“Back to basics”: Know where your company stands financially

Mike PersingerApril 13th, 2020

The times might be complicated, but Ellen Rohr’s message is simple. If you want to run a successful business in the home services industry, you have to know where the money is coming from, and where it’s going. 

Rohr, Chief Operating Officer of Zoom Drain and an author, consultant and motivational speaker, specializes in uncomplicating business in the trades. 

Rohr sat down with ServiceTitan for a webinar at one of the most complicated times in business history. As the COVID-19 pandemic continues to sweep the globe, changing life and business for almost everyone, Rohr says she has done some soul searching. 

 Where did she land? In the same place she always does: Business is simplest when you focus on the basics. 

“When it comes to the money, honey, I am a master of the basics,” she said. “In times of crisis, going back to the basics is always a good plan.”

Those basics, Rohr said, work in good times and bad. 

“Revisit what you are doing, what you swore in the first place — to get back to your mission, back to your why,” she said. “Get clear with the leadership team for starters, and then disseminate that message throughout the organization.

“The soul searching I have done over the course of the last few weeks includes a renewal of my vows, a recommitment to our mission. 

“Our mission has not changed: To demonstrate the best that business can be. At Zoom Drain, we don’t aim to be perfect, we aim to be better than anyone else in our space.”

The two factors front and center at this time of Coronavirus crisis are simple, too. She wants Zoom Drain, as essential service providers during the pandemic, to be safe and solvent.

“Our No. 1 objective is to keep our team safe, and safely working,” Rohr said. “It’s requiring us to step up our game in light of the COVID-19 reality, which is a great thing.”

The second objective, not independent of the first but essential alongside it, is to reach the financial goals of growth, profits and cash. 

“Money buys options,” Rohr said. “To the best of our ability, we’re working to make sure every member of our team is safe and solvent.”

And that financial security extends beyond the business, Rohr said. 

“It’s not just solvency for the business, it’s the team members, too,” she said. “You continuing to work is a way to provide solvency in every family.”

For that to happen under any circumstances, business owners need to understand their financial situation at all times. But in leading at a time of crisis, there is not time to learn on the job.  

“We don’t have the luxury of time,” Rohr said. “I’m happy to share the framework of what works, and grateful to have the platform to do it.” 

For your company’s financial health, the framework has not changed but the importance is heightened. Rohr offered her list of the important things to do, and a warning of sorts about urgency.

“This has to happen now,” she said.  

 Here are the top takeaways from her live webinar with ServiceTitan: 

1. It’s your money. Know where it goes, and where it comes from. 

Rohr said keeping track of the money coming in and the money going out, in close to real time, is key. And now, more than ever, not knowing will slow you down, Rohr said. 

“It’s going to be hard to sleep at night (if you don’t know),” Rohr said. “Even if you’re digging a hole at any point, it’s better knowing than not knowing.”

2. Make sure you have taken care of the basics.

These things should be done, or almost done, now. 

  • Your 2019 financials, even if you don’t have to file or pay yet. “There was just an extension (on tax filing, to July 15), but that doesn’t matter, because we want to know,” Rohr said. “Get 2019 cleaned up.”

  • An up-to-date balance sheet and profit-and-loss statement, every week. “The balance sheet is king,” Rohr said. “(The balance sheet and P&L), those are the Grand Poobahs of financial reports. Everything needs to be right.” Get accounting help if necessary.

  • The previous month is closed by the 15th, with everything entered, exported and verified. 

A month-end checklist is helpful, and verifies everything in writing. 

3. Win the month.

Job 1, in any business, is to sell for more than your costs on a monthly basis. 

There are a lot of KPIs (key performance indicators) available, but the ones Rohr looks at are: 

  • Sales

  • Cost of goods sold

  • Overhead

  • Net profit

  • Gross wages as a percentage of sales

  • Cash position on the balance sheet

  • Total debt

“All of that can fit on a one-page report,” Rohr said. “If you can just assemble those numbers and look at the few numbers from your balance sheet that are going to give you the overall score.”

In ServiceTitan, she noted, it’s possible to drill deeper — to call count, close rate and more. 

Data released by ServiceTitan showed that across the country, there have been wins even in these difficult times. “If it can be done by one, it can be done by someone else,” Rohr said. “If there are places in our industry where people are continuing to work safely and creating profits and cash, that is encouraging news.”

4. Update scenarios for the worst case, and a less than worst case. 

If the numbers are not what they need to be, if sales are down and calls are down, that’s where budgeting comes in. 

“If you’ve got statistics that show a downward trend, update the budget for what’s changing right now,” Rohr said. “The budget is, ‘I don’t have this, what would I rather have? That’s my budget. And now I’ve got a game to play.”  

Play with scenarios and use a spreadsheet or the module in QuickBooks to figure out the path. 

5. Decide if you’re going to play offense or defense.

The No. 1 expense is payroll and labor. That leaves every company with two choices: Play offense and increase sales so team members stay busy, or send somebody home.

“Just like in football, you can’t play defense all the time or you’ll exhaust your team and lose team members,” Rohr said. 

Ask yourself what you have to do to create sales right now. 

“That’s a key indicator right there,” Rohr said. “I’m always looking at labor as a percentage of sales.”

6. Set yourself up for success in the time of COVID-19.

This goes back to remaining safe and solvent. One thing the Coronavirus outbreak has taught everyone is that you can’t work without PPE. 

“Never again find yourself with less than three-month stockpile (of PPE),” Rohr said. “You’ve got to be able to continue to work safely.”

If you can, share with other contractors in your area to make sure everyone can stay safely working. 

“I want to use this platform to steer you to really great resources,” Rohr said. “The Covid-19 playbook put out by ServiceTitan is really excellent for things like how to incorporate contact-less workflows. Things are happening on a daily basis that are going to help contractors now.”

Also, be deliberate about your website, and push out information to your team and your customers from credible websites such as the CDC. “Go to the people who are the experts in a time of crisis — CDC, ServiceTitan, Franchise.org, the Small Business Association.”

7. Be a COD company.

The two grand KPIs, Rohr said, are always going to be profits and cash. Everything else is secondary. That means taking payment on delivery, in cash, is better. Accounts receivable is the one KPI that can harm an otherwise solid company.

“Even for strong companies, I would have a question mark next to accounts receivable who are usually quite reliable right now,” Rohr said. 

If you’re going to work for a commercial company, take their credit card. 

“I’m not a big fan of loaning people money,” Rohr said. “Are you ever going to help a brother or sister out? Of course. But you are going to kill the goose that lays the golden egg if you extend too far.” 

8. Find financial resources locally through the Paycheck Protection Program.

The CARES Act, the federal financial relief program approved by Congress, is a lifeline for those in the trades and other small businesses. To take advantage, leverage local relationships. 

That starts with the Paycheck Protection Program (PPP), a forgivable loan program totaling $350 billion (and potentially more) intended to keep employees on the payroll through the crisis. PPP loans are available through hundreds of SBA-approved banks nationwide. 

“If you have a relationship with a local banker, that is the person you want to be calling right now,” Rohr said. “Those are the people who are at the front of the list right now, those folks who called on their banker and said, ‘How do I do this?’”

For the best chance of success, have your application in order.

“If you have all that data, if your books are up to date, you know you can fill out this application and be done with it,” Rohr said. “If I’m a banker and I’m looking at a hot mess of an application and I’m looking at your really tidy one, all pulled together with real data, which one am I going to choose?”

And don’t let pride keep you from taking the money. 

“If you are in a position to capitalize on PPP or a small business loan, take them,” Rohr said. “Take the money. You are a steward of money. Money ebbs and flows. You, I trust, if you get this money are going to be a good steward.”

Q&A

How should companies address advertising and marketing expenditures?

Poor decisions in marketing are killers, Rohr said. But companies have to track data, including how many calls are generated by each marketing driver, and what the cost per call is. 

“I am so glad that on my team there are smarter marketers than me,” Rohr said. “This is not a marketing seminar because I have been very humbled by this.”

From a financial standpoint, tracking the data is essential. Rohr said 20 of every 100 calls she gets are from online marketing, and the other 80 percent from relationship marketing. “Go back to the stuff that works,” Rohr said. “Go back to customers who love you.”

Even in a crisis situation, a company has to market itself. 

I don't recommend you stop marketing right now,” Rohr said. “I don’t recommend that at all. If others in your market are backing off, that’s an opportunity.”

That could include helping neighbors during the pandemic in any way you can, from delivering a grocery order to handing out rolls of toilet paper. 

“No gesture is too small,” Rohr said. “Any human-to-human contact, we have an opportunity to be kind.”

What’s a good ratio for cash flow vs. current liabilities? 

A general rule of thumb — a 2-1 ratio — will help you sleep better at night, Rohr says. But if most of that cash flow is stuck in accounts receivable, you’re still going to be scrambling. This should be a wakeup call. “Don’t have too much in accounts receivable, and expand the market to people who will pay today,” Rohr said. 

How should companies handle PPP money? Keep it in a separate account?

That’s a possibility, but you should discuss PPP credits and debits with your accountant. “A separate checking account is not a bad idea, but it’s one more account that you have to keep current,” Rohr said. “It can’t just be money moving around in Quickbooks. It has to be a legit account that reconciles with that.”

What’s the best KPI percentage for labor to revenue? 

Yours might be different, but based on past data and for her industry, Rohr, as a general rule for a service company, uses 20 percent for field labor and another 10-15 percent for administrative staff, for a total of 30-35 percent. “Some very successful contractors have different percentages, so you might use those (general guidelines) for training wheel percentages, but that’s just a starter. Match that against your budget and then change it.” 

How can a company enforce a COD culture? 

If your company isn’t getting payment when services are rendered, it’s a training issue, Rohr says. 

“It’s probably that poor service technician who has not been appropriately trained to take the money,” she said. “You have to set up your sales techs to win.” 


ServiceTitan is a comprehensive home and commercial services business software solution built specifically to help companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.

Ready to learn more about what ServiceTitan can do for your business? 

Contact our team to schedule a demo today.

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