Where Has the Money Gone?

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(photo courtesy of www.all-free-download.com)
It’s that time of year again – you have met with your accountant, you have officially closed your books on last year, you have paid your taxes, you are well into the second quarter and now you are asking yourself….where has all the money gone?  This is a commonly asked question in business. As a business owner, you may have even had this experience every year.  Your accountant gave you a hearty congratulations for having a profitable year.  But you are puzzled.  If it was such a profitable year then why isn’t there more money in the bank? There are several reasons why you can have a profitable business but still have no cash.  It would take more than a few minutes to explain it however generally cash will get tied up in your debtors and inventory and can easily be eroded through poor cash management in expenditures – including your drawings from the business. A great way to ensure that you have profit “in the bank” at the end of the month (or year) is to actually open a separate business bank account for PROFIT.  Calculate how much you need to break even in the business and how much profit you would like to make every week or month.  Your task now is to start depositing that amount of profit into the account each week or month. If this seems unreasonable or difficult, you are not alone in your thinking.  Most business owners are not in the habit of banking profit from their business.  They will work all hours of the day and go to extraordinary lengths to attend to their customer’s needs but are not looking after themselves or their financial needs.  By using a profit account it sets up the discipline of banking profit.  After the profit is banked for the week then it is time to pay the bills.  And most people will work much harder to pay their bills than they will to pay themselves profit. Initially, you should only bank a proportion of your profit and gradually build it up.  The main thing is to pay yourself first. And the best part will be, at your next meeting with your accountant you can confidently know where your profit has gone. PJ's New Pic (smaller)  ActionCoach-logo
YOUR CHALLENGE THIS WEEK:  Calculate the break-even for your business, plan the profit you want to make, and set up an account to bank your profit.
If you would like further information or you have any questions about this blog, you can email me at pjweiland@actioncoach.com or call 847-739-3079.
For your complimentary business coaching session visit, www.bestchicagobusinesscoach.com. Build a Business image 3 (small title) To register for our complimentary workshop, How to Build a Business you can Sell, visit www.workingonthebusiness.com. Let’s work together to help your business grow. 

The Price is Right

The fastest way to improve your margins is to increase your prices. That’s right – increase price. There are a lot of reasons and excuses I hear from business owners why this may work in OTHER business but this will not work in THEIR business. All of the businesses that I work with evaluate their prices.  The reason this works is because we build a Unique Selling Proposition that communicates the unique value thus compelling the prospect to shift their focus away from price and towards value in the buying decision. YOUR CHALLENGE:  Look at your pricing model and evaluate how you are selling. If you are competing on price – start changing the conversation with your prospects.   If you would like further information or you have any questions about this blog, you can email me at pjweiland@actioncoach.com or call 847-739-3079. Please visit www.workingonthebusiness.com to register for our complimentary workshop, 6 Steps to a Great Business, and let’s work together to help your business grow.

Managing Margins

If you are like many business owners you have defined your products and services based on the opportunities presented over the years. I recently worked with two clients evaluating their respective business margins.  We looked at material, labor and total cost to serve across each of their offerings. If you haven’t evaluated your true margins by product or service in your business you are likely leaving money on the table or worse yet, you are devaluing your brand in the marketplace. YOUR CHALLENGE:  Take the time in your business to review the margins.  Are you priced to make money.  Be sure to measure the true margin on each of your products and the effort required to service your clients. If you would like further information or you have any questions about this blog, you can email me at pjweiland@actioncoach.com or call 847-739-3079. Please visit www.workingonthebusiness.com to register for our complimentary workshop, 6 Steps to a Great Business, and let’s work together to help your business grow.

Cash Cash Cash

If your company has a long sales cycle, long lead times or pays employees before client payment – you’re likely focused on cashflow. Having worked with many clients under these conditions, here are some tips to increase your cashflow and relieve cashflow stress.
  • Create pricing structures that incent early payments.
  • Require deposits and payments based on milestones.
  • Increase the frequency of invoicing and shift the timing of payroll.
  • Or add products and services that create immediate cashflow.
YOUR CHALLENGE:  Start by understanding your cash position.  Layout the timing of your expenses, invoicing,m receivables, and payroll.  Then look for the opportunities. If you would like further information or you have any questions about this blog, you can email me at pjweiland@actioncoach.com or call 847-739-3079. Please visit www.workingonthebusiness.com to register for our complimentary workshop, 6 Steps to a Great Business, and let’s work together to help your business grow.  

Hunting or Farming

As salespeople, as business owners we decide how we will source our prospective customers.  We look to others in our industry for clues on what works, we try a variety of approaches, sometimes we just do as much activity as possible and cross our fingers.  Sometimes that works and sometimes it doesn’t, in good times our strategy and marketing plan matters less, in tough times it matters even more. Regardless of where you are in your business consider what you are doing from two perspectives…. hunting and farming. As caveman can attest to, hunting is hard work – it is a daily activity where you are personally engaged in finding your next potential customer, and walking with them through the sales process.  You are actively hunting each and every day making one on one contact.  Things like cold calling, bold calling, most networking and direct mail are examples of hunting.  The upside to hunting is that there is very little mystery between the person you meet and the sale. The flip side to hunting is farming.  Farming is more about leverage, about planting the seeds in the most productive of places and then nurturing them along the way.  Farming often has a longer lead-time and can be more difficult but not impossible to link the activity to the specific sale. Things like speaking engagements, advertising, strategic alliances, or newsletters are a few examples. There is no magic formula. It’s about employing multiple marketing strategies that work for your business, some long term, some short term, some highly leveraged and others less so. Your challenge:  Look at the lead generation activities in your business, are your lead generation activities hunting or farming, is the mix working for you or is it time to adjust the mix.

Know Your Numbers

In business, and in your personal life for that matter, you must be familiar with your numbers, you must “know” and be comfortable with your bottom-line. Don’t let your discomfort with accounting or your inabilities to “analyze” your business keep you from growing and prospering. Even though the mindset that many of us grew up with was “numbers are no fun”, “numbers are hard to understand”, “boring”, “not creative” … whatever the misconception you were given about numbers when you were young. But quite the opposite is true. Numbers tell a story of not only your past, but how you can move forward in the future. Numbers help you forecast (your own personal crystal ball), numbers are creative, and when you get right down to it, numbers make up the universe – think music, chemistry, cooking, dance, architecture, and on and on and on. And another simple truth about numbers – if you don’t watch them, test and measure, and track what they’re telling you, then numbers won’t do squat to help you succeed. Embrace numbers, they are your ally. With just a few basic KPI’s (Key Productivity Indicator’s) or metrics, you can keep your finger on the pulse of your business and build accountability into your Team. As an Owner, don’t leave the maintenance, analyzing, evaluating and monitoring of numbers solely up to someone ELSE in your organization. As the Owner, it is your responsibility to KNOW and be a good steward of your business too! YOUR CHALLENGE:  Look at the numbers in your business.  Determine what are the drivers and what you need to know to make your business grow.

Get More Cash

Cash – don’t have enough of it? Not surprising as this is something business owners struggle with every day. Raise your prices.  Most of us our afraid to increase our prices because we see our competitors dropping their prices to get the sale.  That’s because all they know is how to sell on price, not on value.  If you have been listening over the past few months you have learned how to build your value, sell on emotion and consistently wow your customers. Here is a little known fact that may change your opinion about price increases.  If the margin in your business is 25% and you increase your prices by 10%, you can effectively lose 60% of your sales and still bank the same amount.  It may be hard to believe, but it’s true. You can raise your prices, even in this tough economy you can raise your prices if you know how and when. Be sure to raise your prices in your busiest season as this has several benefits.  You are in demand and you will focus your scarce resource of time on better margin opportunities, and you are busy and mentally better prepared to handle the transition. Three easy steps: 1 – List all your products and services and rank them on the amount sold for the same time last year. 2 – Remove the most price sensitive items. 3 – Raise your prices 10% on all the products and services that are left. It’s really that simple. YOUR CHALLENGE:  Make sure that you are selling on value and then take a serious look at your prices.  

Where Has the Money Gone?

It’s that time of year again – you have met with your accountant, you have officially closed your books on last year, you have paid your taxes, you are well into the second quarter and now you are asking yourself….where has all the money gone?  This is a commonly asked question in business. As a business owner you may have even had this experience every year.  Your accountant gave you a hearty congratulations for having a profitable year.  But you are puzzled.  If it was such a profitable year than why isn’t there more money in the bank? There are several reasons why you can have a profitable business but still have no cash.  It would take more than a few minutes to explain it however generally cash will get tied up in your debtors and inventory and can easily be eroded through poor cash management in expenditures – including your drawings from the business. A great way to ensure that you have profit “in the bank” at the end of the month (or year) is to actually open a separate business bank account for PROFIT.  Calculate how much you need to breakeven in the business and how much profit you would like to make every week or month.  Your task now is to start depositing that amount of profit into the account each week or month. If this seems unreasonable or difficult, you are not alone in your thinking.  Most business owners are not in the habit of banking profit from their business.  They will work all hours of the day and go to extraordinary lengths to attend to their customer’s needs but are not looking after themselves or their financial needs.  By using a profit account it sets up the discipline of banking profit.  After the profit is banked for the week then it is time to pay the bills.  And most people will work much harder to pay their bills than they will to pay themselves profit. Initially you should only bank a proportion of your profit and gradually build it up.  The main thing is to pay yourself first. And the best part will be, at your next meeting with your accountant you can confidently know where your profit has gone. YOUR CHALLENGE THIS WEEK:  Calculate the breakeven for your business, plan the profit you want to make and setup an account to bank your profit.  

Dangerous Discounting

It seems that everyone is focused on price. It seems that everyone wants a deal. The larger retailers spend a ton of money promoting in the media and it would seem that because of this we are all required to do the same. You’ll hear them say, “Don’t worry, we’ll make it up on volume.” Don’t be fooled by this. The fact of the matter is that most businesses on average return about 10 percent on sales before tax. This means that after deducting the cost of the goods or services sold and all expenses incurred in running the business, there is 10 percent of the original sale price left as your profit. So if you discount say by 10 percent then the 10 percent you are giving away is the same 10 percent you would have made in profit. So typically, a 10 percent discount will leave you with no profit. Here is another example to demonstrate the dangers of discounting. If your present gross margin is 30 percent and you give a 10 percent discount, you need to increase your turnover by 50 percent to make the same amount of profit. Discounting is not always bad.  If you have obsolete or seasonal stock or specific cash flow requirements this can be used as a specific strategy, however, there should be specific cut-off points when using these strategies.  When planning the profit for a particular product be sure to calculate how much you plan to sell at full price and how much you plan to sell at a discounted price for the lifetime for the particular product. Many smaller retailers will discount because their competitors are and not really consider what it might be costing them.  One of the main reasons small businesses discount is to acquire customers.  It is far more profitable to work out some clever marketing strategies than to discount for this reason. In reality, experience shows that most customers attracted to a business through discounting, rarely if ever comes back again. Discounting in business should be dealt with very carefully.  Because it is so prevalant, business owners get trapped into thinking that it is a legitimate and profitable strategy and are often the worst offenders within an organization. Clearly there is more to it than meets the eye and it should be used with eyes wide open. YOUR CHALLENGE: The next time you are inclined to discount, stop and review the profit margin and look for other marketing strategies that will create the same effect without impacting your bottom line.