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.

You are here: Home

Discover the five components of a most profitable business

By on June 2, 2011 in Most Profitable Business

Are you looking to be the most profitable business in your industry?

Is it important to you whether make a decent profit or not?

If the answer to either of these questions is NO then can I suggest you stop reading right now because what I’m going to say in this blog post will have no relevance to you and you may want to do something more important.

Measuring profit in a business is a key element in making sure that when you do business with your customers you’re doing that in a sustainable way.

Many business owners fail to build a most profitable business while still bringing value to their customers and satisfying the needs of those customers.

This leads to failure in the long haul because there is insufficient profit in the transaction for them to remain viable.

As a business owner you will have at least three forces at you every day with regard to making a profit.

On the day you do your tax return you want the profit to be low so you pay little or no tax

On the day you tell your partner about your business you want the profit to be really high so they’ll believe you’re successful

On the day you want to borrow money from the bank you want the profit to be really high so they’ll lend you the money

Now which of these times do you make sure that the numbers are really right. You may say all the time but the profits of a company come under the most scrutiny regarding profit when you’re doing your tax because if you get that wrong you have to reach into your pocket and find money to pay the tax man and I rarely meet small business owners who enjoy doing that.

This means that often subconsciously the business owner doesn’t want to make profit or more likely subconsciously believes that profit is only a number which is manipulated and has little to do with measuring real success.

So they don’t place a high value of the book keeping in their business.

Now if you’re not one of those and really want to have a most profitable business then there are five components that you need to consider:

1. Sales Price
If you sell your products or services at a price that is too low then you’ll never make a profit. The only issue for you is convincing your customer of the value that’s in that price but you must do this in order to achieve good profitability

2. Sales Volume
It’s one thing to convince the close people around you that you’re selling them good value but in order to have good profitability you must convince at least a niche number of customers you’re providing good value or you simply won’t have enough customers to achieve good profitability

3. Costs to service customers
When you try and service customers you will need to spend money to do that. I like to call this ‘interaction costs with customers’ and it includes the costs of your products, people, marketing and distribution.

If these costs are too high then you won’t achieve good profitability. Sometimes customers fail to realise the costs associated in what they’re asking for and as business owners we can over deliver and under price which only gives the customer a better deal and leaves us out of pocket!

4. Margin
You may have heard the term Gross Margin or simply Margin. When you hear this it is important to know how it is calculated because you can get very different answers depending on what you include in margin.

In our business we use a term ‘contribution margin’ which includes ALL the costs required to interact with our customers. You can read about those above but we have found that we must achieve a 20% contribution margin or else our business struggles. And this MUST include ALL the costs of the business owner as well!

5. Expenses
Expenses in a business make all the difference between making a loss or a profit. If you took all your income and subtracted all your expenses then you’d have a profit (or loss!).

Minimising your expenses will ensure that you end up with a most profitable business but it is important to realise that sometimes in reducing expenses you can damage your business.

If you have an expense such as advertising which will bring in more customers and compare that to rent which won’t necessarily bring in more customers then you need to distinguish between them or you might make a mistake.

We like to make this distinction by calling some of our expenses ‘costs for interacting with customers’ and include those costs in our margin and ‘infrastructure expenses’ which we include after the margin.

This helps us think about the type of expense as well as how big it is.

In developing a most profitable business you will need to consider these five factors as they make up the different pieces for achieving high profitability.

How do you make up your profit and loss account and measure whether you’re successful?

How you can discover fraud issues in your business with a superior Expense Template

By on May 31, 2011 in Expense Template

>What do you do in your business when you feel as though your expenses are out of control and there just isn’t enough money to go round!

It’s an amazingly frustrating place for a business owner because it always seems as though everyone leaves it up to you to get everything fixed and you’re not sure quite how to fix everything.

One of the skills that is really helpful for a business owner is to learn how to create a useful expense template.

Now you might say to me that you don’t really understand the figures or numbers in your business so you have hired a bookkeeper or administrative person who does all this for you.

You may even find that they are really great at their job and bring you reports all the time so you know exactly what’s going on in your business.

Now cast your mind back to the last time you heard about a fraud in a business.

Was it performed by a burglar who just came into the business?

Was it performed by someone new to the business?

Was it performed by the worst behaved employee in the whole business?

Usually not…

Fraud is usually performed by a TRUSTED employee!!

What this means is that every person is subject to temptation and vulnerable to doing something that they’re not proud of.

Every person I know has moments in their life when its possible for them to do the wrong thing and if it is not picked up quickly they can easily move to more and more bizarre behaviour

So my point is that it is important for the business owner to be able to create expense templates so that they can do a second check on what they think is going on in their business.

This does not mean you’re turning into the administrative person for your business.

Far from it because as the business owner you have a different perspective and a different context for looking into your business.

If you descend to becoming the administrative employee then it will be impossible for you to have a big picture look at the business and use your gut instincts for finding where something isn’t quite right

You must learn the skill of looking at expenses from many different angles to get a perspective which is different from others because when you do this you can bring the value that only a business owner can.

From your position you are able to connect parts of the business and look for trends that don’t occur to people looking from their more narrow perspective.

So how can you go about creating a decent expense template when you think there might be something going wrong in your business?

Step 1: Big Picture
When you think something is wrong with the expenses in your business you must clearly work out the context that you’re dealing with.

If you are looking at only a small section of your business then the expenses might be hiding somewhere else in the business because of a mis coding or mis allocation to the wrong area.

This will involve looking at the total expenses for the business and ensuring there is an overall issue.

Once you have established where the problem exists you can move on to step 2.

Step 2: Context of the problem
Once you have established that there is a really expense issue in your business you need to decide the context of your problem.

What type of expense is it?

How is it normally accounted for?

Where would something likely have gone wrong?

Step 3: Different angle
Once you have established the context of the problem you’re ready to build a superior expense template.

The most important consideration is that you look at this problem from a different angle to the normal.

You have to believe that someone else in your business has already made their own expense template and if they are part of any fraud they will cover it up in all the usual ways.

The key for you is to take a different look. A different perspective on the issue.

It’s hard to prescribe something that will work in every case but make sure you follow your intuition or gut feel. In these circumstances it will often be your best guide.

What’s your experience on this?

3 places you can discover the source of difficult employees

By on May 26, 2011 in Difficult Employees

One of the most frustrating things for a business owner that I have observed is when their best employee becomes difficult.

Now there is a real problem because the person who in the past has helped them the most is becoming difficult and they’re faced with what I call a ‘double whammy.’

The help has gone and in its place you have one of your difficult employees!

So how do you stop this occurring and where is the source of this new behaviour?

The chances of stopping someone becoming difficult are very rare for a business owner because in running your business you won’t even notice until you have a problem.

So most of this post is devoted to discovering where the problem came from so you can honestly face up to it.

When people change their behaviour it is normally a result of something changing in their circumstances (environment).

So the first step in dealing with the situation is to determine what environment has brought about the change in behaviour.

Place 1 – Work environment
Often as business owners we can forget the perspective that employees have of our business. It is a place where they work but they rarely have the same attachment as the business owner.

On the other hand it would be incorrect to assume that work environment was not important to employees.

So when you see a change in the behaviour of your best employee the first place to look is whether there is a change in the work environment.

Has there been a new employee hired who has changed the dynamic in your business?

Has there been an employee who has left and this is making your best employees job all the more difficult?

Has there been a change is a major customer of supplier which is bringing different pressures on this employee?

Make sure you consider all the interactions that the employee has with all the stake holders in the business.

Place 2 – Home environment
I’ve often heard business owners instruct their employees to leave their home problems at home when they come to work. While this is good sound advice it is sometimes impossible.

Human beings are unable in stressful circumstances to shut off the pressures that come from their home environment.

Home environments are often more emotional places and can be particularly stressful when the people who you love are causing you grief. The problem with trying to leave these problems at home is that you can do it for a while but the pressure just builds up and up.

Your best employee probably has been trying to leave all the problems at home but if they’re your best employee then likely people at home rely on them for being the best mother or father at home as well.

Suppressing the behaviour means that things are building up and when they come out it can look like a tsunami or atomic explosion which most often arrives completely unexpectedly and make quite a big mess.

Place 3 – Extra curricular environment
The best employees often find their ways into leadership positions at schools, clubs or religious organisations.

Often they are following a passion because they have to find the time to be involved with these organisations.

When things blow up there can be more emotion than even a family environment because the person is dealing with their passion.

This can be as simple as a change in the leadership structure of the club so they feel left out or as difficult as them having to deal with the exact situation at the club that you’re dealing with them.

They had someone who they relied on and now that person is giving them grief.

Where are the places you have discovered issues have emerged from in dealing with your best employee?

Discover the secret of multiplying yourself with Small Business Coaching

By on May 24, 2011 in Small Business Coaching

Do you wish you had more people to help you in your business?

Do you wish that the employees you do have would do more for you?

What would happen if somehow everyone in your business started to pull in the same direction?

All these questions point towards an issue in your business with YOU(the business owner) not being able to multiply your effect through your business.

One of the things that many business owners suffer from is a lack of time because they’re probably trying to DO too much in their business rather than making sure things are done.

When I was the Finance Director of BTR Nylex, (a 7 billion dollar manufacturing business) my son came to me one day and said,

“Dad, you don’t actually do anything do you. All you do is go to meetings and more meetings but everyone does the stuff, you just go to the meetings.”

When I first heard that I was quite taken aback because I was sure that I was doing a lot but it made me realise in a business that size, if I was going to be effective, my influence had to get way beyond my physical presence.

This is the same for a business owner. Your influence must get way beyond your physical presence or else everyone will be trying to figure out what to do next and often it will happen in a very uncoordinated fashion!

So how can you make this all happen?

I like to call this ‘bottling the business owner.’

If we could take the essence of who you are, what you stand for, and the vision for your business and package that up into a bottle we could take that anywhere in your business, pour it out and people would be able to know what to do.

You might think by this I mean turn your business into a series of processes and procedures and everything will be right. If you thought that, then you would be about half right.

Processes and procedures are very important but they contain no emotion and in my experience people find energy and passion from their emotions.

The most important part in my business is accessing the energy from each of the unique people in my business and them finding and accessing the unique energy in me.

So bottling the business owner is much more than a boring set of processes and procedures. It must also contain the essence of who you are and how you tick.

So how can you get this from small business coaching?

Your small business coach must be able to help you find the uniqueness in you. What is it about you that is different to other people and how is this expressed in your business.

For example, are you a reserved person or an outgoing person?

Do you travel at a fast pace or are you more patient?

Are you ambitious or quietly content?

These and many other characteristics will determine the type of person that you are and how you are perceived in your business.

This is what people will experience and hear as you travel personally through the business. It is not so much about what you DO but for most business owners their effect is felt by others more from who you ARE.

The unfortunate thing is that many people think that everyone is basically the same or they will be when they grow up.

They spend all their life waiting for people to grow up and wondering why they can’t get the best out of their people unless they are on top of them all the time.

Does you small business coach help you with accessing who you are or simply deal with what you do?

Discover the big hole in Small Business Coaching

By on May 19, 2011 in Small Business Coaching

Have you ever wondered why your business is not growing bigger?

Have you ever wondered why ‘the buck always stops’ with you?

Do you wish you could find a way to increase your effect in your business without having to do it all personally?

If you answered yes to any of these questions then the likely issue you are facing is YOU.

Many business owners I meet spend so much time trying to get things done they never stand back and have an objective look at what THEY are doing. And when I ask them ‘why?’ – the answer is simple. They don’t have time to!!

Now that may sound quite stupid to you but it is a fact that many people are so caught up in their own world they rarely move outside it to see what other people are seeing when they look in. That’s another way of saying that they fail to get a second objective opinion from someone else.

Now this can be quite scary for a business owner who is supposed to know everything about their business and be successful. It can be quite confronting to realise that you don’t know everything and even worse that other people might see it.

How would your employees feel if they saw it?

What would a customer think if they had any idea that you might be struggling?

Suppliers might look to take advantage of you if you opened up to them!

So you’re stuck in your own little world trying the best you can and never quite getting as far as you wanted.

Do you worry about getting tired and losing the energy required to keep your business going? Some people I know are too frightened to stop because they wouldn’t know what to do if they stopped.

There is a simple answer to your issues and that is to discover an objective view of yourself and someone who can help you manage yourself better and help you find the peace of mind that comes with knowing you’re doing well.

Ever heard this?

The answer to all your problems is more sales. If you got better sales and higher prices then everything would work.

This has been the catch cry of many practitioners of small business coaching and while it is partly true it fails to deal with the any of the behavioural issues of a business owner.
Small business coaching is about a person as well as what they do.

Let’s look at a sports coaching environment for a moment. Do you think there is a single answer for every type of sport and every type of person involved in sport? You’re right!! There isn’t.

Everything starts with the uniqueness of the individual. Are they tall or short for example. This will determine the type of sport in which they are most capable of being successful.

Most business owners start with a dream and then have real difficulty in realising that dream. Many are wired to go out and do something before ever thinking about themselves or how they might need other people around them to help. As a result they don’t look for help and continually struggle. And most likely they struggle with themselves more than others.

This is a big hole in the world of small business coaching. Many business owners would get far better results if they understood themselves before DOING anything like trying to increase sales.

In order to be more effective small business coaching must assist the BEING of a small business owner as well as the DOING of a small business owner if a coach wants to unlock the potential in each unique individual.

What are your thoughts on this?