Creating a Detailed Proforma for Your Business

Show Notes

Do you know how much profit you made last month or last week? Do you know your monthly break even point? Clay Clark breaks down the importance of creating an accurate for every business.

Creating a Detailed Proforma for Your Running Business

  1. **CAUTION – NOTABLE QUOTABLE – “Not staying on top of your numbers kills 90% of the businesses we have seen over the years. Most business owners that can sell well ultimately fail because:
    1. They usually do not know their numbers.
    2. They act like a bank (extending credit and longer payment terms to clients)
      1. Pool and Spa Financing –
        1. https://www.hfsfinancial.net/
        2. https://www.lightstream.com/swimming-pool-financing
    3. NOTABLE QUOTABLE – They invoice people instead of charging a 50% retainer to start the project then they run out of cash when their suppliers want payment, I have seen this unfortunate cash flow poor cycle kill dozens of companies in this industry.” – Clay Clark
  2. NOTABLE QUOTABLE – “Know your numbers’ is a fundamental precept of business.” – Bill Gates (Co-founder of Microsoft)
  3. As the velocity of the money dramatically increases the numbers must be right and tight.
  4. NOTABLE QUOTABLE – “Beware of little expenses. A small leak will sink a great ship.” – Benjamin Franklin (Inventor of the Franklin Stove, bifocals, the former manager of a large newspaper The New England Court and the man who negotiated with the French to secure the funding needed to beat the British in the Revolutionary War)
  5. Do Not Become a Bank (Lending money to companies for 60 days in hopes that they will pay you)
  6. ACTION ITEM – Define Your Hard Costs Per Job
    1. Limo Company Hard Cost
      1. Limo Financing per month = $1,000
      2. Cost of the driver
      3. Cost of gas
      4. Cost of insurance
      5. Cost to park and store the limo
      6. Cost to pay office staff
      7. Cost of taxes
      8. Cost of tags
      9. Cost of Workmans comp
      10. Etc…
  7. ACTION ITEM – Define your variable costs per job for the last 90 days
  8. ACTION ITEM – Create a line item list of all of your income for the past 90 pays
  9. ACTION ITEM – Create a line item list of all of your expenses for the past 90 days
  10. ACTION ITEM – Charge people a minimum deposit to begin working for them (if you absolutely cannot get them to pay up front in your business).
  11. ACTION ITEM – Have them pay at regular set intervals (50% upfront, equal payments of 25%, etc.)
  12. ACTION ITEM – Book attendance at next workshop, it is 100% included in your coaching (does not cost you an additional dollar and we will help you get on top of your finances once and for all.
  13. Downloadable – Proforma Template
    1. https://www.dropbox.com/s/pjr0ducbw498bx2/Proforma%20Template%20-%20Thrive15.xlsx?dl=0
Business Coach | Ask Clay & Z Anything

Audio Transcription

Presenting the world’s only business school without the bs, with optometrist can’t entrepreneur, dr. Robert zoellner, and he ussba entrepreneur of the year business coach clay clark get ready to enter the thrive time show on talk. Radio 1170, the thrive time show on your radio and podcast download listening from portland oregon hello and welcome to another fabulous edition of the thrive time. Should they were talking about creating a detailed proforma for quoting a detail pro forma for your business and so before we get into how to do this. I want to start with the marshall morris, the business coach co-author, the best-selling book start here which all the listeners can download for free at thrivetime, show.Com marshall. What is a performa and why does every business owner need to make a pro okay? So a pro forma is a document that you’re going to use as a budget use it as a proactive planning tool in order to get your numbers right. People active about your numbers in basically structure how your business should run in everybody needs one, because when you use a performa, when you use a budget, it’s like creating a dashboard. It’s telling your money where to go rather than just recognizing where it went. What where it went or maybe using it like a rear view, mirror.

This is something that’s typical that most accountant would provide for you to help set up a proactive business coach business like our show, sponsor up all hood of hoods cpx of future financial performance based upon known variables. So as an example, when I used to run a company called a dj connection, I knew that the it would cost me a proximately. If we did a wedding for $600 I know it would cost me approximately $50 to book the wedding, you might say, $50 to book the wedding. What do you mean I mean we would have to spend $50 on heisman on average? Do we get one booked wedding? One new show:50 i, also knew that, after paying the sales commissions paying the dj paying for equipment, maintenance and all the costs are total profit would be about $167 per event hundred $67 per event. So the goal was to make $100,000 a year and those are you listening. You might go with that. Sweats william! Well, good, good, good, good, good deal, I’m, glad that you have define. My goals have been weak. That’s fine! But here’s the deal it took me about 6 years to get to that goal, and so I had to take $100,000 that divide that by 167 and I’ll. Do it right, now,, and that comes out to let’s see here the key is you got to put it into the calculator correctly 598 weddings for 98 weddings year to achieve my goal that we divide 598 by 52? Typically there’s 52 weeks in a year, I knew I needed to do 11 weddings per week to hit my goals, and so that was a huge thing. When that happened, I remember:we hit 11 weddings per week. Nobody else cared, but I did because I was keeping score and I knew that I had to get to 11 weddings a week until he asking you right now, the listener. What number do you have to get to per week?

What number do you have to get to per week just to break even, and what number do you have to get to per week to achieve your gold and chuck i? Think one of the reasons why business coaching clients struggle before they hire us before we help them is they’re not staying on top of their numbers, and so they don’t. They don’t stay on top of the numbers. They don’t know their numbers in ultimate, overtime, pay, scale of fail and I’ve been working with quiet new clients over this right now kind of finding that paper product profit find out what their average ticket price is over a multi month, long. So, you have a good average of that, and the cool thing is I’ve talked about this before on the show. But once you know some of these numbers, it gets really fun right now or you’re, going you’re driving on the highway with a map you’re not just out there freaking out everyday, and so once you realize, like you just said, $167 all right. Let’s skill that lets multiply that out and see where we need to get to get our goals. So here are the biggest issues I see with a business owners out there as far as it relates to their numbers that I want to I want to help you with right. Now one is just not knowing your numbers and if you don’t know your numbers reach out to your business coach and say hey. If you do know your numbers you’re, like in the top 10% of business coach owners, don’t use I’m, telling you sincerely 90% of the clients that I’ve worked with I’m talking big business and small business. They do not know their numbers. The second biggest issue, I see, is it business owners are acting like a bank when they really wouldn’t be. No, my guy say that again, business owners are acting like a bank when they really shouldn’t be so I can example today if time allows I’m going to go to lowe’s and I’m going to buy a fire extinguisher, know one another. One cuz I think I’m going to do. I try to get a hot chick or once a week, I’m going right now for a while. I was planning one tree every week in and I’ll start that again soon I’m going to probably go there and get get the first immature know. I have a lowe’s card. He might say why do you have a lowe’s card because I like to buy things on my lowe’s card and then pay it off and then buy it and pay it off, and it builds credit by doing that.

So therefore you’re establishing building credit card to buy things and pay it off, and it’s so but lowe’s lowe’s right there just applying me credit how big is lowe’s they’re, pretty big right. If you look into lowe’s-and you say, what’s deep dive into love, guitar center, it goes well I’m going to go, buy some things: guitar center I go every week to buy them, guitar center around going. What do they have that I need lighting, my scalp from using lighting or cables or just a fun place to sell steam scrambles whenever they see you off heads to go in there and I have a guitar center card. Now you might say because again, I buy things, I pay it off which build builds. It continues to build business coach credit. Now. Here’s the thing about guitar, center, guitar center’s credit is not provided shop by guitar center. It’s provided by synchrony bank in you see the secret. If you go to hana pliance I love to go to hahn appliance in buy things using my hand, cart at night and I paid off, and you know what their credit is provided by synchrony and then keith point of that is it synchrony bank synchrony bank. If you go to a local doctors office-and you want to get cosmetic, dentistry done or cosmetic surgery or some elective procedure, you know there’s a thing called:care credit and it’s a credit company. So a lot of business owners out there you’re acting like a bank but you’re, not a bank. So we would highly recommend that you would establish relationships with third-party credit providers. So when your customer says hey can I get some can i. Do some financing terms here for the home, remodel project. You could say absolutely why don’t you apply hear it when they apply ventura blind, not to get credit from you, but from a third-party credit provider. Some example:if you’re installing pools pools like a swimming pool, so I’ll put in swimming pool credit I’m going to go and find the company will put it on the show notes:here, we have h, f s, financial I see them coming.

This is swimming pool and spa financing. Oh I love these guys and it’s right there. That’s it I mean that’s a you know there is hfs financial. Let’s do another one! That’s like! What’s up for one more cuz, this is helping somebody out there and here’s. The thing is with all of these different companies there still an application process. This is what I see is icy business owners out there they’re going in allowing longer payment terms extending credit themselves, and they may not recognize that they’re extending credit, but whenever you go provide service without any type of payment form on file for them. That is exactly what you’re doing and if you do that, without any kind of application business coach process of how good is this business is credit how likely? Are they to pay off what they owe me? If you don’t do that process, then you’re overextending yourself, you’re, going to run into cash flow problems. You don’t have cash coming in and that’s a huge problem, and so the person that doesn’t recognize their extending credit or how to stop this. If maybe historically, maybe there’s a business owner say. That’s me, I’ve been doing this. How do you make the switch with all of the clients that maybe you’ve done this historically with a listing and how much it take a lot of notes? We are going to put these on the show notes, though, if you go to thrive time, show.Com you’ll be able to click on the podcast butt, and you will find all of these show notes. Okay, so step number one number one is you need to stop acting like a bank unless you are a bank? So if you are not a bank, would you want to do moving forward? If you want to stab what relationship was a third-party credit provider today than this this week? Get it done that way when somebody says to you, I would like to get credit. You say no problem.

If you apply right here on my ipad, bring your ipad with you to the meeting with the client and say, go ahead and apply here right now and then we’ll see. If you go to mathis brothers furniture, they do that. If you go to almost any best buy, does this I mean that’s what you do, then, when the person gets denied or accepted right there you go okay, it’s like you’re, approved up to 21,000. Let’s make it happen, looks like you’re denied, so we’re going to have to go ahead and not be able to do it today. I want to cut in your cuz I’ve, had conversations before where people said yeah, but they get denied the credit and I can’t sell them the deal big major companies are shutting them down right. Then they def. You definitely should not be a proven that person work with your not going to get paid. That’s the best point now. The next step you want to do. Is you mind if you, if your company that doesn’t work at third-party credit, you just want to charge deposit slip like a retainer up front, so the dj business, the typical wedding I book was about $600 and we require a deposit of $250, so $250 down, $250 is paid up front and the remaining 350 is not due until the day of the wedding that allowed us to have good cash flow, good income, consistency of income. You have the customer to pay for overtime and we have business coach collateral because you weren’t going to dj or what, until you had paid. If that’s a move in water, what are the expenses that came out of that 250, because this will help you identify how big of a deposit you need to charge? But what are the expenses that immediately come out once you book a deal? What what? What are some of those things to pay for the ongoing advertisement? Cuz? It was definitely $50 a wedding like 57 I think it was like to be 67 years ago, but I mean we were doing a lot of advertising and yellow pages and bridal shows and starting to advertise online back in the day, doing a lot of magazines on a print pieces, a lot of mailers and it came out to $50 per wedding, din advertising.

Plus me the pay, the sales guy, that’s what you have to do:pay them with a deposit up front where we got the deposit missions are paid up front I had the advertising outside the ongoing cost of the lease of the office or expenses I want I just want you to know to be quotable from bill gates. This is the co-founder of mike soft microsoft windows. He says know your numbers is a fundamental precept of business. I’m, saying to you as the velocity of the money increases, the numbers have to be tight. If you don’t mail it and then you scale it, you will fail if you impale it. Oh no I derail it. You might just be living in a van down by the opposite of van down by the river. It’s a nice beachfront private beachfront property, but you probably wouldn’t want to live there. But I want to give to you and then we’ll talk about this. When we come back from the break is benjamin franklin ship? Can you read us the benjamin, franklin notable quotable that they describe nation needs to put into their minds of benjamin. Franklin, says:beware of little expenses a small leak, a small leak will sink a great ship and benjamin franklin’s, the guy who helped to finance the revolutionary war he’s a guy who started his own invention. Business invented the franklin stove, the bifocals here and large newspaper. He knew a little thing about managing money. So again, beware of little expenses a small leak will sink a great ship. It’s about time showing it radio resume attend the world’s best business workshop, led by america’s number one business coach for free by subscribing on itunes and leaving us an objective business coach review. Claim your tickets by emailing his group that you didn’t and your contact information, so you can point drive time show.Com! Welcome back to the conversation, we’re talking about the importance of creating a detailed pro forma for running your business is so big because if you don’t have a performa you’re going to run your business by guess work and typically you as an entrepreneur are going to guess optimistically and thus always be tight on cash. Cash is the lifeblood of your business if you’re out of cash out of business. So what you have to do, what you got to make sure you never run out of oxygen for your business.

You never run out of the lifeblood of your business. You never want to run out of water for the business. It’s the basic things needed to make your business grow its cash and you’re going to run out of cash. Eventually, if you don’t implement each and every one of these super moves, the next super move. Is you want to define your hard costs per job? This is big because if you don’t think about the costs hard cause, this is the costs that go into every single job. I. Just helping a friend of mine there days, building a limousine company and I’ll walk you through the hard cost. To put that as an example for chop on the on the show notes there just of the listeners having a very very real example, so he has a limousine company. So, let’s say i, don’t know the cost of each and every limb mobile. It just said the cost to finance a limo was $1,000 a month in bucks, define insolent, the average limo rental is $600. You could think cool man once original twice making money cuz it only cost $1,000 to make the payment on a limo. If you read it twice for making money, but the problem is here, are all the hard costs associated with each limousine rental would going to pay a driver, the cost of pain, the driver per time the driver goes out I’ll. Do it myself see that’s not a good idea, because then you can delegate see a lot of business model based on them. Do it themselves so yeah? How much does a driver going to get paid if you’re doing it yourself and what you’re going to pay yourself for dry? Second, is:what’s it worth at gas cost the gas grill them, then you say you know:i woke able to get the gas cap live. Well. What about jodi insurance until the insurance payment was $500 a month? We divide that by you know how many weeks and how much does it cost for a week right so it’d be about that? What is the insurance cost per time use a limo, then? What is it cost to park a limo to store the limo? You might say well right now we’re going to put the limos inside the thrive business coach offices for free-and we would say that’s good for free, but what about when? That’s not what about in two years when driving has its own new facility or what about? If you move out what about right, I think about okay. What does it cost to pay? The person answer the phone answer:the phone for going to communicate via email, okay, I doubt that, then what are you going to pay all of it cost me one of these cost think about all these are so many taxes I’m not going to pay taxes. It’s a service business bs! You got to pay taxes to what get tags on the vehicles tag. I, don’t want to put tags on a vehicle. What about workman’s comp for the employees and there’s a lot of insurances, there’s taxes and marshall i, don’t think very i, don’t think! Hardly any of the clients whose ever worked with ever sit down in consider all of these costs that typically just a very vague and loose with it and they and they all of a sudden. They run out of cash marshall, that’s right in here’s the thing, the reason why I would say:95% 99% of business owner magazines is 9 to 10.

Small business owners fail okay, businesses across the system, new or old thing so you’re. So if you don’t know the numbers, I’d say 95 to 99%, don’t write and the reason. Why is because you don’t set aside time in order to go through it, because I’ve never seen this process take less than 12 hours. Just matthew time to just got to go through. You got to list out literally every business expense and know what you’re spending per job, because until you do that, you are never going to be profitable or if you are bringing in money you’re not going to know at what margin your profitable and you can’t scale it I would look at it. This way. The song bohemian rhapsody, oh okay, or cancel the song bohemian rhapsody. This isn’t it is profound former djs I’m just telling you this is the thing it’s pretty long. You know it’s a pretty long song and that song I’m it’s going to go 7 8 minutes. I mean you’re just going to power on right, i. Think the official business coach time on the pop version was 5 minutes and 55 seconds. It takes you an hour to listen to it 10 times you’re going to have to listen to bohemian, rhapsody figuratively, you know, probably 120 * I mean think about that. It’s it takes time it’s. What I want you to do. Is the final action items I want you to book a specific, regular time to look at your expenses every single week every week. You need to do that right. So now you have to find your cost. Your hard costs for your business. Did you want to define osteon? Is a spreadsheet out and write down every single, hard cough, the business type them all out time from all out all the line item on this big spreadsheet then type it all. The expenses that are variable expenses in the last 90 days do it for the last 90 days. 9, you don’t have last week, don’t do it don’t say it in quickbooks I got on quickly in a fan to a pie chart in quickbooks. No because I guarantee you jump how many business owners have you worked with it. If I told you they say hey, you know, I really went to quickbooks and I discovered that I have a lot less money or a lot more money than what I thought free, climbing. Almost every single one is not every single one. Okay, you cannot let your numbers become complacent because they went off in the computer somewhere and you don’t see them anymore.

You have to let clay set schedule that time out when you’re going to schedule time out to review these numbers, you want to schedule win. Like clay said, you also want to define. Where, where do you need to be to do this, and also what do you need? What do you need to get this stuff done and actionable for everybody listening right now, one to find your heart cost to find the hard cost per job or product or service delivery, to define the variable costs for the business for the past 90 days to find your variable costs for the business for the past 90 days, define the the card cost for last 90 days. Is there a variable expenses that are hard costs right here? So my income, and you have to do that? If you don’t do that you’re going to find yourself running out of cash, the final action I might want to give you his book. Your attendance at our next in person drive time show 2 day. Workshops tickets are selling fast. If you go to a business coach thrive time show.Com, you can get your tickets today by clicking on the conference’s button or, if you’d like to get free tickets. All you have to do is you have to just subscribe to the thrive time show on itunes, which is free and then leave us an objective review which is free and email as proof that you did it by emailing us your contact information to info at drivetime show.Com, and we will send you two free conference. Did you get the details to 15 hour workshop? It’s a two-day interactive business workshop and get all the details at drivetime. Show.Com just by clicking go up there throughout time should I come click on the conference is boston bam. All the information is, there do not be overwhelmed. You have the mental capacity and the tenacity to get your accounting in order you got going on top of it. You got to do what you’re never going to find the time you got to make the time do it this week

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