Featured Coaching Training: The Importance of Knowing Your Numbers
How many customers do you need to break-even? How many customers do you need to stay in business? How many customers do you need to achieve your financial goals? Knowing these metrics is vital to your business. Watch Clay Clark teach about the key performance indicators and metrics and every business owner must know.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Accounting: -Episode 1 (Part 1 of 1)
Action Step: Determine how much profit you need to earn per week in order to afford the achievement of your life goals.
Action Step: Determine how much profit you can make per customer after all expenses have been paid.
Remember to factor in:
- Your monthly fixed costs
- The costs of producing each item or selling each service
Action Step: Determine how many transactions per month you must have to break even.
Action Step: Determine how many transactions per day you must have to break even.
Action Step: Determine how many transactions per day you must have to achieve your goals.
Editor's Note: Daily Goal To Achieve Goals: 9.1 per day (times 20 days of work per month)
Ample Example: In one of Clay's businesses, they produce a produce a profit of approximately $8.00 per haircut.
In Doctor Joe's business model, he is able to produce a profit of $300 per patient.
**Note: You have to go to school slightly longer to
become an optometrist versus becoming a hair stylist.
Mentally Marinate: What is your true break even point?
Ask Yourself: How many transactions does Doctor Joe have to do per day in order to achieve a $10,000 per week profit?
This Just In...: Doctor Joe must have 9.1 patients per day to earn a profit of $10,000 per week. -Author's Name
This just in (again)...: Doctor Joe must have 9.1 patients per day in order to achieve his financial goals.
Action Step: You must post the daily number of customers you need to achieve your financial goals some place where you can always see it.
Ample Example: Back in the day...Clay used to have to get 17 customers per week in order to achieve his financial goals. -Author's Name
Ample Example: 50 Patients Per Month = Break Even
2.5 Patients Per Day = Break Even
9.1 Patients Per Day = $10,000 of Profit Per Week
CLAY CLARK: So how many 300s do you have to do a month just to break even?
CLAY CLARK: Next think to talk about is knowing your numbers. And knowing your numbers is a weird thing, because most businesses don't know their numbers. So what we're going to do is for the sake of your privacy and the appearance, we want to make sure we're not taking and sharing your numbers with the world. But we're going to say, as far as knowing your numbers, let's say that you want to get to $10,000 of profit per week. And in the DJ business if I did your wedding, I would make $167 of profit per wedding after all expenses, bills paid. If I come in and I see you, and again I'm coming up with this goal of $10,000 per week, but if I see, you diagnose me, and I buy glasses from you or contacts, and it's a win-win value exchange, what is the profit that you could make per customer that you think you could do per customer?
MAN: Including all expenses or just cost of goods?
CLAY CLARK: Really, what we're going to do is we're going to say right now after the cost of goods, the cost of labor, what we're gonna call the variable cost per patient, how much is a product can be made per patient?
MAN: On average, about $300.
CLAY CLARK: $300?
CLAY CLARK: OK. Now the problem says $300 profit, I'm going to say, after variable costs.
-Now the problem is that people go, well, he's just killing it. He's making tons of money. Well, let's talk about it. Medical school wasn't free.
-Then you have an office, then you have a lease, and you have all that. So how many $300 do you have to do a month just to break even?
MAN: Right around 50.
CLAY CLARK: 50, just to break even?
CLAY CLARK: OK, so you have 50 equals break even. How many days a week are you open?
CLAY CLARK: OK, so let's get into this. And so I'm going to take out my super calculator here and see if I can figure it out here for you. So we have 50 to break even, and you have six days or five days a week you see patients. Average month, you see patients 20 days a month, probably. So we need to see 2.5 patients a day, per day equals break even. Do you agree with that? That seem pretty accurate?
-So how do we need to see to produce the profit we need to get to in your mind?
MAN: If we're looking for $10,000 a profit, it's probably--
CLAY CLARK: --per day.
MAN: --probably finally a least about five or, probably more than that, actually. Probably closer to 10 a day.
CLAY CLARK: And I know off the top of our head, it's going to be hard. So what I'm going to do is I'm going to say here is 2.5 is break even. Now we've got to get to $10,000. So $10,000 per week, and it's $300 a profit. I'm going to take the $10,000, and I'm going to divide that by, $10,000 divided by our $300 a profit. I'm going to go well, that's 33.3. And then we've got to divide that by five days. Right? So divided by 5. So that's 6.6 per day, but you've got to add on the tax of breaking even of 2.5.
-So you say plus 2.5, bam. So it's 9.1 patients a day. 9.1 patients per day equals $10,000 profit per week. You think the math works?
MAN: Sound good.
-So what I want to do, and I'm going to have our program observer type this up here for you, because this is super big. Make sure you leave with this stuff. And he'll type this up. But we need to know, you and your wife need to know, we need to know, they need to know. And you can change these numbers as it becomes whatever your actual goals are, but we need to get to 9.1 patients per day in order to achieve your financial goals. And then what's the point? Faith, family, finances, it should all be funded by that. Cool?
-So 9.1, so homework for you, this is in action now, I'm going to have our program observer type this up. I need you to put that number somewhere real, or whatever the number is for you. So you've got to have it. So I remember when I was building the DJ business. I was like, I have to get every single day to make $100,000. I had done the math. And I'm like, 167, that'd be like five a week would not give me enough. And I would do the math and I would go, I have to get about 17 clients a week to hit my goal.
So then you start putting that-- it becomes a mantra. You put it on the mirror. So you want to go and put that somewhere you see it every day. And everything we're doing today is really related to that. Make sense?
MAN: Yeah, it does.
-OK, so we'll knock this out. But again, the numbers I want our program observer to jot down is 9.1 patients per day equals $10,000 profit per week. 2.5 patients per day equals break even. 50 patients for the month per month, equals break even. $300 profit, so we don't forget those ideas, because what I wanted to do is I want to teach you these moves that don't cost you a lot of money to do.