We live in a world with unlimited distractions, challenges, emergencies and interruptions – it’s a miracle any of us stay focused, sane and on track towards what we want (business improvement).
There are always going to be multiple tasks and priorities competing for your time – marketing campaigns to design, team members to manage, customers to respond to, business opportunities to explore, personal commitments etc. However, when you try to tackle too many things at the same time, nothing gets done. In the end, success and business improvement come down to focus.
In a world where there never seems to be enough time to get everything done, how can you avoid overwhelm, stay on track and get the things that are most important to you done? After all, it has been said there is always enough time in the day to do everything that is WORTH doing.
Here’s a list of questions that I have compiled over the years and shared with my clients and friends. They have helped me to put every challenge, “emergency” and distraction into perspective so that I can choose to focus my energy on what I really want and move forward toward my goals and business improvement each day. I hope some of these will also resonate with you…
1. Has Anyone Died? If not, relax, take a deep breath and know that as bad as things seem right now, “this too shall pass”. I learned this lesson the hard way when I was twenty four years old and had to come to grips with the terrible news that my mother had been murdered. As horrific and paralysing as this event was in my life, I eventually began to rebuild and discover strength that I never knew I had. And I learned a very important lesson – as long as no one has died, the situation really isn’t that grave, and there is always a solution or upside to every challenge you face.
2. Are You Trying to Eat an Elephant in One Sitting? Breaking things into bite-sized chunks makes the world of difference. Having broad high level business improvement goals are good but oftentimes it is easy to get overwhelmed by the amount of work that has to be done. That’s why having an actionable plan is essential – a step by step plan to help you move forward every day and get from where you are to where you want to be. After all, a journey of 1000 miles begins with one single step.
3. Are You In A Bad Neighbourhood? If you are in the ghetto emotionally, you need to change your physiology immediately. That means get up and get moving – put on your favourite song, connect with someone face to face or do a hobby/sport that makes you smile. Whatever it takes, do it NOW.
4. Are You Grateful For What You Already Have? It is impossible to attract more of what you want into your life if you are feeling ungrateful about what you already have. It has been said that the whole is more than the sum of its parts. In many ways gratitude is a bit like that – it’s not what you say, the mere words that count, but sum of the words and the heartfelt emotion that you put behind them.
5. Are You focused on What You Want or Don’t Want? Whether you realise it or not, you are visualising things all the time – visualising either what you want or don’t want. If you are relentlessly focused on the negative outcome and are riddled with fear, your thoughts will impact your reality and push what you want further away.
6. Does it Have To Be Perfect? Perfection can immobilize you and hamper business improvement – prevent you from making a decision, starting a project or signing off on a piece of important work. Truth is, most tasks on your list don’t have to be 100% perfect, you just need to pull the trigger and sign off on them today. The other way that this problem can show up is when you deceive yourself by believing that no-one else can do the job (even simple routine tasks) to your exacting standard, so you must do it ALL yourself. Try the 80/20 rule – delegate what you do not have to do yourself and give yourself permission to be human!
7. Are You Still Holding On To The Past – Have you ever caught yourself saying “last time I tried that, it didn’t work”? Or have you ever avoided doing something that you know you need to do but were afraid because it didn’t work last time? Even though it’s a good idea to stop doing what clearly isn’t working, it’s also important to remember that the past does not necessarily equal the future. If you catch yourself using reasons from the past to justify why you are not moving ahead today, you owe it to yourself to recognize this for what it is – self sabotage – and take action.
8. Are You Listening To Your Own Inner Voice? – The quickest way to guarantee failure and unhappiness is to worry too much about what other people might think. Deep down you know what is right for you in every circumstance. Sometimes it is tempting to suppress or ignore your gut instincts but there is freedom and relief in choosing to listen and to stand behind the decisions that you know are right for you. If you choose to please others, there will always be at least one other person who is unhappy with your choices, plus yourself.
9. Are You Avoiding Your Fears? – Ironically, everything you want is on the other side of your fear. Sometimes we are coaxed to the edge of our fears and pushed off, yet other times we willingly wander there, oblivious to what lies ahead. Either is good – for at the moment you feel your feet leave the safety of the cliff top – you will always find your wings and fly.
10. Are You Afraid of Making a Mistake? – It is only when we are stretched that we discover new things about ourselves. Often it is adversity and mistakes that allow us to become aware of and uncover our own innate talents. If mistakes were fatal, we wouldn’t enjoy most of the modern conveniences that we take for granted every day. Taking a risk and making a mistake is far better than doing nothing. In the brilliant words of Theodore Roosevelt “the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing”.
11. Do You Have Reasons or Results? – In life you either have results or you have reasons, but it is impossible to have both. If you don’t like the results you have produced, you will do one of two things (1) find a reason or excuse to explain why or (2) change your behaviour to produce a different result. Looking for justification as to why things have not worked out is a pointless exercise. When we look at causes, rather than reasons, things are very different. There is no failure, only results. Essentially, it means never having a reason or excuse again.
12. Are You Unrealistic? In order to succeed and achieve your goal of business improvement, you have to be at least a little unrealistic. Being realistic, never led to any significant change, innovation or giant leap forward. Only unrealistic thinking will achieve a result that until now seemed impossible. In the ‘60s, U.S. President Kennedy seemed unrealistic when he announced to a very large audience that America would put a man on the moon in less than a decade. Prior to that statement, a lunar landing seemed impossible, or at the very least, something that was a long way off.
13. Have You Forgiven Yourself & Others? Perhaps we never really completely understand life until we face death. What if we all started off on our deathbeds? Would it make a difference? Would it change the way we choose to play the game? Would it take us to forgiveness sooner? On our deathbed, I doubt any of us would say ‘I wish I held onto more anger and resentment or took a bit longer to forgive.’ In fact, if you were to look out into the future and imagine the world and all of your relationships from a position where you knew with absolute certainty that they would be gone tomorrow, would you act differently today? Would you mourn the years that you kept yourself enslaved by bitterness, blame and indignation? Would you lament the loss of pleasure, love and peace that could have been yours if only you could have found a way to forgive sooner?
14. Are You Hiding Who You Really Are? – We all have scars, but they are not ‘terminal’ blemishes, evidence of your defects, or validation of your lack of worthiness. Richard Nixon once famously said “the finest steel goes through the hottest fire”. Life isn’t easy but that perhaps it was never designed to be! Amazing things can happen, character and strength often develop through the most challenging circumstances – whether the heat destroys you or sculpts you is entirely up to you.
15. Are You a Poor Communicator? – Anytime you have more than one person observing an event, the door is open for the possibility of misinterpretation and miscommunication based on differing maps of reality. Learning to recognise that we all have different maps (filters by which we see and process the world around us) allows us to see the world through another person’s eyes and therefore understand, relate and communicate with greater respect and results.
16. Are You Thinking Inside Your Box? – Our beliefs about what is true, right, real or possible are largely assembled in childhood through a process called conditioning. Essentially children learn what is ‘normal’ from the people around them. These beliefs about the world can have a massive impact on how your life turns out. Einstein referred to limiting beliefs as the “boundary conditions of our thinking” – they act as a box that we unconsciously put ourselves in from a very young age. What we consider possible is influenced by these rigid ideas. That is why it has often been said that the thinking that got you to where you are now will never get us to where you want to be.
17. Are You Running Away? – Sometimes a fresh start can do you a world of good, but the interesting thing about a fresh start is that it never stays fresh for very long. The irritating part of physical or geographical changes is that you stay the same – wherever you go, there you are. As time passes you are forced to realise that while there may be a new job, new boss, new partner, or a new view out the window of your kitchen – you are exactly the same! Now might be a great time to look at the changes that need to come from within.
18. Are You Over Thinking It? – Most of us make a ‘decision’ today, knowing that tomorrow we can change our mind, backtrack or simply do nothing. That isn’t a decision. Unless you take action immediately towards your goal, you haven’t really decided … you are merely thinking about it.
19. Are You Motivated? – No matter whether you have experienced awful things in life or not, there is an innate drive in all of us to seek meaning and purpose. If we understand our ‘why’ then we can deal with any ‘how’ that life brings our way. Even in the darkest of nights, we can all find a way to let the light of who we really are shine through, if we believe in our hearts that there is a grander purpose.
20. Are You Driving The Bus? – I am the only one who can attribute meaning to the events in my life and the same is true for you. Positive, negative or neutral – the choice is always yours. If you are not happy with the choices you have made so far in life the great news is that you can choose new meanings immediately that will drive you towards your bright and compelling future. It’s never too late to become the person you were meant to be!
21. Are You Your Own Worst Enemy? – In my own life, it has never been the load or the obstacles that broke me, but rather the manner in which I chose to carry them. Despite what happens or what others think/say, it’s the things we tell ourselves when no one else is listening, that have the biggest potential to harm and hold us back. Re-writing negative self-talk is the single biggest gift you can give yourself this year.
It’s very easy to get so caught up in the emotion of emergencies, distractions and thoughts that don’t serve you – you can easily lose sight of what is most important to your success, business improvement and well-being. These simple questions (and keeping your sense of humour) are vital to helping you to stay focused and moving towards your goals and success.
Breaking Bad, one of the most beloved television shows of all time, came to a close this year after six successful and gripping seasons. Viewers finally got to witness Walter White’s unforgettable exit and find out which of the key characters made it out alive.
For those of you who haven’t seen it yet, the series is set in a post-GFC, recession ravaged America. The protagonist Walter White is an understated high-school chemistry professor who is forced to take on a second job at a car wash to make ends meet for his young family. After being diagnosed with lung cancer and realizing that he does not have enough health care to cover his treatment, he puts his expertise in chemistry to use and begins cooking the most pure crystal methamphetamine (meth) on the market. But as this career teacher quickly realizes, starting and learning to grow your business successfully, isn’t as easy as it looks.
But there’s more to Breaking Bad than exciting science, shocking drama and riveting character development – there’s plenty here for you to take and apply to grow your business. If you want to succeed as an entrepreneur and be even more profitable than you are right now, you should consider these practical lessons from Walter White at Heisenberg College.
1. Technical Expertise is Not Enough
When faced with insurmountable medical bills, Walt realizes that he is never going to make enough money working as an employee. Like so many other entrepreneurs, Walt is passionate about his technical skill (chemistry) and he starts a business that has the potential to maximize the return he can get from that expertise, albeit in this case, an illegal activity.
What he quickly discovers is that he knows nothing about actually running a business – inventory, distribution, marketing, collections etc. So he does what most entrepreneurs do – he wings it and finds out with disastrous consequences that he needs to educate himself quickly on how to operate a successful business and how to outsource the things that he does not have the skill or the time to do himself.
The Lesson: If you really want to grow your business, you need to invest in your development, put a good strategic plan in place, outsource tasks to others who can do them well and learn to manage your team members properly. Don’t expect success to be easy. Every business faces its own obstacles and challenges. Those who succeed, do so because of their ability to adapt quickly and take responsibility for their actions.
2. Establish a Premium Brand Then Establish a Premium Price
Walter White was a world class chemist and as a result, he consistently produced the highest quality crystal meth that you could buy. In fact, his trademark “blue sky” was widely recognized by both the Drug Enforcement Agency (DEA) and drug users as “the bomb”. Walter could easily have cut corners and produced a mediocre range of product that appealed to the mass market at a discount price, but he didn’t. His pride in his own expertise and his commitment to excellence meant that he owned the upper end of the market.
By creating unprecedented demand for his unique formulation, he could dictate the terms his product was sold under and the price consumers would have to pay. In Walter’s own words – “Corner the market, then raise the price,” White says. “Simple economics.”
The Lesson: If you insist on competing based on price, you are doomed to failure. Anyone can cook crystal meth (or make a mediocre version of the product/service that you are currently selling) but only one person can truly be the best in the world at creating the most pure version on the market. To grow your business and succeed, you must be willing to do what it takes to cure the #1 pain that your customer has with buying your product/service.
3. If You’re Good Enough, You Can Get Away With Murder
There is no denying the fact that Walter White was the best in the world at cooking crystal meth. This fact rendered him virtually untouchable. Walter’s unparalleled cooking skills kept him alive over and over again. Even Gus Fring (the chicken man and notorious drug lord) could not afford to kill him after it became clear that both Walter and his junkie sidekick Jessie, were loose cannons. When Gus came close to finding a replacement, Walter was quick to eliminate his competition, thus restoring his own unassailable status.
Even Jessie, as flawed and messed up as he was in his personal life, was excellent at distribution and sales, thus making it difficult for Walter or Gus to eliminate him easily.
The Lesson: If you are without question, the best at what you do, you cannot easily be fired or replaced and you can charge a premium for your expertise.
4. If You Can’t Decide, You Won’t Succeed
Throughout the fast paced six seasons, Walter was continually forced to adapt to changing circumstances and make decisions. When Gus hired a hit man to kill Walter in Season 3, the only thing that saved him was his clever last minute call to Jessie. Armed with the address of Gale Boetticher (the chemist that Gus had hired to replace them), Jessie was then forced to put a bullet into Gale’s head.
This episode and in fact the one that followed were not for the faint hearted or the squeamish but they illustrate one important point very clearly for you as an entrepreneur – your success or failure relies solely upon your ability to make quick and good decisions… and then take action immediately, based on those decisions.
The Lesson: In order to be the boss and grow your business, you have to be willing to make decisions and do whatever it takes to achieve your goals. You can’t afford to sit on the sidelines of your business hoping and praying that things will change. You need to be the change that you want to see and you need to get good at making decisions today.
5. No One is Ever Successful Without Help
Nothing is impossible when you have the right team around you. As flawed as they were as individuals, Walter and Jesse were successful together because they each brought different skills to the table, they divided up the tasks and they trusted each other to deliver on their responsibilities. On their own, neither one of them would have survived two weeks in the meth business but together, they thrived for years and built a multi-million dollar enterprise.
The Lesson: If you want to grow your business and build a scalable, robust business that runs without you (or is saleable), you need to stop trying to do everything yourself and learn how to delegate and lead others.
6. If You Can’t Negotiate, You’re Doomed to Fail
Ever wondered why most people don’t say “yes” to your product/service? Without a doubt, it’s because you have no idea what they need to hear in order to make a decision in your favour. Walter White started off with absolutely no clue how to run a business or negotiate with suppliers, colleagues or customers. And more than once, this shortcoming almost cost him his business and his life. He stumbled upon a universal truth – that if a person’s pain is bad enough and you provide the only solution, they will decide immediately and won’t need “time to think about it”.
The Lesson: The best negotiators know how to persuade others. In order to succeed you need to master the art of identifying, quantifying and curing your customer’s (employee’s or supplier’s) #1 source of pain. If you do this well, you immediately disqualify your competition and are much more likely to get a “yes” today.
7. Distribution Can Make or Break Your Business
As phenomenal as Walter’s blue sky crystal meth was, he would never have achieved market penetration, leading brand recognition and phenomenal sales without Jessie’s distribution efforts. Jessie’s ability to build relationships, enforce collections and find distributors who were willing to do the hard yards to reach customers, was integral to their commercial success.
Walter didn’t know the first thing about pricing, competitive analysis, money laundering or channel management; he needed to connect with the right people – Jessie, Saul Goodman, Gus Fring et al.
The Lesson: If you insist on doing everything yourself, then you must be prepared to accept the fact you will never have a scalable, successful and saleable business.
8. First Impressions Are Everything
Gus Fring was by all outward appearances a legitimate, respected member of the Albuquerque business community. He owned a chain of successful fried chicken restaurants and he was a vocal and public supporter of the DEA. He was also the most feared and successful drug lord in the southern states. Even though he was targeted and questioned by the DEA, Gus avoided investigation and culpability by always putting his best foot forward. He was articulate, well-dressed, outwardly legitimate and successful. He made it difficult for anyone to identify and convict him as a drug trafficker. Both Gus and Walter understood that first impressions are everything.
The Lesson: You only get once chance to make a good first impression. The part of your customer’s brain that decides is highly visual and hasty. If you don’t appear credible and trustworthy, it will be infinitely more difficult to influence and persuade others to do business with or believe in you. Fail at making a good first impression, and you will never grow your business successfully.
9. It Pays to Manage Your Liabilities
Slowly over the six seasons of the show, Walter and Jessie go from being small time players (much like the typical consultant or start up) to fully fledged business owners of a manufacturing and distribution empire. But there’s just one problem. No matter how much they make, it seems that the overheads (fixed costs of running the business) just keep getting bigger and bigger. Sound familiar? Not only does Walter have to pay Saul Goodman for legal protection, but there’s also plenty of money going towards collections, enforcement and dealers who “know too much”.
While Walter is initially disgruntled about all these expenses he learns an important point – while it’s important to keep your overall expenses as low as possible, you should never skimp on items that are crucial to your success. Although you might be frustrated with fixed expenses, you can afford to pay top dollar for the best employees, legal services to keep your business on the right side of the law, or an advisor/coach to help you grow your business profitably.
The Lesson: If you want to grow your business you cannot afford to be penny wise and pound foolish. If someone or something is integral to your success, ensure that you invest your time and money here. You can always find money in the budget for everything that is worth spending on or investing in.
Breaking Bad was poignant, provocative and powerful on many levels. And the genius of the show is this – despite all his shortcomings, killings, and character flaws, Walter While has longevity and likeability as both a character and successful business man. When it comes to learning how to grow your business, these 9 lessons from the Walter White School of business, are a whole lot more applicable, memorable and engaging than a boring, introductory business book like the eMyth.
**This blog is taken from a series of posts and press releases on this subject by Rhondalynn Korolak. She is a lawyer, chartered accountant, media commentator, keynote speaker and best-selling author of 3 books, the most recent of which –Sales Seduction–is in theTop 20 Sales and Marketing Books on Amazon.com
If you had to pick 1 thing – 1 strategy or change that you could implement in your business that would allow you thrive despite tough economic times, what would it be?
Let’s make a list of the top 5 things that I hear most business owners (like you) say when I ask them the same question…
- Spend money on marketing – attract new customers
- Have a sale
- Ask for referrals or help
- Tighten your belt – cut costs
- Do more networking
Now what do all of these have in common?
They all involve you doing more of the same thing that you have always done. None of these involve a radical shift in the way that you do business, do they? None of these involve you taking a step back and re-examining what you do and whether it’s actually working. And none of these involve you changing the way that you communicate what you do to your customers.
And that is precisely why none of them will work to recession proof your business.
So why is that important?
Because consumer sentiment and spending has changed dramatically in the past few years and those changes are being felt across every industry and by both big and small businesses. Everything you thought you knew about your customer and why she was buying from you has probably changed. And if you don’t take the time now to re-discover your prospect’s main source of pain – the reason why she needs your product or service – you risk losing more sales and more ground to your competition.
Now some of you are probably sitting there thinking “but MY industry is different. You may think that you’ve been hit especially hard and that everyone in your niche has lost sales. But that’s not the case for 99% of you. Even some of the most competitive and vulnerable industries have companies who have continued to perform well and who have even stole market share.
Just for a moment, I want you to cast your mind back to the first few months after the GFC. A lot of people lost their life savings during the stock market crash and many lost their jobs immediately after that. It was a horrific few months and few industries felt the wrath of the crash more so than the automotive sector. If you remember, new car sales dropped by almost 20% in a short period of time and stayed that way for almost a year. That’s a huge drop in an industry that is vital to the health of the national economy.
Now sales of new cars were down 20% for the industry. Despite the massive drop in sales, 1 manufacturer actually managed to gain market share and outperform all other companies in sales growth. Do you remember who that was and why?
Only 1 company stopped and took a good hard look at the pain their customers were in at the time. They didn’t do what all the others did – which was spend more money on newspaper ads, lay off salespeople and slash new car prices.
Only 1 company examined the change in the market, correctly diagnosed the pain of their prospects and came up with a solution. “If you lose your job and can’t make the payments, no problem – we will take it back free of charge”.
Do you remember who that was? That’s right Hyundai.
With one simple change to their focus and strategy they stole market share from every other manufacturer because they correctly identified the shift in their customer’s pain. They didn’t keep going on with the same old strategy and approach that clearly wasn’t working. Yes, there had been a major downturn and the whole industry was hit hard, but there were still lots of customers who wanted to buy a new car but were afraid to do so because they might lose their jobs.
So how can you apply this to your market right now? First and foremost, your customers are not thinking about you, your brand and your features and benefits – they are thinking about their own survival and whether or not you can cure their pain. If you are able to correctly diagnose the pain, you will trigger the part of their brain that makes decisions and you will stand apart from your competition. That’s the power of Sales Seduction.
Think about one of your customers right now and her pain? What do you need to do in order to get more clarity around that? What questions do you need to ask her about how it is affecting her financially, personally and strategically? To the extent you can diagnose her pain, get her to acknowledge it and put forward the solution that cures it, she will listen to anything that you have to say.
Take a look around you… businesses are closing their doors everyday – which means more potential customers for the businesses like you that DO survive. And in times like these, it’s going to take more than just doing more of what you have always done to recession proof your business. Uncertain times call for deliberate decisions and proven practices. In order to recession proof your business you need to shift your thinking around the way you do business and start providing THE solution to the #1 pain or challenge that your customers have. And if you need some diagnoistic questions and a step-by-step framework to help you do this…I highly recommend that you check out Chapter 8 of Sales Seduction.
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.
17 Oct 2012
Point. Set. Love Your Financials!
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.