This week, we're talking about metrics.

Numbers.

Stats.

*Yawn*, right?

Well, not so fast. Like I said yesterday, you need to track your stats in order to improve what you're doing in your school. Again, "if you don't measure it, you can't improve it."

In my last email, I asked you to spend a few minutes writing down specific goals for your school. Specifically, I asked you to write down the gross profit (that's all revenue coming into your business) and net profit (what you take home before taxes) that you need to achieve to live the kind of lifestyle you desire.

(Now, if you want to know how to increase your gross and net profits, you should read Small Dojo Big Profits and The Profit-Boosting Principles.)

Every metric you track ultimately is a piece of the overall puzzle that either increases or decreases those two stats. So, the first metric I'm going to have you start tracking is just that...

...the difference between your gross revenue and your net (take home) profit.

I know what you're thinking. "Mike, I already know what I'm bringing home each month - I don't need to look up what I'm paying myself."

Sure, you know what you're taking home... but do you know what factors are contributing to what your school brings in, and what you profit at the end of the month?

I bet you haven't looked at that in a while. So, what I want you to do today is to look at all your revenue streams (tuition, down payments, paid in full memberships, pro shop/retail sales, private lessons, etc.) and break them down by category. And if you haven't already, you need to enter these categories into QuickBooks, or whatever accounting software you use.

Do the same thing for your expenses. I suggest categorizing them both by the same categories used for tracking expenses for income tax and corporate tax purposes, and by an additional modifier that's useful for identifying categories related to how you run your school.

For example, you might have a category that's "cost of goods sold" and a subcategory that's called "intro uniforms." And, you might have a category called "tuition income" and a subcategory called "intro lessons."

The reason you'd want to have that extra modifier is so you can see how much the intro uniforms that you give away as part of your intro course are costing you (and remember to account for shipping costs), versus the amount of revenue that your intro programs are bringing into your dojo.

If those uniforms are costing you more than you're bringing in from your intro courses, that means you're losing money on each student. Sure, you'll make it up on the back end when students enroll, but the idea of charging for an intro is to cover you up front expenses (advertising, mainly). 

And if you're losing money in that area, you can either increase the intro course price, or find another source for getting student uniforms that offers you a better price.

This is just one example of how you can use good data to drill down into individual expenses, and in turn make your school more efficient and profitable. And, it's a good example of why knowing where every red cent is coming from and going to is essential to maximizing the profit your school generates.

So, spend some time today setting up these codes and categories in your accounting software, and familiarizing yourself with the reports functions that your bookkeeping suite provides.

Doing so will make it easier for you to generate greater profits in your school. And, it will set the stage for what I'm going to talk about in coming emails this week.