“There was once a Countryman who possessed the most wonderful Goose you can imagine, for every day when he visited the nest, the Goose had laid a beautiful, glittering, golden egg.

The Countryman took the eggs to market and soon began to get rich. But it was not long before he grew impatient with the Goose because she gave him only a single golden egg a day. He was not getting rich fast enough.

Then one day, after he had finished counting his money, the idea came to him that he could get all the golden eggs at once by killing the Goose and cutting it open. But when the deed was done, not a single golden egg did he find, and his precious Goose was dead.”

A white goose

Every time I hear this story, I’m reminded of a conversation I had with a relative of mine a number of years ago. In passing, I happened to mention that after 25 years, I was thinking of selling my business and taking my chips off the table.

To my surprise, he immediately responded that it was a terrible idea and that I should just hire a manager, sit back, and collect an ongoing dividend. “So don’t kill the Goose that laid the golden egg” he said.

“Theory is great,

until it is put into

practice”

Now this is a fine idea in theory, however as we all know, many theories are only good until they’re put into practice, then they just fall apart.

What really set me back with his theory was that he had never c0me close to risking his future on anything remotely entrepreneurial. He had a secure position, plus a bullet proof pension. That is far different than the life of an entrepreneur.

We do it all!

As owners, we deal with far different issues than being a corporate manager. We don’t have the luxury of having an HR department to handle hiring and discipline issues. Nor do most of us have a CFO to manage cashflow, payables and receivables. No, we tend to do it all.

In addition, we carry the burden of our family and employees futures on your shoulders. Let’s not forget the hours spent worrying how we are going generate revenue during a particularly lean period or wondering where the next threat to your business lies.

a golden egg

Let’s face it, if we are honest with ourselves this is what we signed up for and for the most part these challenges are what drive us forward, but the list of things that preoccupy us is endless. And unlike an employee, we don’t leave these worries at the office. They are always lingering just below the surface, 24-7.

This theory of hiring a manager to run your business is a great idea if your plan is to expand your business holdings in other areas. This is because you are still engaged. However, if you have reached a point or age in your life where you’ve achieved your goals or are no longer motivated, then this is just a bad idea.

For many of us, we have built our companies up over several years and any success we’ve enjoyed is a result of keeping an eye on the critical metrics of our enterprise. Turning everything over to a stranger in the hopes they will be as diligent as you have been, is a bit of a stretch.

Of course, if you’ve built a large enterprise and have the luxury of professional managers in place, then stepping away may work. But this is not the reality of most small businesses.

No, its never as easy as just walking away and have someone send you a check every month. There’s just too much at risk.

When you consider that most small business owners have upwards of 80% of their wealth tied up in their business, you’ll certainly need to stay engaged in some manner, lest you wake up some day only to find your business wrecked on the side of the entrepreneurial highway. This is not like a guaranteed annuity that sends you a check every month until you die, without ever lifting a finger.

Further, do you want to risk having to reengage in your business after an extended absence from the industry if the manager doesn’t work out? If you’re like most of us, the answer is probably no!

What the uninitiated don’t realize is that most owners decide to sell because they feel it’s time to move on and take their chips off the table and leave the worries behind.
Hiring a manager and hoping they do well just gives you one more thing to worry about. Isn’t that what we are trying to leave behind?

The moral of the story

Every fairy tale has a moral and so does this one. It’s simply, watch where you get advice! It’s always easy to be an armchair quarterback and offer an opinion when you’ve spent your life on the sidelines.

Let’s remember that it’s just a fairy tale, there never was a goose that laid the golden eggs.

 

You may also enjoy SBM #42  Successful People Do the Hard Stuff

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

So what’s a whale? In this case it’s not a big fish. The whale I’m referring to here is a very large customer. It’s the client that spends more with you than anyone else. Overnight it can take your business to the next level. But if you are not careful, it can also put you out of business.

Pursuing large clients is what most of us strive to do. It’s even better if the company is well known. It gives us instant credibility with prospects and within our industry.

New challenges

But let’s not kid ourselves. Landing a whale is a lot of hard work. As they say, getting the order is the easy part. Ramping up your business to manage their demands can strain the whole organization. HR, finances, and the needs of existing clients can all be impacted.

A whale tail

Even once the large client is up and running, you have a brand new challenge. That is to deemphasize its importance to your business. It’s not uncommon that a newly acquired customer can account for 30% or more of your business. But having any client that represents more than 15% of your business is a flashing red light.

The 15% rule

Somewhere along my entrepreneurial journey, I had read that “no client should represent more than 15% of your business!” I have no idea where I had read this, but once I understood why, I embraced it.

Why the 15% rule? The 15% rule is designed for your protection. As a client moves above 15% of your revenues, their importance to your business grows exponentially. This is because, large, and very large clients end up representing a disproportionate amount of your revenue, your expenses, and your focus. This shouldn’t come as a surprise and is to be expected. But as the saying goes, “don’t put all your eggs in one basket”, because if you do, you better keep an eye on that basket.

When you consider that for most of us, onboarding a large client requires some form of investment. Depending on your industry, it could range from hiring a few people to committing to more physical space, vehicles and equipment that could run into the thousands of dollars. As a result, the financial pressure and risk rise significantly.

The math

So let’s look at this in a pragmatic way. A healthy net profit for many small businesses is 7%, but most barely exceed 4%. So, in a million dollar business that only represents $40,000. Not a lot of money to cover increased costs.

And if we are being honest, most of us sharpen our pencils when it comes to pitching a potential whale. Granted, if priced right, this strategy should put more dollars in our pockets, but it reduces our margins.

This then results in their percentage of expenses exceeding the percentage of revenue. For example, they may equal 20% of your revenue, but because of the discount you provided, they now account for 30% of your expenses. This is normal and so long as they are a client, things should work.

But what happens if you lose that client? Losing the revenue is one thing, but now having to cover all those expenses can become a monumental challenge. Your 4% net profit won’t come close covering an extra 30% in expenses and now your once profitable business can be facing bankruptcy.

However, before it gets that far, you would try to counter the loss by cutting expenses. But reducing staff usually comes a cost of severance pay and those fixed costs, like rent, are almost impossible to dispose of quickly without paying huge penalties. This of course is with money that you may not have.

Growing our business is what keeps things exciting and if done properly can be quite profitable. But keeping your business safe is equally important. That is why the 15% rule is so critical.

So if growing your business is your goal, then you must make growing your existing clients or finding new ones a priority to deemphasize the whale’s dominance. Granted this adds more pressure to your already busy life, but it’s too easy to relax at this point. Once you’ve brought the new whale’s revenue back in line, you can take a break.

By limiting your largest clients to 15% of revenue, it also reduces your dependence on them. Should they leave, and they most likely will at some point, you will probably only face some short term pain. But with a little hustle, you can survive and get back to building your company.

For those that are interested, I’ve created a “Be prepared checklist” that is available for download by clicking here.

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

The reality of being a small business owner is that you are going to have difficult clients. How you deal with them comes down to how much you are willing to endure.

These are the clients that hire you because of your expertise, but then try to tell you how to run the project. They can also be the type that doesn’t respect your time or are late in getting you the information you need but still expect you to meet the original deadline. Of course, let’s not forget those that expect you do more than originally agreed upon, and don’t think they should be charged more. I could go on, but you get the point.

(more…)

One question I get all the time is, “How can I increase my sales?”

The answer to this is question is quite simple. The hard part is executing on the answer.

Selling is more than just showing up so, here are five ways to increase your sales that apply to any business.

#1 Improve your knowledge and become an expert

sales charts and graphs

Knowing everything you can about your product, your industry and your competition can give you a massive competitive advantage that will set you apart Why? Because so few people really immerse themselves in all aspects of their industry to become an expert.

To be sure, lots of your competitors act like they are experts by using all the current buzzwords, but few are, and their depth of knowledge is shallow. Two of the key benefits of being an expert is that it’s disarming to clients, especially to those that think they know more than you. Secondly, it gives clients the confidence that they are dealing with someone who knows their stuff.

Becoming a subject matter expert requires you to do a deep dive into understanding of your product, your target customer, and certainly your competition. Of course, this all requires a continuous investment of time and effort to keep abreast of changes and trends and It’s never ending. But that’s the price one must pay to become an expert.

(more…)

Inflation is much like rust. Left unchecked it can quietly eat away at your buying power and can turn a profitable business into one that struggles and a struggling business into non-existence.

For many of us, you pretty much had to be a Boomer living in an industrialized world to fully appreciate the impact that inflation had during the 80’s. During that period mortgage rates skyrocketed to over 21% and unemployment exceeded 12% in North America.

As bad as that was, there were countries that faced 100% annual inflation back then. To put things in perspective, that meant that the price of goods doubled in a year.

Inflation is like rust

The point of all this is not to provide an economics lesson, because I’d be the wrong person for that. No, this is intended is reinforce the need to be vigilant in managing your costs and pricing.

Regardless of your industry, you are probably facing cost increases in materials and wages. The latter because of the tight labour market, thanks in part to government social programs.

With all the things we must oversee as business owners, being a little more vigilant with all our purchases can become burdensome. However, with inflation starting to ramp up to serious levels, it’s more important than ever review your costs and adjust your pricing to protect your margins.

Too often I find small business owners struggle with increasing their prices because they are afraid of losing customers. Their internal dialogue usually centers around “I can’t charge them that much, that’s expensive, they’ll never pay that much!”

How is it that they won’t pay that much? Everybody is paying higher prices for just about everything they buy now. So, why should you be a martyr? Unfortunately, inflation is a perpetual motion machine that never stops.

The destructive power of inflation

What so many entrepreneurs fail to realize in a high inflation era, is that you need to keep your prices in step with the increases in your costs, otherwise it ends up costing you money and potentially your business.

Inflation can destroy your income statement in short order. When you look at the bottom line of many small businesses, there is not a lot left over after a year of hard work. The typical small business has a Net Income is way below 10% with many running in the 2-4% range. So, on a $1 million business that means your left with $20-40,000 or $10-20,000 on $500,000 and only $6-12,000 on a $300,000 business. Not much of reward for all the hard work.

Now layer on inflation at 4-7% that has recently been reported by various governments over the past few months and you will start to see the potential for margin destruction. But only if you don’t adjust your costs accordingly.

Business is not a charity

Using the previous examples, a 4% increase in inflation can wipe out the profit of most small businesses. Whereas a 7% increase you automatically go negative into a loss.

Look, nobody likes price increases, but it is a reality of our time. For the past 10+ years most of us have enjoyed a low predictable inflation rate below 2%. Even then I have encouraged small business owners to take annual price increases. Because 2% compounded annually equates to over 6.1% over a 3 year period.

Business is not a charity. You are here to make money. The more you make, the more security you can bring to your firm and your employees. The more money you make, the more you can pay your staff and yourself.

Some options

Being worried if your customers can afford the new price is noble but not realistic. There’s no point of losing money just to avoid increasing your prices. Yes, you can always offer a one time discount to your better customers as a way to ease them into the new pricing. But I stress one-time.

I also know that there always seems to be someone willing to do the job cheaper and to that I say let them. Every industry has someone who offers low pricing but it’s my experience that most don’t last long.

Alternatively, you can do what many consumer goods companies are doing, reduce the size of the product to maintain a price. Offering your customers a “lite” version of your existing product or services may be all you need to do.

Minor tweaks such as a decrease in reporting, a reduced delivery frequency or even quicker payment terms are just some of the examples. These small adjustments can be used to maintain a given price point.

Another thing to always keep in mind is if those customers are only shopping on price, you must ask yourself whether you want them as customers in the first place. Often, they are not loyal and will change suppliers for a nickel.

It has been my experience that profit margins are never high enough. So, increasing your prices to ensure inflation doesn’t destroy your company, is just smart business.

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Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

For Thanksgiving we decided to get the whole family together and rent an Airbnb. Since our family has grown significantly over the last few years with marriages and the explosion of grandchildren, we now require a much larger accommodation. 

For the most part, many of the larger places also come with a higher price tag. In keeping with the higher price, such locations typically boast of a higher level of amenities. This is all good and is what it is.

As one would expect, with a higher price tag, there is an expectation that everything should be in working order and that cleanliness should be a priority, especially during this Covid era.

Person lying in bed-complacency

Unfortunately, what we encountered is a case of what I refer to as a “Lazy owner”. This is something I regularly caution all business owners against. No one sets out to be a lazy owner, but it happens to most of us at one time or another. Another term that can be easily substituted for Lazy owner is – complacency.

Complacency doesn’t just happen overnight, at least not for most people. No, it creeps in over time, where little by little we let our standards drop.

Short term vs long term complacency

Short term complacency is easy to understand and why it happens. When you consider that as entrepreneurs, we are always on and even for the best run companies, there are times when we have more issues to deal with than available resources. So, in our haste, we might let our standards drop a little.

However, once the storm has passed, conscientious owners usually up their game and re-establish their standards. Not ideal, but it happens.

Then there is the issue of long term complacency that has the potential to damage your business reputation. This kind of complacency truly reflects the lazy owner and is rooted in arrogance.

I say arrogance because the owners believe that they have a great product or service. It might be because it is popular and in demand now, so they feel they no longer have to try as hard anymore and dismiss any feedback as whining.

It’s been my experience that these owners used to sweat every detail about their business. They did so in order to establish themselves so, hard work is not foreign to them. In addition, their current success, reinforces that they have good instincts. Unfortunately, these good instincts can also lead owner to reject and negative feedback, because they think they are in tune. This combination can easily lull an owner into complacency.

Unfortunately, they fail to realize that they must put forth some effort in order to uphold those original standards. Sadly, many let success go to their heads and over time they lose sight of the finer points of their business and good enough becomes the norm.

Our experience

The Airbnb we selected had very high ratings and came with a price tag of $800/night. Not cheap but considering the size of our gang and the promised level of amenities, it was acceptable.

In general, the property met our expectations, however on closer observation, signs of complacency were everywhere. The following is the list of deficiencies we encountered during our 4 night stay:

1. Numerous burnt out light bulbs.
2. Very weak or no Wi-fi in many parts of the house. The listing stated working wi-fi however, the router was situated in a bedroom in the far corner of the original stone farmhouse which is not conducive for signal travel. Therefore, most of us had to use our cell phone data plans.
3. Satellite TV not functioning.
4. Water dispenser/ice machine on the fridge was non-functioning.
5. Remnants of leftover dry foodstuff from previous guests including empty containers.
6. An instruction manual that included updated data that was placed behind older instructions. The binder was full of with updated handwritten notes that conflicted with printed sheets and chalkboard information i.e., Wi-fi password, security codes, etc.
7. Numerous hairs found in and around master bedroom and bathroom.
8. A severely stained mattress and no mattress cover in one of the rooms. Unfortunately, it was not discovered until we were checking out
9. Unresponsive owner to text messages.

Except for the cleanliness issues, such as the hair and mattress cover, none of the items were a deal breaker, but it goes to show a level of inattention that is not acceptable.

So, what should have been done?

1. This owner should be doing is a quick walk around inspection between guests after the cleaning crew had left. Doing a walk around with a checklist would ensure the property was up to standards and that the cleaning crew was maintaining the property. I call this trust but verify.

2. Check the instruction manual. How hard would it be to check that the instruction book was up to date, without conflicting information? Writing in new information and scratching out the old is not acceptable.

3. If the appliances don’t work as expected, communicate that to the next guests or replace the unit.

4. Look up and around to ensure the lights are functioning.

5. Test the wi-fi and satellite tv and take corrective actions without the client having to discover sub-par performance. In other words, be proactive instead of reactive.

Unfortunately, this property appears to be consistently booked and therefore has effectively lulled the owner into a false sense complacency.

The review

After checkout, Airbnb requests a review of the stay. So, in a very diplomatic way, we mentioned the deficiencies. Unfortunately, the owner responded in what I like to call the “Not my fault syndrome”, suggesting that we were somehow at fault for some of the shortcomings and that we should have notified her, etc. etc. Which, by the way, we had attempted, but got no response.

So, instead of humbly apologizing, this owner goes on the attack. If you dig deep enough into the reviews of this property, you will discover that this a recurring pattern by this owner when faced with critical or negative reviews. Frankly, it’s not a great way to build relationships.

So, what’s the lesson?

I get it. We are all guilty of letting things slip occasionally, but it’s what you do about it that counts. When was the last time you took a fresh look at your office, retail space or warehouse? Is it looking a little tattered or cluttered with stuff? Are there a few more scuff marks on the wall or chipped paint than the last time you noticed?

What about your vehicles, are they clean and safe for your staff to drive? How do your employees look? Are they presentable or have their standards dropped? How do they talk to customers? Are they a little abrupt? How’s their language? Is it professional or a little too casual?

Even after you have asked all these questions, there is still a much bigger question to ask, and that is, how is your attitude? Because as an owner, you set the tone. Have you become little complacent and as result so have your employees?

Yes, these are all little things, but they go a long way to projecting your professionalism and show your customers that you are not a lazy owner.

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Comments, thoughts or ideas for future topics? Let me know in the comment section below

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

An often published piece of advice to aspiring and to lesser extent existing entrepreneurs is to follow your passion. By doing so, riches or success will surely be yours. But, as with most of these sound bites, this is rarely the case.

Let’s be honest. There’s lots of things that people have a passion for that could never support their dream lifestyle. Unless of course their dream is to just grind out a meager living.

There are plenty of examples of bankrupt restauranteurs who have a passion for cooking but couldn’t run a restaurant. What about the numerous clothing stores that couldn’t make it even though the owner’s passion was fashion?

Be passionate

Plenty of people have a passion for gardening, knitting, pottery, or music, but few would ever be able to or even consider creating anything more than a side hustle that adds a few dollars in their pockets. Of course, there are always the exceptions to this, but they are by far in the minority.

Be Passionate

So, just because you have a passion for something doesn’t mean you can make a business out of it. But then what would happen to all those “Follow your passion” sound bites and their perpetrators?

So instead of “Follow your passion”, what we should be promoting is “Be passionate about what you do!” To some this may be just semantics, but it’s far more than that. It’s about believing that what you do provides a better solution for your customers and not just wishful thinking.

Another way to look at it is that being passionate more closely resembles enthusiasm whereas having a passion is more emotional.

Merriam-Webster defines enthusiasm as having a strong feeling of active interest in something that you like or enjoy. The operative words being “active interest”. Emotions on the other hand, is defined as a strong feeling such as love, anger, joy, hate or fear.

Being passionate is also about continually trying to improve what you do. It’s about immersing yourself in the industry and grasping its nuances. It’s about becoming a student of your industry and the needs of its customers. In other words, to strive to be an expert.

What are you good at?

Another reason being passionate wins out over passion, is because being passionate usually means your good at something. You’ve found a niche that allows you to excel and therefore you just naturally gravitate towards the area where learning and subject matter information is easily consumed.

At the end of the day, most of us would never achieve any level of success if we just followed our passion. And having talked with hundreds of successful entrepreneurs it was interesting that most didn’t follow their passion.

As a matter of fact, I don’t recall anyone of them telling me they followed their passion. No, most just saw an opportunity that aligned with their skill set and went for it. But they were passionate about what they were doing. Being “passionate” about what you do, is far better advice than “follow your passion” in my opinion.

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Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

I’m always surprised at how many small business owners don’t prepare for their business’s year-end. Sadly, it’s more of a case that “they don’t know what they don’t know!” But spending some time on this annual event can potentially save you a lot of money.

As to why so many entrepreneurs are oblivious to the importance of preparing for year-end has a couple of parents.

To begin, most of the responsibility lies squarely on the shoulders of the business owner. For some unknown reason, far too many owners don’t take the time to understand the financials of their business.

Being an entrepreneur requires you to have an understanding of all aspects of your business if you hope to succeed. So many owners can recite chapter and verse on the merits of social media or other online promotions but can’t read an income statement. This makes absolutely no sense to me.

Files

The root cause for this appears to be that many owners are afraid or don’t want to look foolish by asking questions of their accountants, yet in the next breath complain that it’s bewildering and too complicated. Therefore, like ostriches, they just stick their head in the sand and leave it to their accountants.

This brings me to the second group that can share part of the responsibility – accountants . Now, as a caveat, I personally know a half dozen accountants that take the time to help their clients get a working knowledge of financials statements. These individuals also provide insight to entrepreneurs on how to manage their corporate finances in areas such as cashflow, receivables, etc. Unfortunately, they are in the minority.

Far too often I come across individuals that leave their accountants office feeling they that they are no wiser and everything they heard was in Latin. Sadly, most just sat through the meeting nodding their head pretending they understood. Now in defence of accountants, most will gladly explain anything on the financial statements, if they are asked. Unfortunately, they rarely ask their clients if they truly understand what is being presented. So, a word of advice to owners, start asking questions and don’t stop until you understand.

So, in order to help you prepare for your companies year-end the following areas need to be addressed to ensure you get the clearest idea of where you and your company stand at the closing of each and every year. This process should begin during the final month of your company’s year-end.

1.Invoices

Get your invoicing done! Simply invoicing every client for work completed during the current year could make the difference between a good year and a bad year or a good year and a great year! By doing so, you attribute all the income you have generated to the actual year that the work was done. Failing to do so, distorts the actual revenue and expenses you generated during the year.

Often, I see companies showing a loss at year-end and after a little digging, I find they should have shown a profit had they just invoiced their clients.

2.Expenses

Get all your payables in whatever accounting system or spread sheet you use. Again, these are for work completed during the current year-end period. Much like invoicing, failure to get your arms around all the expenses you incurred, distort your final financial results.

For example, failing to get all your expenses in could increase your profits for the year. Those profits are subject to taxes. Inadvertently overlooking some expenses mean that you’ll have a higher tax bill, and nobody want to pay more taxes than they need to. So, get a hold of any laggard suppliers you have and get them to send their bills to you.

People woking on computer

3.Inventory

Does your business carry any inventory? If so, this is the time of year to do a physical count to determine its value. Inventory is an asset and can impact the value of your company. Although a company’s valuation is always important, it is even more so, if you are planning on selling it.

 

4.Write-offs

Have you got any bad debts? You know, those clients that are never going to pay you. So, if you’ve exhausted every means to collect and have decided that spending any more time, effort or money in trying to collect is useless , then it might be time to write off the receivable. This also applies to customers who have declared bankruptcy.

The same thing applies to inventory. If you have dead inventory sitting around collecting dust, now might be the year to blow it out at clearance prices and turn it into cash or donate it somewhere, but get rid of it and take the write-off.

Writing off bad debts and blowing out dead inventory, both serve to reduce your net income and when we reduce our net income, we also reduce our, you guessed it, taxes.

5.Purchases

In need of a new piece of equipment for the business? This might be the best time to make the purchase or purchases, especially if you’ve generated a profit.

You see most jurisdiction allow businesses to deduct a percentage of the value of their equipment every year. This deduction is an expense and serves to reduce your taxes.

However, the real intent for depreciation allowance is that the government knows that you will need to replace that equipment as it ages. In theory therefore, that allowance should be kept aside for future replacement purchases. But in reality, no one does.

So, the point of that explanation was to bring to your attention to that by buying that new piece of equipment before year-end, you may get the benefit of a whole year’s worth of depreciation expense even though you have only owned it for a couple of weeks. Depending on the item, some countries even allow for a 100% write off in the first year. You’ll need to do your own homework on this one to get the specifics for your country.

As I said earlier, the responsibility for getting your house in order lies with you, the owner. Entrepreneurs need to look at this whole year-end process as getting a report card. Some years you pass and some years you fail, but having accurate information lets you know where you truly stand.

I’m providing this information to get you thinking, but it is by no means an exhaustive list of things you need to do to get ready for year-end. Furthermore, don’t take this as fact until you check your own tax guidelines. As a matter of fact, the easiest way to get that information would be to call your accountant and ask.

 

You may also enjoy The Money Business

Comments, thoughts or ideas for future topics? Let me know in the comment section below

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

One of the biggest challenges of a service business is managing your inventory. Now you might wonder what inventory, besides a few stationary supplies you may have, that need to be managed?

Well, unlike a manufacturing, retail or a distribution business, where you have physical inventory that needs to be stored, sold and then replenished, service businesses on the other hand have a single and very unique inventory -TIME!

 

3 people standing inside big clock

Time- It’s how you get paid!

Because as a service business, your product is the knowledge that you and your staff carry around in your head. Putting this knowledge or expertise to work is how you generate your revenue and that’s usually in the form of hours worked.

It can be argued that service technicians like appliance or auto repair have inventory, but for the most part you hire them for their knowledge and they in turn they charge you for the time it takes to fix the problem. Therefore, the parts although important, are secondary to diagnostic skills the technician possess, because without those skills, there wouldn’t be a part to sell.

Similarly, sales and marketing services companies also generate revenue by the hour, however, it is rarely shown as such as most fees are displayed as a total for a given project. But all the fees are calculated as an estimate of how much time or hours are involved in executing the project by the various staff members.

Establish some balance

One of the biggest issues with owners of service businesses is understanding that their inventory is finite and that they should be running their companies with that in mind. Unfortunately, this is contrary to how many of these businesses operate. They assume that they can just put in more time and work longer hours. Although feasible in the short term, it is rarely a long term strategy. Yet so many continue to do so.

There are some advantages to managing your business based on your available inventory of time. First off, it should bring a sense of balance to a business. Balance, as in work life balance.
Secondly, it would allow you to establish realistic delivery timelines to the customer. Let’s be honest, we all think we can complete an assignment quicker than reality dictates but that just stresses out your staff or annoys the client when we are late. So being realistic can reduce the occurrence of both.

Additional benefits of managing your inventory can be significant on the financial front. Foremost, you’ll quickly understand whether you are charging enough and whether your existing inventory of hours available can support your financial demands.

Calculate how much time you really have

Furthermore, you should also discover how efficient or inefficient your organization is and where improvements can be made. Increases in efficiencies can greatly enhance your profitability. A simple metric such as revenue per hour is great place to start in benchmarking any improvements. This calculation is done by simply dividing your total revenue by total payroll hours for any given period, including your own.

So, how do you calculate this inventory? Well, it is easier than you think, and it really doesn’t matter whether your staff is making $20/hr or $200/hr as it is the exact same calculation. Earning a higher hourly rate does not give you more hours in a day, as we all get the same 24hrs.

The following example is how you calculate your total available inventory of time in a service business.

1. Assume a 40 hour work week = 2,080 hrs
2. Assume 3 weeks vacation = (120)
3. Assume 11 statutory holidays = (88).
4. Assume 5 sick days = (40)
5. Assume 2×15 mins breaks/day = (12.5)
Total available hours 1855.5 hrs

So before doing this exercise, most owners assume they have 40 hours a week or 2080 hours per year per employee that are available to them. However, after taking into account vacations, stat holidays, sick days and coffee breaks, that number is reduced by 11% to 1855 hours per year or a loss of almost 6 weeks out of a 52 week year.

This number actually gets worse if employees are required to travel to clients as in the case of a repair technician or a salesperson. You can easily lose and additional 2 hours per day which is a potential loss of an additional 13 weeks per annum. So now we are down to 33 weeks of billable time in a year or 1335 hours from a high of 2080 hours. That’s a 36% reduction in available inventory or billable time.

Once you understand how much available time you have, you can now start to make realistic assumptions and projections. Of course, the challenge to all service businesses is the ability to maximize your available time inventory and make sure it’s productive.

Hiring more people not the best option

Unfortunately, the only way to increase your inventory in a service business, is to hire more people. But realistically, that’s not necessarily the best option, especially if you have demand peaks and valleys in your business throughout the year. So, finding tools or processes to increase productivity might be a better avenue to maximize your existing inventory.

Realistically, we are all faced with slack periods where there’s insufficient demand and people are not busy. Sadly, you can’t store any unused time for future use. Because once that minute hand on the clock moves forward, you have lost that inventory forever.

So, sit down with staff and explain the impact they can have on the business by being more efficient. Then ask them where the bottlenecks are and their suggestions to get rid of them, because once that inventory is gone, it’s gone!

You may also enjoy episode #59 Quit Digging!

 

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.

With the vaccine rollouts well under way in many countries, the talk has turned to the reopening of the economies. One of the biggest issues facing many entrepreneurs, is the return to the workplace.

At the start of the pandemic, millions of office workers were sent home to work remotely. Once the initial technical issues were resolved, everybody seemed to profess that they are never going back to the office and their future was a zero commute remote work environment.

So confident that this new structure would be the new forever normal, many moved out of the big cities to rural or small communities, never expecting to commute again. Unfortunately, this might be a decision that they come to regret.

Employees happy to return to the office

Understandably, no one knew if or when a vaccine would be developed. However, in less than two years many countries are experiencing high vaccination rates and are slowly reopening much of their economies as life returns to some form of normalcy.

So, what’s next? Well for starters, offices will begin to reopen, and people will be required to show up for work. Just wait for the howls of injustice, that after more than a year of remote work, employees will be required to be physically present at their place of work. But, the interesting thing is that this vocal group may be in the minority.

Research

Recent research from KPMG is revealing that the majority of employees want to return to the workplace stating they “miss the social interaction, the buzz, the creativity of being at work”. However, they do want some form of hybrid arrangement combining the opportunity of working remotely part of the week.

Interestingly, another survey conducted by Accenture of financial firms in the US shows that 80% of executives want their employees to return office at least 4 to 5 days a week. Clearly there’s a misalignment between employee and employer expectations.

Just to muddy the waters a little more, EY conducted another survey, whereby more than half the employees surveyed around the world would consider leaving their job post covid-19, if they are not afforded some form of flexibility in where and when they work.

This juxtaposition could prove quite interesting for both parties. When you consider that most employers want people in the office, where exactly are those employees willing to leave their present positions going to go?

Lots of discussion

Apparently, HR consulting firms and employment lawyers have been exceptionally busy over the past 18 months. For the most part they been dealing with work from home challenges many businesses have had to manage, and it doesn’t look like it will subside any time soon.

The new challenge is how to deal with the return to office post Covid-19.

But, depending on the jurisdiction, employees may not have much choice as to where they work. According to some employment lawyers, employers have the right to expect their employees to return to the office as the pandemic was an aberration or a departure from the norm and didn’t change the employment contract.

Granted, for some businesses, working from home may not be an issue and therefore will continue the practice. However, other employers will be less open to continuing the work from home concept. This is primarily because the pandemic has shown that communications, productivity, and creativity has suffered because of remote working.

In SBM #89, Work From Home I related how IBM recalled 11,000 of their employees back to the office 18 months after sending them home to work remotely. They realized that they were missing out on the innovation that happened through in person interactions. So, I think there’s an opportunity to learn from their experience.

Small business soap making

Now what?

So, the question to small business owners is what are you going to do? This question needs to be dealt with now and should not be put off, because once the economies reopen, you may be just too busy to give this the necessary thought.

The best advice I can give any employer is to decide what you want. Yes, it’s important to weigh the needs of your employees against any decision you make. But one thing we must remember is that your business is not a democracy. At the end of the day, it’s your business, your vision and your decision. The buck really does stop with you.

 

Managing the desire of employees to work when and where they want to will be an absolute nightmare for most small businesses. And let’s be honest, the reason many employees want this flexibility is that they are free to do what they want, when they want to do it. Whether that’s going to the gym or shopping and they’ll just do the work at nights or on weekends.

When you consider that prior to the pandemic the clarion call was for work life balance and the separation of the two. Now some have reversed their position solely in order to support their desire for utmost flexibility. Unfortunately, that’s not how the world works. Business needs to operate in a structured environment, where individuals can depend on their teammates to be available when needed.

For example, when everyone was working 9 to 5 at the office and a crisis erupted, the typical reaction was to gather everyone around and brainstorm a solution. The same could be said about an urgent opportunity. However, with everyone working when they want, chances are your company can’t effectively react with the urgency that these situations require. Unless of course you mandate that everyone needs to be available during normal working hours, but that is contra to their desire to work where and when they want.

Will a hybrid model work?

Much discussion has taken place around some form of hybrid solution, whereby employees work part of the time in the office and the rest of the time at home. This may be easier for a large company but probably less so for a small business.

Another major challenge to the hybrid model, is who gets to participate? It could be argued that administrative people can split their work, but what about the person responsible for shipping, receiving or order fulfillment? How do you make this situation equitable?

Another way to look at it, is if your employees were unhappy before pandemic, you probably have a leadership or other issues. However, if for the most part everyone was happy before Covid-19, then why should you change?

For many entrepreneurs, this situation is going to cause a few sleepless nights as they try to weigh their needs versus the needs of their employees. But at the end of the day, you have got to do what’s best for the business.

 

Get More LIFE Out of Your Business

You shouldn’t be the hardest working person in your company.

Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.

Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.

Do you suffer from any of the following?

1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.

You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.