Simple Numbers is the framework Greg Crabtree developed and documented in his book Simple Numbers, Straight Talk, Big Profits. It's built on the premise that most small business financial reporting is either too complex to be useful or too superficial to reveal real problems.
The four core metrics
The Simple Numbers framework centers on four numbers: pre-tax profit margin (target: 10%+), Labor Efficiency Ratio (target: 2.0+, ideally 2.5+), salary cap (total labor relative to what the business can afford at target profit), and core capital (two months of operating expenses held in reserve before distributions are taken).
Why these four?
Most small business profitability problems trace back to one of two causes: not enough gross profit per dollar of labor (an LER problem), or too much labor relative to revenue and margins (a salary cap problem). The other two metrics — pre-tax profit and core capital — measure the outcomes. Together, the four metrics tell you whether your business is healthy, where the problem is, and what lever to pull to fix it.
Simple Numbers and the Ketchup Clarity Report
The Ketchup Clarity Report is built on the Simple Numbers framework. Every monthly report includes a scorecard that grades all four core metrics, written commentary, and the Four Forces of Cash Flow prioritization.
See these numbers in your own monthly Clarity Report.
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