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The Nine Numbers You Need to Know for Business Success

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Accounting in the language of business finance. The nine numbers are the most important concepts in accounting. You must be familiar with them to really understand your business.

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The Nine Numbers You Need to Know for Business Success

  1. 1. 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
  2. 2. There is only one number that ultimately measures the success of your enterprise.
  3. 3. Builder-Resources.com Wealth
  4. 4. The first step is to break the effort of WEALTH-BUILDING into the following three measurable categories: Builder-Resources.com However, knowing that you seek wealth does nothing to help you achieve wealth. You need: •Manageable components •Metrics •Systems •Processes Wealth
  5. 5. The Components of Wealth-Building Builder-Resources.com • 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 Income Net Worth
  6. 6. Wealth Production Metrics Builder-Resources.com 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 Income Net Worth
  7. 7. CASH FLOW The Cash Flow system is made up of: Starting Cash +/- Cash In/Out = Ending Cash Builder-Resources.com CASH FLOW Ending Cash Cash In/Out Starting Cash
  8. 8. INCOME The Income system is made up of: Sales - Costs = Profit Builder-Resources.com INCOME Profit CostsSales
  9. 9. NET WORTH The Net Worth system is made up of: Assets = Debts + Net Worth Builder-Resources.com NET WORTH Net Worth DebtsAssets
  10. 10. THE NINE NUMBERS From which are derived… Builder-Resources.com THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth
  11. 11. THE NINE QUESTIONS How well do you know your business? Builder-Resources.com THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth
  12. 12. THE NINE QUESTIONS Builder-Resources.com 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?
  13. 13. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Cash In/Out - how much money came in and/or went out during the period?
  14. 14. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Ending Cash - how much cash is in your bank accounts now?
  15. 15. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Sales - how much business did you do during the period?
  16. 16. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Costs - what was the total cost of doing business during the last period?
  17. 17. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Profit - did your sales exceed your costs for this period?
  18. 18. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Assets - what do you own right now?
  19. 19. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Debts - what do you owe right now?
  20. 20. THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth THE NINE QUESTIONS Builder-Resources.com Net Worth - IS YOUR BUSINESS MAKING YOU WEALTHY?
  21. 21. 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? Builder-Resources.com 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
  22. 22. 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. Builder-Resources.com THE NINE NUMBERS Starting Cash Cash In/Out Ending Cash Sales CostsProfit Assets Debts Net Worth
  23. 23. The Nine Numbers® - Speaking the Language of Accounting Builder-Resources.com 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 Statement the financial snapshot Start Cash Cash In/Out End Cash Sales Costs Profit Assets Debts Net Worth Cash Flow Statement Income Statement Net Worth Statement
  24. 24. Cash Flow Statement Builder-Resources.com Starting 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
  25. 25. Sample Cash Flow Statements Builder-Resources.com View the Cash Flow Statement in "Checkbook" format View the Cash Flow Statement in "Category" format Download the Interactive Cash Flow Statements (Click to View or Download)
  26. 26. Income Statement Builder-Resources.com Sales 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
  27. 27. Net Worth Statement Builder-Resources.com Assets 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
  28. 28. The Nine Numbers® - Answering Three Important Questions. Builder-Resources.com Start Cash Cash In/Out End Cash Is the business going to SURVIVE?
  29. 29. The Nine Numbers® - Answering Three Important Questions. Builder-Resources.com Is the business HEALTHY? Sales Costs Profit
  30. 30. The Nine Numbers® - Answering Three Important Questions. Builder-Resources.com Is the business making me WEALTHY? Assets Debts Net Worth
  31. 31. Would you like to see more about this topic? Builder-Resources.com

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