4 Keystone Habits For Financially Savvy Business Owners

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I recently read an article by Jari Roomer about daily habits by people who have their personal finances well in order. As I read the article, I thought how these habits would also be applicable to a business.

What are the habits?

  1. They put their money to work
  2. They resist lifestyle creep
  3. They save
  4. They continuously upgrade their financial IQ
  1. Put Your Money to Work. Roomer was referring to a person investing their savings into income producing assets such as stock, bonds, or real estate. For a business owner, this would be the equivalent of seeking out complimentary revenue streams and products that would not only increase their sales but also diversify their revenue. By having more than one way to earn money, a business provides a hedge against having only a single product or service line to depend upon.
  2. Lifestyle Creep. You may have experienced this yourself whereas your income grew, so did your expenses. For some, the expenses might even exceed their increased income. For a business this can also happen. A business owner may see opportunities (I refer to these as “shiny objects”) to invest their newfound income. Later, they find out that it didn’t work, and they failed to have enough saved to cause potential life-threatening damage to the survival of the business.
  3. Saving. Personal finance experts will often recommend that you save 3 to 6 months of expenses as your “emergency fund” for when unforeseen circumstances such as a large medical bill or repairs to your automobile. The same holds true for a business. Saving 3 to 6 months of expenses can give the cushion that a business needs to weather similar unforeseen circumstances. Who would have thought in our lifetime that a pandemic would come along and shut down our economy for months? Many companies found themselves in dire situations and unable to pay their employees to keep them onboard. Be sure to build in a cushion to protect your business.
  4. Continuously Upgrade Your Financial IQ. This is where the business owner and their leadership team have a desire to continue understanding what their numbers mean. These business owners seek out the education and resources that ensure they can equip themselves to understand the financial results of their business. The numbers are the way a business keeps score, just like a professional sports team keeps score so they know who has won the game. Here at The Numbers Coach, this is exactly what we work with clients on doing: Owning your numbers.

Build these four keystone financial habits for your business and your leadership team. It can be the difference between success or failure.

3 Tips For Better Business Planning

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Planning is a critical part of making sure your business is focused and on track.  Here are six important elements for long term planning.

  • Define the outcome.  Each planning session should have a desired outcome in mind that you define at the beginning of it and then circle back at the end and ask yourself the question if you actually addressed it.
  • SMART goals need to be the prepared and documented.  Your management team should come up with what they feel from their perspective the goal or goals should be so that you can see where the common ground is and where your team is thinking the business should go.
  • Have a specific written agenda prepared ahead of any planning session and stick to it.  Don’t let meetings drag on without keeping people on time which means on track.

Follow these 3 guidelines for your next business planning session and create a better road map to your success!

Mike

Simple but Powerful Rules for Business

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Charles “Red” Scott was a President and CEO of several public companies over his career, including Intermark and then Fuqua Industries.  His business philosophy for success in running a business resonates with me, seems timeless, and cuts across all industries.  While simple on the surface, these rules and principles remind us as business leaders of what is important. 

Below are some of Red Scott’s “rules” that I think you will also find are key to business success:

  • Don’t run out of cash. . . no matter what!
  • No surprises: Give fair warning when you hear bad news
  • Never compromise quality for price
  • Plan strategy and set objectives before fixing structure
  • Be careful of a “quick fix”
  • “About right” now is better than “exactly wrong” later
  • Creativity is great. . . but not in accounting
  • Always ask “What if?”
  • Hire smart rather than manage tough
  • Do the “right thing” rather than do “things right”
  • Invest in business with a low cost to exit
  • Hire for attitude, train for skills
  • Be careful: A little success can create a whole lot of overhead
  • “I will” beats IQ every time!

These are just a few business tips that can help you pull through all your circumstances.

To your business health!
Mike

Buffet’s Advice for Financial Success

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The “Oracle of Omaha” has created an impressive following of people and his investing results have proven the test of time.  Below are 10 simple bits of wisdom that I believe are timeless:

Never lose money.  Buffet’s rule # 1 is to not lose money.  And his rule #2 is to remember rule #1.  Keep in mind if you lose 50% of your investment, then it takes 100% return to get back to even.

Get high value for low price.  What he means is value is what you pay for.  Make sure that you are paying the right price for the value in the product, business or investment that you are buying.

Build healthy money habits.  Habits are what drive our behavior.  It’s been said that finance is 80% behavior and 20% math.  If we don’t change poor behaviors with our wallet then we can’t expect to find success with money or building a business.

Avoid debt and, more specifically, avoid credit card debt.  Credit card interest rates can be as high as 18% and more.  If you have to roll over your credit card balance regularly, then you can’t afford spending on it.  In effect, you are trading your future for your present satisfaction.

Keep cash on hand.  Come up with what your minimum cash balance needs to be.  Is it 3 months or 6 months of expenses?  “Cash is to a business as oxygen is to an individual: Never think about it when it is present, the only thing in mind when it is absent,” said Buffet.

Invest in yourself.  Your biggest income producing asset is yourself.  Improve your skills to make yourself more valuable to the market.  Unlike other assets and investments, “Nobody can tax it away and they can’t steal it away,” said Buffet.

Learn about how to manage money as a part of the investment in yourself.  Not everyone enjoys this subject, however, there are simple methods to follow that help you win with money.  Spend less than you make. . . save 15% into a low cost index mutual fund. . . it’s not how much you make, it’s how much you decide to spend.

Trust a low cost index fund. Expenses matter when it comes to returns on your investments.  Consistently adding to your investments each month or quarter exercises an important “money muscle.”

Give back on a regular basis.  Giving of our “time, talents, and treasure” to our community and nonprofits is a natural law of human nature where we want to help others in need.  Giving produces psychic benefits for the giver and it helps society move forward.

Invest for the long term.  Investing not only with dollars but in ourselves is a long term game.  Building true financial security takes time.  Buffet said, “someone’s sitting in the shade today because someone planted a tree a long time ago.”

Together these pieces of advice can help take us on the journey to financial security.  The advice is simple and timeless.

Here’s to reaching your financial goals! Mike

Mastermind is the Name of the Game

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What is a mastermind group? This timeless concept is explained by Napoleon Hill in his books published in the 1920s and ’30s, The Law of Success and Think and Grow Rich.

Some mastermind groups are informal with 2-3 people and other groups are more formally organized, such as organizations like Vistage (www.Vistage.com), YPO (www.YPO.org), or View From the Top (www.viewfromthetop.com).   More formal mastermind groups consist of approximately 8-12 peers who meet on a regular basis (weekly or monthly) either in-person or via Zoom. Members pay monthly dues, and their fee often covers in-person speaker(s), activities, and/or retreats.

CEO & Co-Founder of Sustainable Investment Group (www.sigearth.com), Charlie Chichetti, has belonged to a 10-person mastermind group, Iron Sharpens Iron (“ISI”) as part of the View From the Top, for the past six years. Chichetti says the strength of a group lies in the diverse personal and business experiences of its members. Participants share best practices and hold each other accountable for tackling problems and meeting goals. Each member takes a turn in the “hot seat,” while the rest of the group brainstorms strategies and solutions to aid them in facing their challenges head on. A successful mastermind group enhances its members’ business AND personal lives.

Make no mistake, these formal groups like Vistage and ISI are not laid-back clubs.  Attendance and participation are  required. Members are expected to present problems, as well as provide feedback. The group devises a method of holding members accountable for following through, which keeps everyone focused and on track.

Charlie Chichetti offers the following guidelines to create an efficient and productive mastermind group:

  • Meetings are not the time to multi-task; they should be structured and begin and end on time.
  • Be present – both physically and mentally.
  • Members should come with a giving—as opposed to taking—mindset.
  • Include a mix of members, including “solopreneurs,” people from small- to large-size businesses and from different industries.

Trace Blackmore, owner of Blackmore Enterprises (www.blackmore-enterprises.com), has been part of a mastermind group for the past 10 years. He currently facilitates a mastermind group, Rising Tide (www.scalinguph2o.com/mastermind), and is a firm believer that learning from others’ mistakes and successes is one of the best tools for good decision making. Like Chichetti, Blackmore contends that the structure of mastermind groups is key to their success. He provided the following guidance to anyone who is part of a mastermind group, or is considering joining one:

  • All devices should be on silent mode during the meetings.
  • Progress is expected every week and a group may choose to offer consequences for members who come unprepared.
  • Before deciding to join a mastermind group, be sure you have the time, energy, and desire to make it a priority.
  • Each meeting should start by celebrating wins. Support and accolades are integral to keeping members motivated.
  • Ask questions! Questions help people think and look at circumstances from different perspectives and keep people from jumping to conclusions until they have all the information.
  • Members should be honest, while doing so in a tactful way. A book titled Fierce Conversations by Susan Scott is a good resource.
  • Individual goals and plans should be clearly verbalized to the group and should include deadlines for completion. This keeps people focused and on track.
  • What happens in mastermind stays in mastermind. Like all of life, business and personal events overlap, and problems and solutions are often of a personal nature.

Now you are officially aware of the who, what, when, where, and why and of mastermind groups. The benefits— accountability, strategy development, and healthy business and personal habits—are invaluable. Perhaps you will think it over and decide that membership is right for you.

As a member of a mastermind group for 10+ years now, I’m happy to advise you if you are thinking of joining one.   Feel free to contact me to discuss.

Prioritization: The Foremost Rockefeller Habit

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One of the best ways to improve your work productivity is to emulate the habits of someone highly successful. John D. Rockefeller, who founded the Standard Oil Company in 1870 and ran it until 1897, is one of the true titans of American business. And so, the book Mastering the Rockefeller Habits by Verne Harnish made its way onto my reading list.

As the book documents, Rockefeller’s approach to running a growing business was really quite simple. He identified three underlying habits that he considered essential to good business management:

  1. Setting priorities for the organization.
  2. Collecting and analyzing sufficient management data.
  3. Establishing an effective organizational rhythm.

Of the three key habits, setting priorities is first, and arguably the most important.

Setting Company Priorities

Rockefeller developed a list of the Top 5 priorities of his business for the upcoming year and the next quarter. He also ranked those top priorities in order and set a clear Top 1 priority from among his Top 5. He communicated these priorities throughout his company and encouraged employees to set personal priorities that aligned with and supported the company’s priorities.

It seems to be common sense to solve the problem at hand before moving on to another challenge, but not every team or employee has the discipline to follow through to completion of a difficult task. Rockefeller’s managers provided the discipline needed to make sure the top priority was completed before the second priority was undertaken.

As productivity tools go, Rockefeller’s Top 5 priorities list is one of the most widely used in American business history. As an example of the effectiveness of the tool and how soon it came to be appreciated by others, Harnish relates the story of a management consultant who was summoned to the office of Charles Schwab in the early 1900s. At the time, Schwab was the CEO of Bethlehem Steel, and he was looking for ideas to improve the business.

The consultant told Schwab how he could improve Bethlehem Steel’s bottom line by using a simple productivity tool. It was Rockefeller’s Top 5 priorities list.

The consultant told Schwab to start each day by writing down the top 5 things he wanted to accomplish for the company’s benefit. They had to be prioritized from 1 to 5, with 1 being the objective likely to have the greatest impact on the business.

Schwab was instructed to work only on priority 1 until it was completed. If it was not accomplished by day’s end, it remained the top priority the next day. Under no circumstance could he move to priority 2 without completing priority 1.

The consultant told Schwab to implement this principle and afterwards pay him whatever he felt the advice was worth. If it didn’t work, Schwab owed him nothing. A period of time elapsed and one day the consultant received a check in the mail from Mr. Schwab. The check was written for $25,000, which was a great deal of money in those days – over $600,000 in today’s terms. That’s how beneficial the borrowed productivity tool was to Bethlehem Steel, which became a world leader in its industry.

Rockefeller knew, and Schwab learned, this: Management of any business, large or small, needs to clearly establish and communicate to employees the most important priorities that will help the company make progress towards its vision.

How well have you identified and articulated to employees your company’s priorities? If you’re not sure, contact Trillium Financial and we’ll help you find the answer.

Scaling Up: “My Formula for Retirement”

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Do you need a clear path to make sure you have enough money to retire? In this “Scaling Up” podcast, Numbers Coach Mike Iverson share his formula for retirement:

An Environmental Services Firm Uses The Numbers Coach to Achieve Financial Results

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The Company

Sustainable Investment Group (“SIG”), founded by Charlie Cichetti and Jason Kiefer, provides sustainability services to commercial property owners.  SIG provides high quality services for LEED certification with commercial buildings.  A LEED certified building ensures the property uses sustainable activities to help protect our environment.  SIG offers LEED training, consulting, and engineering services domestically and internationally.  SIG has become an industry leader and expert in LEED practices.

Situation

In 2020 the SIG team wanted to enhance their financial management and reporting.  They were looking to create a platform to communicate the company’s key performance indicators (“KPI”) that drive its financial results.  In addition, the SIG team wanted a “road map” that could guide them as they made financial decisions impacting strategies for growth.

Solution: The Numbers Coach Leadership Service

The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing SIG’s performance metrics.  NC developed a financial scorecard focusing financial drivers that give the team visibility into the profits and cash flow critical to sustained profitable growth.  The scorecard offers an “at a glance” view of results.  NC developed a financial model from its proprietary software the Numbers NavigatorTM that provides the road map for the SIG team to see where they were headed with profits and cash flow.  The model provides a rolling forecast during the year so that SIG team could make financial and operational decisions “on the go” to achieve their goals.

Results

NC pulled together financial and non-financial data to complete a customized scorecard and financial model.  Each month NC meets with the SIG team to methodically review results and provide the input and analysis from the Numbers NavigatorTM financial software.  Each monthly financial coaching meeting, the SIG team can take actions on activities that improve the company’s bottom line results.

For more information on Sustainable Investment Group visit www.sigearth.com

To learn more about the Numbers Coach financial leadership services, click here

“Mike has been an important part of our team.  His understanding of financial processes, cash flow, and how to explain our results gives our team the right tools to navigate our finances successfully and stay focused on our financial goals.”  

– Charlie Cichetti

Numbers Coach Helps Medical Firm Stay Financially Focused

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The Company

 Georgia Pain and Spine Care (“GPSC”), founded by Dr. Charles Brownlow in 2010, is a leading pain management medical services firm that provides comprehensive solutions to help restore each patient to their original lifestyle.  The company uses progressive approaches to pain management with education, counseling, and minimally invasive procedures.  Their mission is to relieve pain, increase productivity, and improve the quality of life for its patients using technologically advanced treatment regimens through is various metro Atlanta offices.

Situation

 In 2020 the GPSC team wanted to enhance their financial management and reporting capabilities.  They wanted to create a platform to communicate the company’s key performance indicators (“KPI”) and help educate its key team members on what drives its company’s financial results.  In addition, the GPSC team wanted a “road map” that could guide them as they made financial decisions impacting strategies for growth.

Solution: The Numbers Coach Financial Leadership Services

 The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing GPSC’s performance metrics.  NC developed a financial scorecard to focus on the financial measurements that drive company profits and cash flow critical to sustained profitable growth.  The scorecard offers an “at a glance” view of results.  NC developed a financial model from its proprietary software the Numbers NavigatorTM .  The software provides a road map for the GPSC team to see where they are headed with profits and cash flow.  The software’s rolling financial forecast provides the GPSC team with a tool to make critical decisions “on the go” to achieve their desired results.

Results

NC pulled together financial and non-financial data to complete a scorecard and financial model.  Each month NC meets with the GPSC team to methodically review results and provide the input and analysis from the Numbers NavigatorTM financial software.  From the monthly financial coaching meetings, the GPSC team can take actions on activities that improve the company’s bottom line results.

For more information on Georgia Pain and Spine Care visit www.gapaincare.com

To learn more about the Numbers Coach financial leadership services, click here

“Mike has become an important part of our team.  His understanding of financial processes, cash flow, and approach to educating us on our results gives our team the right tools to help us understand how to navigate our finances successfully and stay focused on our financial goals.”  

Dr. Charles Brownlow, Founder / Medical Director
 

Why a Slow Economy Doesn’t Have to Mean Dire Straits for Your Business

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Is the slowing economy adversely affecting Atlanta’s businesses, or is it a great time to be in business?

Well that depends mostly on your recent revenues. But even if those are in reverse, a slowing economy can be a great time to take advantage of some opportunities and position your business to come out of the gate at full speed when the economy takes an upswing.

We wanted to hear what local professionals in finance and business had to say about the current state of affairs. CFO service provider Mike Iverson and Vistage Chair Tim Fulton had some good tips for bad times.

Cash is King

The first step to understanding how to make sure your glass is half full is to assess your financial situation and understand exactly how much cash and credit you have. Even if cash flow is good, “Now would be a good time to go the bank,” says Mike Iverson, CPA and Principal of Trillium Financial, “before the economy gets worse or your company financials get worse. Go to the bank and make clear why you want a line of credit and what you will use it for.” It’s important to be proactive when it comes to having the cash stores ready. If you wait until you need it, your statements probably won’t look as good, and the bank may decline a loan or line of credit. Planning ahead is always a good thing. “The key to survival in an economic downturn is to out perform the market, and accumulate cash”, says Tim Fulton, a Vistage International Group Chair which works with over 14,000 chief executives in 16 countries.

Another aspect of understanding your capital position is modeling. How long can your business last with a certain amount of decline? What will you do to make sure you can weather the storm and start growing again? Imagine the various scenarios – even the truly ugly ones – and devise solutions before they come to fruition. You’ll be able to think more clearly in the face of adversity if you have a battle plan and, again, a line of credit to back you up. This doesn’t mean that you have to focus on the worst case scenario, just plan for it, then focus on your everyday business.

Modeling the tough situations is especially important if you are in a cyclical business; for example, the automotive industry. When the economy hits the skids, the average car dealership will probably see sales decline rapidly. Managers must have enough cash reserves to ride out the storm, and to pay for overhead and inventory so they can still be in business a year from now.

If you are a manufacturer, or a company that manages a lot of inventory, be mindful of your production capacity. You don’t want to continue to run at full capacity and end up with an overstock. Go to your clients and continually measure what they anticipate ordering from you in the next two to three months. For production purposes, you might have to scale back so the inventory on hand can be used, and not end up obsolete. On the positive side, manufacturers are usually the first to see orders are picking up. They’re not necessarily the canary in the mine shaft, but these businesses tend to provide a leading indicator.

The Positives of Slower Times

Once your cash situation is well-positioned, the glass is definitely half full. Now is the perfect time to expand your business through capital investments such as acquiring a struggling competitor. You can often take advantage of businesses being sold at fire-sale prices.

“When the economy bottoms out, there will be an abundance of great investment opportunities,” says Fulton. “The business owner with cash will be in a strong position to take advantage of these opportunities.”

Companies with cash can also get the upper hand over competitors by investing in the introduction of new products and in new technology that other business can’t afford. “If you can do any of these things”, says Iverson, “you’ll be in a different place than your competitors because you will be nine to twelve months ahead of them.  You will have something to offer customers that your competitors cannot.”

Companies who differentiate themselves in this way will be growing when everyone else is declining. Constantly look at opportunities to grow with products and services that will serve others struggling with hard economic times and continue to help them through good economic times,” says Iverson.

Another way to grow through a slowing economy is to ramp up marketing. While other companies cut their marketing budgets, Fulton recommends against this instinct. “Be very, very focused in your marketing strategies. This is not a time to be spending a lot of money on broad branding efforts. It is a time to be laser-focused on acquiring new clients and retaining profitable existing clients,” he says.

Iverson agrees. “Marketing is the last place you should cut back,” he says. “Marketing initiatives are priming the pump to create your sales engine. If you cut back on that, you cut back on future sales and opportunities. If everyone else cuts back on marketing, you will stand out even more, possibly turning that half-full cup to overflowing.”

Keep the Boat Afloat: Strategies for Securing Your Finances Through A Global Pandemic Storm

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By Michael Iverson

We are in an unprecedented time – one that is impacting most businesses in the United States and the world. And there’s no telling what the fallout will look like or even how long social distancing and company shutdowns will continue.

As a numbers coach for my business clients, many of them are asking for advice and guidance during this volatile and unpredictable time. I assure them that as a business owner or leader, a number of financial factors remain under their control. Here’s what I’m emphasizing:

Lead where you can: Communicate and Be Flexible

Change and uncertainty are all around us right now: How long shutdowns and isolating will last, the long-term macro- and micro-economic impact of this crisis on businesses, families, and communities around the world, or whether people will regret buying a year’s worth of toilet paper are unknown. We have little to no control over most of this.

What you can control is how you react.

No one knows exactly what to do – and that’s OK. Your strategic decisions can keep your company afloat through this crisis.

Communication: Transparent and honest communication isn’t a new concept, but it is more important now than ever. Explain to employees, customers, and other stakeholders that, like everyone else, your business is experiencing the ramifications of the coronavirus. Explain your challenges and your high-level strategy to overcome them. Everyone is more likely to empathize if you communicate honestly and authentically. The health and safety of your employees is the most important priority.

Keep the communication flowing – ask where they’re struggling the most, and where you can help. Offer a free brainstorming session. Remember – your goal is to maintain the relationship so it can grow after this crisis passes.

Flexibility:  As you’re asking for flexibility from your clients and employees, consider offering some in return. I always encourage my clients to have a 3- to 6-month cash reserve. Times like these are why you held that money. Offer customers a modified payment plan or if you can relax payment terms for products or services like ongoing license support or maintenance.

For employees, be flexible with time, productivity and deliverable expectations. People’s daily lives have been upended, from homeschooling and supervising children to caring for sick family members. And for the most part, they want to do their best for you while figuring out their situation. Consider staggered or flexible work schedules. Relax deliverable dates where possible.

If you have employees with a lighter workload during this time, give them the opportunity to shine when others are overwhelmed. Maybe ask for a volunteer to provide updated COVID-19 information both medical and financial. Dedicate someone to helping employees take advantage of cost- and time-saving benefits such as telemedicine, wellness programs, and EAP offerings.

But also remember as crucial as communication is, too much information, repeating the same message with minor tweaks, or asking employees to be constantly online or send hourly updates are all examples of actions that could provoke burnout and deeper anxiety. Remember, we’re all getting corona-related messages from companies we haven’t heard from in years. We’re all figuring out this out together. Don’t unnecessarily add to the cacophony.

Pivoting to new operational models

With office and business closures, we’ve shifted to working almost entirely online. Engage customers and prospects virtually through platforms like WeChat, Zoom, Skype. For those with whom you haven’t engaged with this way, the novelty may actually open doors. Use email lists and social media analytics to reach new leads. Try apps like Trello or Monday or dig out that intranet project you’ve been putting off, to organize and detail projects so everyone is working together.

Prioritize initiatives that require less capital, less risk, and have a proven positive impact on cash flow. It is possible to continue to operate debt free and maintain access to capital. For more cash preservation guidance, check out the “Preserving Cash in Uncertain Times” article I published last week.

If your company’s situation is looking dire and you’re considering layoffs, consider looking into a four- or even three-day work week to reduce costs. If employees are sitting on the bench due to loss of client work or decrease in demand, ask if they could use their PTO now or agree to work half time or take unpaid leave. Look into emerging government programs to cover salaries. The Cares Act is landmark legislation passed on March that has several key programs:

  • Paycheck Protection Program Loan with a forgiveness provision
  • Economic Injury Disaster Loan program as part of the Small Business Administration
  • Employer 6.2% payroll tax deferral program
  • The Unemployment supplemental insurance program

The following link provides more detail on the programs and what is offered:  COVID-Bill-3-Summary

If you need to consider across-the-board pay cuts, keep them in direct relation to job positions. Start first with voluntary cuts. Some employees are looking for ways to help others who can’t afford a pay cut. For example, the CEO should lead by example and take the largest pay cut, the highest paid employees take the next highest cut, and so on down the line.

Finally, if you haven’t already, postpone all travel and make every effort to allow employees to work from home.
Negotiate with vendors, who are undoubtedly making changes of their own. Look for extraneous expenses to eliminate, and lower cost alternatives to conventional advertising. Look into whether your insurance coverage can help. Leave no stone unturned when looking at ways to conserve cash.

Learn, grow, breathe. We’ll get through this!

It may be the last thing you want to think about, but now is the time to take note of practices that will prevent repeating mistakes in the future.

Take notes. If you didn’t have a solid disaster recovery plan ready this time, prepare one for the future using knowledge you acquired during the COVID-19 pandemic.

And no matter how brilliant and detailed your plan is, expect things to continue to go awry. When this happens, stop, take a few deep breaths, remember your training, focus on the end goal, and make the most rational decisions possible.

If you’re looking for more guidance, I’m happy to talk. Give me a call at (404) 353-2148 or email me. I’m here to help.

With hope, gratitude, and cooperation, it won’t be long before we turn our TVs, smart phones, and laptops on and see nary a mention of pandemics.  Until then, stay safe and be well!

Keep Your Finger on the Pulse of Your Business

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There are plenty of ways to measure the financial success of your business: profit margins and revenue growth, for instance.  But do the old standby measures give you the whole picture? It’s never too early or too late to try out new ways of analyzing the financial health of your business.

I recently came across a 2017 Inc. magazine article written by entrepreneur and author Norm Brodsky. In “Pencil Power” he suggests an assessment method that would have been called “old fashioned” in the past, but today might be termed “retro.”  It involves—brace yourself—a pencil and paper.  (Yep, I’m coming back to the same pencil and paper I mentioned in a blog post a few months ago.)  Brodsky believes that tracking monthly sales and gross margins by hand is especially beneficial to new, or relatively new, business owners.

He says the practice will improve young businesses’ chances of success 100 times over:

“By writing the numbers down and doing the calculations yourself, you begin to have a feel for the relationships between them. Later on, when other people are reporting numbers to you, you’ll be better able to recognize when something’s wrong.”

Brodsky recommends a simple exercise to try at the end of each month: write down sales, cost of goods, gross profit, and gross margin of each product for both the month and year-to-date. Then write down the same information for each customer.  This is a quick way to see where you are saving money and where you aren’t.

If your business is already doing a good job tracking these metrics, there might be others that could shine light on an area that’s erratic or negatively trending. Try writing down monthly inventory holding costs or Accounts Payable and Accounts Receivable totals. Maybe some cash flow metrics need attention.

It’s a painless, 30-minute exercise that just might surprise you by exposing a weak or strong area of your business that’s been hiding in the dark. Add it to your evaluation and decision-making arsenal. I suspect you’ll find it insightful.

Let us know if we can help you track your metrics.