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The Nine Numbers You Need to Know for Business Success
Jul 28, 2015
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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.
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Wealth
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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
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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
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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
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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
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INCOMEThe Income system is made up of:
Sales - Costs = Profit
INCOME
Profit
CostsSales
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NET WORTHThe Net Worth system is made up of:
Assets = Debts + Net Worth
NET WORTH
Net Worth
DebtsAssets
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THE NINE NUMBERS
From which are derived…
THE NINE NUMBERS
Starting Cash
Cash In/Out
Ending Cash
Sales
CostsProfit
Assets
Debts
Net Worth
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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
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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?
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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?
Builder-Resources.com
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?
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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?
Builder-Resources.com
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?
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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?
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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?
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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?
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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?
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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
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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
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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
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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
Cash In/Out End Cash
Sales Costs Profit
Assets Debts Net Worth
Cash Flow Statement
Income Statement
Net Worth Statement
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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)
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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
Cash In/Out End Cash
Sales Costs Profit
Assets Debts Net Worth
Cash Flow Statement
Income Statement
Net Worth Statement
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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
Cash In/Out End Cash
Sales Costs Profit
Assets Debts Net Worth
Cash Flow Statement
Income Statement
Net Worth Statement
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The Nine Numbers® - Answering Three Important Questions.
Start Cash
Cash In/Out End Cash
Is the business going to SURVIVE?
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The Nine Numbers® - Answering Three Important Questions.
Is the business HEALTHY?
Sales Costs Profit
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The Nine Numbers® - Answering Three Important Questions.
Is the business making me WEALTHY?
Assets Debts Net Worth
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ConstructionBusiness?
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