But number one is your sales numbers. We’re working backwards here. Right. A backwards plan.
Number two is tip those sales numbers, what your pipeline size needs to be. Now, there’s a lot more to this, and we’re not going to be able to explain it in one podcast. But as leaders, we need to know that the healthy number of our pipeline size. That is what that is. That will deliver ourselves to aim for $100,000 in sales. If we know that we convert at 50%, that would give us a $200,000 pipeline. But if we know that that pipeline takes, on average, two months to convert, we’d need two times of that. So we need a $400,000 pipeline. This is one I often get people reaching out for help on.
0:13:41 Jemimah Ashleigh: And these numbers one thing I want to say really quickly here, Ben, I know it sounds like we’re throwing a lot of numbers around. This stuff is really important to know. And I think it is one of those things that as business owners, we can go, oh, just let my book keep. No, no. Gonna bring you back. You need to be part of this conversation at the table. But also, you know, this is one of the things that people reach out to you to have this discussion. Cause it’s so vital to get this bit right.
0:14:03 Ben Wright: And it doesn’t take long to build this. No, I think go in the sales metrics base. In fact, I’ll come to that in a moment. So we need to know what our sales numbers are, what our active pipeline needs to look like, and then how many quotes or appointments we need to be getting to each month. So we know that if we’re aiming for $100,000 of sales, we’re closing at a 50% close rate. We need to be getting to $200,000 of quotes a month. Our average quotes, $5,000. So 200,000 divided by $5,000 is 40.
0:14:32 Jemimah Ashleigh: Yeah.
0:14:33 Ben Wright: So we need to be getting 40 quotes out per month. And you can step it further to say, or do we quote every time we, you know, we get a lead? Right. We can work through that. But for me, it’s with sales numbers. It’s how many quotes have I got to get out? What’s my active pipeline? I need to be working. And then what’s the revenue target that I have there? With all of those, we can drill up and down around them, but if you get a handle of those metrics again on my website, strongestsalesteams.com/resources, there’s a piece there around three box model.
0:15:02 Jemimah Ashleigh: Go grab that. So vital.
0:15:05 Ben Wright: Yeah. There’s a little bit of complexity in it, but if you take the time to get your head around it, it can certainly happen. So that for me are the key metrics we need to go through. Do you want me to run through them at a summary level?
0:15:14 Jemimah Ashleigh: I would love you to tell me what happens if I don’t know these numbers.
0:15:17 Ben Wright: Yeah, well, it’s the she’ll be right mate piece that we talk about. Right. Where you actually lose control over the performance of your business. Now if you’re very small business and you’re doing the majority of the work. Okay. It’s a slightly different story here, but if you’ve got a team and you’re looking to grow without having control of these numbers, then it’s really hard for you to make impactful decisions based on fact. You’re relying on gut feel. And you certainly reach a point with a business where gut feel doesn’t work anymore.
0:15:47 Jemimah Ashleigh: You certainly reach a point in the business where gut feel doesn’t work anymore. Agreed.
0:15:51 Ben Wright: Yeah. If you’re a one person show and you’re out there doing your thing and you know your numbers. Right. In terms of revenue and you know what your costs are, roughly. Okay, I can live with that. But as soon as you got that team and really once you’re going north of that million dollar mark, that’s when you need to be really on top of this budget. And look, I’ll say with every business, even the smaller ones, we build out of P and L because it just builds good business skills. It just helps our customers when they’re in front of their clients and you’re starting to talk about pricing and terms and deal sizes. When they know the numbers they need to be delivering each and every month.
0:16:27 Jemimah Ashleigh: Makes it so much easier and more practical for all of you.
0:16:30 Ben Wright: Yeah, absolutely.
0:16:31 Jemimah Ashleigh: What are we doing here?
0:16:33 Ben Wright: Yeah. Well, let’s summarise these. So number one is to get a budgeted profit and loss statement done. Do it in Excel, they’re easy to do. You can get templates from everywhere and then compare it each month against your progress. Get your bookkeeper to help or learn some basic P and L skills. They won’t Take long.
Number two is around knowing your key financial metrics. Revenue, gross profit, expenses and net profit target per month. You know those four. And you’ve got perspective when you’re making decisions.
Third piece. Then runs into the difference between your debtors and your payable, particularly your short term. You need to make sure your debtors are higher than your payables.
0:17:12 Jemimah Ashleigh: Yes.
0:17:12 Ben Wright: Right. And please don’t get trapped by the overall number. We need to make sure that in the first next 30 days. Pardon me. That your debtors are greater than your payables.
0:17:21 Jemimah Ashleigh: Yeah, Understood.
0:17:22 Ben Wright: Last but not least, a little bit more complex is the three box model. Understanding how many customers you have to meet or quote a month, the size pipeline you should be working and then what that leads to in terms of numbers. Because all of those work within each other to show your close rates, to show your number of appointments, how hard your team’s working, whether or not you’re getting enough leads in the business. All super, super impactful. But for me, that’s the majority of the financial suite you need to know.
0:17:46 Jemimah Ashleigh: Yeah. Amazing.
0:17:47 Ben Wright: You get on top of that as a leader or as a sales leader. Sales leader. That’s three box models certainly applies. The gross margin certainly applies. Right. Having a budget certainly applies. Right. Maybe you won’t worry about debtors and payables as much. You won’t worry about the overall business expenses. But yeah, there’s some things in there, as a sales or divisional leader that are really important.
0:18:08 Jemimah Ashleigh: And just that website. One more time, Ben. Cause we’re all gonna need to run to this. Go and get these documents.
0:18:14 Ben Wright: Yeah, yeah. Strongestsalesteams.com/resources.
0:18:19 Ben Wright: And you’ll see in there the one called the three box model. There’s a few things in there will take you some time to get your head around, but certainly I hope you enjoy it.
0:18:25 Jemimah Ashleigh: And also reach out to Ben. He’s the best at this stuff. This is the only person I would speak to about this stuff.
0:18:29 Ben Wright: I do love working around numbers.
0:18:31 Jemimah Ashleigh: Such a nerd. And I’m here for it.
0:18:33 Ben Wright: Thank you. I love it. Well, everyone, thank you very much. There’s a bit in there for you to digest. Please just carve out a few minutes after today to go and have a think about how you could apply some of this to your business. Even if you aim to do one a month for the next four or five months. Reach out to Jemimah or I if you need some help. We’ve been your friends in business.
0:18:51 Jemimah Ashleigh: We’ll see you next week.
