Just 3 Numbers to Higher Profits
We understand that for most of you the numbers side of managing your business is last on the fun list and often ignored most of the year. This approach works as long as you are happy with your pay and your business financial results. We hear from a lot of you that making more money is important so we are here to help. Keep reading as Dog Guru Susan helps you get to know your numbers.
There are really three important numbers for you to know that become the tools to making more money. Once you understand them you can make decisions and take action to improve your profits.
We’ll start with revenue per pet or effective rates earned by your business. You should know this as a company total and for your key services you offer. The reason it is so important is that the rates we charge clients fluctuate since most offer discounted packages, discounts for multiple pets or client demographics.
You need two numbers to calculate and the first one is total revenue. The next number needed is the number of pets serviced. This is where things can get a little tricky. How do you count the number of pets serviced?
For the best information be sure to include all pets that pay for services and pets that you discount or offer free care as well (e.g., fosters, shelters, etc.). Every pet in your center takes up a space, labor time and some supply costs. If you do not enter these pets in your POS system keep a separate tally and add to your POS counts.
The next two numbers are your fixed and variable costs in providing services. Knowing these costs on a per pet basis allows you to calculate the break-even number of pets you need in your center each month. Look at your most recent profit and loss report and mark each account as either fixed or variable. If an account is both we recommend you split it going forward.
Fixed costs are the expenses you pay regardless of how many pets come through the door. This includes items like rent, insurance, marketing and professional fees. You should also include payroll costs for reception, management and other support staff that do not directly care for pets.
Variable costs are the expenses you pay that will vary based on how many pets come through the door. The biggest expense is your direct labor cost for employees that take care of pets and provide services. Also include supplies used in the service and any other direct cost of offering care.
If you do not separate your payroll by department or use staff in multiple departments we do recommend that you perform an allocation. Based on a typical pay period divide your total payroll between fixed and variable costs. For variable it is valuable to allocate cost to each key service offered.
You have your three key numbers and can easily make the following calculations for your business overall and by key services.
- Effective Discount Percentage – Total percentage of discounts you offer
- Breakeven – Number of pets you must service to cover all costs
- Profit or Loss per Pet – How much each pet you take care of contributes or reduces your profit
Now your data is key information for you to make educated business decisions. Reviewing this data in total and by key service will highlight which service is contributing most or least to profit. Focus your time on ensuring every service is profitable. These calculations also highlight which services would benefit from having more pets come through the door allowing you to focus on that in your marketing efforts.
For great tools to get you started check out the finances resources in our store.
