Are you missing the point?Are You Missing The Point? 

It has often been said that “profit is pointless and cash flow is King”.  But do you know why?

It is possible for a business to show a profit for a period of time, yet have negative cash flow.  In fact, businesses that have profit (on paper) go under every single day.  Negative cash flow, if sustained for an extended period of time, will eventually cause the company to run out of money and cease operations.  Therefore, knowing the cash flow position is critical to staying afloat and knowing how to unlock more cash flow is imperative to effectively coach a business owner or senior executive.

Are You Chasing The Wrong Target?

You can have the most brilliant product or service but if the business runs out of cash, it won’t matter. Most businesses make the fatal mistake of thinking that they simply need more customers.  If only they had more customers, they would have more sales and more profit…and they would be more successful.

But is this true?

Can businesses simply advertise their way into more sales and better results?  No.  In fact, advertising and discounting often have a negative impact on the bottom line and cash flow.Simply put – the initial instinct most coaches and business owners have is to focus on increasing sales.  Employing this strategy in a business coaching context – chasing customers and sales – is often the worst thing you can do for the business.

The common assumption is that if you are running a business (or involved in business coaching) where the price you charge for your products is greater than what they cost, everything will be okay: you will be profitable and successful.  Profit is good – don’t get me wrong – but it is simply not enough on its own.  To be sustainable, the business must also have a healthy cash flow.

If you are like most coaches and business owners, you never dreamed that the ability to understand how money flows in and out would be incredibly important. You thought: “That’s for the accountant or finance department to worry about. Sure, they may show me a few reports from time to time, but I don’t see the need to really understand what the numbers mean. If there was a problem, they would tell me, wouldn’t they?”

You probably didn’t realise that all those numbers – the financial DNA of the business – can tell you a lot more than you thought.  They can tell you why the business is not growing or is struggling to meet targets. They can reveal why there is less money in the bank account [again] than there was last month.

The financial numbers ARE the story of the business. Numbers don’t lie. They are one of the few objective indicators of how a business is performing and where the problems are.  Ironically, financials are the most overlooked area of business coaching with the majority of practitioners choosing to specialize in leadership, sales or marketing disciplines.  Unfortunately, without a solid understanding of financials, it is impossible to coach effectively and produce predictable results.

Regardless of any justifications you (or your business coaching clients) use to explain why the business is not performing – the economy, the shortage of ‘good’ staff, competition, supply chain issues etc. – the numbers tell the truth and can lead you to the solution. You just need to learn HOW to use them to your advantage.

You need a bit of Financial Foreplay®.

Are You Avoiding The Numbers?

When is the last time you took two hours out of your week to analyze the financial statements of a client or your own business?  Can you honestly say that you know exactly where you (or they) are at and WHY?  Do you sometimes wonder what the numbers are trying to tell you?  Are you guilty of wasting money chasing new leads and sales instead of fixing the business and making it more profitable?

Most business coaches and business owners make the mistake of assuming they can improve the business by examining the Profit and Loss and Balance Sheet on a monthly basis.  Unfortunately, these statements only tell part of the story.  In fact, you cannot measure the cash flow position of a business by looking at the bank balance or examining the financial statements at a specific point in time.

This is because most businesses use what’s called ‘accrual’ accounting. Rather than recording ‘money spent’, they record spending as ‘money spent plus money committed to be spent’. So if stock has been purchased on account, accrual accounting includes the value of that purchase from the point it is made – not from the point when the account is paid. Accrual accounting takes into account the amount of money that has been spent plus committed to be spent in the future. The same thing happens in reverse with earnings – it includes money received plus money expected to be received. When a sale is invoiced with 30 days to pay, the value of that invoice is included in accrual earnings even though the money won’t be received for at least another 30 days.

Therefore, when accountants talk of ‘profit’, then, they usually mean ‘accrued profit’ as opposed to what we would call ‘real or cash profit’. Accrued profit is the expected real profit after ‘spending already committed to’, and ‘earnings expected to be received’, are
taken into account along with real (cash) spending and real (cash) earnings. As a result, the profit showing on an Income (or Profit and Loss) statement is a more complicated and less useful representation of the current financial situation of a business.  Net profit cannot be relied upon in isolation to gauge the financial health of a company.

Stated another way, cash flow must be tracked over a period of time and can be measured by the following calculation:

Net profit (year to date)

+/- changes in inventory

+/- changes in accounts receivable

+/- changes in accounts payable and GST and

+/- changes in fixed assets

=  Cash Flow

Changes in these 4 items on the Balance Sheet have a significant impact on the cash flow and viability of a business. That is why getting inventory levels right, optimizing receivables and payables and investing only in assets that generate a return, is critical when coaching a business of any size.  In fact, a coach can often have more tangible impact and influence on a business by focusing on these 4 areas than on directing effort towards gaining new customers and increasing sales.  And oftentimes, it costs the business very little to implement highly effective strategies in these 4 areas.

In practice, it is vital to have an eye on both real profit (cash flow position) as well as accrued profit. It is a common error to focus solely on accrued profit – an error which has the potential to send a business to the wall prematurely.

Are You Sure It’s Profitable?

Profitable growth should be the goal of any business.  However, you cannot achieve profitable growth without first establishing that the business is in fact profitable.  Attracting more leads or closing more sales may not be enough – the costs and efficiencies in a business change every day and this means that we must constantly monitor and measure results and take appropriate action.  Focusing solely on customers and sales is a bit like spending 100% of your time practicing your tennis serve while neglecting to watch the scoreboard, analyze the strategy of competitors and practice your returns.

Break-even is one of the most simple and powerful calculations that you can use yourself and with your clients each month to measure and enhance profitability.  A company is said to “break-even” for a period (usually a month) when its sales revenue catches up to its costs. Specifically, accountants talk about break-even as the point where ‘fixed costs’ (rent, salaries, etc.) are matched by ‘gross profit margin’ (sales revenue minus COGS).

Therefore, it follows that break-even with profit is the point in the month where the business covers all of the fixed and variable costs and starts making the desired profit target.  Remember, if you and your clients are in business and not running a charity, the goal is profitable growth.  In order to achieve profit, you MUST in fact plan to achieve it.

Calculating break-even (and break-even with profit) each month and knowing specifically which day of the month the business breaks-even, allows management to make informed, strategic decisions about how to achieve growth that is profitable for the bottom line and enhances the cash flow position.

Are You Ready To Get Results?

Knowing where the financial pain is when you are coaching a business allows you to focus your time and resources where they will make the greatest impact on the bottom line.  And if you are truly serious about being a successful business coach, and it is not just a hobby or a way to pass the time, you will find a way to fit a bit of Financial Foreplay® into your day so that you can help others to whip their businesses into shape and start taking home more cash! It’s the quickest and most effective way to get your clients working ON not just IN their businesses.

I got a 15 page sales letter the other day from a marketing coach trying to convince me to attend his seminar.  It was the perfect example of what NOT to do.  If you want to attract more clients and make it easier for them to say “Yes” to working with you, you will want to pay particular attention to what I am about to share with you right now.

You may not know this but there are reportedly over 14,000 sales and marketing books on Amazon – and most of them (like the email from this coach) deal with techniques and strategies that cause your prospects to waste valuable time and energy thinking.  Without realizing it, these techniques cause your audience to have to use their neo cortex (the thinking part of their brain) to process what you are saying.

While some of these techniques may work for some of the people some of the time, they are not reliable or predictable because they are designed to trigger the wrong part (the thinking part) of your prospect’s brain.

So, what do top sales and marketing coaches do to help their audience to decide quickly?

Clearly there are some principles that work – there is a process to marketing and selling products and services effectively.  However, some of these principles (while valuable) have been taken to the extreme by many experts and coaches.  In doing so, they dilute your message and make it ineffective.  Without realizing it, these strategies will kill your ability to close sales because they will make it difficult for your audience to decide anything.

For example, I’m sure you have heard of the concept of “social proof”.  This was first proposed by Dr. Robert Cialdini and it essentially means that before people decide, they will often look to what other people do before making their decision.  It explains why customers will choose to go to a restaurant that is full and has a line up outside ,when the one next door is almost empty and there are plenty of tables available.

According to Cialdini, you will assume that the busy restaurant must be better because others have decided to eat there.  Social proof is an important driver and on some level, it does help your brain to make decisions more quickly. Your customer wants to find a solution to her pain but she is also afraid of taking a risk.  Social proof is one factor that can help to swing the balance in favour of your product or service.

However, too often this principle is taken to the extreme.  Take my example of the marketing coach who sent me a ridiculously long sales letter.  5 out of 15 pages were designed to show you how many people have used and love his products.  Does this seem like a bit much to you?  Is it possible that his long winded letter (while paved with good intentions to provide social proof), might have had the undesired effect of causing the audience to engage the thinking part of their brains… and ask for more time to “think about it”?

Social proof is a great tool in your marketing belt but it is not as effective as understanding the 7 Stimuli that trigger the decision making part of your customer’s brain.  Knowing these 7 simple and effective triggers, can transform how you talk to your customers and the results you achieve.  And the 7 Stimuli which trigger the part of the brain that decides, are part of my simple, step-by-step process called Sales Seduction.  Sales Seduction, is based on neuromarketing principles, and it can help you go from confusing your prospects, to convincing them.

 

Click on video above to see and hear Rhondalynn in action.

You may be surprised to hear that 95% of your prospects don’t really understand you message.  You have to understand that your potential customer is simply in pain (in some aspect of his life) and he is looking for the solution.  So he has come to you… and what do you do?

Let’s take a look at your last ad, press release, email or even the home page of your website.  If you are being honest, I would bet that more than 60% of the prime real estate here is focused on YOU – your brand, your product/service, what you are doing and why you are doing it.  And if you are using visuals they are probably of your products, your machinery, your location or even YOU.

And if you are like most business owners, the last 40% of your time and space is spent trying to cram as many words as you can into this bottom section to let your prospects know just how much you can do.  In my experience, most of you are spending way too much time trying to impress your audience with fancy words and descriptions.

Here’s the bad news – you’ve already lost your potential customer.  In fact, you put him to sleep about 2 minutes ago.

Your brain accounts for 2-3% of your body’s mass but uses 25% of your body’s energy. This is a very important fact to know if you are trying to influence or persuade others.  Your brain is the 2nd most energy consumptive organ in your body – if you don’t give it what it needs, it will control your thinking.  For those of you who are hungry right now, you know exactly what I am talking about.

From a survival perspective, the brain doesn’t like to use more energy than it has to.  If you can make it easier for your customer’s brain to grasp your message, process it quickly and decide, you are more likely to get a YES.

Just for fun, I would like to introduce you to one of your customers… well, at least the decision making brain of one of your customers.

The part of your customer’s brain that decides is the same brain that you and I share with this crocodile.  This part of the brain is solely focused on what?  Survival, that’s right.  Does Mr. Crocodile care about your brand, your products, your photo or your features and benefits?  No.  Does it care about win/win? No.  It is solely focused on itself and physical survival. This part of your customer’s brain gets triggered within 30 seconds and is permanently tuned into the WIFM (what’s in it for me) radio station – constantly scanning to protect itself from pain or death.

So what does this mean for you?  To the extent you understand the pain of your customer and are here to help him solve it, he will listen to you or read what you have to say.

Let’s come back to your marketing message for a moment.  How can you use this insight for your next ad, press release, email or your website?

First, you are going to stop wasting your most valuable real estate talking about your products, your background, your brand, your philosophy or who you have been certified by.  Your clients do not care.  If this box represents 100% of the time and space that you have to get your message across right now, you need to spend 80% of it:

–          Showing your customer you understand his pain

–          Recreating his pain

–          And offering THE solution with proof you can deliver

This means that you should never waste it with a lame opening statement like “Introducing our new spring line”, “welcome to our newsletter” or “here are our latest clearance items”.  While important to you, they mean nothing to the part of your customer’s brain that decides.  They are like a bedtime story for your customer.

If you are using photos or video, and I highly suggest you do for reasons that we will cover in a session together very soon, you want to select visuals that support what?  That’s right – recreating or demonstrating you understand your customers pain.  This is not the time or place (if you are an electrician for example) to show a picture of you and your van.  That photo is about you and not your customer’s pain.  Remember your customer is tuned into WIFM radio station.

Also, if you are going to feature your brand or logo, it does not belong up here in this important 80% area.

That leaves only 20% for your call to action and contact details, which is plenty of space if you have captured your prospects attention up top in the 80% zone.

Do you remember when I made the bold claim that 95% of your prospects don’t really understand your message?   As you can see, the reason for that is really very simple – your customer has come to you in pain (in some aspect of his life) and his crocodile brain is solely fixated on finding THE solution.  This part of his brain, which is responsible for decision making does not have the time or patience to sit around reading or listening to information that is all about you.  If you don’t capture his attention in the first 30 seconds with something that is relevant to his pain, you’ve lost him.  He can’t possibly understand your message no matter how clever or funny it is because he’s not even paying attention – his reptilian brain has already moved on to look for the solution that will keep him alive or cure the pain .

I want you to assume for a moment that you are dying of thirst. Would you be willing to sit for an hour while I substantiate my credentials, talk to you about why I started my company and educate you on the value and qualities of my pure spring water?   Or would you simply get up, walk across the street and find the water that you need to survive?

What if you were dirty and itchy?  Would you be any more willing to listen to me focus on my brand or my product for an hour?  How long would it take before you just got up and found something to wash yourself with?

And what if your house were on fire?  Would you kick back and read 3 pages of stuff on my website about how great my water is or would you rather find someone right now who can help you put out the flames?

The bottom line is this – the quickest way to connect with your customer and get the attention of the decision making part of his brain is to let him know immediately that you understand his pain and can cure it.  If you do this well upfront, he will listen to whatever it is that you have to say.

This insight will help you go from boring your prospects to convincing them and that’s good for your business.

worryHave you ever heard somebody say to another person “Don’t spill that coffee”  and seen that exact thing happen, that you know will happen…. which is that  they do spill the coffee by accident!

Right now you are laughing because it is funny. It is funny because it  happens all the time. And if you are still laughing it may be because you are masterful at getting what you don’t want?

For some reason it seems the more you tell someone NOT to  do something, the more likely it is that it WILL happen. Why is that? Sometimes  we attribute it to simple disobedience – for example a child testing a parent,  when the parent has said “don’t do that.”

However, it is more than just a simple testing of the boundaries. There is a  biological, scientific reason for getting what you don’t want and it has to do with the way that our  brains are wired.

So why do we always seem to do the very thing that we are told not to do?

Our Subconscious brain struggles to process negatives. In effect it hears and  acts upon the command to do the very thing that we DON’T want it to do – i.e.  “smoke” or “spill the coffee.”

In fact, the subconscious mind cannot think – it can only ACT or CREATE based  upon what is of VALUE. That value is a product of our map of reality and every  event we have experienced over a lifetime. The subconscious is actually 100x  more powerful than the conscious mind and the subconscious is an AUTOMATIC  mechanism. It kicks in and acts about 1/2 second before the conscious mind  does – so if your embedded beliefs, attitudes, values etc. are negative, you end up always getting what you don’t want.

If you say to yourself over and over “Don’t spill the drink” or you tell a  child “Don’t miss the ball”, you are focusing the attention of the subconscious  mind on the opposite of what is desired. Instead of saying “carry the drink  safely to the counter” or “hit the ball son”, you have commanded the automatic  mechanism to do exactly what you DON’T want. The automatic mechanism of the mind  is focusing on missing the ball. It’s not that the mind doesn’t hear the word  “Don’t” (or cannot understand it) it’s that the ENTIRE SENTENCE is designed to  create the opposite of what is wanted. You have to look at the sentence in its  entirety to understand why it will not work to create the desired effect.

That is in fact why many books self help books, DVDs and audio CDs DON’T work  to deter unwanted habits and behaviours. Many of the NLP and hypnosis  practitioners have loaded their materials with embedded commands like “you will  not have any problems sleeping”, “you will not want to have any more cigarettes”  or “you will no longer have cravings for fried chicken and beer”. Unfortunately,  these programs are doomed from the start. They only serve to further entrench  these undesirable patterns.

If you want to change behaviour or get around a problem you must think of new  ways to phrase the desired behaviour in a positive way. This requires the  removal of all negatives or references to the problem in the sentence. Rather  than saying “Don’t mess up the calculations” you could say “Be careful to ensure  all the calculations in the spreadsheet are double checked and correct”. Instead  of saying to your child “Don’t throw that toy at your sister” you should say  “Put the toy down now and come to me”.

Instead of telling yourself what NOT to do, focus exclusively on what you  want do to (or have happen). It can be difficult for some to unlearn old  patterns and pessimistic language. However with practice and the positive  reinforcement that comes from achieving the results that you desire most, you  will find yourself speaking and behaving in new and empowering ways.

Article Source: http://EzineArticles.com/3142214

optimism1The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” William Arthur Ward

I was reminded of this brilliant principle last week when I spoke to one of my business coaching clients. There can be no doubt that we are living in interesting times…. the global financial crisis has impacted overall spending and consumer sentiment – and this has hurt many small businesses around the country. It’s no good hoping that circumstances will change – in order to survive we all need to dig deep and find creative ways to work smarter not harder.

Jim Collins, in his book, “Good to Great,” talks about this very interesting paradox that he calls “The Stockdale Principle”. According to Collins, “you have to be realistic about your current situation and yet, stay optimistic about the future”.

General Stockdale was the highest ranking American prisoner of war in Hanoi, Vietnam. Over the years he began to notice an interesting phenomenon – optimism could in fact be a liability. His fellow prisoners (who were the eternal optimists) constantly set themselves up for disappointment. They set huge milestones – “we will be rescued by Christmas” – but those milestones came and went year after year and with it… their will to live.

Conversely, the prisoners who looked at the painful day-to-day reality they were in and channeled their energies to the right places survived. This is not to say that the second group were pessimists but rather realists that maintained an unwavering faith in the end game, and a commitment to survive despite the brutal fact of their incarceration and torture over a period of years.

Here’s how Stockdale put it in his own words: “I never lost faith in the end of the story. I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

How many of us would look back on seven years of detention – with regular torture, dismal living conditions and an uncertain future – as an experience we would not trade? Do you regard the greatest obstacles or challenges in your life as the defining moment that shaped who you are today or do you choose to look at them as an excuse or reason why you have not achieved more?

Have you ever sat back and thought how this distinction between optimism versus reality could apply to your business/career or your life in general? Where in your life are you ignoring reality in favour of being optimistic and missing a crucial opportunity to take action?

Take for example my business coaching client that I mentioned above. She has an employee who doesn’t take responsibility for her actions, doesn’t pay attention to details and is often defensive and reluctant to take direction and feedback. This employee is negatively impacting the entire work environment as everyone gets caught up in the drama of it all. My client doesn’t want to let the employee go and is resisting doing what she knows that she must. She hopes that it will somehow improve without any action on her part – she is now learning the distinction between reality and optimism. When she sees the difference for what it is, then and only then, will she become decisive and take action.

Another area where it’s easy to be blinded by optimism is in the financial arena. Do you have detailed financial reports, KPIs and cashflow forecasts in place to drive your decision making or are you simply relying on your optimism instead of reality? Failure to effectively plan in this area (especially in these tough times) could lead to a cash crunch and the demise of your business.

Take a moment today to examine your relationship to optimism, pessimism and realism. Success belongs to those who operate from both sides of the Stockdale Paradox. The key is balance – knowing when to accept reality and take appropriate action AND never losing faith in the end of the story. If you can walk this delicate line of balance and responsibility, you increase your odds of making good decisions and this will lead to your inevitable success and breakthrough results.

In life, we will all experience setbacks, disappointments, loss and challenges. What separates successful people from the rest is how you deal with those inevitable struggles. This is a very important distinction and it is what divides the winners from the losers. You must never confuse faith that you will prevail in the end – which is something that you can never afford to lose sight of – with the discipline to confront the brutal facts and reality of your current situation, whatever that might be.

Article Source: http://EzineArticles.com/2884021


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