He knows more about his business than you do about yours.
The dude sells noodles with sauce and your choice of pork, beef, chicken, shrimp, or vegetables on top. He does it out of a stand surrounded by plastic furniture. He’s got a line down the block, and you have to wait for one of the little chairs to open up before you can sit down.
He’s crushing the noodle business on this corner.
He has a little cart with an umbrella mounted on the side. His ingredients are spread out on the cart, and he’s cooking just off to the side. He’s serving bowls as fast as he can assemble them.
It’s hot out here, and there’s no air conditioning anywhere nearby. He keeps working and selling noodles as fast as possible until midday. Then he’s left with a pile of dishes—lots of dirty dishes.
He and his wife get to work on cleaning up. He starts packing up the stand while she goes to work on cleaning the dishes, on the sidewalk, in two big plastic tubs. One is for washing, and the other is for rinsing. The wastewater goes into the gutter and down a nearby drain. Eventually, they stack up the tiny chairs, and everything packs neatly into the cart. They live four doors down from the corner, and they have an area in the alley where they store everything overnight. The business will open back up before sunrise tomorrow.
What the Noodle Guy Knows That Most Lawyers Don’t
This guy knows his business. He knows his revenue. He knows his expenses, including his cost of goods and his labor costs (not much). He knows his net each day. He counts the number of bowls he serves, and he knows his average revenue per customer.
He keeps the business simple, and he understands instantly the impact of a price change or an increase in price by a vendor. He knows whether business is trending up or down, and he knows the impact of the seasons on his overall profitability.
He can’t control all the variables. If it rains, he’s got a problem. Thankfully, it doesn’t rain during much of the year. But he understands what he can control and what he can’t. He plans accordingly.
His knowledge of his business is stunning when juxtaposed against the knowledge of many lawyers when it comes to their businesses. The noodle guy has no formal education. Of course, the lawyer has a great deal.
But, with all that education, do we lawyers know our revenue, expenses, and net? Do we know our revenue per client on average? Do we know our revenue per employee? Do we know how the trends are running or the impact of seasonality?
“I’ll have to check on that” is the answer I usually get from lawyers when I probe. That’s not the case with noodle guy.
Why Lawyers Don’t Know Their Business
“But our business is more complicated,” we argue when I ask the lawyer/business owner why he doesn’t know his numbers. “There are more variables, more types of services, more everything,” and our work is “unpredictable,” we continue as we push back.
Yeah, right. Did I mention that he offers pork, beef, chicken, shrimp, and vegetables? He offers it with seating or takeaway. He has motorbikes stopping to grab a bag of soup to go. He offers small and large. He offers it with more or less spice. Plus he does a solid business selling tea, coffee, and a few other drinks. He’s got lots of variables like crazy, plus he’s cooking, serving, and making change all at the same time.
Why does he know his business better than we know our own?
I can’t even begin to recount the stories I’ve heard from lawyers. There are various versions of these excuses:
- I don’t have time.
- I wasn’t taught this in law school.
- I don’t have a business background.
- No one in my family ever owned a business.
- I’m just not good with numbers.
Noodle dude does it. So can you.
Why the Numbers Matter
Knowing your numbers is the foundation for building the business. You’ve got to know them, understand them, and be able to predict the impact of changes. Knowledge of the numbers is square one. You’ve got to understand the business.
If your financial information consists largely of knowing whether there’s any money in your checking account, then you don’t know your numbers. That’s not sufficient information to run your business.
Financial information is the information required to decide what to do next. It tells you whether to do more of option one or more of option two. It’s the data you need to move forward.
You can’t properly drive the car without knowledge of the speed. You can’t properly sell noodles or run a law firm without knowledge of the numbers.
You need to know at least as much about your business as noodle guy knows about his.
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