We closed a record month in March. I wasn't excited. I was suspicious. When I pulled the report apart, two clients had pulled work forward and one had paid an old invoice. April was going to be ugly, and it was.
A spike feels like a win. It's usually a timing artifact. Work that should have landed in April landed in March. A client who paid late finally paid. A one-time project closed. None of that tells me the buisness is healthier. It tells me the calendar shifted.
The number I actually watch is recurring revenue divided by recurring cost. If that ratio is above 1.0, payroll and rent are covered before anyone picks up the phone to sell something new. At a 15-person company, that's the difference between making decisions from a calm place and making them from a panicked one. We're at about 1.15 right now. I'd like 1.3 by year-end. Anything below 1.0 and I'm not sleeping.
Predictability isn't free. To get it, I had to do three unglamorous things over the last eighteen months.
Each of those decisions reduced our theoretical upside. A retainer client who has a huge quarter doesn't pay us more. Fine. I'd rather know what June looks like in April than gamble on a windfall.
If you're growing from 15 people to 30, the failure mode isn't a bad month. It's a great month followed by three mediocre ones, with payroll obligations sized to the great month. I've watched two peer companies fold that way. Both were profitable on their P&L the quarter they ran out of cash.
The exercise I'd run this week: pull your last twelve months of revenue. Mark which dollars were recurring and which were one-time. If the recurring number doesn't cover your fixed costs, that's your real problem, regardless of what the bottom line says. Then decide what you'd trade — pricing, client mix, payment terms — to fix it in the next two quarters.
If your revenue chart looks like an EKG and you're trying to hire into that volatility, this is exactly the kind of cleanup we help small operators work through. Send us a note.
— Amanda @ SBATC
