Business coach wisdom and advice: When you start a business, you must do your due diligence to account for every dime that must be spent to make a transaction happen. If are not diligent about this, you will find yourself working 17 hour days without making a profit. Hypothetically, it is very possible to bring in large amount of gross revenue (gross revenue is the initial amount of money you bring in before expenses), while netting very little. If you do a ton of work, but profit very little, you are going to be in a world of hurt when payday comes. When you do your costing for business, you must observe my seven business coach rules and you will be fine.
Business Coach Rule #1: Pay yourself first.
Make sure you pay yourself first. On every transaction, make sure you slice off an amount to pay yourself. If you own a car dealership, every time a car is sold, make sure you get paid something. You must pay yourself first.
Business Coach Rule #2: Produce a 20% profit.
After each service or product is delivered, make sure that you have at least a 20% profit margin remaining. If your business is not making at least a 20% profit margin, banks and investors will be very hesitant to lend you money.
Business Coach Rule #3: Use a variable pay method when possible.
According to the Small Business Administration, well over 85% of all the jobs created in the United States are created by small business owners. Having spent time as a consultant, speaker, and trainer with thousands of small business owners, it is apparent that most small business owners do not have huge amounts of startup capital. Thus, protecting your initial startup capital is super important. Paying your team on a variable based pay out system will make this possible. Pay your initial team on a commission only basis, if possible. Don’t pay any money out unless money comes in. This system is the best. Offer huge commissions and big incentives, but simply refuse to pay any money out unless money comes in. Essentially you are telling your team, “You will get paid for what you do, not for what you intend on doing.”
Business Coach Rule #4: Remember to account for the small stuff.
You must account for the small stuff. American politician and Senator, Everett Dirksen once said, “A billion here, a billion there, and pretty soon you’re talking real money.” WOW, those guys are out of touch. However, what I am talking about is:
Business Coaching Rule #5: No one wants to work for a poor boss.
My friend, it is absolutely essential that you pay yourself more than everybody else who works for you because you are the boss. You are risking your savings, your time (which is your life), your energy, and everything you have to start a business. Don’t feel guilty for paying yourself well for a job well done.
Business Coaching Rule #6: Use merit-based pay to reward “great work” with “great pay.”
“Good is the enemy of great.” – Jim Collins
It is absolutely important that you allow for great bonuses and great pay for “great work.” Survey every client. Measure everything so that you can give generous bonuses for those who are really producing “great results.” Don’t give bonuses for “working hard.” Give bonuses for “great results.” Survey your client and give bonuses to your team members who WOW the clients time and time again. Make a show about it. Honor them publicly. Everyone in your company should know who does great work and who does good work. Everyone must know that you give bonuses only for “great work.” For more information on creating and implementing a merit-based pay system, read and apply the principles found in The Service Profit Chain by James L. Heskett. This book was put out by Harvard Professors and it shows you step by step how America’s most successful companies are implementing this system. If you are stumped, visit www.thrive15.com and send us a message. We can help you do this.
Business Coach Rule #7: Make sure you are achieving your financial goals.
After adding up all of your costs, if you don’t make enough money on a “per product/service basis” to achieve your goals, adjust your numbers. Keep adjusting your numbers until you are making enough money to make it worth it. Don’t start this business just because you “already have a degree in this area” or because “your father was in this industry.” You have to make money to make it worth it.
Business Coach Rule #8: Automate and outsource when possible.
If you can automate each transaction with an online shopping cart, do it. If you can outsource or automate any part of your business, do it. Automated shopping carts, never show up late, they don’t “get tired because they got into a fight with their girlfriend,” etc. You are in business to make money. Stay focused.
“Rule Number 1: Never lose money. Rule Number 2: Never forget rule Number 1.” -Warren Buffet