Beyond Profit: Understanding the Three Bottom Lines in Your Restoration Business
Most business owners focus on a single bottom line—net profit. But as any experienced restoration business owner knows, profit on paper doesn’t always translate to financial stability or long-term success.
That’s why in Managing by the Numbers, by Kremer and Rizzuto, the concept of the three bottom lines is introduced as a more complete way to measure business health:
Net Profit – Are we making money on paper?
Operating Cash Flow – Do we actually have the cash to run the business?
Return on Assets (ROA) – Are we using our equipment and resources efficiently?
Understanding and tracking all three bottom lines will help you avoid cash flow crises, make smarter financial decisions, and build a business that thrives long-term.
Bottom Line #1: Net Profit – Are We Making Money on Paper?
Net profit is the most familiar financial metric. It’s the number you see on your income statement (P&L), calculated as:
Net Profit=Revenue−Expenses
If this number is positive, your business is technically profitable. However, in restoration, net profit can be misleading because of delays in insurance payments, seasonality, and high overhead costs.
What to Watch:
Gross Profit Margin – Are you pricing jobs correctly to cover labor, materials, and overhead?
Net Profit Margin – After all expenses, how much of every dollar earned is actual profit?
Job Costing Accuracy – Do you really know which jobs are profitable and which are draining resources?
The key takeaway: Net profit is essential, but it doesn’t mean much if you don’t have cash in the bank when bills are due. That’s where Operating Cash Flow comes in.
Bottom Line #2: Operating Cash Flow – Do We Have the Cash to Run the Business?
Restoration businesses often find themselves in a cash crunch—payroll, materials, and equipment costs are due long before insurance payments arrive. That’s why Operating Cash Flow (OCF) is just as important as net profit.
OCF measures the actual cash moving in and out of your business from operations—not from loans or equipment sales.
OCF=Net Income+Non-Cash Expenses−Changes in Working Capital
Why Cash Flow is Critical in Restoration
You have to pay for jobs before you get paid – Employees, vendors, and equipment maintenance don’t wait for insurance checks.
A positive net profit doesn’t mean you have cash available – If receivables are slow, you could be “profitable” while struggling to make payroll.
Growth requires cash – Expanding your business (hiring, buying new equipment, taking on more jobs) is impossible if your cash flow is negative.
How to Improve Operating Cash Flow:
Invoice immediately and follow up on outstanding payments.
Require deposits or progress payments on large jobs.
Negotiate better payment terms with vendors to keep cash longer.
Use Kiwi Cash Flow, a CFO subscription service that helps restoration businesses track financial insights, budget forecasting, and KPIs.
The key takeaway: Even a profitable business will fail without positive cash flow. But profitability and cash flow alone aren’t enough—you also need to know how well you’re using your business’s assets.
Bottom Line #3: Return on Assets (ROA) – Are We Using Our Equipment and Resources Efficiently?
Restoration businesses are asset-heavy—you need trucks, dehumidifiers, air movers, and extractors to do your job. But just owning assets doesn’t mean they’re helping your business succeed.
Return on Assets (ROA) measures how efficiently you’re using your investments to generate profit.
ROA=Net IncomeTotal Assets×100
If your ROA is low, it could mean:
You’ve invested too much in underutilized equipment.
Your assets aren’t generating enough revenue to justify their cost.
You’re holding onto outdated or unnecessary equipment that ties up cash.
How to Improve ROA:
Track equipment utilization – If some equipment sits unused most of the year, consider renting instead of owning.
Avoid unnecessary purchases – Before buying a new truck or extractor, ask, Will this directly increase revenue, or am I just accumulating more stuff?
Sell underutilized assets – If you’re not using it, turn it into cash.
The key takeaway: A restoration business with high net profit and strong cash flow can still fail if it’s tying up too much money in underperforming assets.
Bringing It All Together: The Three Bottom Lines in Action
If you only focus on net profit, you might miss the fact that your business is cash-starved or wasting resources. If you only track cash flow, you might not realize you’re underpricing jobs and squeezing your margins. If you only measure ROA, you might miss profitability issues.
The real magic happens when you manage all three together:
Net Profit ensures your business makes money.
Operating Cash Flow keeps your business running smoothly.
Return on Assets helps you use resources efficiently.
Kiwi Cash Flow helps restoration businesses take control of their finances with clear financial insights, budget forecasting, and KPIs. By tracking all three bottom lines, you can grow strategically, avoid cash crises, and ensure your business is financially strong—today and in the future.
Want to make sure your business is hitting all three bottom lines? Schedule a call with us at Kiwi Cash Flow and let’s get your numbers working for you!