The Nine Numbers You Need to Know for Business Success

introduces

Builder Academy

The Nine Numbers You Need to Know

Builder-Resources.com Builder-Academy.com

A Construction Business Curriculum Designed to Help the Independent Builder Transition to a Lean

and Efficient Technology-Based Environment

Builder Resources

There is only one number that ultimately

measures the success of your enterprise.

Builder-Resources.com

Wealth


The first step is to break the effort of WEALTH-BUILDING into the following three measurable categories:

However, knowing that you seek wealthdoes nothing to help you achieve wealth.

You need:•Manageable components•Metrics •Systems•Processes

Wealth


The Components of Wealth-Building

• CASH FLOW is the stream of money you are able to generate, from which you will extract...

• INCOME, which is the amount of money you can convert to your use from the stream of money you have generated, the excess of which forms your...

• NET WORTH, which is comprised of the assets you own free and clear and represents your...

• WEALTH.

Wealth

Cash Flow

IncomeNet Worth


Wealth Production Metrics

Now we have names to use in defining the wealth-production process, but..

What are the metrics of • the Cash Flow system, • the Income system, and • the Net Worth system?

They are the

Nine Numbers.

Wealth

Cash Flow

IncomeNet Worth


CASH FLOW

The Cash Flow system is made up of:

Starting Cash +/- Cash In/Out = Ending Cash

CASH FLOW

Ending Cash

Cash In/OutStarting Cash


INCOMEThe Income system is made up of:

Sales - Costs = Profit

INCOME

Profit

CostsSales


NET WORTHThe Net Worth system is made up of:

Assets = Debts + Net Worth

NET WORTH

Net Worth

DebtsAssets


THE NINE NUMBERS

From which are derived…

THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth


THE NINE QUESTIONS

How well do you know your business?

THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth


THE NINE QUESTIONS

THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

Starting Cash - how much cash was in your account at the beginning of the period?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Cash In/Out - how much money came in and/or went out during the period?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Ending Cash - how much cash is in your bank accounts now?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Sales - how much business did you do during the period?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Costs - what was the total cost of doing business during the last period?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Profit - did your sales exceed your costs for this period?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Assets - what do you own right now?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Debts - what do you owe right now?


THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth

THE NINE QUESTIONS

Net Worth - IS YOUR BUSINESS MAKING YOU WEALTHY?


The Nine Numbers & Nine Questions

1. Starting Cash – how much cash was in your account at the beginning of the period?2. Cash In/Out - how much money came in and/or went out during the period?3. Ending Cash - how much cash is in your bank accounts now?4. Sales - how much business did you do during the period?5. Costs - what was the total cost of doing business during the last period?6. Profit - did your sales exceed your costs for this period?7. Assets - what do you own now?8. Debts - what do you owe now?9. Net Worth - Is your business making you WEALTHY?

Can you answer the questions tied to each of the numbers?

THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth


The Nine Numbers

If you know the answers to most of those questions, you have a basic understanding of the financial systems of your business.

You just need a structure to put the numbers into so they make sense.

That structure, that system, is Accounting.

Accounting is the language that business uses to talk about money.

Just like we structure our sentences and paragraphs to speak in a language, we structure the Nine Numbers in a specific way to speak the language of accounting.

THE NINE NUMBERS

Starting Cash

Cash In/Out

Ending Cash

Sales

CostsProfit

Assets

Debts

Net Worth


The Nine Numbers® - Speaking the Language of Accounting

The "Nine Numbers" encapsulate all the important financial information you need to know about your business.

They are the basic components of:

•your Cash Flow Statement the checkbook

•your Income Statement the shoebox depository

•Your Net Worth Statementthe financial snapshot

Start Cash

Cash In/Out End Cash

Sales Costs Profit

Assets Debts Net Worth

Cash Flow Statement

Income Statement

Net Worth Statement


Cash Flow StatementStarting Cash - Comes from the asset section of the Net Worth Statement.

Cash In/Out (Transactions) - Are, for the most part, your cash sales and cash expenses for the period. - Could also include the -down-payment on a pickup, -the purchase for cash of an expensive tool, or -short-term money borrowed for operations.

Ending Cash- What is left in your checking account at the end of the period.- Balance is recorded in the asset portion of the Net Worth Statement.

Start Cash


Sales Costs Profit


Cash Flow Statement

Income Statement

Net Worth Statement


Sample Cash Flow Statements

View the CashFlow Statement in"Checkbook" format

View the CashFlow Statement in"Category" format

Download theInteractive Cash Flow Statements

(Click to View or Download)

http://www.builder-resources.com/support-files/cashflowstmt2.pdf

http://www.builder-resources.com/support-files/cashflowstmt1.pdf

http://www.builder-resources.com/Cash-Flow-Download.html


Income StatementSales contribute to the- Cash-in on the Cash Flow Statement, or- Accounts Receivable on the Net Worth Statement.

Costs paid in cash show up in - Cash-out section of the Cash Flow Statement. - Cost for materials, subcontractors, utilities , etc bought but not paid for go into Accounts Payable on the Net Worth Statement.

Profit - Is NOT CASH. You do not get to spend Profit. - Is the difference between Sales and Costs.- Shows up in the Income Statement- Is recorded in the Accrued Earnings section of the Net Worth Statement.

Start Cash


Sales Costs Profit


Cash Flow Statement

Income Statement

Net Worth Statement


Net Worth StatementAssets are what the business owns- Cash, -Money owed by customers, -Equipment, buildings, and land.

Liabilities are what the business owes, - Materials purchased on account, - Subcontractor billings unpaid, and- Money borrowed for equipment, buildings and land.

Net Worth is the wealth of the business. - Your wealth.- Report card of how well you are doing. - Assets minus Liabilities,- Includes the accrued Profits from this and previous periods.- Positive number = You are doing well.- Negative number = fix the problem.

Start Cash


Sales Costs Profit


Cash Flow Statement

Income Statement

Net Worth Statement


The Nine Numbers® - Answering Three Important Questions.

Start Cash


Is the business going to SURVIVE?



Is the business HEALTHY?

Sales Costs Profit



Is the business making me WEALTHY?



Would you like more about running a

ConstructionBusiness?

Would you like to see more about this topic?

http://www.builder-resources.com/NineNumbers.html

http://www.builder-resources.com/

http://www.builder-resources.com/Cash-Flow.html

http://www.builder-resources.com/Survive.html