Ever wondered ‘Where’s the money gone”?

‘Where’s the Money Gone?’ traces the learning of a typical business person named Mike. Mike believed that to be successful he just needed to make a profit.

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How to work out the optimum inventory level for your business

By on October 7, 2010 in Business Plan

Why would you not stock up your shelves with as much inventory as you can so that customers have plenty of choice and therefore give you the maximum opportunity to make sales?

I can hear you shouting back things like:

  • My inventory is fresh product so I can’t buy too much in advance
  • My inventory is seasonal and I don’t want to be stuck with it
  • My product is changing with technology so I can’t buy ahead too far
  • I don’t have the money to buy the inventory

All of these are good reasons why you would not buy too much inventory but there is a more sound business reason and it is this.

You business should match its inventory to the level of sales that is achieved or likely to be achieved.

So how do you calculate this and work out the right level to aim for?

Here’s the calculation:

Match your inventory to the number of days that works for your business model. My suggestion is that it is no greater than 45 Days.

So the simple calculation is this:

Supplier Costs for Product for the last three months $100,000

Inventory level should be 45 / 90 * 100,000 = $50,000

How to avoid your business being shut down in a cash flow crisis

By on September 30, 2010 in Cashflow

Have you ever run out of money in your business and still had bills to pay?

This seems to be a very common problem for business owners when the timing of money coming in and money going out doesn’t seem to match.

When this happens most business owners do one of two things.

  1. Tip in money of their own to solve the situation
  2. Ring all their customers and ask for money

BUT there is actually a more important thing to do if you’re in a product style business.

Ring your suppliers!

Let them know that you have a cash flow issue. Don’t wait for them to ring you because by then you will have lost some goodwill with them.

Keeping your supply lines open is critical because without them you may as well shut the doors and give up.

If you’re to keep trading you must keep your trade accounts open because your business can produce the money to trade its way out.

That’s the least painful way out of a cash flow crisis!!

What’s your experience on this?

How you can avoid getting lost in your marketing in three easy steps

By on September 23, 2010 in Marketing

As a small business owner it’s really easy to get overwhelmed with trying to keep up with the latest in marketing techniques.

There seems to be a never ending list of things to increase the effectiveness of your marketing such as search engine optimisation, social media and automatic referral generation but where do you find the time to do all this and still remain focused on running your business?

I have found that it is important to focus on three easy steps in our marketing message to make sure potential customers get a clear understanding of what we’re offering and how it will solve the issues they are facing.

  1. Problem

    What is the pain that our prospects are feeling? What is it that keeps them up at night and they would do anything to get relief from!

  2. Agitation

    How can I describe the problem in a way that really focuses on the issues that our customers are feeling? How can I take the pain and make it so real in their world that they’re crying out to get some relief!

  3. Solution

    How can I be the solution that they’re looking for? How can I get them to identify with my solution as the best to deal instantaneously with their problem?

By focusing on these three things I won’t get lost in my marketing.

It makes no difference whether I’m trying to get to the top of Google, have thousands of followers on my twitter or simply bring more prospects through the door.

Following this framework allows me to maintain focus on what’s important to my customers rather than what’s important to me

What’s been your experience on this?

Video

I can’t get enough sales to survive – can you help me?

By on September 21, 2010 in Melbourne Vlog Tour

A key component in making sure you have enough sales is building a list of prospects that you can market to.

In today’s Vlog, Andee looks at the metrics which you can adopt to make sure you build a list that is big enough.

These simple metrics will assist you to aim for the right goals in your business.

The Vlog series comes from One Sherpa an online global membership community dedicated to helping small business owners succeed and prosper.

The series is filmed on location around Melbourne, Australia and answers questions commonly asked by small business owners.

This video is filmed from the Caretakers Residence at Kurth Kiln and answers the question ‘I can’t get enough sales to survive – can you help me?’

3 easy steps to decrease debt in your business

By on September 16, 2010 in Cashflow

Many people get into debt in their business before they even open the doors and then it becomes a long hard struggle to recover and become successful.

My three easy steps will ensure that you start off correctly and then continue to accumulate strong cash flow and therefore decrease any debt you have in your business.

The three easy steps are:

  1. Make sure you have sufficient equity in your business before you start

    This means that you need to be putting in some CASH of your own and avoid starting your business with a loan from the bank as the only money to start with.

    It is much easier to continue working a job and save some equity so that you’re not overwhelmed from day one of your business by too much debt.

  2. Make sure you make profit AFTER tax

    If you are trying to avoid paying tax at the same time as growing your business you run the risk of making no profit and then the growth in your business must be funded by an increase in debt.

    Ensure you make good profit AFTER paying yourself a market wage AND paying the correct amount of tax

  3. Make sure you get paid by your customers

    Many small business owners make reasonable profit by selling to large businesses that have long payment terms.

    Others simply sell to small businesses that can’t pay because they’re not making profit.

    In both of these cases you will find that the accounts receivable can grow quite quickly and this again will need to be funded by more debt.

    Negotiating good terms and then getting your customers to stick to those terms is key to decreasing the debt in your business

What’s your story regarding debt in your business?

Have you been caught owing a lot of money and been stressed as a result?