Why Knowing Your Numbers is the Key to Unlocking Maximum Profitability (And Not Just Revenue Growth)

If you're like most ambitious entrepreneurs, you're laser-focused on growth.

Growth in sales, growth in market share, growth in recognition. And, of course, growth in revenue.

But here's the truth that top-performing CEOs already know: Revenue growth is not enough.

In our Board of Directors Program, we recently had Brad Ebenhoeh , CEO of Accountfully join us to speak with a group of elite 7 and 8-figure CEOs.

And let me tell you — what he shared about knowing your numbers was a game-changer, even for seasoned business owners.

Brad's insights made one thing crystal clear:

While revenue growth might look good on paper, profitability drives long-term business success.

Let's break down some key lessons from that discussion and why understanding your numbers is non-negotiable if you want to run a tight, profitable operation.

1. Accrual vs. Cash-Based Accounting: Why It Matters

Brad highlighted a fundamental concept many business owners overlook: the difference between Accrual-Based Accounting and Cash-Based Accounting.

• Accrual-Based Accounting is the gold standard for making business decisions because it gives a true picture of financial health. It matches revenues to expenses when incurred rather than when cash changes hands.
• Cash-Based Accounting, on the other hand, is generally used for tax purposes, showing what cash you have at any given time.

Why does this matter?

If you only consider your cash position, you might think your business is in better shape than it is.

Accrual accounting, however, helps you see potential cash flow issues down the road and make more informed decisions regarding investments or managing expenses.

2. Profitability Per Product, Per Service, Per Client

One of the biggest takeaways from Brad's session was this: You need to know precisely which parts of your business are the most profitable.

This means breaking down your profitability by:

• Product
• Service
• Client

If you don't know which clients or offerings are bringing in the highest margins, you're likely wasting time and resources on areas that aren't contributing to your bottom line.

Many CEOs are shocked when they realize their highest-revenue client isn't their most profitable.

Without this level of clarity, you're essentially making blind decisions, and that's a recipe for inefficiency and wasted potential.

3. Employee Utilization: The 75% Rule

Another critical metric we discussed was employee utilization, which measures how effectively your team is spending its time.

The formula Brad shared was simple but powerful:

Employee Utilization = (An employee's total billable hours) / (An employee's available hours)        

A good target? 75% billable hours.

Why 75%? Anything less, and your employees may not be working at their full potential.

Anything more, and you risk burnout or compromising quality.

Striking the right balance here can make all the difference in keeping your team productive while maintaining high-quality output.

4. Calculating Your Billable Rate

If you're running a service-based business, your billable rate is one of the most important numbers you need to know.

Here's the formula Brad shared:

Billable Rate: (Cost per billable hour + overhead per billable hour) + profit margin        

Your profit margin should be at least 20%.

You're not charging enough to cover your costs and grow your business if it's any lower.

Yet, many business owners are afraid to raise their rates, thinking it will scare off clients.

But here's the bottom line: you're just spinning your wheels if you don't have a healthy profit margin.

You're working hard but not seeing the financial results you deserve.

5. Revenue Growth vs. Profit Growth: Where to Focus

Revenue growth is exciting.

It's the number you love to share with potential investors, partners, or peers.

But it's not the most critical metric.

Profitability is.

At Predictable Profits, we've helped countless entrepreneurs scale their businesses using the Predictable Profits Operating System, designed to create scalable and predictable growth. And here's the thing — growth without profitability is a ticking time bomb.

You can't afford to focus on revenue while ignoring the health of your margins and overall profitability.

You could grow into a financial disaster if you're not dialed into your numbers.

Final Thoughts

Knowing your numbers is non-negotiable if you're serious about building a business that lasts.

It all matters, from understanding your profitability to the client level to making decisions based on Accrual Accounting to ensuring your team works efficiently.

Remember, revenue growth is essential, but profits are everything.

The Predictable Profits Advantage

With the right systems in place, you can grow your business in a way that's predictable and profitable.

It's not enough to grow your top-line revenue.

You need to clearly understand where your profits are coming from, how your team is utilizing their time, and whether your pricing is aligned with your financial goals.

If you're ready to take control of your numbers and build a business that's both scalable and profitable, we're here to help and will send you an exclusive resource from Predictable Profits Board of Directors.

Let's Talk.

Want to know more? Or better yet, want to experience firsthand how Predictable Profits coaching can help you achieve your goals? Comment "PROFITS" below or DM me.

As a bonus, we'll perform a business diagnosis and show exactly what's keeping you from hitting your revenue targets and where you're leaving money on the table.

We'll also uncover the most significant opportunities you can leverage to reach your financial goals.

Let's turn your revenue into REAL profits.

With gratitude,

Charlie

Charles E Gaudet, II

CEO of Predictable Profits

Named "The Go-To Business Coach for 7 & 8 Figure Businesses" by The International Business Times

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