Understanding the Financials When You’re Underwriting

It’s all about the numbers, if you don’t know your numbers you don’t know your investment you don’t know your business.

The numbers are KPI’s which are key performance indicators and their metrics, and the metrics are what make up the KPI’s.

Must know everything that generates your numbers. Everything that lands on your P&L. You’re P&L is what makes up the business with income and expenses. Dollars in and dollars out. You want to know where all your income is coming from as well as every dollar is going to by tracking your expenses. Detailing every line item.

For example, if you have an expense labeled “telephone” you want to break that out to land line, cell phone, virtual cell phones, ect. Break it out in detail to track every expense individually. Vice versa for every other expense as well as residual income as well that is coming in by different means, such as laundry, pet fees and other services you might provide that you charge for.

Keep it simple and don’t over complicate it. Remember its income minus expenses equal your net income.

If you understand that, you will understand your business as well as your investments.