Half the year is gone. Six numbers worth pulling before July ends

Most small businesses look at their numbers twice: at tax time, when it is far too late to change anything, and when something goes wrong. The half year point is more useful than either, because there is still enough of the year left to act on what you find.

Six numbers. They take an afternoon to pull from your bookkeeping and each one answers a specific question.

1. Revenue against the same period last year

Not against a budget, which was a guess made in January. Against the same six months of the previous year, which is a real comparison against real conditions.

What you want is the direction and the size of the move. Flat revenue against a year of cost increases is a decline in real terms and should be read that way. Growth of a few percent may be entirely price rather than volume, which is a different situation and calls for a different response.

Break it down by service line if you can. Total revenue often conceals one line growing while another shrinks, and that is exactly the thing worth knowing in July rather than January.

2. Gross margin by type of work

Take each main kind of job you do and calculate revenue minus the direct costs of delivering it: materials, subcontractors, and the labor hours actually spent on it. Express the result as a percentage.

This is the most informative number on the list and the least frequently calculated. Almost every business discovers that one category of work it does a lot of is substantially less profitable than assumed, usually because the time it takes has crept up while the price has not.

The action is either to reprice that category or to do less of it. Both are available in July and neither is available in December.

3. Cash days in hand

Add up your fixed monthly costs, the ones that occur whether or not you work: loan payments, insurance, rent, subscriptions, any salaried staff. Divide your current available cash by the daily equivalent.

The result is how many days the business can operate with no income at all. Under thirty is uncomfortable. Under fifteen means any disruption becomes an emergency.

If the number is low, the fix is not usually to cut costs. It is to arrange a credit facility now, while the business looks healthy, because a line of credit arranged in a good month is available in a bad one and an application made under pressure rarely goes well.

4. Average days to get paid

For invoices issued in the last three months, calculate the average number of days between the invoice date and the payment date. Then look at the worst offenders individually.

Compare it against your terms. A thirty day term with a forty-five day average means you are financing your customers for two extra weeks on every job, and that gap scales with your revenue.

The available responses are all cheap: invoice on completion rather than at month end, call at day twenty-five rather than sending a reminder at day forty-five, and take a deposit on larger jobs. Each of those moves the average by days.

5. Your own effective hourly rate

Take what you have actually paid yourself in six months, including any owner draw, and divide by the hours you have worked, honestly counted, including evenings and administration.

This number is often the one that produces a reaction, because for many owners it comes out below what they would pay an employee to do the same work. It is worth knowing, and it is the strongest available argument for whichever repricing or restructuring the other numbers are pointing at.

6. Tax set aside against tax owed

Calculate what you have earned so far this year and what you have actually put aside for it, including estimated payments already made.

The gap, if there is one, is the most predictable problem a small business faces and the one most often left until it is a crisis. Six months out there is a straightforward remedy: increase the percentage you transfer from each payment for the rest of the year, and increase the remaining estimated payments accordingly.

The seventh number, if you have staff

One more is worth adding once anyone else is on the payroll: revenue per employee, calculated as total revenue for the six months divided by the number of full time equivalent people including yourself.

Tracked against the same period last year, it tells you whether adding people has added output or only added cost. A business that grew headcount by a third and revenue by a tenth has taken on overhead it has not yet found work for, which is a problem with a limited window before it becomes a cash problem as well.

What to do with the six answers

Write them on one page, with last year's figures next to them where you have them, and keep that page. The value compounds when you do this every six months, because you start seeing trends rather than snapshots.

Then pick one action for each number that came back badly, and put a date on it. If the numbers are unfamiliar ground, the small business development centers funded through the Small Business Administration will often sit down with an owner and work through figures like these at no charge, which is a better use of an afternoon than reading about ratios in the abstract.

An afternoon in July is a strange time to think about the year's results. It is also the last point at which they are still adjustable, which is what makes it the right one.