businessman blindfoldedBlind faith can be a wonderful thing if you’re buying a lottery ticket, but  it can be dangerous if you are relying on it to operate your business  safely.

Closing your eyes to the financial reality of where you are at and letting  your business run itself — without clear key performance indicators from your financials (KPIs) and a  business plan — is asking for trouble.

Your financials are the engine that drives your business forward. Your  financial statements — and the KPIs you glean from them — serve as the dashboard that lets  you know if you are heading in the right direction. Ignoring the gauges and  warning lights in your financials is akin to sitting back and simply waiting for the inevitable crash  to happen in your business.

See full article:  http://mvb.me/s/0b9a58

Imagine you are playing an important game of tennis…

It’s the club final and you are the favourite to win. There is a big crowd watching and as the game progresses, everything seems to be going to plan. You’re playing well and you’re winning points. Victory can’t be far away. There is only one problem: there is no scoreboard, and the umpire is keeping the score to herself. So no one except the umpire knows what’s really going on.

Nevertheless, you plough on and, despite being in the dark about the score, you feel positive that eventually the umpire will declare you the winner. You are so confident that you can’t help but relax just a little. You start enjoying the party like atmosphere.

Then a shock! Out of the blue, the umpire declares that it is match-point … to your opponent! You can’t believe it. You go back to the baseline, determined, and set yourself up for this big point. But to no avail. It’s too late to get your mind back into gear and you hit the return wide. The game is over, the final is lost. If only you’d been able to track the score during the game. At least you would have been able to fight back a little bit earlier.

Every day, hundreds of businesses, big and small, operate as though they are playing a game of scoreboard-less tennis. Every month the owner runs on feelings for most of the month – no more than a guess about how well the business is travelling. A day or two after the month ended, you will look to the ‘umpire’ – your accountant – who will give you the ‘score’ – your figures. And most times, his perceptions will have proven inaccurate and it is far too late to do anything about it. When things changed in the business – when your ‘opponent’ started to get on top – you simply would not have seen it coming.

Your financials are to your business what the main scoreboard is at a sporting contest. Can you honestly say that you know where you are and where you are going?

Do you often look at your reports and wonder what they mean?

Do you waste money and time chasing new customers instead of fixing your business and making it profitable?

If you are ready to get serious about your business… it’s time for a little Financial Foreplay®.

It’s time you learned:

· Why cash, more than profit, is the key to success in business;

· How to find and unlock the hidden profit and cash that is trapped in your business;

· How to use the numbers in your financial statements to give you information that is useful for you – not just useful for your accountant. For instance, I’ll show you how to calculate a few simple but important ratios, to understand the results and to monitor them on an ongoing basis;

· How to stop making common business mistakes that are preventing you from being as successful as you deserve to be;

· Why too much inventory can strangle your business;

· How to manage debts owed to you and minimize the risk of default;

· How to charge the right price for your goods and services;

· How to decide whether an investment will be a good use of your company’s money or not;

· How to work out when, during each month, you ‘hit the front’ and start being profitable;

· How to set powerful and meaningful targets that will focus the attention of both yourself and your staff on making good decisions and taking positive actions ALL the time;

· A way to measure and track your financial success in a simple and meaningful way; and

· How to eliminate the unproductive habits that have been holding you back.

You will learn all this through the stories of my clients. Powerful stories about real business owners, just like you, with common financial problems. I’ll show you how these business owners found themselves in trouble, how they worked out what was wrong (with a little help from the financial numbers) and how they took action to turn things around.

What should you say in your business plan?While only 2 pages in length, the executive summary is by far the most  important component of your business plan or proposal. It is designed to  summarize the key elements, capture attention and most importantly, showcase the  financial highlights.

So, if you only have 2 pages to convey a significant amount of information  and summarize the financial upside, how do you decide what to put in and what to  leave out? Which financial features are critical to emphasize?

Depending on the purpose of your document and the intended audience  (investment, sale, partnership, strategic alliance, joint venture etc.), you  will want to tailor your financial disclosure to suit their needs and  expectations. What would they want/need to see in order to make an informed  decision?

At a minimum, you need to clearly state what financial input is required from  them and what they will get in return – i.e. a share, debt instrument, license,  exclusive right etc. Next, highlight the expected net profit and cash flow over  2-3 years. Also, give a clear indication of return on investment (ROI) AND a  realistic, well defined exit strategy.

In an executive summary, it is important to be succinct and focused. It is  not the time to tell your life story, overpromise with unrealistic projections  or overwhelm with too much detail. You will only get one chance to make a good  first impression and capture the attention of the reader. In fact, many  sophisticated investors have told me they rarely read a business plan or  proposal in its entirety. They make their decision on the strength of the  executive summary and their assessment of the owner/manager (in terms of  character, knowledge, skills and tenacity).

Focus on “what’s in it for them”. Show them clearly how they can benefit and  when the result will be crystallized. Give them enough detail to understand the  industry, opportunity and unique solution you provide. And most importantly,  clearly summarize the key financial metrics of profitability, cash flow and  ROI.

In short, make it EASY for them to invest in YOU.

Article Source: http://EzineArticles.com/6107414

Your executive summary can make or break your business plan

While only 2 pages in length, the executive summary is by far the most  important component of your business plan or proposal. It is designed to  summarize the key elements, capture attention and most importantly, showcase the  financial highlights.

So, if you only have 2 pages to convey a significant amount of information  and summarize the financial upside, how do you decide what to put in and what to  leave out? Which financial features are critical to emphasize?

Depending on the purpose of your document and the intended audience  (investment, sale, partnership, strategic alliance, joint venture etc.), you  will want to tailor your financial disclosure to suit their needs and  expectations. What would they want/need to see in order to make an informed  decision?

At a minimum, you need to clearly state what financial input is required from  them and what they will get in return – i.e. a share, debt instrument, license,  exclusive right etc. Next, highlight the expected net profit and cash flow over  2-3 years. Also, give a clear indication of return on investment (ROI) AND a  realistic, well defined exit strategy.

In an executive summary, it is important to be succinct and focused. It is  not the time to tell your life story, overpromise with unrealistic projections  or overwhelm with too much detail. You will only get one chance to make a good  first impression and capture the attention of the reader. In fact, many  sophisticated investors have told me they rarely read a business plan or  proposal in its entirety. They make their decision on the strength of the  executive summary and their assessment of the owner/manager (in terms of  character, knowledge, skills and tenacity).

Focus on “what’s in it for them”. Show them clearly how they can benefit and  when the result will be crystallized. Give them enough detail to understand the  industry, opportunity and unique solution you provide. And most importantly,  clearly summarize the key financial metrics of profitability, cash flow and  ROI.

In short, make it EASY for them to invest in YOU.

Article Source: http://EzineArticles.com/6107414

Can you apply Warren Buffet’s best advice to your small business?

Discipline and attention to details is more important than ever if you want to succeed in challenging economic times. Take a look around… competitors are closing their doors – which means more potential customers for the businesses that DO survive. And in times like these, it’s going to take more than “thinking outside the box” and goodwill with existing customers to secure the survival of your business.

You may have been lucky over the past few years – you may have found it possible to operate without a detailed, written plan and systems/processes. But the global economic crisis has changed all of that. If you want to thrive, there is only one thing that is for sure – uncertain times call for deliberate decisions and proven practices. So here are my top tactics to recession-proof your business.

1. Begin with the end in mind

If you don’t know exactly where you are going, how will you know when you get there? Now is the second best time to decide on your strategy, set your goals and document tactics and timelines. Keep it simple – write a 2-3 page summary of what you intend to accomplish in 3 months, 6 months and 12 months.

2. Focus on cash flow not profit

You cannot buy a house or a new car with “profit” from your business. Make it your mission this year to develop and maintain a weekly/monthly cash flow forecast for your business. This is not hard to do but it does require discipline and a simple excel spreadsheet. If you need help, I recommend that you consider signing up for Imagineering Profit. With just a few numbers from your Balance Sheet and Profit and Loss statement, Imagineering Profit can calculate your cashflow for you and give you the insight that you need to get your company operating in the black!

3. Collect your debt NOW!

How many days does it take to collect your debts on average? Whatever it is, make it your goals to reduce this by at least 10 days. You may be surprised to know that if your annual revenue is around $500,000, you could save yourself up to $2,500 in interest carrying charges simply by collecting your debts 10 days quicker on average. Pay attention to customers who are taking longer than usual to pay. Now is not the time to be extending too much credit if you are concerned about their ability to pay.

4. Rank your customers

Do you know who your best and worse customers are? Have you ever tried to calculate how much profit you are making from each customer or group of customers? If you don’t know the answers to these questions, today is the best time to start tracking and measuring this.

5. Fire your worst customers

Everyone knows that is cheaper and easier to garner incremental business from existing customers. Some even argue that it is 6 times cheaper and 75% easier to convert a sale from someone who already knows and trusts you. If you have unprofitable customers, get rid of them and focus your attention on your best customers.

6. Trim your product range

Contrary to popular belief, it is better to have money in your back pocket than tied up in stock sitting on your shelves for months on end. The longer it sits and does not turn over, the more it actually costs you in lost opportunities. Spend 2 hours today calculating which of your SKUs or stock lines are your worst performers; make it a priority to sell those quickly to release some much needed cash. Consider reducing your overall investment in stock. Compile a spreadsheet of all the SKUs you carry and then run two separate columns – one for how many units you sell on average of each per month and the other being the total units on hand. If your stock gets delivered quickly, you should never be carrying more than one month’s worth of sales at any given time.

7. Monitor your breakeven and key numbers

The most important day of the month is the day that you break even and start making a profit. If you don’t know which day of the month that is, you need to find out today. Knowing this number allows you to monitor your performance and take measures to correct issues right now. Waiting until the end of the year for your accountant to produce financial statements is not a good idea – if you are behind, you need to know now so that you can correct the situation.

 


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