Monthly Insights
Written analysis · Jan–Dec 2025
The business looks busy. After all costs, it's keeping $1,940 per month. A half-million operation with the profit margins of a side project.
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Focus for next month: Get tax estimated payments current before anything else. Then model what one additional $85K/year revenue employee vs. reducing one position does to the dLER.
Performance Scorecard
Simple Numbers benchmarks
| Metric | Grade | Target | Actual |
|---|---|---|---|
Pre-tax profit margin Well below floor. Busy operation, thin results. |
Caution | 15%+ | 4.8% |
Labor efficiency (dLER) Each $1 of labor generates only $1.72 gross profit. Below 2.0 floor. |
Caution | 2.5+ | 1.72 |
Salary cap at 10% profit $55,200 over cap. Total labor exceeds sustainable level. |
Over Cap | $142,800 | $198,000 |
Core capital target $13,200 short of the 2-month operating expense floor. |
Caution | $31,400 | $18,200 |
A/R days outstanding Collecting fast. A real competitive strength. |
Great | ≤30 days | 22 days |
Quarterly tax set-aside Behind on estimated payments. Underpayment penalty risk at year end. |
Short | $5,820/qtr | $2,100 |
Debt repayment Vehicle and equipment loans. On track, consuming cash flow. |
OK | Declining | $42,000 |
Four Forces of Cash Flow
Priority order for every dollar
1
Taxes
Behind on estimated payments. Address immediately.
$5,820/qtr
⚠ Only $2,100 saved
2
Debt Repayment
$42,000 balance. On track to eliminate in 2–3 years.
$18,400/yr
On track
3
Core Capital
$18,200 vs $31,400 target. $13,200 gap to close.
$31,400 target
⚠ Underfunded
4
Distributions
Hold until taxes are current and core capital is funded.
—
Hold
Profit First Model
Revenue → Profit → Labor → Expenses
Total revenue
$485,000
Profit target (10%)
($48,500)
Owner compensation
($72,000)
Direct labor
($126,000)
Contribution margin
$238,500
COGS (materials)
($121,250)
Operating expenses
($188,720)
Pre-tax profit
$23,280
The Insight You Can't Unsee
Owner compensation analysis
Owner draw (reported)
$72,000/yr
Market wage for this role
$85,000/yr
Profit at market-rate pay
$10,280/yr
Pre-tax margin at market rate
2.1%
$856/month.That's the actual profit from a $485K operation — once the owner pays himself what the role is worth. The business isn't failing. It's subsidizing itself.
This company did $485,000 in revenue last year. That sounds like a healthy business. But after materials, subcontractors, three employees, the owner's draw, truck payments, insurance, and rent, pre-tax profit was $23,280 — just 4.8%. That's $1,940 per month on a half-million-dollar operation.
The good news: gross margins are strong at 75% and customers are paying fast at a 22-day DSO. The product side of this business works. The problem is labor. At a dLER of 1.72, the team generates less than $2 of gross profit for every $1 spent on wages. Crabtree's target is 2.5.
Total labor is $55,200 over what the business can support and still hit 10% profit. The fix is higher revenue per employee, fewer employees, or higher prices. The margins say the market will bear it.