Running a training company is hard work. There's no shortage of moving parts to keep track of - learners, instructors, venues, enquiries, content creation...the list is endless. Luckily, if something goes wrong with one of those parts, you'll likely hear lots about it and get a chance to fix things!
Sadly, it's highly likely that the only time you'll hear about a financial failing, is when the bank manager calls.
We know that you're busy, and that an accountancy lecture isn't on your "to-do" list. But can your training company afford not to pay attention? To make it as simple and easy as possible, here's the key 8 figures to keep tabs on, and why they're so vital.
Cost Per Session
This is an important metric to track, but luckily, it can be calculated with ease. This should help you to figure out the optimum number of sessions to deliver a high level of attainment, while ensuring you protect your bottom line and maximise your revenue. Complete the following calculation to figure out if you're on the right track:
CPS = Total Cost of Course Delivery / Total Sessions
Why is this important? Let's say you're running a short course, that takes 10 sessions to complete. That's 10 sessions that you may need to pay an instructor, a venue, new materials, travel expenses and many other costs. Those are costs that can be reduced, if your number of sessions can be lowered. Check out Administrate's course planning tools, and see how they can help!
Profit Per Session
Calculating your course profit is straightforward, and in the above calculation we explained how to optimise your course in terms of your session delivery cost. However, calculating your profit per session can help you identify where you should be spending your valuable training time. To calculate your profit per session, perform the following calculation:
Profit Per Session = (Course Revenue - Total Cost of Course Delivery) / Total Sessions
Why is it important to track how you spend your time? Simply, because some courses can take longer than others to complete, but not be as lucrative. For example, if a course has 100 sessions, and the profit per session is £20, you would have a course profit of £2000. However, if another course you offer has 10 sessions, and a profit per session of £5, that still gives you a course profit of £50 in 10% of the time spend.
Cost Per Learner
By knowing what it costs to deliver your training to each individual learner, you're able to accurately assess your course prices to maximise revenue. To calculate your CPL:
Cost Per Learner = Cost of Course Delivery / Number of Learners
Tracking your CPL allows you to take the cost per learner, and use this figure to plot future growth. So if, for example, it costs £20 per learner, you can anticipate your variable costs in advance and make adjustments to course prices accordingly. To assess your cost of course delivery accurately, grab our ROI calculator by clicking here.
Understanding how quickly your company is growing, or failing, is vital for near endless reasons. Tracking your revenue growth will help you to make informed business decisions, as ultimately, selling a product or service is the most fundamental factor of business success. Use the following calculation to calculate your growth rate:
Revenue Growth = (Current Period Revenue - Last Period Revenue) / Last Period Revenue X 100
Once you have this figure, you can start to make decisions regarding your future resourcing, create a more accurate business plan, and set KPIs in line with forecasts.
Free Cash Flow
Companies with a healthy free cash flow are able to comfortably meet their monthly bills, and ideally have some left over for the directors or owners to use.
Free Cash Flow = Period Revenue - Operating Costs and Taxes - Required Period Expenditure
Typically, a company with a high free cash flow figure (or a figure that is trending upwards), can be considered as performing well and ready for expansion. By contrast, a company with low free cash flow likely has to re-evaluate their current spending. Of course, there are industries and niche cases where the meaning of this figure can become distorted - for example, it's slightly more common for early stage/high potential software companies to have lower revenues and burn through raised capital instead.
Calculating your liquidity ratio allows you to assess your company's financial readiness for emergencies. In short, it determines your businesses ability to pay debt obligations in a short-term emergency. To calculate your liquidity ratio:
Liquidity Ratio = Total Cash in Bank / Short-Term Liabilities
If the value of the equation is greater than 1.00, your business is positioned to meet short-term liabilities and survive an emergency. Ideally, you would want this ratio to be slightly higher than 1.00, in order to survive an emergency as smoothly as possible and steer back to calmer waters.
Through understanding your profit margin, you can assess and understand how profitable your activities are. For example, you might find that by offering blended or eLearning, you can reduce training costs and boost revenue. To calculate profit margin, perform the following calculation:
Profit Margin = Net Profit / Total Revenue
Looking for a way to boost your profit margin? Consider some of the above calculations, such as your profit per session figure, and think about what the best medium for you and your training delivery could be. Check out our introduction to eLearning guide to see just how easy it is to get started!
Similar to free cash flow, working capital is the amount by which your current assets exceed your current liabilities. To calculate working capital:
Working Capital = Current Assets - Current Liabilities
Understanding working capital is important, as it allows management to make informed decisions and manage risk. For example, if your working capital is low, it could be a bad time to experiment with new systems, and a good time to focus more on refining your existing output.
With the calculations above, you can be confident that your training company is set up for long-term success. Why not download our free money saving guide, which is sure to help your finances fly!