Business Mapping

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Are You Making the Right Costs Decisions as a Business Owner?

By | 2018-06-17T05:19:33+00:00 June 17th, 2018|Tags: , |

The world of business is rapidly changing! Outsourcing which used to be only for a few special projects is now becoming a common part of most business processes. This changes the way a business owner looks at costs they have to incur in the operation of their business. Take for instance the world of online business: people are making hundreds of thousands from the comfort of their home. Just ten years ago, what is happening today seemed impossible. Making this kind of money without incurring the high expenses associated with a business was a laughable concept.

It is time to think differently.

Thinking to grow your business the way grand ma did is not going to cut it anymore.

There are two broad categories of costs I will like you to consider when choosing your cost structure namely:

  1. Committed costs
  2. Discretionary costs

Committed Costs

Committed costs are costs an organization commits to for an extended period of time. It usually requires a contract and there are usually consequences for breaking the terms of the contract. An example is a 2 year phone contract.


Discretionary Costs

Discretionary costs are money wilfully assigned to a purpose. An example will be supplies bought in your business. It is important to note here that a discretionary cost does not mean costs you do not need in your business but rather it means costs that is more flexible in nature and can change as your business changes.

 

The rapid change in the business world is changing the structure of what can be called committed versus discretionary costs. It used to be labor used to be a committed costs but now with outsourcing it is becoming more discretionary. Most business costs are also moving in the same direction: That is from committed to more discretionary in nature. A good example is the cellular phone: most phone companies are beginning to realize in order to survive in the long run they have to get away from only offering long term contracts and giving people an option to only pay for services they need when they need it.

Discretionary costs allows for flexibility. That is you are able to change as the market changes. When your circumstances change, you will need the flexibility to change your cost structure to reflect the changes in the environment. Today it is possible to be more nimble in handling your business costs and taking on more than you should is never advisable.

Starting your business with discretionary costs

You have heard the term it makes money to make money. On the other hand, I think it takes wisdom to make money. There are lots of people out there that have taken very little money and turned it into a fortune by being disciplined. People who often say it takes money to earn money have not given much thought to how money can be made with very little resources. The costs of starting an online business are very negligent in nature. If you are willing to put time into growing your followers, you do not need a lot of financial resources.

The problem with people who unsuccessfully start businesses is that they start asking the wrong questions. Take a look below at 3 common questions asked and what should be asked in its place:

Wrong questions

Right Questions

How can I afford the “committed costs” needed to start this business (Committed costs could be machinery, rent, etc.)? What are the minimum resources I need to effectively serve my customers?
How much do I expect to spend in my first month or year of starting this business? How many units am I likely to sell and how do I directly link my profits to my costs per unit so I am not coming out of my pocket?
How much do I need in my marketing budget? How do I engage my audience so I can influence them to patronize me?

 

The wrong questions have one thing in common, they all deal with committed costs and the right questions are more discretionary in nature. It is difficult to stop thinking like grandmother; especially since things are still evolving. But, the idea that you need to have committed expenses to start a business is becoming ludicrous in today’s society. This is especially true in the labor market which used to be a business’s biggest committed costs. Websites like freelancer.com, elance, odesk make it easy to get what you need when you need it and only pay for what you use. Even seasoned companies are beginning to realize the change in the external environment and are structuring their labor force to become more flexible. Having more discretionary costs makes you nimble.

Cost Analysis

So now we know the difference between discretionary and committed costs, there is one more thing we need to do to stay nimble. At least on a quarterly basis analyze your costs to see if you are being efficient in the way you are running your business. It might be you have subscribed to services you are no longer using and will need to cancel.

Always, ask yourself how the costs you currently have add value to your customers.

The end result is you want to enrich your customer’s lives and the cost you incur should reflect this. If your costs are discretionary in nature then getting rid of non-value added costs will not be very difficult.

Non value added costs should not only be thought about in terms of money spent but also time spent on activities. The customer should always be in mind when adding or subtracting activities which consume time in your business. Your goal as the business owner is to continuously add value to the life of your customers. This process of continuously adding value is always on-going and the moment it stops, the business begins to die.

So do you have a business? How do you as a business owner determine what costs go into your business? Are your costs necessary? Do you add value to the lives of your customers?

 

Leave a comment below, I will love to help you make right costs decisions in your business.


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You need a plan to grow your business.

By | 2015-11-13T16:49:36+00:00 November 13th, 2015|

Do you operate in a vacuum? That is you run your business hoping all will go well. Unfortunately, without good planning a business cannot go too far. One tool business owners can use in planning is the budget. A budget helps a business owner plan to measure how effective the business is in reaching its strategic goals. A budget has three major goals:

  • Planning: A business with a plan of action is more likely to take action than one without a plan.
  • Creating consistency within all aspects of the business:
    A budget turns an operating plan into actionable numbers. In other words, it brings consistency to all areas of operations. For example, if you plan to start a new product line a budget will force you to examine where the cash is going to come from. A budget also forces the business owner to allocate resources to major expenditures. In short, a budget keeps a business owners from living in the clouds and planning for reality.
  • Evaluating performance:
    Once a budget has been established, there has to be a system to measure and record the results. On a quarterly basis, the results from the budgeting process should be evaluated to determine if things are going according to plan.

Developing a good and useful budget

A good budget ensures all aspect of the business are considered before the final budget is approved. For this to happen, a business will need a master budget also known as a profit plan. The master budget begins with the sales forecast, then continues with the production budget and goes until the budgeted financial statements are created.

Sales forecast

The accuracy of the entire sales forecast depends on your getting this part of your budgeting process right. If you have been in business for a while, there should be some patterns that develop over time. If no patterns are developing, then the probability is you are not taking time to develop essential systems into your business so everything you do is random. When creating a sales forecast be sure to adjust for changes in the external environment.

Production budget

Once you know how much sales you expect, you have to think about how you will deliver on those sales. The production budget makes sure that you account for your labor, materials and overhead needs.

Selling and Administrative budget

Next you will need to create a budget of what it will cost you to sell the products you have made. Also included in this budget is the cost of administering your business.

Cash Budget

Once you know projected sales and what it will cost to make the sales, you put together a cash budget. A cash budget will show how cash will actually flow through the business which increases the likelihood of succeeding in the plans. It will be bad if you created a plan only to find out you do not enough cash to execute. With the cash budget, you know upfront if you need financing to complete the plan.

Income statement and Balance sheet statement

Lastly, create your projected income statement and balance sheet statement which will be used for measurement and comparison purposes.

 

In conclusion, a budget is important for planning for future growth. It allows for resource allocation and consistency within operations. Budgets serve as communication and resource allocation tools. It enables a business to control resources so it focuses on its core competencies.

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The importance of planning in business

By | 2015-11-02T16:05:27+00:00 November 2nd, 2015|

Every action has a reaction. What goes up must come down. There is no better way of determining the consequences of certain actions than predicting the consequences beforehand. For instance, let’s say your competitor provides a service for $50 and you provide that same service for $70. To match your competitor’s price you drop your price to $50. However, you failed to examine what the impact of reducing your price to $50 will be on your profit. In fact, the only time you ever look at your financials is when it is time to file your income tax returns. At tax time, your tax accountant tells you, you had a loss of $20,000 for the year. You are dumb founded by this information because by increasing your price, you doubled the number of customers you served and it seemed that business was going well. However, deep down you knew you were struggling to pay your bills but you thought having more customers will be the solution to that. What you did not realize is the more customers you had, the more money you lost.

While you cannot predict or prevent every circumstance in business, instances like that just described above can be avoided with proper planning and budgeting. Planning in your business does not have to be complicated. By planning, you can predetermine the impact of certain actions on your business. Besides, to successfully grow your business you will need to do some planning. Without planning you cannot focus, without focus you are guaranteed to waste the scare resources in your business. With waste, the efforts and resources cannot be directed to the activities that can accelerate your success. Writing your goals is the first phase of planning. But don’t stop there, you should strive to achieve them!

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How to make better decisions

By | 2015-10-26T16:01:57+00:00 October 26th, 2015|

The average adult in the United States today makes about 35,000 decisions each day. Most of these decisions are simple ones like: What will I have for dinner, should I change lanes, should I buy the blue or red pen, etc. The more choices presented to us in a day, the more decisions we need to make. Even simple activities like visiting a department store, present us with so many choices. What was supposed to be a 15 minute trip turns into a one hour trip. Having too many options, increases the amount of time it takes to make decisions.

Since we are inundated with so many choices, how do we effectively make decisions in today’s world? Making better decisions all starts with having goals. A simple example is when you go to the grocery store with a list of what you want, you spend both less time and money because you are not trying to decide at the time of purchase. Making grocery list is a form of setting goals. As humans, we are not always rational and neither are we capable of processing large amount of data. While some decisions in life are so small and does not require much conscious processing power, you should make it a habit in following a rational process in making bigger decisions. Emotions play an important role in making decisions and not having a rational process could lead to a lot of regretful decisions.

To make decisions

Understand the problem:

Without understanding the problem, you will spend a lot of time and energy solving the wrong problems which sometimes could be worse than not addressing the problem at all. For example, if sales are going down in your business, you need to understand whether the forces affecting sales are internal or external. Understanding the problem is 50% of the solution.

Specify goals and objectives

Once you understand the problem, clearly define how you will know when you have reached a solution. For example if the problem was decreased sales due to high turnover, then an objective will be to increase sales by 10% by reducing turnover rate by 50%.

Identify alternatives

Next, seek solutions and be sure to give yourself alternatives. Locking yourself to one solution could cause short sightedness.

Create a point system

On a white board (or similar platform), lay out the problems, the possible solutions and create a point system for how important certain characteristics are in solving a problem. This allows you to strip out unnecessary details presented by the sales rep of a solution provider.

Select an alternative

Next, select the solution that scores highest in your point system.

Evaluate the effectiveness of the decision

Once the solution is implemented, it is important to come back and evaluate how well the solution is meeting the goals and objectives. This is useful as it helps create better decisions in the future.

The ability to make good decisions contributes to our success in life. The decisions we make daily affect our future. Knowing what you want in life (having goals) makes the process a lot easier. Remember, if you do not know where you want to go, anywhere will take you there.

 

 

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To Attain Freedom as an Entrepreneur, Watch Out for These Three Pitfalls

By | 2015-10-14T00:59:12+00:00 October 14th, 2015|Tags: , , |

Most people start their business because of the freedom they thought it will provide: freedom to earn what you deserve and to work for whoever you want, when you want, and from wherever you want. However, as time elapses business owner find they do not enjoy this freedom. From dealing with demanding customers to indecisive employees, the stress of running your business falls on your shoulder. The sad part of this is that business owners truly believe this is the only way business can be done. What they do not realize is that they are only one person and can do so much.

This article discusses the top 3 freedom killers in business. To get freedom in your business you have to learn how to allocate scarce resources to the right things in your business.

Freedom Killer 1 – Using too much energy fighting duds

Danny started his business because of his creativity. He started out part time helping friends and his website design company grew to 20 clients at which point Danny decided to go into his business full time. Danny had clients who paid him an average of $28,000 per year. To assist him with his client base, he hired 3 full time staff. From the outside looking in, it looks like Danny should be able to live his desired lifestyle. In fact, neighbors seeing him drive his BMW and talk about the big names he works with, thinks he has arrived. However, this could not be further from the truth. Danny knows how much he struggles to stay afloat once he gets to the office. He especially has one client who makes up 30% of his revenue and is very demanding. The client expects 24 hour service, never pays on time and does not seem to appreciate all the work Danny and his team does for him. Danny often pulls his staff from other projects to attend to the whims of this client. Danny’s other clients are beginning to notice that it takes more time to get their job done. This client alone accounts for approximately $150,000 of Danny’s revenue stream and Danny feels he can do nothing about it. Danny is so exhausted serving this client and he has no time left to plan for the future of his business.

Don’t think you are exempt if you own a product based business, the same principle also applies. In product based business, resources are often pulled from stars to promote duds. For example, the creative founder thinks of a genius product he is sure the whole world will love. After months of pouring man power and marketing dollars into the product, the owner refuses to admit he has a dud but rather pulls resources from more successful products to serve the dud.

All past investment in the product is sunk costs. Sunk costs are investments we have made in the past whose outcome might not be too favorable to us in the present. Rather than admit to ourselves that our original ideas was not so good, we continue to pour resources on the project or product line, hoping it will turn around. Refusing to admit past mistakes will prevent us from moving forward in the future. In both case the problem child be it a client or a failed product can pull down the business. The owner must sit down to plan and re-allocate its scarce resources. No business can do it all: As a business owner you have to watch out to ensure that your resources are not being used to fund problem children but rather you want your resources focused on opportunities.

Freedom Killer #2: Thinking you know it all creates a business which cannot scale

You have structured your business to be centered on you. You wear all the hats needed to deliver value in your business. Your role ranges from sales man to the floor sweeper. This is a very stressful way to run a business! Delegation is a necessary part of growth. Thinking no one can do what you currently do as well as you do is the surest way to keep yourself enslaved to your business. The difference between a strong company and weak company are its people using their knowledge to move towards a predefined direction. How much money you make each year is important, but how you earn that profit will have a greater impact on the value of your company in the long run.

Freedom Killer #3: You skip planning for the financial future of both you and your business

Without a plan they can be no focus or motivation. A person who has a vision they single mindedly believe in will achieve that vision. A focused mind is like a person who is being chased by a lion: he/she quickly discovers they are able to run very fast. Your single minded focus of avoiding being eaten creates in your abilities that you did not even know existed. Skipping the planning process is the surest way to ensure you stay where you are today. Without focus, you will lack direction and fulfillment.

In summary, it is so easy to be tied up in the things that steal our freedom in our business. We need to make continuous effort to keep sailing in the right direction. Having a plan is the best way to start in the right direction.

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Growth can be stressful!

By | 2017-11-24T20:52:08+00:00 September 1st, 2015|Tags: |

After a successful career in marketing, April John decided to start a shoe retail business. The retail store will sell specialty shoes specifically made to increase the activity level of seniors by reducing the stress on their feet. The business became so successful that April within the span of a year opened three other stores. April took loans to finance the opening of these three stores.

April could not believe how fast she was growing. April started adding additional product lines which took her away from her original concept of “keeping seniors active”. She added a kid’s line of products so grandparents can pick up a pair of shoes for their grand kids. With more product lines, came the need to finance inventory. Cash flow problems became an issue and on several occasions, April came very close to not making payroll.

The market had also become attractive to competitors as they tried to imitate April’s success. With increased competition and restrained cash flow, April was no longer able to allocate resources to new product development for her senior citizen market. Traffic to her stores began to decline as her customers were looking for something new. April was very close to losing all four stores.

Looking at April’s story it seems like April’s major problem was cash flow. But looking deeper, you will see a more integral problem. April lacked focus in her business. She had no plan, and she did whatever felt good at the time. Her cash flow suffered as a result. As entrepreneurs, it is so easy to divert from why we went into business in the first place. Staying focused is one of the hardest things for us. This is why we need systems to keep us in check. Without systems we spread ourselves too thin. How could April make her growth more manageable? April could have done the following:

Create a map

April should have created a map of where she wanted to go. She should not have added a kid’s product line without evaluating how this addition would have affected her existing strategy. Why it might have seemed like a good idea to sell children shoes to grandparents, April did not consider the financial consequences of her action. Adding new product line means tying up cash in inventory. Tying up cash in inventory means April cannot serve her current market as well as she could. She had to forego market research to sell children’s shoes. She did not realize that seniors did not come to the store to get children shoes, they only bought the children’s shoes because they were already in the store. If no innovation occurs, her customer traffic also dries up. If she had a plan, she will look for alternatives which will allow her sell children’s shoes on consignment.

A map allows you to focus and focus allows you to maximize the returns on your investment. By staying focused on her seniors market, April would have continuously sought ways to help them.

Create a budget

Once a plan is created, the next step is to add numbers to the map – this is called a budget. Every business has financial constraints, and cash should be invested in markets that yield the highest return given the businesses core competencies. A budget is the reality check that says, “You can’t do it all”. Therefore, choose wisely!

Cash Flow Management

If you are a business that heavily depends on supplies, inventory, employees or contractors, then cash flow management could become an issue. April never took the time to develop good vendor relationships. Good vendor relationships allows you to better manage your cash while getting the best deals on your order.

Something else, April needs is a line of credit to finance cash shortages. April, over extended herself by getting multiple loans to open up three other stores and her bank did not want to lend her more money. This is another area where having a plan comes in very handy. If April, had a plan, she could have foregone opening up three other stores in exchange for a line of credit to finance her cash shortages. Being overextended, presents you as a business risk, which makes it less attractive to investors. Slow but sustainable growth is better than fast growth that liquidates you.

Learn to say NO!

Learning to say no could be hard at first. But, this word gives you the freedom to do the things you really love. Growth becomes very stressful if you never learn to say no. Each time April clients made a comment about something she could do in her business, she implemented without considering how it will affect the overall financial health of her business. This made April stressed to the point where she could no longer serve her original customer base effectively. You cannot do it all. A jack of all trade, is a master of none. Master one thing to the exclusion of others. Having gazelle focus, intensifies your growth.

In summary, as entrepreneurs we go into business because we are passionate about a cause, a product, etc. We want to change lives and we deeply care. These same attributes that makes us successful also could become our downfall if not properly managed. Passion has a “dark side” and as entrepreneurs we need to be aware of what these are and address them appropriately. This is why it is important to surround ourselves with people that keep us accountable. If we don’t, we find ourselves spending our money in foolish ways and even worse, we find ways to justify it!

3 ways to minimize growth risks

By | 2015-09-01T06:29:46+00:00 September 1st, 2015|Tags: |

There are very few decisions we make in business that are truly important. These few decisions have the propensity to propel or crash us as entrepreneurs. One such decision is choosing to expand: If not done with care, business expansion can wipe us out. You could grow to your destruction if you choose to expand too quickly. For instance, your growth strategy might require you to expand your current office space, hire more staff, acquire a whole new location, etc. If you do not have sufficient cash to fund this growth, you end up at a worse place than where you started. This is why you need a plan, a budget and metrics to minimize your growth risks.

Develop your growth strategy

Growth should never be embarked upon casually. To successfully grow, you first have to create a map showing how to get to your destination from where you are now. A good growth strategy is simple, clear, focuses on the customer and is specific. Your reason for growth should not be solely based on a random thought of increasing revenue. First you should have a clear vision of where you want to go. In developing growth strategies, less is more. Trying to focus on too many things will cost you more in the long run.

Resource allocation

As mentioned earlier, focus is essential to sustainable growth. If you try to be good at everything, you waste resources. This is because each decision you make has financial consequences. For instance if your growth strategy is to expand services to current customer base by educating key staff in new technologies, then care must be taken to ensure that resources are available to send employees to conferences. If you choose to grow by creating new services for your customer and at the same time want to acquire Mr. Jones practice down the street, you could be spreading yourself too thin. I am not saying one strategy is better than the other, but you will need to choose one and run with it.

Every growth strategy must be allocated resources. Another way to put this, is create a budget. A budget is a great way to make sure your organization stays lean. It is also important that you develop a cash budget while allocating resources. Regardless of your growth strategy, you will need cash to execute. If cash is not readily available in the business, then you will need to find a source to finance your growth plans. The cash budget will show you exactly how much you need to borrow. You can fail before you even start by not having enough cash cushion before taking the full plunge.

Optimize

Once you have a budget, you need a way to determine if you are on track with your growth plans. Metrics allow you to measure how well you are doing. A metric will help you tweak and optimize your growth strategy.

In summary, a business which does not grow will die. However, pursuing growth without thinking of the financial consequences is not wise either. Do not grow to your own destruction! Take the time to plan your growth and make sure you have enough resources to carry out that plan.

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Identifying new business opportunities

By | 2015-08-17T05:05:53+00:00 August 17th, 2015|Tags: |

As a business owner you should always have one eye on your external environment. This knowledge is very useful for restructuring the way you do things. Part of growing as a business owner is innovating periodically. This article briefly touches on how to identify new opportunities in your business.

Identify who you are or who you want to be

The first thing you need to know about seeking new opportunities is you need to first understand who are as a business and where you fit in your industry. For example: if you were in the furniture business, you are either on the top of the value chain cutting down the trees, or you are the sawmill converting the log to lumber, or the one who assembles the furniture or the retailer. Each strategic business unit in the value chain fulfills the consumers need for furniture in different ways but all are important to creating value.

Knowing where you fit is important because the better you understand how all the processes in your industry works, the better you can position yourself for success. For example a retailer in the furniture industry after examining its industry value chain may decide to skip the assembler and charge a nominal fee to the consumer to assemble the furniture in their home. This cuts costs for both the retailer and the consumer. The retailer is happy because the product cost less to produce and the consumer is happier to pay less for the same product.

Recognizing where you can cut costs as a business owner and yet increase customer satisfaction is just one advantage of examining your industry value chain. Another advantage is it shows you how you can capitalize on your strengths and opportunities in the market place.

What about the service business

In service businesses, it is very likely that all the processes/ activities that provide value to the consumer are all produced in one business unit (firm). However, this does not preclude you as the business owner from observing your industry to see where you could have a competitive advantage. As a service provider you should understand the way your competitors do business, what it costs them to do business and how much they charge for similar services. You then figure out how to differentiate yourself from the market. You derive a lot of market knowledge from studying your competitors.

Do a SWOT analysis

The second thing you want to do is a SWOT analysis. This enables you as a business owner to see how you can capitalize on the opportunities you have found in your industry. SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis allows a business to leverage its strengths, compensate for its weaknesses (by outsourcing or partnering), while taking advantage of opportunities and planning for threats.


 

Identify the opportunity

With knowledge of the external environment, you should be able to identify a list of opportunities. The opportunity pursued should be one that capitalizes on your strength while minimizing weaknesses and threats.

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Business Owner or Freelancer?

By | 2014-12-07T00:54:28+00:00 December 7th, 2014|Tags: , |

Have you ever asked yourself if you run a business or if you are self-employed, a freelancer, or a consultant? Is there even a difference between self-employment and business owner? To answer your question, I will like to pose the following questions:

  1. Are you able to walk away from your business, do nothing and still earn money
  2. Do you find yourself working more as you become “more successful”?
  3. Do you feel you are enslaved to your business?

If you answered yes to any of these questions then you are self-employed and not a business owner. But what really is the difference between self-employment and business ownership?

There is a big difference between having a side project, hobby, being self-employed and having a business. A business has systems while the others do not. A business generates income from assets; a self-employed individual generates income directly from customer. Generating income from your business is not the same as being financially independent. However, most people start out with side projects or self-employment and later build entire systems around it. If you intend to build a business it is important to set that goal from the onset.

Being location independent or a lifestyle designer is not the same thing as having a business or even being financially independent. True financial independence comes when your assets are providing enough income to meet all your needs. If revenue is coming directly from customers and you have not built any tangible or intangible assets that produce revenue, then you are not truly financially independent.

The diagram below shows the difference of having a business and being self-employed/ freelancer or consultant.

Businesses have systems which aid in the asset accumulation process. Income is derived from assets


Self-Employment/Freelancer/Consultant – freelancers get income directly from customers


So what makes a business an asset in order to make one truly financially independent? I am glad you asked. It is the collection of systems that becomes the underlying assets that produces true financial independence. If you have just a product or service you will eventually hit the maturity and decline phase. However, a business that has systems in place has the potential to outlive its founder. If you want to build a lifestyle business that endures, you need to understand financial systems and how to make the numbers work in your favor.

Understanding your financial systems is the first step to planning your way to financial independence. There are various tools used to plan your system such as:

  1. Building a map
  2. Budgeting
  3. Forecasting
  4. Financial Analysis
  5. Cash flow management
  6. Metrics Development and Analysis

Building a Map

Do you start out a journey by entering your car and driving without a destination in mind? Well it is the same with your business. Most people start their business with an idea without drawing a map of where they actually want it to go. If you want to move from self-employment to business owner then you need a map that will take you there. You have to start by imagining the kind of life you want and designing your business to fulfill that lifestyle. How this is done is going to look different for different people because no two people are exactly alike.

Budgeting

Once you have your map, the next thing you will want to do is design your budget according to your map. A budget puts numbers to the words in your map. Once you break down your map into measurable terms you begin to see how achievable your dreams really are. The journey from self-employment to business owner does not have to be a total mystery. It is well within your reach if you have the right processes in place.

Forecasting

So now you have your budget, don’t relax just yet. You still need tools to help you see into the future. Forecast helps you think beforehand problems that might come your way so you can deal with them before circumstances happen to you rather than you happen to them. Being able to foresee problems before they happen is a characteristic of a business owner. The self-employed person is often so busy getting work done and never spends enough time planning.

Financial Analysis

Financial analysis should be done at least once a month. This is when you look at your financial statements. When looking at your financial statements look for the following:

  1. Where have you succeeded?
  2. Where have you failed or could potentially fail?
  3. How does this compare to your plan and budget?
  4. Are you still on track?

These are the basic questions you will need to analyze at least once a month. Doing this regularly will help you see where you are faltering and help adjust your steps as soon as possible before it is too late.

Cash Flow Management

You have heard the saying cash is king. You could have all the profits in the world but without cash you will still be broke. Managing your cash is an essential part of the self-employment to business owner journey. In the beginning of this journey, they will be a lot of sacrifices you will have to make. However, with a plan and budget in hand, these become easier because you know they are for a purpose. If you are frivolous with the cash in your business, your business will be frivolous with you.

Metrics Development and Analysis

So you have a plan: How do you know how close you are to achieving the goals in your plan if you do not have metrics. Developing metrics to measure the success of the goals in your plan is paramount to your success. Metrics development deals with the development of relevant metrics and metrics analysis has to do with periodically coming back to check how you are doing.

 In summary, the road to self-employment to business owner is not impossible but takes considerably planning and patience on the part of the entrepreneur. It is not a journey for the faint of heart. This article has barely touched the tip of the iceberg of all that it takes.

I am curious to know where you are on your journey. Post a comment below and share your journey with me.

Ordinary or Exceptional? Your Sales Mix

By | 2014-04-07T05:25:34+00:00 April 7th, 2014|Tags: , , |

I have a very good friend that recently passed away from cancer: She was very young. I remember going shopping with her after her condition had become really bad and she was beginning to suspect the end was near. I was shopping for a jacket and being the very price conscious customer that I am I chose a jacket I found to be okay but had the right price. My friend asked me if I liked the jacket. I replied that it was okay and that I will probably grow to like it. She looked at me very sternly and said to me, “then don’t get it, we will go to another store where you will find something you like at the right price. Never trade the okay for what you really want, life is too short”. I knew going to another store for her was a big deal. She was tired and would rather go home and rest. But being the great friend she was she was willing to sacrifice her time so as not see me settle. Even though she has passed away that sentence still haunts me every day. I frequently ask myself, “am I trading the okay for what I really want?”

In life it is so easy to settle for what is just okay, rather than striving for our dreams and vision. For instance, we get a job offer and we know we want to be in another field but we accept it because we are afraid we may not be able to do better. Or an example I see a lot is women dating men that are just okay for them. They date because they are afraid they might not be able to do better.

So how does this apply to business?

How do you build an exceptional lifestyle business that is way beyond the ordinary? How do you move away from okay?

The answer is in your sales mix. A sales mix is the relative proportion of the each type of product or service you sell. Look at your sales mix: Are you passionate about what you offer to others? Or, are you in business just to earn a living? This does not mean you have to like everything about your business. As a matter of fact, there are things about your business you are just not going to like. But the point is, when you stand back and look at your business as a whole, do you like what you see or is the ordinary taking precedence in your business?

How do you determine your sales mix?

Like I said earlier, the sales mix is the relative proportion of goods or services you provide. So for example, let’s say you have 2 services and 90% of the time you perform Service A and the other 10% you perform Service B. Your sales mix is 90% Service A and 10% Service B. You can compute your sales mix using sales data from previous years (hopefully you keep good records and if you don’t you need to start).

If the percentage of “ordinary” products or services you offer is more than the “exceptional” products or services, then it’s time to have a business makeover. A business makeover starts by looking at all part of a business and develops a plan to turn the ordinary to the extraordinary. Without a plan, you will keep doing the same things hoping for different results – the very definition of insanity.

Every lifestyle entrepreneur goes into business because they cared enough about something. Somewhere along the line we get buried in the tasks and forget the purpose we started in the first place. We get the okay jackets” rather that the “exceptional ones”. If you look at a child, they seem to know what they want. But as they grow older they are told to just be grateful for what they have before them. Don’t get me wrong, I am all for gratefulness: I personally am grateful of all the wonderful blessings in my life. But gratefulness has been used interchangeable with mediocrity. This is what bothers me.

So let’s turn back to you: I do not want you to stop reading this blog without taking at least one minute to reflect on your life. Is your dream worth waiting for? Is it worth it for you to go beyond what is okay and strife for what is buried deep down in your heart? Just like the jacket we are surrounded with things, concepts, people, ideas that are just okay for us and it is so easy to settle. Today I am challenging you to go beyond okay, DON’T’ SETTLE BUT STRIVE FOR THE EXCEPTIONAL!

Lifestyle CPA

Financial Keepers, LLC
Innovate Springfield
15 South Old State Capitol Plaza,
2nd Floor Springfield, IL 62701
Telephone: 417-812-5945

Phone

417-812-5945