5 Operating Numbers Every Trades Business Owner Should Know.

Every truck you put on the road costs you money before it earns a dollar. The tech's wages and benefits. The fuel. The insurance. The phone. The software. The truck payment. A slice of the office rent, the dispatcher's salary, the bookkeeper. Add it all up, divide by the number of working days in the year, and you get your cost per truck per day.

This is the floor. If a truck costs you $850 a day to put on the road and you only bill $700 that day, you lost money on that truck. Doesn't matter what the customer thinks of the work. Doesn't matter how busy you looked. The truck went out and came back lighter than it left.

Most owners have a rough sense of this. They'll tell you "we need to do about a thousand a day per truck" and they're usually in the neighborhood. The neighborhood isn't good enough at $2M and up. The number you want is precise, because once you know it, two things change. You bid differently. And you stop accepting work that can't clear the floor.

It also makes the question of "should I add another truck?" a math question instead of a feeling. If your existing trucks are clearing the bar by a comfortable margin, the next one probably will too. If they're scraping by, adding another truck just gives you another way to lose money.

You probably think you know this one. And you probably do know the formula. But it's exactly what you're plugging IN to that formula where things often go wrong. Here's an example: Are you using your techs' hourly wage as their cost? If you are, your margin is smaller than you think it is.

Here's why. A tech doesn't cost the company what's on their pay stub. They cost the pay stub, plus your half of the payroll taxes, plus workers' comp (which in trades is one of the most expensive lines of insurance there is), plus health insurance, plus retirement contributions, plus PTO and holidays and sick days, plus the truck stock they burn through that never gets billed as materials. Add it all up, and a tech paid $30 an hour is actually costing the company closer to $42.

That gap between wage and true cost, usually 25 to 40 percent, is where a lot of shops quietly bleed margin. Bid a job assuming labor is $30 an hour and it'll look like a healthy 40% margin going in. Do the same job with labor actually costing $42, and the real margin lands closer to 22%. The P&L catches it eventually, because the P&L uses real payroll, not the number in your head. But by then you've spent the whole year running on figures rosier than reality.

And while we're on inputs going wrong: markup and margin aren't the same number. A 40% markup is a 29% margin. If you're pricing at "cost plus 40" and calling that a 40% margin, you're about 11 points off the number you think you're running.

Here's the simplest way to think about it. You finish a job. The customer pays you. Then you pay everything it took to do that job: the materials, the labor of the guys on the truck, the subs, the fuel, the disposal fees. Whatever's left over is your gross profit. Divide that by what the customer paid you, and you've got your gross margin.

That number tells you whether the work itself is making money. Not the company. The work. Before you've paid yourself, before the office rent, before insurance, before the truck payments. Just: did the job, on its own, leave anything on the table?

This is the one most owners feel in their bones already. You bid a job at 40%, you finish a job at 28%, and you know in your stomach that something went sideways. Maybe the crew burned an extra day. Maybe materials came in hot. Maybe you priced it wrong from the start. The number tells you it happened. Looking job-by-job tells you why.

There's another trap worth flagging: averaging. A 38% gross margin across the whole year sounds fine. But if it's 50% on service calls and 22% on installs, you don't have a 38% business; you have two different businesses, one of which is dragging the other one down. The number is only useful when you slice it.

If the first four numbers are diagnostic, this one is the report card.

Operating cash flow is the cash the business actually generated in a period. Not the profit on paper, the cash. Money in the door from operations, minus money out the door for operations. Not money from loans. Not money from selling a truck. Just: did running the business this month put more cash in the account or take some out?

Profit and cash are not the same thing, and that's the part that catches owners off guard. You can have a great profit number on the P&L and a shrinking bank balance, because the profit is tied up in receivables, in materials sitting in the warehouse, in deposits on jobs that haven't shipped. Profit is an accountant's calculation. Cash is what pays the crew on Friday.

The honest test of a healthy business is this: in a normal year, with no funny business, is the operating cash flow positive and growing? If it is, you can hire, you can invest, you can absorb a bad month. If it isn't, you're running on borrowed time even if the P&L looks fine.

This is also the number a banker, a buyer, or a partner will look at first. Profit gets you the meeting. Cash flow gets you the deal.