Small Business Profit Maximizer!

Problems for Employers Created by President Trump's Payroll Tax Deferral

Employers NEED to watch this video to learn the problems you face and decisions you will need to make before September 1st.

 

 

Creating Your Profit Plan

 

I am always telling my business owners that they need to have a profit plan.  I have seen many different profit plans including a few that were drawn up on the back of a cocktail napkin.  Of course, if you want to achieve massive profits you will need a more organized method.

I have developed the following system after trying many different options taught by other business gurus.  One advantage of this system is that business owners can easily understand it and implement it.  Call your accountant if you need help the first time. 

Start by creating a spreadsheet that looks like the following:

                Sales                                                                            $4,300,000

                 Cost of goods sold                                                         2,100,000

                            Gross profit                                                       2,200,000

                   Less net profit goal (10% of Gross profit)                       (220,000)

                   Less overhead (non-payroll and related taxes)              (800,000)    

     Calculating salary cap                                                              1,180,000

                Actual payroll costs                                                       1,540,000

                (Excess) payroll costs                                                    $(360,000) 

                                                                                                     ========

A few notes while putting this form together:

• When establishing your profit goal be sure to aim high. I assume your goal was to make money when you started your business.  So aim high. 

         Notice I am subtracting profits as the very first item.  Your business profit plan is designed to make you the profit that your business deserves.  If you           can’t figure out how to reach that profit than maybe the business isn’t a viable business as currently being operated.  (Pickup and read “Profit First”           by Mike Michalowicz for a very good explanation of why you must take out your profits first.)

• Cost of goods sold is all expense items needed to produce your product. Do not include payroll.

• Payroll costs are all wages, salaries and outsourced contractors that you pay. Also add in all related costs such as payroll taxes, pension plan contributions, bonuses, health insurance, etc.

• Overhead costs are all other business expenses other than costs of goods sold and payroll costs.

Once you have completed the form determine if you have excess payroll costs, like my example above, or if your payroll is under the calculated salary cap. 

If you are under the salary cap I recommend that you increase your profit goal dramatically.  In fact I would recommend that increase it to the point that you have created an excess payroll cost situation.  My experience is that businesses that are making a good profit already are perfectly situated to rapidly increase their profits by following my SMART Profit Maximizing System.

If your worksheet shows that you have excess payroll costs don’t panic. My example above is from a real client who I worked with.  Once I worked with them to implement my SMART Profit Maximizing System they had eliminated the payroll cap deficit and had increased their profit to $166,000 rather than a $220,000 loss.

This is the order that I use to increase the profits (all of these areas are covered in other articles):

• First, I work with the client to decrease their overhead costs.
• Second, I work with them to reduce payroll costs.
• The third step is to increase your gross profit. This is mainly done by reducing your product costs and to improving your business cash conversion cycle.
• Finally, we work to increase sales. We do this last because; at this point, we now can increase sales that add to the bottom profits.  Remember, if you increase sales first you may actually work harder and lower your profits.

Remember that massive profits are not an accident.  They are a result of creating and implementing a well thought out profit increasing plan.

So until next time—let’s make this our most profitable year ever.

Study Confirms Main Reasons Businesses Fail

These reasons that cause new business to fail are also the main reasons that I see in businesses that are stagnating and even starting to lose sales and profits.

 

A study by CBInsights listed the top 20 reasons startups fail.  (Full study at https://www.cbinsights.com/blog/startup-failure-post-mortem)  This isn’t the first study about startup failure, but it is different from others in that it provided a much higher level of detail.

Though it focused on startups, I believe its lessons apply to every business that is not growing to the level the owner expects.  Here are the study’s top five reasons businesses fail:

1. No market need was listed by 42%. Almost half the failures were caused because their product didn’t solve a customer problem.  This is why we spend so much time in our Sales & Marketing Boot Camp pushing our clients to really discover their customers’ true need

2. Running out of cash was listed by 29%. A third of the businesses simply ran out of cash.  This is why the business owner must become an expert in raising cash, keeping cash, and budgeting.  This is also why the business owner must have good accounting records.

3. Not having the right team was listed by 23%. Too often a small business owner can’t grow a viable business independently and fails to bring in qualified help.  Sooner or later this kills the business.

4. Being outcompeted was listed by 19%. You are often told to ignore the competition and just put out good work.  But if they have a solution to the customer’s problem that is much easier to use, or they simply out-market you, they will become the leader in your niche and you will lose.

5. Pricing/cost issues were listed by 18%. Many businesses have trouble determining what to charge and what pricing model to use.  They often build a product or service and say, “This is what I need to charge to make money.”  This approach ignores the customer.  What is the customer willing and able to pay to solve their problem?  Only after you discover this information can you determine if you have a profitable solution (product or service) to offer.

This brings me back to where I mentioned that businesses seem to be either doing very well or simply surviving.  If you aren’t doing as well as you think you should be, these five things may be a large part of the problem.  Read the full study with the comments and I guarantee you will find ideas and solutions that you can apply to your business.

The Importance of Controlling Labor Costs

Watch this video to learn the only two reasons for hiring employees, how to calculate your company salary cap and how to control labor costs. Also review three examples of success controlling labor costs.

 

Labor costs are usually the biggest cost item for a service business, and the second biggest cost for a business that sells products.  But rarely does the owner make a serious attempt at controlling it.  They may work at controlling overtime and insurance costs, but they seldom do a staffing review to ensure they are not overstaffed.

The business owner should be doing a review at least once a year.

• Scrutinize every job in your company to determine how it fits into the entire operation in accordance with your company’s long-term objectives. Probe all aspects of each job—its basic function, the level of work being performed, its relationship to other jobs, and so on.

• Decide if any job should be eliminated and those responsibilities shifted to someone else in the department. Can this job be outsourced?  Has anyone been performing work that lies well outside of his or her assigned responsibilities?  Do all positions require full-time workers or can one or more be filled with part-timers?

• See if you need to hire additional employees so that critical jobs are being staffed properly.

 

Don’t get lazy and don’t dodge the tough decisions.  The key to running a profitable business is keeping your costs under control.

8 Things You Must do to Jump Start Your Business Profits

Here are the eight things highly successful business owners do differently from their not as successful competitors.

 

A trend I noticed a few years back seems to be gathering steam.  My business clients seem to be doing either exceedingly well or just barely surviving.  Those in the middle appear to only be there while they are either growing rapidly or continuing a long-term slide to elimination.

 Granted, my client base is a small sample.  But my online research and talks with other CPAs seem to back up a trend that is basically being ignored.

 I believe that it is no accident that this separation of businesses into the extremes is occurring.  In the past you could just operate your business and make a decent living.  Now what I am seeing is that every niche is being dominated by one or two companies who have acquired 85-95% of the customers.  All the other business owners are left fighting over the scraps.

 So what do extremely successful business owners do differently?

What I have noticed is that extremely successful business owners do the following eight things that are critical to their massive success:

1. Successful business owners set SMART goals.
2. Successful business owners eliminate all excuses that stop them from reaching their goals.
3. Successful business owners are committed to constant improvement.
4. Successful business owners are committed to lifetime learning.
5. Successful business owners constantly work to identify and eliminate their profit killing mistakes.
6. Successful business owners maximize their profits from their current business.  They don’t leave any profits on the table whatsoever from their current assets.
7. Successful business owners understand the profit formula and how to apply it to their business.
8. And finally, successful business owners set a weekly appointment with themselves to systematically improve their business.

So what does this mean for you?

What are you doing this year to ensure that you are one of the successful business owners?

What's Your Marketing Grade?

As Dan Kennedy, author of the No B.S. marketing books says, “Every business is a marketing business.” Only after business owners understand this key point are they ready to grow their business. Take this test to see how good your marketing is.

 

Grade yourself on each of the following key points with a traditional letter grade from A (for
excellent) to F (for failure, or when there is nothing done in an area):
1. Do you have a short answer for this question: Why, with all the other choices out there
(including the choice of doing nothing), should I buy from you? Grade____
2. Do you know the lifetime value of a new customer? Grade___
3. Do you make it easy to buy from you? Grade____
4. Do you understand that every contact with a customer is a marketing opportunity?
Grade___
5. Is there a script for all of your staff to use for every contact point with a customer?
Grade___
6. Do you have a clear strategic marketing plan? Grade___
7. Do you have a written marketing implementation plan for the next 30-60 days?
Grade___
8. Do you use this marketing plan to guide your daily, weekly, monthly, and annual sales
and marketing activity? Grade___
9. Do you act on your marketing plan? Grade___
10. Do you contact all your customers by mail, email, or phone every month so that they
don’t forget you? Grade___
11. Do you personally call your top customers monthly looking for new ways to better serve
them? Grade___
12. Does your company have a plan to upsell or cross-sell to every customer? Grade___
13. Do you have a clearly defined customer benefit statement for each of your products or
services? Grade___
14. Do you have a way to capture contact information for all prospects? Grade___
15. Do you have a systemized plan to turn prospects into customers? Grade___
16. Do you have good sales material? Grade____
17. Are you only using advertising and marketing tools that allow you to track effectiveness?
Grade___
18. Do you concentrate on selling to a particular niche rather than trying to be all things to all
people? Grade___
19. Do you have sales training meetings? Grade____
20. Do you have a marketing-based website? (A website that leads to sales or an
appointment, rather than an electronic business card.) Grade___
21. Do you use email marketing? Grade___
22. Do you use social media to educate your customers and build loyal fans? Grade___
23. Do you look for ways to WOW your customers on every sale? Grade___
24. After you have wowed them, do you ask for testimonials? Grade___
25. Do you look for ways to create marketing partnerships that are beneficial to both parties?
Grade___
26. Do you remember to thank your customers at least yearly? Grade___
Review the grades you gave yourself and work on improving any grades lower than a C.

I Forgot to File My Taxes! Now What?

Every year I hear this question from people who just missed the tax deadline. What should you do If you forget to file your tax return on time?

 

Every year I hear this question from people who just missed the tax deadline.  I joke that these are the people who believe that deadlines are only recommendations that really don’t apply to them.  Unfortunately, that is not how the IRS looks at it!

Here are the key points to remember when filing late:

• If you are getting a refund, then there really is no problem, since penalties and interest only apply to any balance you might owe. Of course, you should file promptly in order to get your money back.  The IRS will not refund you any money owed if you wait three years from the time the return was due.  That means that you can still file for 2010, 2011 and 2012 and receive a refund.
• If you owe tax, you may be charged a failure to file penalty of 5 percent of the balance due per month (or part of a month), up to a maximum of 25 percent. So try to get your tax return filed as soon as possible to avoid this penalty.
• If you don’t pay your taxes on time, you will also be penalized a failure to pay penalty of 0.5 percent per month (or part of a month) up to a maximum of 25 percent.
• Filing an extension will not eliminate the failure to pay penalty, only the failure to file penalty. You will still be charged interest and the failure to pay penalty up to the date you finally pay the tax.
• If you can show reasonable cause for not filing or paying on time, the IRS may abate the penalties. You should explore this possibility with your tax preparer.
• Don’t ignore the problem and hope it will go away. The IRS, like any large bureaucracy, can often take months or years to send you notices about unfiled and unpaid income taxes.  But they will always catch up to you.  Ignoring the problem only makes the balance owed larger and can lead to the IRS seizing your bank account, paycheck, and assets.

Save Taxes by Hiring Your Spouse

Your spouse is probably already helping you in your business. Actually, officially putting them on the company’s payroll has many advantages.

 

If you’re a business owner, you know how much you rely on your family’s support.  Your spouse is probably already helping you in your business.  Actually, officially putting them on the company’s payroll has many advantages.

1. You can deduct the full amount of contributions to a qualified retirement plan made for your spouse. Of course, you still need to follow the laws and guidelines, but this is a great way to lower your taxes and save for retirement at the same time.

2. If a business owner is operating a C corporation, payments to the spouse can reduce taxes if the company is in a higher tax bracket than the owner’s tax bracket. This also allows you to take more funds out of the corporation before the company is hit with the excess earnings tax or has to pay dividends, which results in the much-feared double taxation of income.

3. If your spouse is considering going back to school for a business degree or something else that can benefit your business, the business can pay for it and deduct the tuition. You cannot take any education credits for yourself, but you will not be taxed on the money you spend on tuition. This can be tricky, so please check with your tax preparer.

4. Health insurance is another area where hiring your spouse can cut costs. As we all know, health coverage is expensive, and if you hire your spouse, you can get the same coverage and price that your other employees receive.  The difference is that it is 100% deductible.

5. If you and your spouse travel a lot for business, you can deduct the mileage and expenses for both of you. If your spouse is an actual employee and will be performing work-related duties during the trip, expenses can be deducted as normal business expenses.

6. Again, if you offer your employees life insurance at group rates, you can include your spouse in that plan.

These are just some benefits that you can receive if you are considering employing your spouse. You may want to consult a tax advisor and your insurance representative to make sure the savings are worth the payroll tax expenses.

Like any good CPA, I need to add a disclaimer:  Unfortunately, it is impossible to offer comprehensive tax info in this video or article, no matter how well researched or written. And remember, I love my readers, but watching this video or reading this article does not make you a client. Before relying on any tax information given in this magazine, contact a tax professional to discuss your particular situation.

Where Are You Going & How Will You Get There?

Do you know where you are taking your company and how you will get there? In this video I discuss why you must have a company strategy and how it is vital to growing your business.

 

Simply put, a company strategy is how you are going to reach your long-term goals from here. If
I need to get to San Diego from El Paso in the next couple of months, my options are almost
endless. If I wanted to, I could copy one of those Bike Across America guys and ride 20 miles
every day until I got there. But if my goal is to get to San Diego tomorrow, then my strategy
better include finding a flight or jumping into the car now for a 12-hour road trip.

At its most complicated, a company strategy is the unique formula for success that forms the
foundation of a business plan and governs day-to-day operations. This strategy is not a business
definition and summary of pertinent markets; it is an account of the one or two key factors that
distinguish the firm from its competition and are most expected to contribute to the firm’s longterm
success.

To be effective, a company’s strategy should be no longer than one page. For many businesses a
single sentence is ideal. The strategy should be easily and frequently communicated to
employees so that a cohesive business focus is always maintained.

Why develop a strategy? Your strategy helps you understand and properly communicate to your
investors, employees, and your customers who you are, what you do, and why you are the best.
It helps you understand who your best target audience is and discover the best way to reach
them.

By serving as a jumping-off point for annual business planning, your strategy will become the
nucleus around which an annual business plan is developed. It will also form a framework for
considering mid-term deviations from the plan. It will help set a consistent direction for key
functional areas.

A good strategy should endure year after year and tie one year’s business plan to the next. This
enables the company to easily build upon the accomplishments of the previous year. This does
not mean it doesn’t change or that once done, it should be stuffed in drawer to be forgotten. It
should be considered a “living” document that changes as your business grows and new
opportunities present themselves.

Without a clearly defined strategy, companies of all sizes tend to lose direction when they run
into temporary difficulties, or when management gets bored operating “the same old business.”
It is amazing to see so many very small businesses, after having had a few moderately successful
years, start adding completely unrelated product lines or services that only muddy their
identities. This tactic signals to customers that management has no clue as to what the nature of
the business really is.

If I haven’t sold you on the importance of a strategic plan, consider this: 79 percent of the
largest, most successful companies said that strategic planning was their most important and
favorite growth tool. One quick way to success is to see what the best of the best do and copy
them.

Can you quickly state your company’s strategy? If not, now is the time to start creating one. I
would recommend buying two books: The Plan-As-You Go Business Plan by Tim Berry and
Strategic Planning Kit for Dummies by Erica Olsen.
What Is Your Company Strategy?

Action Tips:
1. Re-read the article.
2. I would recommend buying two books: The Plan-As-You Go Business Plan by Tim
Berry and Strategic Planning Kit for Dummies by Erica Olsen.
3. Write down your long-term goals.
4. Decide how you will reach these goals. Your plan is your new strategy.

Critical Business Mistake #3- Not Knowing Your Costs

Not knowing your true costs & opportunity costs can seriously lower your business profits. Learn why you must know your costs & how to calculate them

 

Make Sure All Your Products Are Cash Cows

 

All business owners know that not all products are created equally.  There are some products they make a ton of money on and others where they barely break even.  But it is amazing how many business owners don’t really know what products they make the most money on.  They focus on those products that they make very little profit on and ignore those that are real cash cows.  Even worse, I have seen business owners who have unintentionally put a product on sale below their costs, and then spend advertising dollars to sell even more items at a loss!

Why?  The business owner is either just trusting their gut and their back-of-the-cocktail-napkin calculation from years ago, or they are not calculating their product costs.

The Starting Point:  Calculating Gross Profit by Product

 

First, calculate the gross profit for each product using a spreadsheet as follows:

• Sales price for each product.
• Less: Purchase price of product.
• Less: Cost of direct labor for each product.  This is best calculated using a standard rate times the standard number of hours to produce the product or service.
• Less: Cost of outsourced work.
• Less: Cost of other direct costs related to preparing the product for delivery or sale (freight, packaging, supplies, etc.)
• Equals: Gross profit for each product

 

 

Advanced Product Cost Management:  Activity-Based Costing

 

If you have already calculated your gross profit per product, congratulations!  This puts you in the top 10 percent of business owners who manage their profits to this detail.  Now the bad news:  You have just started.  I have seen business owners make costly mistakes because they did not know the total cost incurred throughout the sale, from taking the order to delivering the product and collecting the invoice.

I had the owner of a commercial glass installation company who called me in because his sales had increased by 50 percent but his profits had dropped by 25 percent.  When I did activity-based costing on his major products, I found that he had put a new type of glass on sale that was taking his staff almost three times as long to install.  When we added this installation time to the product cost, we found out he was losing about 10 percent on each sale with his current pricing.  But it got worse!  He was having a 10 percent off sale on that item for the month.  This meant that he was now losing 20 percent on an item that, because of the sale, was selling out quickly.

To calculate your total activity-based cost you take:

• Gross profit for each product
• Less: Sales costs.  This is the amount of time you and your sales staff spend to sell the product.
• Less: Advertising costs.  This is the cost of any advertising you run on this particular product.
• Less: Delivery and freight costs.
• Less: Collection costs.  This is particularly important if you are in the medical field and bill Medicare, Medicaid, or private insurance.
• Equals: True Product Profit

 

Knowing your true product profit is the key to making good profit management decisions.  You will now be able to focus on your most profitable products while eliminating or reducing those that add little or nothing to your bottom line.  Let your competitors focus on the losers.  You will now be focusing on your cash cow products!

Part 2 Not Mastering Your Cash Conversion Cycle

In every business, cash is king. You’re going to go out of business without it, even if you’re profitable. With it, you can hide a lot of sins. But the truth is that very few business owners actively manage their cash.

 

Mastering Your Cash Conversion Cycle

The Key to Getting More Cash in Your Bank Account

In every business, cash is king.  You’re going to go out of business without it, even if you’re profitable.  With it, you can hide a lot of sins.  But the truth is that very few business owners actively manage their cash.

Business owners usually enjoy producing and selling their products, but they often feel that managing cash is the bookkeeper’s job.  The big problem with this is that if you run out of cash, you’re pretty much out of business.  Your employees expect to get paid every Friday.  Your landlord expects to collect his rent at the beginning of the month.  Payroll taxes are due every month.  The list goes on and on.

So when business owners start to run low on cash, they quickly have to figure out how to get more.  This usually means collecting receivables, investing some personal money, running up credit cards, and asking for loans.

Once the cash balance is back to normal, everything is business as usual—at least until the next cash shortage.  The best way to solve cash flow problems once and for all is to speed up the complete sales-to-cash process.

 

Understanding the Sales-to-Cash Cycle

This is how the sales-to-cash cycle goes:

• You advertise your product or service.
• The customer places an order.
• Your staff turns out your product.
• The product is delivered.
• The invoice is sent.
• You collect the invoice.
• The staff is paid.
• Your vendors are paid.

Any cash that remains is called cash flow.  That’s the small amount of your collections that actually finds its way into your bank account.

This is how it works in a perfect world.  You collect the invoice before you have to pay your staff and vendors.  But as most business owners know, we don’t live in a perfect world, and the truth is that we often have to pay our staff, our vendors, and our overhead before we have a chance to collect anything.

And it gets worse!

Every business owner has certain fixed expenses (rent, loan interest, taxes, insurance, utilities) that have to be paid monthly, no matter when the cash is collected.  Accountants and bankers refer to these expenses as overhead expenses.  I joke that they are called overhead expenses because they are constantly hanging over your head demanding that you participate in a never-ending hunt for cash.

Why Improving the Sales-to-Cash Cycle Is Critical to Success

The reason so few businesses improve their business cycle is because it is really hard work.  You have to look at each step individually and find ways to improve them.  But the payoff can be big.

Amazon is a great example of a company that has almost perfected this.  Think about their business model.  Everybody pays with a credit card upfront, which Amazon will even keep on file for you.  This allows customers to place an order in one step.  They have several regional warehouses, making it easy to ship the product as soon as the next day.  This fine-tuning of their system has allowed Amazon to dominate the online retail world and easily compete with many brick-and-mortar stores.

So how will speeding up the sales process improve your cash flow?  Compare the following two companies.

• If I buy from Company A, I place my order today and it’s delivered in a week. I get an invoice at the end of the month and I pay 45-60 days later.
• If I buy from Company B, I place the order today, pay for it today (or at least leave some down payment), and it ships tomorrow. The invoice accompanies the order, and I pay the remaining balance (if any) in the same 45-60-days.

Company A receives the cash from my sale 90-100 days after the sale is made.  They have to maintain a large cash reserve to finance this amount of work-in-process and receivables.

Company B has purposely designed their sales-to-cash cycle so they receive at least half of their sales price before the product is delivered.  This one change dramatically increases their cash balance and allows them to make more sales without worrying about running out of cash.

But That Won’t Work in My Industry!

Until recently, I was one of those business owners who believed this.  I assumed I had to follow the traditional business design of most CPA firms, which are run like Company A above.  They bill when the work is completed and then wait to collect their receivables.  This leads to a constant struggle to collect enough cash to cover payroll and overhead.

A couple of years back, I decided to see if I could change this and made these sales-to-cash cycle improvements:

• We started requiring that our clients consent to monthly billing via credit card or bank draft. I only want to hold receivables when absolutely necessary.

• I used to have a huge problem with collecting on tax return work. If I let my client take the tax return without payment, I often did not get paid later—there’s simply no pain later.  I’ll get paid whenever they feel like paying me.  Now we simply tell the client, “You can’t have the tax return until you pay me.”  The IRS deadline helps make the payment of my return a priority.  We explain our new policy to every client at the beginning of the process so there are no misunderstandings.

• Then I wanted to take it a step further. Why can’t I get paid in advance?  Yes, this is almost unheard of in the tax business, which in many ways is just a commodity business.  I first told myself I couldn’t because no one else was.  Then I found a CPA in Oregon who was getting prepaid for a lot of his work.

So I put together a system that gives my clients an upfront discount for paying me monthly.  I then offset this discount by upselling an audit protection program.  The result:  My net income is basically the same, but I get the cash in advance.

• All new clients are now required to leave at least a 50 percent down payment. They don’t have a relationship with us, and we don’t know how promptly they will pay.  This helps weed out the deadbeats.  If they don’t want to pay us now, they probably won’t want to pay us later.

• For our business clients, we created a variety of packages combining tax preparation, year-end financial statements, tax planning, QuickBooks support, and sales and profit consulting. We designed them to provide what the clients really wanted—more sales, more profits, more cash in the bank, and less taxes paid—while getting what we really wanted, which was greater monthly income.  This allowed us to increase our average sales per client above the industry average.

Key Cash-Building Tip:  Don’t assume that just because all your competitors do it one way, you have to do it the same way.  Don’t be afraid to look at how you’re treating your customers and how you’re getting paid, and then look for ways to get paid at the time of the sale or even before the sale.  One of the key components of speeding up the sales-to-cash cycle is to just eliminate receivables as much as you can.

Major Business Mistakes You Must Avoid! Part 1: Not Focusing on Marketing

Thousands of businesses fail every year. This year much more than any time in history. Here I discuss what marketing and sales you must focus on to succeed.

 

Every year thousands of businesses shut their doors, ending the dreams of so many hopeful entrepreneurs.

One thing that is overlooked in this statistic is the high physical, emotional, and financial cost of each failure. I have watched as clients of mine who were forced to close their businesses suffer through divorce, depression, embarrassment, loss of their life savings, loss of friendships, and arguments with family members who have often invested in those businesses.

In my experience, the number one cause of business failure is that the business owner didn’t have a systematic and proven sales process for increasing leads that are then converted into paying customers. They also had no idea what their gateway products were, what their unique selling position was, what their closing rate was for their sales staff, who their most profitable customers were, or what their most profitable products were. Worse yet, they often don’t know what these things are or why they are important.

Too many failed businesses concentrated more on selecting their business cards, stationery, and office furniture than they did on the following four things that would have almost certainly guaranteed their success:

1. Marketing and lead generation. Successful business owners have a direct response marketing plan that consistently entices prospects to call, email, or visit their business.

2. Sales and conversion. Successful business owners have a scripted plan and consistent sales staff training designed to convert prospects into customers. They leave nothing to chance, and they don’t do anything that doesn’t produce measurable results.

 

3. Up-selling and cross-selling. Successful business owners have a plan to upsell and cros-ssell to customers at every step of the sales process.

 

4. Client retention and follow-up. Successful business owners actively work on client retention with frequent follow-up after a sale. Many of them use monthly newsletters as a no-fuss way to accomplish this.

 

5. Referral generation. Successful business owners have an active plan to get their best customers to refer them to their friends. They do not leave this chance or just wait for it to happen naturally.

Sadly, I have many business clients who seem to have given up and accepted that their

businesses have stagnated and are in trouble. They just don’t seem interested in doing the hard work needed to get their marketing in shape and become leaders in their niches. Trust me, it is a lot more fun to run a profitable business than one that is barely hanging on.

So, when are you going to start concentrating on improving your marketing?

Do You Have What it Takes to Succeed?

In this video I cover the three traits every successful business owner and high level sales person must have.

 

I was recently listening to an interview with master salesman Steve Clarke (you should check out his website www.newschoolselling for some great sales tips).  In it, he mentioned three traits held by every successful salesperson he's ever met.  After listening to him, I realized that these same three traits are essential if you want to succeed in business.

First:  The business owner must not make excuses!  To put it simply, this means the business owner must take responsibility for everything in their business, whether it goes well or fails.  If you don't like something in your business, don't complain about it!  You created the business you now have.

It is almost impossible for me to help a business owner who is always blaming someone or something else for his problems.  Until you take responsibility for everything that happens in your business, there is no way for you to change your management style.  But of course, it is much easier to blame the new competitor down the block, the Internet, lazy employees, or banks who aren't lending.  The list of excuses I hear goes on and on.

So if you really want to improve your business, stop looking for excuses as to why it isn't working, and start looking for things that you can do to improve it.

Second:  The business owner must be a self-starter!  When you own your own business, no one is there to make sure you show up to work every day.  No one is there to make sure that you do the work that is necessary.  And no one is there to make sure you focus on the hard work of growing your business.

Being a self-starter can't be taught.  Either you are or you're not!  But I have often found that it is much easier to get started on a project when you really enjoy what you're doing.  So a key question here is:  Do you enjoy the work your business does?

Third:  You must be resilient!  Every business owner is a salesperson, and every business owner will fail to make the sale at some point.  They will also fail to close a business deal, fail to hire the right person, fail to make a profit, and sometimes just have their business fail in total.  There isn’t a single business owner I know that hasn’t had some failure!

But a successful business owner learns from their failures, figures out how to do it better next time, and never gives up!

So do you have what it takes to be a very successful business owner?

Increasing Profits with Product Tiers

Creating product tiers is one of the easiest ways to increase sales from your current customers. See why they work and how you can use them for your business.

 

Creating product tiers is one of the easiest ways to increase sales from your current customers.  All it requires is that you design more elite versions of your current products.

You and your customers are already used to this.  We see examples everywhere:

• American Express pioneered this by having their regular Green card, with their better customers moving up to a Gold card, then Platinum, and finally the elite Black card.
• Airlines use tiers with their coach, business class, and first class seating.
• Video games do it with their “Ultimate Collector’s Edition”.
• Books have paperback, hardback, collector’s edition and signed first edition copies.

You get the idea.

To get started, all you do is create a higher tier of your basic product, then a better one, and then the best one.  Each level up will have a higher price point, of course.

Price tiers work because of people’s buying psychology.  Customers are hardwired to always want to stand out and be the best.  You want to position your product upgrades such that people feel having your top product will give them that satisfaction.

Most people will use your regular product, but others will upgrade, and they will gladly pay the price to get the best in order to feel like the best.

So give those people what they want and watch your profits soar!

COVID19 Closed My Business Again! Should I Bother Trying to Reopen?

This week I had many calls from businesses that have been forced to close again due to COVID19! They want to know what should they do? Here's how I answered?

 

 

Marketing on a Small Budget

Every business experiences a time where they need new customers but just don’t have the advertising budget. For this I recommend four things.

 

Every business experiences a time where they need new customers but just don’t have the advertising budget.  For this I recommend four things.

First, get into today’s Yellow Pages.  In the past it was key that you get your business into the Yellow Pages so that people ready to buy now could find you.  In most markets today the Yellow Pages just don’t work as well.  Today you need show up on the first page of a Google Search or the online Yellow Pages.  It is so important that any marketing budget you can afford should first be spent here.

Second, look for ways to increase sales from current customers.  This is often the quickest and easiest way to increase sales since your customers know you, like you, and trust you.  Check out our article in our blog titled “Fastest Way to Grow Your Business!”  (https://bit.ly/2Vz4vVT).

Third, identify your ideal customers who you can reach by mail.  Yes mail! (Check out NO B.S. Direct Marketing by Dan Kennedy to learn how.) Not doing what everyone else is doing is a great way to stand out. Then design a three-step mail campaign to get prospects to call you. The advantage is that you can print and mail what you can afford.  If you can only afford $50 this week, then only send out 100 letters to prospects.  If next week you can afford $75, then mail another 150 letters to prospects.  Continue this pattern each week based on your cash availability.

Finally, you may not have money but you usually have time.  Get out of your chair and hit the streets.  Stop in on prospects and introduce yourself.  Pick up the phone and make calls.  Email your contacts.  Just get out there and make yourself known.

Doing these things usually starts to generate sales and cash that will allow you to expand into paid advertising.  But I have found that this is a great way to start when your cash is short.

Business Myths Can Kill a Business!

Myths are harmless for most people. But when a business owner believes a myth, it can cause business failure. Let's discuss those that can hurt a business.

 

Myth:  A widely held but false belief or idea. 

Myths are harmless for most people.  They can believe them without any real negative effects.  But when a business owner believes a myth, it can cause business failure or stagnation.

I’ll use myself as an example.  As a CPA who had assisted many business owners before starting my own business, I thought I knew exactly what was required to open and run a business.  I could not have been more wrong!

This brings us to the number one myth that new business owners fool themselves with when they first start out:

Myth:  I know what it takes to run a business because I have studied other business owners and have done my research.  The truth:  The responsibilities, pressures, and demands of running a business can only be understood by those who have actually started and owned a business.  Much like getting married, becoming a parent, or learning to drive a car; there is no single course, book, or experience that will prepare you for the experience of being a business owner.  Expect to be challenged and pushed to your limits almost daily.

Unfortunately, this is only one of the many myths stopping business owners from growing the businesses of their dreams.  Every day I speak to business owners who are struggling with the hard truths that must be learned to be successful.  Here are some of the most common and destructive myths:

Myth:  All I need to succeed is a good idea.  The truth:  Every business owner thinks they can offer their customers something better than their competition.  But there are few truly original ideas.  Even Apple's Steve Jobs didn't invent something new when he introduced the iPod, iPhone, or iPad.  He saw an opportunity to create a new product by improving or combining existing technologies in a way that the market would love.

Myth:  Offer a great product, and customers will beat a path to your door.  The truth:  Steve Jobs didn't use the "Field of Dreams" method to market his products.  Apple is a master of marketing and sales.  Every business owner must understand one thing--every business is a marketing business first!  Every business owner must become an expert at sales and marketing.

Myth:  Success depends on hard work.  The truth:  Yes, you will work hard, harder than you may have ever worked before.  Trust me; 40-hour weeks are going to become things of the past.  But working hard isn't enough.  You have to work on the right things.  Start by setting goals and deciding how to reach them.

Myth:  I can be my own boss.  The truth:  You may be in charge, but you aren't the boss.  My name is on the door, but I have hundreds of bosses.  Every client is your boss.  Even your employees are your bosses sometimes.  You might get to decide who you work with, but whatever work you do accept must be delivered in a quality way.  That delivery of a quality product or service that the market is willing to pay for is your new boss!

And you can't do it alone if you want to grow.  Accordingly, hiring quality employees is essential.  It is your responsibility to find the right people, train them well, and give them the tools they require in order to produce the quality products or services the market expects.

Myth:  I can set my own salary.  The truth:  Most business owners were successful and making good money before they became owners.  In fact, it took me almost 12 years to get back to the same level of income I was making at my last job!  With a new business, most of the early profits must be re-invested in order for the business to grow.  Sure, many business owners make a very comfortable living, but only after they have met a need that the market pays them well for.  (Yes, I am repeating myself.  It's that important!)

Myth:  I will make a profit quickly.  The truth:  You will learn that in business, everything takes twice as long and costs three times as much as you expect.  Expect the unexpected and plan for it.  Always have two or three times the funds you think you will need to start the business, open a new store, or launch a new product.

Myth:  I can take more time away from work.  The truth:  A new business is like a newborn baby.  It needs constant attention.  The most successful business owners work many long hours and are always striving to improve their businesses.  To be successful you must achieve this single-minded focus on making your business a success.

Myth:  I can't compete with the national chains.  The truth:  The national chains can't compete with you!  You are closer to the customers than the managers of these large chains.  You can spot market trends much sooner, and because you don't have the large infrastructure that they have, you can respond much more quickly.  Plus, you can build a very good business from the small niches the big chains don't want.

Finally, perhaps the most dangerous myth that almost all new business owners (and even many experienced business owners) fall prey to:

Myth:  I know all I need to know about running my business.  The truth:  The biggest problem is not what you don't know.  Rather, the biggest problem is that you don't know what you don't know.  A successful business owner never stops learning.  They concentrate on improving all of their business skills.  They read books, hire coaches, go to conferences and seminars, and learn from what other business owners are doing right and wrong.

What myths do you believe?

How are they holding you back?

Reviewing the Income Statement to Increase Profits

Learn how a CPA looks at your Income Statement with an eye towards increasing profits.

 

 

Why Should I Buy From You?

In this video I discuss the 3 major rules of to follow to answer the most important question of "Why should I buy from you?"

 

Just about every marketing book stresses the importance of having a successful “unique selling proposition” (USP).  This is often called a unique selling point, unique selling position, or even a unique selling product.

But many times they fail to follow the 3 major rules of a successful USP.  These were introduced by Robert Reeves in his book Reality in Advertising which was published way back in 1961.  And yes, he was one of the Mad Men that the popular TV show is loosely based on).

Mr. Reeves argues that being different isn’t enough.  To be truly successful your USP (unique selling position) must:

• Offer a benefit your prospect truly wants, needs, desires. It should really offer a benefit your prospect can’t get unless they buy your product/service.  It should say, “Buy this product, for this specific benefit.”

• Deliver a clear difference from the competitor’s product. Is your product exactly the same product sold by your competitor?  When a customer loads your website or walks into your store, is it exactly like your competitor’s website or store?  Your benefit must be one that your competition cannot or does not offer.  It must be unique.

• This difference must be huge! Your prospect should take notice and immediately see why this difference means buying from you is the only smart choice.  Remember, a USP must be strong enough to attract new

NOW is the Time to Massively Grow Your Business!

In this video I discuss why NOW is the perfect time to grow a massively profitable business--even in these tough economic times!

 

Starting a business is risky.  Very few businesses last 10 years, and even fewer actually achieve massive profits.  So why do so few businesses achieve this level of success?  A more important question is, what do the businesses that achieve massive profits do differently from the other 99 percent of businesses?  My experience over the last 30+ years of working with thousands of business owners has taught me that successful companies add action to good ideas.

These owners see what their competitors are doing and do the opposite.  Why?  Because it makes sense!  Remember, 80 percent of start-up businesses don’t last five years and only five percent of the surviving companies actually achieve massive growth and profits.  So why copy your competitors if 99 percent of all startups fail to survive or make massive profits?  Obviously, most of them are not doing the right things.  See what they are doing and then do something else!

Industrious business owners have good ideas and are able to identify and market their Unique Selling Proposition (USP).  They know how to advertise their product or service to the consumer in a way that answers that all-important question:  Out of all the choices available to the customer, including doing nothing, why should they buy from you?

Successful business owners know how to increase sales.  They understand that every business is a marketing business.  They become experts at marketing and selling their products and services.  These uber-successful businesses spend the vast majority of their time getting new customers and upselling to their current customers.  They work at providing legendary customer service that leads to happy customers and regular referrals.

They understand that profits, not sales, are what really matter.  They work hard to control their costs.  They concentrate first on controlling employee costs and the cost of goods sold (COGS). This is where 50 to 75 percent of costs are in most businesses, but most owners spend more time managing their phone bill than cutting costs in these two critical areas.

Successful business owners make decisions based on documented data.  They are also masters of productivity and time management.  They understand that the most valuable asset in any business is the owner’s time, so they learn how to maximize it so they can work on what really matters:  increasing sales and profits.

Successful business owners are always trying to come up with new business ideas.  All business owners who have taken their business to the next level do the following:

• They read at least one business book per month.
• They subscribe to multiple general business and industry-specific publications to spot trends early and get ideas on how to improve their business.
• They all have had the help of a business coach to guide them through the steps necessary for growing a successful business.
• They are not afraid to take ideas from other industries. Think of Netflix who took an idea from product-of-the-month clubs and applied it to movie rentals.  This idea literally destroyed the market leader, Blockbuster.

Finally, every successful business owner has a laser-like focus on taking action.  They understand that successful businesses occur when the owner makes consistent improvements.

They start by making a list of their long-term business goals.  Then they figure out what they have to do this year in order to reach them.  What do they have to do this quarter, this month, this week, and today to reach those annual goals?

Successful business owners know that the secret to massive profits is the combination of good ideas with a laser focus on monthly action.  This is the mantra you must follow.  Think of how much better your company would be if you committed to working four hours per week on improving your business.  Do that for 50 weeks this year, and you will have worked 200 hours on improving your business. How many of your competitors are making this kind of investment?  Worse yet—what if one of your competitors does and you don’t?  How far behind will you be?

So steal an idea from Nike and “Just do it!”  Review this issue and our past issues and find the articles that discuss the one area you feel needs the most improvement. 

"I Have become a slave to my business!"

The most valuable resource in every business is the business owner’s time!  You can buy everything else except more hours in the day.

So what can a business owner do to “find” the time to focus on what is most important to their success and survival—increased sales and profits?

 

The following are the steps I recommend to every business owner I am coaching when they say they have no time for the changes they have identified as vital to their success:

1. I always start by having the owner track their time in detail.  To do this, the owner simply writes down everything they do on a pad or a calendar for a week or two.  Be sure to mark down how long every job takes.
2. Then the owner must decide how much an hour of their time is worth.  A simple way is to decide how much they wish to make (or what they would pay to replace themselves) and divide this by 2,500.  This is 50 weeks at 50 hours per week (Sorry—I don’t know a business owner who doesn’t work at least that much in a year).  So if you want to take home $100,000/year, you need to make a profit of $40/hour.
3. Analyze your time and highlight anything that you are spending your time on that occurs on a regular basis and has no direct impact on your customer or your bottom line.  Highlight items that you are doing that you wouldn’t pay someone else to do at the hourly rate you calculated in #2 above ($40/hour in our example).
4. Eliminate as many of the things identified in #3 as possible.

At this point, the business owner usually laughs at me and tells me, “Sounds great, but I can’t because (fill in any of the 100s of excuses you can come up with here).”  My response is always the same:  “If you want to be successful, you must!  Otherwise, you will continue to have the same problems you are having now.”

Once you identify those items that you shouldn’t be doing, figure out how you can:

1. Delegate it to one of your employees
2. Outsource it
3. Eliminate it in total

This is not a one-time exercise though!

I keep a red Post-it note on the corkboard right above my computer screen that says:

How can I get someone else to do this?

This is a reminder to myself that I should only be working on those things that will directly increase sales and profits.

Cash Profits Are All that Matter

In this video I discuss how the basic accounting formula of Sales-Expenses=Profits is hurting your business profits.

 

When I took my accounting classes and passed the CPA exam (the first in 1976, the second in 1977—dang, I’ve been doing this a long time!) I learned the definition of business profit as promulgated by GAAP (Generally Accepted Accounting Principles).  What I didn’t learn at that time is how trying to teach business owners to understand the GAAP principle of profit was really hurting their ability to grow a highly profitable business.

The problem is with the basic accounting formula itself:

          Sales – Expenses = Profit

So what is wrong with this formula?

First, it makes the business owner concentrate on the wrong thing.  As humans, we normally concentrate on the first item of any list.  As business owners, we concentrate on increasing sales at all costs, and then we pay all of our expenses.  Finally, whatever is left over is our profit.  Most business owners wait for a CPA to tell them what the GAAP profits were after they perform their “magic” and generate a financial statement.

Second, it doesn’t force us to look at every sale and expense with an eye toward profits.  Is this a sale with a high profit margin after all costs?  Is this a sale that leads to profits in the future, or is this just a one-off kind of a sale that just increases related costs?  Does every dollar of expense lead to increased profits?

A third problem with the GAAP formula is that human nature is to spend.  The more we increase sales, the more cash we bring in.  The more cash we bring in, the more money we have to spend.  The more money we have to spend, the more money we actually spend.  We justify all this increased spending as necessary to grow our business sales.  We are only concentrating on growing the top line of sales rather than the last item of profits.

Finally, the accounting formula puts profits last and makes getting to that final number so complicated that the vast majority of business owners just pretend they understand it.  What is last on a list is almost always ignored.  Human behaviorists call it the primacy effect.  The accounting formula puts sales first, so we concentrate on sales.  It puts profits last, so we barely think about it.

What is your company profit?  As accountants we calculate your GAAP profits based on many estimates.  What is the value of your inventory?  What is the collectability of your receivables?  When should a sale be recorded?  When should a payable be recorded?  How do we handle customer prepayments?  How and when do we record profits on large, long-term contracts?  How long and what method do we use to write off equipment?  Many decisions go into a CPA’s calculations of your bottom line.  In truth, the GAAP formula is really just an estimate of your profit for a specific time period.

Way, way too complicated if you are trying to successfully run your business!

Your definition of business profit should be much more simplistic—how much did I increase cash this year?

That’s it!  Cash is all that counts.  It’s great when you have it and it sucks when you don’t!  The only thing you should be focusing on is cash profits.

Three things to help you out:

1. Pick up Profit First by Mike Michalowicz to discover a simple system any business can implement to grow a business concentrating just on your cash balance.

2. Click on this link (https://profitmasters.mykajabi.com/store/YBR9FPzq) to access a free course I have, Turn to Your Customers When You Need Cash Now!

3. Click on this link (https://profitmasters.mykajabi.com/store/esox55ut) to purchase my online course Finding the Cash Hiding in Your Business! This is a low-cost option if you are serious about quickly eliminating your business cash flow problems.

How 15 Minutes a Week Can Massively Increase Your Sales, Cash Flow & Profits!

In this video I show how the owners of highly business profitable business owners use 15 minutes a week reviewing certain financial numbers to increase their sales, cash balances and profits.

 

How spending 15 minutes per week reviewing five reports can increase your profits tremendously.

 

Nothing is interesting if you’re not interested. – Helen Macinnes

About the last thing most business owners are interested in is spending some quality time with their accounting records.  In fact, I often joke that all business owners have ADD.  They have so many hats to wear that reviewing their books often loses out to selling their products, producing their products, delivering their products, and collecting from their customers.

But the successful business owner truly understands that accounting is the language of business, and that reviewing their accounting reports on a regular basis is a major part of increasing their business profits, sales and cash flow.

Business is NOT a game of numbers; but a game of human behavior—in particular, the business owner’s behavior.  Good accounting data gives us a scorecard to measure our behavior and its effects.  K.C. Truby (the Lonesome Cowboy and marketing expert) calls it the Five Minute Books.  I call it the Daily Scorecard.  But we both agree that it is a vital tool to achieving success.

The following are the five essential reports and how to use them:

1. A daily profit and loss. Review your income statement at least weekly in order to identify what is or isn’t working for you.  You want to identify where you should focus your limited resources and time.  Comparing results from month to month helps us identify trends and react quickly.  You also want to compare your results to the industry average.
2. Sales reports by product or customer. Sales reports by customer with related costs and profits help us to identify our most profitable customers and products.  With this report you will try to identify your best customers so that you can 1) make sure you focus on giving them excellent service and 2) look for opportunities to sell them additional products.  Your best customers already know you, love you, and trust you.  This makes them the easiest customers to sell additional products or services to.
3. Accounts receivable. The most common cause of cash flow problems is a failure to keep collections under control.  A daily review prevents surprises and allows you an improved chance of collection.  Simply put—the older an invoice is, the less likely you are to collect on it.
4. Accounts payable. Too often a business owner looks at their bank account and sees that they have enough cash to buy that new car or piece of equipment.  What they don’t know is that they owe their vendors more than what they have in the bank.  If business owners know how much cash they need in the next thirty days, they will more often than not find a way to meet their obligations.  A daily review of your obligations will help you sleep at night, as well as plan for the timely repayment of your vendors and creditors.
5. Cash on Hand. Profit can be an opinion but cash is a fact.  Each day you must know exactly how much you have in the bank.  This one step alone will drive you toward a bigger bank account.

Highly profitable businesses are almost always run by owners who know their numbers!  They value the information their accounting records provide, so they often hire an experienced CPA to help them analyze them.

The following video shows you how to set up these reports and provides you with some tips on what to look for when you are reviewing them.

(INSERT VIDEO)

Action Tips:

• Decide what reports you need to review in order to discover what you need to do to improve sales, cut costs and increase profits.
• Design the reports in your accounting program.
• Schedule some time weekly to review this.
• Hire an experienced CPA to:
  • Help you set up the reports.
  • Show you what to look for.
• Seriously consider hiring an experienced CPA to review your financial reports quarterly. They will often spot trends that you won’t.

Use Special Project Teams to Increase Profits

As you work on increasing your profits each month, you will start to identify many projects that need to be completed. Some will naturally belong to a certain employee; others will not. Those that do not should be assigned to a special project team.

The purpose of a special project action team is simply to improve the business. It is hard to improve your business amidst the chaos of running the day-to-day operations. Apple is a great example of the success of action-oriented teams that strive to improve business and develop new and innovative products. This is not accomplished by a mysterious spark of creative genius. They consistently make ideas happen by taking an organized approach to implementing their projects.

In this video I reveal how to correctly use special project teams to increase profits consistently.

 

The keys to the special project action team’s success are:

• Identifying the projects that will have the most impact on the company’s success. This is obviously the owner’s job to start with.  Later, as the team gets used to the idea, they will start to recommend projects themselves.
• Setting aside some time weekly or monthly for the project team to meet and work. This has to be scheduled to emphasize to your team the importance you attach to the projects chosen and your dedication to completing them.
• Choosing the right people to implement the project. This means those employees who can offer the most to the project.  Another advantage of a team is the ability to include employees from different departments.  This can help get the proper input, ideas, and skills needed to complete the project.
• Implementing a system to ensure action and completion. Delegation of tasks and responsibilities with consistent follow-up meetings, timelines, and deadlines are essential for a successful special project team.

I used special project teams to great success when I was the CFO of a local Coca-Cola bottling plant.  For each of the six years I was there, our special project team worked on projects that increased the company’s profit by at least the total cost of my 30+ person department.  In one year alone, we worked on projects that cut production costs by over $10 million.

Even if you are a solopreneur, you can have a special project team.  Do the work yourself or better yet, hire a coach to help you.  Either way, I can all but guarantee that the increase in profit from having a special project team will far exceed the associated costs.

Use Hot Tickets to Eliminate Customer Errors

Most problems occur repeatedly for a reason. Using hot tickets helps you quickly resolve problems. You will soon discover that they also help you track problems. Once you identify recurrent problems, you can start looking for causes and finding solutions. In this video I discuss what Hot Tickets are and how to use them to eliminate customer related errors.

 

To develop hot tickets, first create a checklist of the most common errors you have when delivering your product.  Once an error is spotted, a hot ticket is created and the problem is checked off or written in using the space provided for those unusual and original problems.

On the back of the form, the employee should document how the customer’s problem was resolved.  It should also document when the customer was contacted and if the employee feels the owner should be contacting this customer.

Impress upon employees how important it is to take the time to fill out hot tickets accurately.  They will help ensure that all customer problems are resolved quickly.

The tickets will also tell you what problems are recurring.  Review them at the end of the week.  If the same problem arises multiple times during the week, you will know that it is time to investigate the cause of the problem.

There are dozens of reasons why people make mistakes.  Hot tickets help you find the root causes of your most frequent mistakes.  Problems have specific causes and specific solutions.  Make sure you have systems in place to track them.

(I first read about hot tickets in a book by Jay Goltz called The Street-Smart Entrepreneur.  While it was published in 1998, this is still a good book that you should buy.  It is available on Amazon.)

You Must be the Profit Maximizer for Your Business!

It may seem like the biggest cliché in the world, but profit is the key to your success. Explaining why profit is so important for companies is a little like explaining why your health is important.

In this video I discuss why it is essential for you to become your Profit Maximizer for your business.

 

It may seem like the biggest cliché in the world, but profit is the key to your success. Explaining why profit is so important for companies is a little like explaining why your health is important.

Why are profits so important?  Here’s why:

• Profit is the only objective measure of your company’s performance. When people use profit for scorekeeping, there’s a clear-cut way for everyone to know how well the company is doing.
• Close behind profit can follow bonuses, profit sharing, and savings plan contributions.
• Profit means customer needs and problems can be fully addressed. Happy customers mean repeat business and a growing company.
• Profits provide the ability to weather the unexpected downturns that sooner or later strike every business.

Profit provides an ongoing source of cash, your company’s lifeblood and the fuel for future growth.  Your profitability, or lack of it, will determine your company’s quality of life.  When a company is profitable it has:

• Happy, well-paid employees
• Happy bankers and investors
• Happy customers who buy more and tell their friends.
• Happy owners (and family) who can afford the lifestyle that success brings.

To increase profits, your whole company must have a profit mindset.  That’s the whole purpose of the bonuses, profit sharing, and 401(k) matches.  They are to give your employees an incentive to help you increase profits.  That’s why you need to stress profits and always reinforce the fact that your employee’s goals and the company’s goals are identical.

There are three things you must do increase your business’s profitability:

• Decrease expenses
• Increase margins
• Increase sales

Every business should have a Profit Enhancement Officer who keeps the company focused on increasing profits.  Obviously, the owner should be the prime Profit Enhancement Officer.  Unfortunately, owners tend to be so busy running the company and putting out the daily fires that they seldom have the precise focus required to increase profits.  This is one of the main reasons for hiring a consultant. 

What Changes are in the PPP Forgiveness bill Passed by Congress?

In this video I cover the major changes in the "Paycheck Protection Flexibility Act" designed to make it easier for PPP loan forgiveness. This bill is particularly important to business owners who received a PPP Loan but are still not able to fully open or are having problems hiring qualified employees back.

 

 

Business Management Mistakes to Avoid!

When you first start a business you are both the president and the janitor. As long as you are doing most of the work, management is easy. Once the business grows to a point where you can’t do it all by yourself anymore, having strong management skills is what separates the highly profitable from those businesses that fail or are just getting by.

Unfortunately, most business owners have little or no training or experience managing a business. I use myself as an example. I was a good CPA when I started my business, but I really had no idea how to manage a CPA firm. I had to learn on the job.

How important is this? If I had to start over in a new city tomorrow, I am convinced that I could grow my business back to this point in about five years, rather than the 23 years it has taken. This is the power of learning how to manage your business. It is also the only way to grow a successful business, which is why many business owners end up failing when their business grows. These are the common mistakes I see.

 

They don’t have long-term goals or a plan for reaching them.  If you don’t have goals, you are just drifting.  If you do have goals but no plan for how to reach them, you are only dreaming.  Every year you should have set or reevaluate your goals, and every month you should have a plan for making progress towards those goals.

Not aligning your goals, strategies, and business systems with your values.  Trying to sell something that is against your morals is a sure road to failure.  I once passed all the tests to sell insurance and retirement products to my clients.  That only lasted six months, because I couldn’t get over my feeling that I have lost my autonomy with my clients.  I found myself sabotaging my sales because of this conflict with my values.

Not recognizing a new threat or opportunity.  Too many businesses have failed to notice a trend and either fallen into severe financial trouble or been completely eliminated.  My favorite example is Blockbuster, who failed to notice the opportunity in digital content.  If they had done an annual SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) they might have been able to continue as a major player in the home entertainment market.  Instead, they are fighting for their very survival.  What threats or opportunities are you missing? 

They don’t know how to hire good employees.  A good employee is often a business’s most important asset.  A bad hire can cost thousands of dollars to fix.  Learning how to hire good talent is a crucial skill many business owners simply do not have.

Not keeping good employees.  Once you have hired the perfect employee, you must have a system in place to direct them, monitor their work, and reward good performance.

Not having job descriptions.  Without job descriptions it is impossible to have the right people in the right spots.  This leads to confusion, overlap, and loss of productivity.  It also leads to your employees creating their own jobs in order to fill the time.

Failing to develop leaders and managers.  If you want to grow, you must have strong managers.  This takes time and patience, so don’t wait until you absolutely need a manager.

Micromanaging.  Too many business owners think that the only way to get the job done right is if they are involved in every single aspect of their business.  This stifles employee productivity, reduces initiative, and makes it difficult to keep quality employees.  Stop being a meddling taskmaster and focus on growing a profitable business.

Lack of systems and procedures.  It is almost impossible to provide your customers with a consistent experience without procedures and systems.  I tell my business owners they do have procedures, even if they didn’t design them.  They are whatever your employees decide will be the best (or fastest!) way to finish the job.  This is obviously not what you want.

Failing to manage the owner’s time.  Running a business is complicated and can quickly overwhelm the owner.  It is very common to get so lost in the day-to-day operations of a business that you end up ignoring the important work of growing your business.

Marketing Mistakes to Avoid!

Every time I meet with a new business owner I say the same thing.  “Congratulations, and my condolences.”  See, I know what a wild ride they are about to embark on.

I congratulate them because being self-employed can be both financially and emotionally rewarding.  Nothing beats the feeling of satisfaction that comes from building a business from scratch that supports you, your family, your employees, and their families.

Owning a small business is the essence of the American dream.  Nothing else rewards you for your hard work and ingenuity the way owning a successful small business does.

I give them my condolences because they simply don’t know what they don’t know.  And what they don’t know causes them to make very common mistakes that result in lost sales, lost profits, and often the failure of their business.

The results of a business failure are devastating for the owner, the owner’s family, and the employees.  Business failure is a leading cause of divorces, bankruptcy, depression, and alcohol and drug addiction, and has even led to suicide.

The sad thing is that almost all of these mistakes can be avoided simply by being aware of them.  Here is a list of the most common mistakes I see small business owners make when marketing and selling their products or services.

 

Marketing Mistakes Small Business Owners Make 

I was like most business owners when I started.  I was good at my core product and thought that would be enough.  My training and experience had made me a good CPA.  But I had never been trained in marketing and sales.  I thought if I just did a good job, the customers would show up.  I call this the “Build it and they will come” model.  Unfortunately, I soon found out that the big problem with this model is that you don’t know what to do if the customers don’t show up.

Not knowing how to market is the biggest reason businesses fail.  Here are the biggest marketing mistakes I have made and have seen clients make over the years:

Not having a true USP.  That stands for Unique Selling Proposition.  Simply put:  When faced with all the possible choices, including doing nothing, why should the customer buy from you?  If you can’t answer this clearly and concisely, your sales will suffer. 

Not spending enough time on marketing.  If you are not spending at least half of your time on marketing, you are setting yourself up for failure.

Giving up control of your marketing.  Without customers, you don’t have a business.  You have a hobby.  You can outsource and delegate basically everything, but you must keep control of your marketing.  Even the most experienced marketing professional won’t care about your business as much as you do.  You are just one client.  No one knows as much about your business or your customers’ wants and needs as you do.  Plus, your marketing must match your ethics, values, and goals, or it will fail.  Get help but stay in control.

Failing to target your marketing.  You can’t afford to market to everyone.  Pick a niche and create an offer that will appeal to them.  You are much better off being a big fish in a small pond than a small fish in a big pond fighting off the sharks.

Not identifying your ideal customers.  You should be able to communicate who your perfect customers are.  Knowing who those customers are helps you design advertising that attracts them.

Not knowing what problems your prospects need solving.  Concentrate on the benefits of your product or service rather than its features.  You should know what keeps your prospects awake at night.  What do they need help with?  What are they worried about?  How can you solve their problems and alleviate their pain?

Being inconsistent with your marketing.  A company that runs poorly-designed advertising every month will outsell well-designed ads that are only run once.  Whatever advertising you choose should be committed to for at least six months.

Not selling to your current customers.  Your current customers are your best source of added revenue.  They already know you, like you, and (hopefully!) trust you.  It makes sense to spend the majority of your marketing time and dollars selling to them.  I have personally worked with clients who have increased their sales by 40 percent or more just by having a program of selling additional services and products to current customers.

Not looking for other products to meet your current customers’ needs.  The hardest thing is to get the customer.  Once you have a customer who trusts you, why not sell them other things they need?  Wal-Mart does this by selling eye exams, health insurance, and prescription drugs.  You don’t even have to start up a new business.  Create an affiliate agreement with a business in another field that gives you a commission for every customer you send them.

Failing to see other prospects who could use your products or services.  Is there another niche or type of prospect who can use your product but isn’t doing so now?  I followed one business owner who developed a paperless system for bookkeepers and accountants.  He found other professionals like lawyers, engineers, and architects with similar problems and sells to these niches as well.

Not asking for referrals.  This is directly related to not selling to your current customers.  Right now I do almost no traditional marketing.  About 95 percent of my new customers come from referrals.  A prospect from a referral is the closest thing to a sale you are likely to see.

Not providing outstanding customer service.  Today customers will research you online and using social media.  It is no longer enough to provide “industry standard” service.  To be successful, you must provide legendary service that far exceeds what your competitors offer.

Only using one marketing channel.  Your company should have a full quiver of advertising and marketing arrows.  Once you find one way to attract customers, start looking for another to attract even more customers.

Not tracking and measuring marketing results.  If you don’t measure your results, how do you know what is working, what should be improved, and what should be eliminated?

Not testing your new marketing before making a big buy.  If you are planning on mailing out 10,000 postcards, you should test mail 500 first and make sure the results justify the cost.

Not including targeted direct mail.  Direct mail still works and can be a very good way to get new customers.  Today many business owners think this is too old-fashioned, and focus all of their time on web and email advertising.  I have found that only about 20 percent of my customers have signed up for my email list.  I would be ignoring the other 80 percent if I didn’t snail mail newsletters and offers.

Not including social media and text marketing in your plans.  Many small business owners are missing out on inexpensive marketing opportunities.  Every business owner needs to become proficient at social media marketing or will be left behind by savvier competitors.

Not creating an in-house list of your customers.  This list is your most important asset.  Build this up and you will always have the ability to sell new products and services quickly.

Forgetting to include a call to action and a deadline in all of your advertising.  Always tell your customers what step they should take next.  Don’t assume they will know and follow through.  Tell them what you want them to do and give them a deadline.  This works.

Being mediocre in the sales department.  You must be able to sell.  Your advertising and marketing will bring in the prospects, but you and your staff must be able to sell to them.  Yes, some people are much better at this than others.  But all business owners must become proficient at selling to survive. 

Not knowing the lifetime value of your customers.  Knowing how much your average new customer is worth helps you know how much you should spend to acquire them.  Cell phone companies understand this and have built their business models around this key concept.  They deeply discount the cost of a new phone knowing they will easily make up the difference with huge profits on monthly service fees.

Giving up on what’s working when times get tough.  If it’s working, never stop.  When times are tough, cut somewhere else.  If it’s working, don’t stop, even if you are bored with it.

Passing up free publicity opportunities.  Send out press releases for everything.  Get to know the newspaper editors and bloggers who cover your industry.  Work to become a trusted source.

Not marketing when you are busy.  Too many business owners experience the “boom or bust” cycle.  This is when they are busy with work and they are too busy to market.  Then when they finish up, they have nothing to work on next.  This is why it is important to systematize your marketing so it can run on auto-pilot even when you are swamped.

What if I Fail?

What if I fail has been a question that I have been getting frequently from small business owners. In this video I cover how I answer them.

 

I was talking to a new business owner who was worried about failure.  He kept saying, “What will I do if this doesn’t work?  I have young children, a mortgage, and other bills to think about.”

This “What if I fail?” worry is the biggest thing that stops people from either starting a business or expanding their current business.

“What if I fail?”

Of course you’re going to fail!  Every massively successful business failed, and failed often.

What people don’t understand is that the largest part of building a successful business is figuring out what works and what doesn’t.  Failure is a large part of this formula!  The key to figuring out what works is to keep at it.

1. Try what you think will work.
2. See what worked and what didn’t.
3. Adjust what didn’t work.
4. Try again, and
5. Repeat the first four steps on this list until you get it right!

Thomas Edison’s famous quote when he was asked about his many failures in trying to invent a working light bulb says it all when it comes to how an entrepreneur should think:

            “I have not failed.  I’ve found 10,000 ways that won’t work.”

I personally like another one of Thomas Edison’s quotes:

“Many of life’s failures are people who did not realize how close they were to success when they gave up.”

The only way to become a successful entrepreneur is to work hard at making your product or service so excellent that your customer can’t ignore you.  And the only way to do that is to keep learning what works and improving your product or service.

So, fail until you don’t!

It's Not a Sale Until You Can Deposit Their Payment!

A recent study found that half of all small businesses are having trouble collecting receivables. During good times this is an annoyance. During bad times it is often the path to an appointment with a bankruptcy attorney.

Collecting receivables requires a plan and a system that addresses collections both before and after the sale is completed. In this video I discuss these steps that every business owner should focus on when making a credit sale.

 

Before the sale is complete you should:

1. Review the customer’s ability to pay.  Big companies use credit reports.  But for most small companies, the easiest method is to require a down payment from any customer without a track record.  How they handle the down payment is a good indication of their payment ability.  Plus, a down payment lessens your exposure, recovers your cost, and speeds up your cash flow.
2. Make sure that your product has value to the customer that is equal to or (preferably) higher than the price that the customer will pay.  This is one of the top reasons for slow pay or non-payment.  We have all fallen victim to the slick salesperson who gets us to buy something that we later regret.  The customer usually “gets even” by slow paying or refusing to pay.
3. Offer incentives for prepaying.  This can be a discount, but I would rather offer a bonus of some sort that actually increases the value to the customer if they pay early.
4. If possible, don’t deliver without receiving payment.  At a bare minimum, review your payment terms with the customer.  The goal is to eliminate the excuse that they didn’t know when the payment was due.  Keep an eye out for clues that something has changed in the customer’s financial ability between the order date and the delivery date.
5. Invoice quicker.  Don’t wait until the end of the month.  Invoice the work as soon as it is completed.
6.  

After the sale is complete you should:

1. At every step in the collection process remember to keep stressing the value that the customer received.  Don’t stop selling!  Remind them of the value you brought to them.
2. Call shortly after the sale to make sure they are happy with the purchase.  You are still stressing the value of the product or service they received.  If you can’t call all of your customers, you should at least call the largest sales.  (This is often a great time to up-sell to the next level or to sell an add-on product!)
3. Have a system that includes some combination of calls and letters that automatically go out to any account that is past due.  The squeaky wheel does get paid first.  So squeak loudly!  Of course, remain polite but keep stressing the value of what they received.
4. At a certain point (60-90 days after the sale) the owner should make it a point to call.
1. Make sure the customer really felt they received value.  If not, the owner should try to fix the problem.  This may be your last chance to save a customer.
2. Ask them for payment.
3. If they can’t pay, the owner should say, “You are a valued customer and I would like to help you by offering a payment schedule.”
4. As a last resort, offer a reduced payment if the invoice is paid by a certain date.
5. If all else fails, write off the balance and forget about the customer.  Don’t waste any additional time and money suing them.  Your time would be much better used learning what went wrong in your sales and collection process and getting better customers who value what you are providing and are willing and able to pay.

Sharing Quickbook files

SATURDAY RERUN

Here is a Yahoo video I posted in the past that shows you the various ways to share your QuickBooks company files with co-workers, your bookkeeper and CPA. 

 

 

Discover the cash Hiding in Your Business!

In my forty+ years of working with small businesses, just about every business owner that I have worked with has been surprised by the amount of cash that they are leaving on the table. In tough times or good times, tracking every dollar your business uses and making sure your cash is spent wisely will lead to more cash in your bank account. Making changes early on can be the difference between success and bankruptcy. Here are some ideas that usually increase business cash flow quickly.

In this time of business turmoil this is more important than ever. In this video I discuss tried and true methods of increasing cash by mining your business.

 

Increase sales

Almost every business is ignoring one sales area that is a goldmine—their current customers!  If the business owner works on nothing else, they should work on the following systems:

1. Improve your systems to increase your lead conversion rate. Your goal is to turn more of your customer contacts into sales.
2. Improve your systems to increase the order size by upselling. Create a list of products and services that go together logically and make sure your staff is trained to offer them to every customer.
3. Improve your systems to increase repeat sales. Develop incentives for your customers to shop with you more often.  Increase your communication with your current customers about new products and services you have that will solve their problems.
4. Improve your systems for customer referrals. Ask for referrals from your best customers.  Pick up The Referral Engine by John Jantsch for great ideas on getting referrals.

Increase your prices

The quickest and easiest way to increase your income is to raise your prices.  If you are worried about losing customers, do the math.  You will be surprised by how many customers you can lose and still make the same sales amount.  And most business owners find that they make even more money with less work.

Speed up your collections

Review your receivables now and every week.  Call every customer who is past due as soon as they become late.  There is no secret to collecting receivables—the owner just has to stay on top of it constantly!  Don’t let someone else’s cash flow problem become your cash flow problem.

Avoid receivables entirely by getting prepayments, larger down payments, or requiring payment at the time of delivery.  Additionally, speed up your billing cycle by billing weekly instead of monthly.  As a last resort, look into receivable financing.

Control your inventory

Money tied up in your inventory is money that is not in your bank account and money that isn’t working for you.  Examine your inventory and identify those items that are not selling quickly.  Get rid of these by lowering your sales price until they sell.  Remember:

• It is better to sell it today at a 10 percent discount than six months from now at your normal price.
• If it doesn’t sell at a 10 percent discount, it is better to sell it at a 25 percent discount today than at its normal price a year from now.
• If it still doesn’t sell, sell it at cost and reinvest the money into products that are selling for a profit.
• If you can’t sell an item at cost, selling it below cost is better than keeping it on the shelf and throwing it away in a couple of years.

Decrease expenses

A ten percent across-the-board cost-cutting approach probably won’t work.  Cutting advertising will probably cut sales, too.  So the proper method is to review all expenses line by line and look at ways to eliminate or reduce the cost item.  If you haven’t bid an item out recently, you are probably spending too much on it.

Control your outgoing cash flow

Ask your customers to supply raw material.  Explore just-in-time (JIT) inventory options.  As a last option, look into floor plan financing of your inventory.

Your suppliers have a stake in your survival, so they will often work with you if you can show them it is in their best interest.  Ask for longer payment terms, even if you have to offer to pay a slightly higher price (of course, keep an eye on your margins and decide if you can pass these costs onto your customers).

There are many other things you can do, but this is a great starting point.  Before you pay for anything, just ask yourself, “Can I live without this right now?”  If you can—wait!  Keep cash in your bank account for as long as you can.

What Very Successful Business Owners Concentrate on (During Both Good & Bad Economies)

Over the last 35+ years I have had the pleasure of working with thousands of business owners. Less than 1% of these I would classify as highly successful businesses dominating their niches. Yet all of these business owners had one thing in common: Every extremely successful business owner has a laser-like focus on taking action based on good ideas. In this video I discuss why this is so important to every business in order to navigate through the current craziness.

 

Over the last 35+ years I have had the pleasure of working with thousands of business owners.  Less than 1% of these I would classify as highly successful businesses dominating their niches.  Yet all of these business owners had one thing in common:  Every extremely successful business owner has a laser-like focus on taking action.

They understand that successful businesses occur when the owner makes consistent improvements.

They start by making a list of their long-term business goals.  Then they figure out what they have to do this year in order to reach them.  What do they have to do this quarter, this month, this week, and today to reach those annual goals?

Successful business owners know that the secret to massive profits is the combination of good ideas with a laser focus on monthly action.  This is the mantra you must follow.  I believe it is so important that I have made the slogan “Good Ideas + Action = Massive Profits” the motto for our magazine and our coaching programs.

Think of how much better your company would be if you committed to working four hours per week on improving your business.  Do that for 50 weeks this year, and you will have worked 200 hours on improving your business.  How many of your competitors are making this kind of investment?  Worse yet—what if one of your competitors does and you don’t?  How far behind will you be?

But they not only have a focus on taking action, they also schedule time monthly to plan and implement the good ideas that move them toward their goals.  We recommend three steps to our coaching clients:

1. Use our Perfect Monthly Growth Tool (Call me if you want a free copy of this)

2. Use a monthly process to plan and analyze their marketing and promotion activities.

3. Use weekly delegation meetings to ensure their employees are working on those items that move the business toward its profit goals. 

Finally, every successful business owner hires a coach to keep them accountable.  I have a personal coach who is helping us with our online marketing funnel.

An accountability coach helps you:

• Set a realistic timeline to reach your unique goals.
• Flesh out a strategic action plan designed to reach those goals.
• Measure your progress.
• Stay focused! Business owners who have a focus on growing their business very often get tempted by the newest shiny object.  An accountability coach reminds you why you should finish one thing first before moving on to something else.
• Find encouragement and motivation when you feel like giving up.
• See a fresh perspective based on their experience with multiple companies in different industries.
• Challenge yourself to go beyond what you are comfortable doing on your own.

The end result is usually a massive increase in sales and profits.  Why?  Because the coach pushes you past the places you have sabotaged yourself in the past.

Now is the Perfect Time for a Cost Cutting Audit

Increasing sales is important to any profit enhancement plan. But cost cutting cannot be left out. If you are operating on a 10 percent net profit margin, a $1 cost reduction is equal to a $10 increase in sales.

In order to achieve lower costs, you should perform a cost-cutting audit annually. In this video I cover how successful cost cutting requires you to follow three simple but painful rules.

 

Increasing sales is important to any profit enhancement plan.  But cost cutting cannot be left out.  If you are operating on a 10 percent net profit margin, a $1 cost reduction is equal to a $10 increase in sales.

In order to achieve lower costs, you should perform a cost-cutting audit annually.  First, identify your biggest costs and assign them to cost centers.  Then use those centers to allocate the remaining costs.  Once you categorize your costs and understand their relationship to your business, you can implement cost cutting.  All companies attempt to do cost cutting, but they often fail.

Successful cost cutting requires you to follow three simple but painful rules:

1. Make cost cutting a continuous activity. Most companies have cost-cutting drives at intervals of several years, and generally only during business downturns.  In between, only a token effort is made to run economically.  You can win big by having all of your managers work on cost cutting every day.  Require a written report on their progress on cost reduction every quarter.  This not only reduces problems in bad times, but can substantially increase your cash flow during the boom times.  This is a much more efficient way to cut costs.  Crash programs tend to result in process hang-ups and quality problems because the measures taken are not thought out and are implemented in a hurry.  Continuous cost cutting gives you the opportunity to carefully test results and avoid false economies.

2. Cut the major costs first. It seems obvious to start where the money is.  Unfortunately, I have sat through countless meetings where the cost cutting applied to as little as one percent of the total costs.  Be creative!  Look for ways to cut costs that don’t affect efficiency or reduce your product’s quality.

3. Cut costs by eliminating, not reducing, activities wherever you can. As you examine each cost and cost center, the first question you should ask is, “Can we get rid of this entirely?”  The answer of course will probably be “No!”  You can jar your people out of that rut by rephrasing your question like this:  “Okay, suppose we were forced to stop doing it.  What would we do instead?  Would it be cheaper?”  Don't even consider your options for reducing the cost of an activity until you have convincing evidence that it is impossible to eliminate it altogether.