Dear Business Leaders,

Happy New Year and welcome to the second edition of Business Expedition Monthly! I hope you all had some time to rest, reflect, and/or spend time with loved ones over the holidays. Now we're ready to make 2025 our year.

I've noticed this pattern from my 20+ years of working with small and midsize business owners: Most of us, especially newer leaders, are either overwhelmed by data and tracking the wrong metrics, or we're tracking the right ones but not using them to drive growth.

This isn’t just my observation. According to a recent survey from BARC (Business Application Research Center) and Eckerson Group, while 92% of companies reported increased use of business intelligence tools, only 25% of employees actually use these tools effectively. The report also found that this low number has barely changed in the past seven years as of 2022.

Effective reporting and KPI (key performance indicators) tracking are essential for all businesses, not just large, established enterprises. The story your numbers are telling can guide key decisions that will impact your path to steady growth. The key here is to identify the factors critical to your success, build a reporting schedule, and track KPIs that keep your business on pace to achieve its goals.

This month, we’ll explore the building blocks of impactful business reporting and accurate, efficient, and actionable KPIs.

Here’s to starting the year strong and setting ourselves up for success!

In this expedition together,

John Pittman and Business Expedition Partners

The Hidden Story in Your Numbers: A Guide to Financial Reporting & KPIs

"Your books need to be reportable once a year, but functional every day of the year."

If you follow me on LinkedIn, you know this is one of my favorite quotes. It may sound cliche, but it’s catchy enough to remember and encourages us to stick to the golden rule of bookkeeping.

Most business owners know they need financial reporting, but just having the numbers in the back pocket doesn’t cut it. Every business leader must understand the story their numbers tell.

So let's go through the five key chapters of your business's financial story:

1. The Foundation: Profit vs. Cash Flow:

“Profit” doesn’t pay your bills—cash does. For businesses with delayed revenue cycles (e.g., real estate or manufacturing), understanding cash flow is vital. Growth often means increased expenses today for revenue that may not materialize for months, which makes cash flow management your first priority.

At its core, a healthy business requires a profitable model. But profitability on your P&L (profit and loss) statement isn’t the only measure of success—this is especially true for growth-stage companies.

For example, let’s compare a service-based business, like asphalt sealing, to businesses with longer revenue cycles, like a real estate flipping company:

• In the service business, revenue from today’s jobs offsets current expenses.
• In real estate flipping (and some construction, manufacturing, or seasonal businesses) expenses for acquisitions and renovations happen now, but revenue might come 6–12 months later.
• These different types of businesses demand entirely different reporting structures to manage cash and forecast needs.

2. Decoding the Balance Sheet – Your Business Snapshot:

Think of your balance sheet as a GPS for your business's financial health. Instead of getting lost in accounting terms, let's focus on the three basics that matter:

1. What you own (Assets): Your cash, inventory, equipment, and other resources
2. What you owe (Liabilities): Outstanding loans, bills, and other obligations
3. What's left over (Equity): This is simply the difference between the value of all your assets and what you owe

To simplify things even further, here are the two important numbers that you should be paying attention to most from all of your business’ data:

1. Your Debt-to-Equity Ratio: Are you borrowing too much? This number tells you if you're over-leveraging your business.
2. Your Working Capital: Do you have the liquidity to cover your short-term needs (current assets minus current liabilities)?

Pro Tip: Review these two numbers monthly. It’s like checking your fuel gauge while driving—regular balance sheet reviews help keep your business moving ahead and ensure you won't run into bigger, avoidable problems down the road.

3. Understanding KPIs and Metrics:

There's a big difference between merely tracking numbers and using them to grow your business.

Think of it this way: Metrics show you the results of behaviors and actions, like your revenue or units sold. On the other hand, KPIs go deeper—they evaluate the behaviors and performance driving those metrics.

Case Study:

When Logan Baker, my long-time client turned close friend, first came to us for help with his LED signage company, he and his team lacked consistent and accurate reporting and were drowning in metrics.

"Our books were a mess, our processes were loose, and our financial data and dashboards were either inaccurate or missing," he recalled.

Monthly reports should answer questions, not create them. By first understanding how Logan views and analyzes his business, we helped transform those messy reports into functional dashboards with focused, actionable KPIs. Instead of tracking everything, we identified the core metrics that actually drive decisions.

The result? In Logan’s words:

"John has simplified the financial view of my business, which gives me enough information to guide the business relative to financial decisions. At the same time, I can also aim my team's focus where we can impact the business most rather than tediously digging through financial data."

Bottom line: financial reporting isn't just for looking in the rearview mirror to see what your company has done—it should also guide your daily operating decisions going forward.

Here's how to build your own scorecard:

To make your metrics start working for your business’ success, let's turn basic numbers into actionable insights. First, start with what currently matters most to your business (e.g., revenue or customer retention) and break it down into measurable steps.

Example:

• Your Goal: $100,000 monthly revenue
• Working Backwards: To hit this, you might need:
• 200 leads
• 20 qualified prospects
• 10 closed deals
• Your KPI Dashboard: Use tailored KPIs to track what drives these numbers:
• Lead conversion rates
• Average deal size
• Time-to-close

4. Reading Your P&L Like a Pro:

Your P&L statement offers valuable management and operational insights—but it's important to go beyond surface-level understanding.

Here’s how to read between the lines to spot these essential pillars of your P&L story:

• Revenue Trends: Look for patterns in sales over time. Are they seasonal? Growing? Declining?
• COGS (Cost of Goods Sold): These are the direct costs it takes your business to produce your product or service. Subtracting COGS from revenue gives you your gross profit—a starting point for bigger operational decisions.
• Operating Expenses: Compare expense categories to revenue and gross profit. Are they proportional, or are certain costs growing faster than your revenue?
• Net Profit: This number shows your bottom line. But keep in mind, it's just one part of the bigger story.

Pro Tip: Look at your Trailing 12-Months (T12)—a financial statement that displays your business’s financial operations month over month covering the previous 12 months—to identify deeper trends and anomalies. Are the changes in revenue, COGS, and expenses consistent or unexpected? Do you know why?

5. Your Action Plan for Better Reporting:

1. Identify Your Key Metrics: What drives your business's success? (It could be revenue, qualified leads, customer retention, average transaction value, etc…)

2. Map Out Your Operational Workflow: From first contact/lead generation to delivery, what are the KPIs and metrics that matter at each stage?

3. Set a Reporting Schedule… And Stick To It!: Establish regular intervals for reviewing KPIs (weekly, monthly, quarterly) to stay on track. Make adjustments as you gain deeper insight into your metrics.

4. Keep It Simple: Don't overcomplicate things by tracking too many KPIs. Aim for 3–5 targeted KPIs per department or step in your workflow to maintain clarity and focus.

5. Align Numbers with Your Goals: Use your metrics and KPIs to set and track against realistic targets, and build strategies to achieve them.

6. Get Support & Leverage Financial Tools: Work with a CFO/financial advisor and/or business coach to tailor your reporting system to your business's unique needs.

Final Thoughts: Tailoring Reporting to Your Business

There’s no one-size-fits-all approach to reporting and KPIs. The metrics that matter most to your business depend on your industry, growth stage, and your specific goals.

Whether you’re scaling a service-based business, flipping real estate, or running a wholesale operation, the key is using your numbers to tell the true story of your business—and then letting that story guide your decisions.

Are your current reports giving you the insights you need to succeed? If not, let’s start a conversation about how to optimize your reporting and KPIs for better results. Reach out to us at: https://bizxpartners.com/contact-us.

Here’s to informed decisions and intentional growth in 2025 and beyond!

Biz X Moves

Certification: Completion of The Hero’s Journey (Round 2!):

I’ve completed DARREN HARDY’s year-long Hero’s Journey program for the second time. Why twice?

Because effective leadership isn't static—just like our society, it's ever-evolving.

Beyond the tangible lessons from Hardy (a respected business mentor I've long admired), what really resonated with me was what happened in our smaller weekly huddle groups. Eight of us continuously worked together to dive deep into personal growth, challenge our assumptions, and support each other's journey as leaders.

What I value about this program is that it's not about following a blueprint. It's about doing the inner work, which is what really transforms how we show up for our teams.