Financial

What Will Your Profit Margin Be This Year?

Did you predict an end of year profit in January?

If you didn’t, why not? What are you afraid of? What do you fear will happen if you throw a number at it and don’t achieve it? Or, what if you surpass it?

Every year we hesitate to forecast the numbers for the next year. Why? Let’s look at it:

  1. Do we feel the whole process is out of our control?
  2. Are we dependent on the economy?
  3. Are we dependent on the stock market performance?
  4. Does it depend on how certain employees will perform?
  5. Does it depend on how you’ll perform?
  6. Will the government shut down and affect your business?
  7. Are you vulnerable to a supplier on the brink of a buyout or failure?
  8. How about your biggest customer, are they on the fence with switching to another company?
  9. Is global competition going to price you out?
  10. Are you unable to find qualified help?

These are all very valid concerns that all businesses face. The question is, should they affect our outcomes? Sure, they make affect our volume in revenues, but depending on how much control you have over your company, they should minimally affect it. Your profitability is controllable. You just need to ask yourself the right questions, contemplate different scenarios and develop strategies for each that protect your profitability.

Leading Edge Business Strategies is offering a 15% discount for any company that wants to guarantee their bottom line for 2017. This package includes coaching for budget development, scenario creation and strategy formation. You’ll be provided with a monthly budget that you can use as a road map for your business throughout the year. You’ll have predictable monthly profits to use as benchmarks and be able to make adjustments as you work through.

Make this year a year of predicted success. Call today for a free consultation and quote.

(207) 577-1948 or email: paul@leadingedgebusinessstrategies.com .

Quotes are based on company size, number of employees, revenues and sales structure. All quotes are written showing fee, discounts and net payable amount.

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Sneak a peek at my answers to the questions above on page 2.

Suggested answers to questions from page 1:

  1. No. The process of developing a budget should be completely in your control. You have the reins of everything about your business. If you don’t, who the heck does? It does not  just happen. You make it happen.
  2. No. When the economy improves, our revenues go up and vice versa. Our profitability can remain the same when we take those reins and control the horses. With enough planning, your profitability should improve when the economy improves, but profits should not go down when the reverse happens.
  3. No. The stock market affects investors. It influences how people think about the economy. It scares people when it nose dives and makes people happy when it skyrockets. But pay attention to what you do best in your business and your customers will keep coming.
  4. No. If it does, sell them the company. They should not have that type of control over your bottom line.
  5. Yes. You are in charge and have the power to affect your bottom line.
  6. Yes. It’ll affect your revenues (income) but you still have control of your profitability. Make adjustments. I know that’s not easy.
  7. No. You should know your supplier well enough if that will happen. Make a decision if that should be your supplier going forward if that is the case.
  8. No. Just like your biggest supplier, know your biggest customers as well. You should know most of your customers well, but know them like family.
  9. Probably. What is your strategy ‘in case’ that happens? Be prepared for your competition making changes.
  10. No. Treat your help fairly and pay then well, offer them good benefits and they’ll take care of 1 through 9 by default.

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Cash Flow – the lifeblood of your business.

SMALL BUSINESS SPECIAL

Is cash flowing through your company like a river? Comes in fast and goes out faster?

Are your expenses under control or are there too many hands in the pot?

Are you making the best use of your cash and line of credit?

Are you forever surprised at the end of the year over money you have left (or don’t have left)?

Here’s your chance to get your business organized at the halfway point of 2017. Start off on the right foot with a cash flow projection that shows you real numbers that you can run your company and lowering your stress level by taking action six weeks before your cash and expenses become unbalanced. Always be prepared.

Call us today, get 8 hours consultation on a business channel, department or overall company process you need help on and you’ll get a free cash flow analysis that will help you finish 2017 with a real time view of the cash flowing through your company.

Create opportunities for adjusting prices.

Enable your ability to set money aside.

Pay bills on time.

Pay down that line of credit.

Know when to buy that new equipment.

Take advantage of discounted buying opportunities.

Don’t wait until its too late, call or email us today.

A River Runs Through Your Business

 Are you controlling your (cash) flow?

I’m always amazed at how many businesses don’t pay attention to cash flow. It is your financial river that keeps your kayak on smooth water. It allows you to either sleep better knowing you are securely operating a profitable business or keeps you awake because you’re not!

Cash flow is the management of your receivables, money coming into your business, and your payables, money going out of your business. You control how you pay your bills and when you receive payments for invoices and cash from counter sales.Money wave

Your ability to see weeks ahead also allows you to make purchasing decisions based on cash availability. If you know your cash on hand is $7,000.00, you may elect to purchase an office computer or revenue producing item for your business. Setting benchmarks for cash on hand, cash to move to interest bearing products, issue bonuses, hire more people; all these decisions become clearer and easier when you control your cash.

Cash flow is also dependent on your marketing & advertising efforts. If you know from experience you’ll be entering a slow period, you may beef up advertising with a promotional discount or giveaway to incentivize customers to buy. This practice can improve your revenue stream in a time that is normally slow. While the margins may be lower, the revenue dollars will increase providing you with operating capital.

What if you are a startup and don’t know your peaks and valleys yet? All the more reason to keep your cash flow current. (Ironically, both definitions of this word apply here. Current as in up-to-date and current as in flow both have meaning to the need in this case.) Reserving cash for unanticipated slow times gives you cash to keep paying bills. To what degree, depends entirely on the cash on hand and the business type. This is where you start making gut decisions.

Cash Flow - Weekly

Click image for full cash flow sample.

Cash flows should be looked at for the short term and the long term. Establishing a worksheet with daily, weekly and/or monthly receivables along with weekly payment schedules gives more insight into how your business is doing.

I helped a client create a cash flow that we monitored on a weekly basis. Based on their predictable income stream from invoicing due dates, we knew what money would come in and when. We added in the payroll, loan payments and expenses as they were due weekly. This generated predictable cash on hand, anticipated the need to dig into a line of credit when necessary and was completely adjustable on a weekly basis for unforeseen income and surprise expenses.

The unexpected advantages are the psychological benefits of taking action when the cash flows dip and you have the luxury of time to do something about it. Maybe it’s a matter of calling a customer who is 30 days past due, delaying a payment or postponing an expense. In extreme cases, it may tell you to increase or reduce your payroll. Predictability is the key. Another psychological benefit is the reduction in stress when you can see the road far enough ahead to act rather than react.

Cash flows should become your best friend when you review them every Monday or Friday. Their accuracy grows as you discover new lines to add to them. Moving from weekly to monthly shows signs of maturity and progress. Forecasting cash flows in annual budgets can drive your goals each year.

In Summary:

  1. Create a cash flow statement if you don’t have one.
  2. Monitor your cash flow at least weekly with your financial & key manager(s).
  3. Set specific actions to be taken when flow is disrupted such as expense controls, receivables policy, what expenses or payments can be delayed and what sales are missing the mark.
  4. Set benchmark revenue ratios for sales/employee, sales per cost center, etc.
  5. Monitor your results against your budget, last year figures and rolling 12 month results.

Paul Beaudette is President of Leading Edge Business Strategies LLC, a business consulting firm that helps small businesses achieve their goals through proven business practices and his 34 years of successful business experience.

5 Strategies to Structure an Empowered Business – Part V

This is the 5th of a 5 Part series on getting and keeping your business organized

See also: Part I, Part II, Part III, Part IV

Financial

And now for the hard part. This is the diagnostic, truth revealing, red corpuscles of your business. From your financial reports, you can control the viability of your business, read historical events and predict future outcomes by carefully scrutinizing and summarizing your data. Whether it is meaningful or not, depends on how you enter data.

Let’s take a look at meaningful inputs. First of all, keep in mind GIGO. That is garbage in, garbage out. If you enter inaccurate information into your business system, the information you get out of it will be inaccurate and irrelevant. It could even mislead you into wayward strategies.

Now that you are providing good information, keep up with it. One of the biggest challenges of small businesses is keeping financials current. When you’re out there working long days and being a part of the process, it is difficult to find the energy in the evening to keep the books up to date. And maybe, you’re not quite where you need to be financially to hire someone to do it for you. Paying a bookkeeper is basically eating into your profits. It can wait. But, not really.

How does your cash flow?

How does your cash flow?

Each month (or quarter), depending on your business structure and cash flow, you need to know what your profits or losses are. The longer you wait, the deeper you risk sinking into deeper debt or the longer you could have been putting off hiring someone to do your books if the cash flow was healthy enough.

My recommendation is you contract with a local bookkeeper to do your books as soon as you can afford to pay one. Structure your agreement so you furnish them the information they need for receivables and payables. Do not yet give them electronic limited user access to your bank account for statement downloads. Download them yourself and email them. You will still have some paperwork to do to organize bills, invoices and statements, but at least it will keep you up to snuff with your business giving you a gut feel for what it should look like at the end of the month.

Make sure you monitor your cash flow weekly or even daily depending on the revenue size of your business. At the beginning or end of each day, take a look at your income and expenses, looking ahead so you will have a heads up about what needs to be adjusted. If your income is slacking, make sure you work with your bank to fill in with a line of credit to cover those slumps in revenues. Pay off the line as soon as you can.

One of the critical habits of small businesses is the cycle of marketing and advertising when business gets slow resulting on periods of inadequate revenues. The time to advertise (or network or market…) is before you slow down. How do you know when the slow times are coming? By reading your cash flow statement, looking at your funnel of opportunities, sales trends, etc. This can and must be forecasted. Decision making ahead of a downward curve allows for smart adjustments to expenses which leads to successful companies.

Expenses are either variable or fixed. Variable are those expenses that can be manipulated, adjusted and controlled. These are the ones you pay special attention to when you need to cut back, like business lunches, some advertising, etc. The fixed expenses are your lease or mortgage payments, equipment payments and any payments you have that the collateral is required to produce your products.

No matter what size or type of business you run, pay attention to the financial aspects of it frequently. How frequently, you will figure out as you go on. Don’t leave it to the last minute when you’re out of cash or when you’ve had an unexpected major expense and have to scramble for cash. Know the cash flow of your organization and be ready to react without losing a beat.

How do you control your cash flow?

Share your ideas

Thank you

5 Strategies on Structuring an Empowered Business – Part III

This is the 3rd of a 5 Part series on getting and keeping your business organized

See also: Part I;  Part II

Allied Partners

5 Lessons Capture

 

Every business has to depend on outside sources for products, services and support. The relationship you establish with them will help you serve your customers to the highest level of satisfaction. Vendors and suppliers should become business partners with your business to the point that when a problem arises, they are there to help and support you through it.

Recently, an order came through for my retail client ordering custom tables for his restaurant customer. The paint color on the furniture came in a shade different than intended. After further research, it was determined that the sample that had originally been presented by the vendor was furnished while the customer intended on a slightly lighter shade from a color swatch. When the order was placed, the customer did not notice that the color description on the purchase order was not what he chose.

Colors are typical issues when ordering of products. But the question always arises, who is responsible for the error? It could be said that either party was wrong. The end user, the customer, rarely wants to acknowledge the mistake. They remember what they said and it doesn’t matter what the purchase order had written on it. Customers also do not want to pay twice for a product they are buying (nor does the retailer or vendor).

Here is how this was resolved. The vendor offered to replace the tables at no extra cost OR give the retailer a credit that could be extended to the customer. The restaurateur chose to wait for the right color and was allowed to use the delivered tables until the new ones arrived. This is a vendor who cares about his customer’s customers. He avoided a hardship for his retailer and satisfied the customer. Allowing the customer to use the delivered tables while the new tables were being manufactured is an expensive task. He will never be able to resell those as new. But the correction is a long term investment in his retailer. The retailer gets to salvage his customer who can now tell a good story to his friends.

warehouse.distribution

With vendors and suppliers, always work to establish solid partnerships. Spell out the details of how business will be handled when things go right and when they go wrong. Don’t wait for something to happen to find out. Ask them how they have handled those things in the past. Make them a part of your business and expect the same from them. Don’t do business with suppliers you don’t trust. You have to be able to trust that they are looking out for you. They will want to trust that you will help them when they need it too. That’s a partnership. When you open the lines of communication, trust ensues.

As a customer, how do you want to be treated when an order doesn’t work out? After you’ve answered that question, ask yourself, “Are you treating your customers that way?”

Tell us what you look for as a customer.

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