If you can’t measure it, you can’t improve it

February 28, 2019

It’s tax season! Are you as excited as I am!? Probably… because I’m not that excited. If you were excited about finances and statistics, you'd likely be an accountant or statistician instead of a backflow tester. However, stats and numbers don’t have to be the enemy. There’s a lot to be gained from understanding your business's finances.

Knowing is half the battle

I’m a proponent of Peter Drucker’s theory - if you can't measure it, you can't improve it. Knowing your numbers means you can improve your backflow testing business, or any business!

So, what numbers should you know? Beyond the basic finances, which seriously, are important, these are some of the numbers that you should know as a business owner:

  • Number of tests performed by each tester
  • Outstanding invoices over 30, 60, and 90 days
  • Number of backflow tests performed in 2017 compared to 2018

If you’re using Syncta today, you may be utilizing our data analytics to see where your business has changed, or how much your company has grown or shrunk. Here are a couple of examples of what these analytics look like in Syncta.

Backflow as a Service

Syncta is a SAAS model: a software as a service. You can look at your business in the same way - backflow as a service. Why? Because the way that you maintain your business is with recurring revenue. While you have the occasional customer that needs their backflow tested only once, most of your customers are repeat customers, or recurring annual revenue.

That’s a really good thing. A lot of businesses in the trades industry don’t get to reliably count on having the same customer the next year. Keep your customers happy and they’ll keep you happy.

When you compare your test numbers to last year’s completed tests, have you grown? Let's say you did 3500 tests in 2017 and 4285 in 2018. That’s means you grew by 22% year over year.

As a previous small-business owner, I get that looking at your bank account come tax time can feel pretty disheartening some years. But glancing at your available funds isn’t the only way to measure how your business is doing. Doing some sleuthing might be the answer to improving your bottom line.

Let’s do another quick calculation:
1. Figure out how much revenue you received (how much you charged) for all of your backflow tests last year. If you use Syncta Invoicing, you can look at the Invoicing report for the last year right here.
2. Find the total number of tests you did last year. If you’re using Syncta, you can grab that from here.
3. Take that revenue number and divide it by your total tests. For example, if you had $78,000 in revenue and divided it by a total of 2385 tests, your average test price last year was $32.70.

Is this number you expected? I’ve talked with a lot of testers that tell me, “oh yeah, I charge 40 dollars or more for everything,” only to find out that their average test price was closer to $32. They didn’t realize how many discounts they were doling out.

This is how much you’ve made for each backflow test performed. Small business owners often over-estimate how much they make per test or item sold. It’s easy to do when you forget how much gas you put in a company vehicle, or how much insurance was at the beginning of the year.

Let's be honest

So, be honest with yourself - is that cost of each test lower than you want it to be? That’s okay, because now you know the number. And if you know it, you can manage and improve it. There’s more than one way to improve the cost of each backflow test performed.

Think about other ways to look at this as well. Maybe you want to consider charging different rates depending on the water purveyor or size of a device? Maybe you have a tester that is excellent at knocking out big devices, but falls down when working on smaller residential devices? It’s important to see what the data says instead of always trusting your gut! It’s amazing how often the data will tell you a different story than what you originally thought.

Start improving your bottom line today

If you implement changes today, you will see a difference by December 31, 2019. And come next tax season, you might not be dreading it quite as much. Taking that first step is essential though.

When was the last time you brought on substantial new customers? How many customers did you potentially lose last year? Here’s a handy stat: customers that use Syncta’s customer portal bring on an average of 20 new backflow customers per month. I’m not making that up! The reason we know that is because it’s one of the many statistics that we track internally to help improve how you manage your backflow testing business.

Let us help you improve your bottom line

What are some of your favorite stats to track? Is there a number we’re not providing that would help you? Let us know! We want to help you manage your business better. And measuring where you are at now is the best way that you can begin to improve it.