Lesson B101.1 · Business Finance 101: Run It Clean
The owner's checkup: where you are and what to fix first
5-minute read · Figures checked October 2026
Photo: Lukas Blazek / Pexels, Pexels License
The short answer
Score your business on eight lines: revenue trend, gross margin, months of cash, debt payments against cash flow, your own hours, your crew, your customer mix, and whether the books are current. Then pick the one problem that holds the others back and fix it first. Finish that fix, score again, and pick the next one.
Where you are, where you're going, how you'll get there
Every plan answers three questions: where you are, where you want to be in 12 months, and how you'll get there. The checkup below covers where you are. For where you're going, write one or two goals in your own words: take January off with pay, add a second sealcoating crew, get a bank to say yes. How you get there is one fix at a time, starting with the constraint.
Start by marking your size: owner only, 1–4, 5–9, 10–24, 25–49, or 50 or more employees. A one-truck owner and a 22-person company score the same eight lines. The numbers just come from different places: the owner's head and the bank app in one, a bookkeeper's reports in the other.
Most owners are working the same problems. In the Federal Reserve's 2026 Report on Employer Firms, owners named reaching customers and growing sales as their top operating challenge, then hiring and keeping staff. Their top financial challenge was rising costs.
Score eight lines
Mark each line green (fine), yellow (watch it) or red (hurting now). Compare each one to your own past, not to a number you heard at the supply house.
| Line | What to measure | Red flag |
|---|---|---|
| Revenue trend | This year against last year, month by month | Falling, or rising with less cash to show for it |
| Gross margin | (Revenue minus direct job costs) ÷ revenue | Falling, or you can't figure it |
| Months of cash | Cash ÷ monthly fixed costs and owner pay | Shrinking, or short of one slow month |
| Debt payments | Cash available for payments ÷ payments | Under $1.25 for every $1 of payments |
| Your hours | Hours a week in season, and how many on the tools | You can't take a week off in July |
| Crew | People for the booked work | Only you can run a job |
| Customer mix | Share of sales from your biggest customers | Losing one would sink the year |
| Books | Closed through last month | Last month's profit isn't ready by the 15th |
Gross margin is what's left of each sales dollar after the direct costs of the jobs: materials, crew pay and payroll costs, equipment and fuel. Math example, not a target: $200,000 of revenue with $130,000 of direct job costs is a 35% gross margin ($70,000 ÷ $200,000). The $1.25 line is the floor lenders often look for.
Name the one constraint
The constraint is the red line that keeps the others from getting fixed, or from being seen at all. Books four months behind hide your margin and your cash. An owner on the tools 65 hours a week has no time to fix anything. One big customer can sink a year by switching contractors.
Fix one at a time because your attention is the scarcest thing in the business. A fix needs a month or two of follow-through before it holds. Start five and most of them stall halfway.
Example (made-up numbers). In February, Dee scores Ray's two-truck crack-repair and striping shop.
| Line | Ray's shop | Score |
|---|---|---|
| Revenue trend | $340,000, up from $310,000 | Green |
| Gross margin | Unknown: books closed only through September | Red |
| Months of cash | $18,000 ÷ ($8,000 costs + $4,000 pay) = 1.5 | Yellow |
| Debt payments | $3,500 available ÷ $2,000 in payments = $1.75 per $1 | Green |
| Ray's hours | 65 a week in season | Red |
| Crew | One foreman who can run a job | Yellow |
| Customer mix | Biggest customer is 18% of sales | Yellow |
| Books | Four months behind | Red |
Three reds. Dee names the books as the constraint. Until they're current, she can't see the margin, and Ray can't tell whether a second foreman would earn back the cost. Her first fix is to catch up, then close every month by the 15th (B101.3). In 90 days, she scores the shop again.
Your Move
Do this week
- Pull revenue by month for this year and last year, your bank balances and your monthly loan payments.
- Score the eight lines green, yellow or red, in the Owner checkup tool or on one sheet of paper.
- Circle your one constraint. Write down the first fix and the date you'll finish it.
- Put a re-score on the calendar 90 days out.
Log it: Checkup done, constraint named.
Common questions
What if everything is red?
If payroll or a tax payment is at risk this month, that comes first. Otherwise, start with the books. Once they're current, every other line turns from a guess into a number.
How often should I run the checkup?
Every quarter, and every winter before you plan the season. Score again after each fix.
Does this work for a one-truck business?
Yes. Some lines go fast (the crew may be you), and the constraint may well be your own hours or your cash.
Watch out for
- Reading revenue growth as health. Sales can climb while cash and margin fall.
- Starting five fixes at once. Pick one and finish it.
- Judging your margin against another shop's. Their costs, work mix and books aren't yours.
Free help
- America's SBDC: Find your SBDC for free business consulting
- SCORE: Free business mentoring
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- Federal Reserve Banks: 2026 Report on Employer Firms
- Chase: What is the debt service coverage ratio?
- America's SBDC: Find your SBDC
- SCORE: SCORE home page