Do you struggle to keep up with whether you are winning or losing financially in your business? In this broadcast of The Thrive Time Business Coach Radio Show, Clay Clark breaks down the super moves that entrepreneurs must learn to read their financial dashboard including: Scheduling a specific time and place to review your numbers, knowing yourself and giving yourself enough time and space to review your numbers calmly without anxiety, knowing your weekly income, knowing your weekly expenses, and knowing your weekly profit
Accountants and some qualified business coaches are trained to read the story your financial statements tell. You must seek assistance in learning what these numbers say as well as what numbers are important to measure. Your Financial Dashboard is very specific to you and your business. Most accountants are reactive by nature and are of little help in developing your dashboard but CHOOSE to focus on your numbers like they are looking in a rear view mirror. Be Proactive and hire Proactive advisors that want to help steer your financial vehicle by taking past performance and comparing specific key indicators with the results needed to achieve your goals.Use your financial statements to look forward on the road to achieving your goals to allow you to adjust your path as necessary.
NOTABLE QUOTABLE – “We need to re-create boundaries. When you carry a digital gadget that creates a virtual link to the office, you need to create a virtual boundary that didn’t exist before.” – Daniel Goleman (A psychologist, and New York Times bestseller of Emotional Intelligence)
Chet Holmes in The Ultimate Sales Machine says“Concentration is like a muscle, the more you exercise it the better it gets but the more interruptions you have the weaker it gets”. Lack of focus is a major cause of inefficiency in the workplace. Unfortunately inefficiency is not limited to employees, owners fall victim to it just the same. When an owner is inefficient the entire business suffers. Be diligent and specific about what, when, where and how you are going to be successful. A great place to start is have a Proactive business coach or advisor knowledgeable of your business who can hold you accountable much like how a personal trainer to get in shape is used.
DEFINITION MAGICIAN – Anxiety – apprehensive uneasiness or nervousness usually over an impending or anticipated ill : a state of being anxious
We are nervous and apprehensive about what we don’t understand. Remember the phrase do what you fear and the fear will disappear. Also remember this is YOUR business, YOUR life, YOUR finances. You answer only to you. No one is going to scold you or chastise you. Reviewing your numbers should be a positive thing to help you guide your business on the most engaging and joyful trip you will take with the end target being your defined goals. Do the work, measure your success with your team of Proactive advisors, and enjoy the journey. No guts no glory my friend.
NOTABLE QUOTABLE – “Stay focused, work hard, know your numbers, and be disciplined. If you do those things and take care of your people, the likelihood of being successful is very, very high.” – Marcus Lemonis (The chairman and CEO of Camping World, Good Sam Enterprises and Gander Mountain and the star of The Profit, a CNBC reality show about saving small businesses.)
By now you have defined your financial goals which begin with gross income needed to achieve said goals. Break down your annual gross income goals into monthly and then weekly goals to achieve the annual number. This number is useless unless you compare the goal with actual results. You financial Dashboard should report your weekly actual income to be able to compare to the income needed to achieve your goals. Your weekly income number is also needed to allow you to calculate the amount you designate to be saved or invested as part of the pay yourself first plan.
NOTABLE QUOTABLE – “Control your expenses better than your competition. This is where you can always find the competitive advantage.” – Sam Walton (The founder of Wal-Mart)
1. Know All of Your Fixed Costs
Definition Magician – “A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold. Fixed costs are expenses that have to be paid by a company, independent of any business activity. It is one of the two components of the total cost of running a business, along with variable cost.” – Investopedia
2. Know All of Your Variable Costs
Definition Magician – “A variable cost is a corporate expense that varies with production output. Variable costs are those costs that vary depending on a company’s production volume; they rise as production increases and fall as production decreases. Variable costs differ from fixed costs such as rent, advertising, insurance and office supplies, which tend to remain the same regardless of production output. Fixed costs and variable costs comprise total cost.” – Investopedia
3. Know All of Your Sneaky-Easy-to-Forget-About Costs
FUN FACT: “According to the Small Business Administration somewhere between 36%-53% of small businesses are involved in at least one litigation in any given year and 90% of all businesses are engaged in litigation at any given time.” – You’re Going To Get Sued – Here’s How Not To Get Screwed – Bash Rudin – Forbes
FUN FACT: “The U.S. Chamber of Commerce estimates that 75% of employees steal from the workplace and that most do so repeatedly.” – Employee Theft: Are You Blind to It? – RICH RUSSAKOFF AND MARY GOODMAN – CBS News Money Watch
Workmen’s Compensation Insurance –
Buy More Insurance and Have Less Stress. It’s Better to Have a Bad Day Than a Bad Life.
Once the deep dive process happens to reduce current expense amounts as much as possible, total expenses and certain key indicator expenses need to be reported on your Proactive financial Dashboard against budgeted amounts set up to guide you on your path to reaching your financial goals. Breakeven calculations should be constantly monitored and adjusted as your business adjusts to the path you Proactively steer down. As the ultimate goal is for your business to provide the outcome you have defined you need to guard against possible setbacks. Other than Insurance salesmen most people are not big fans of insurance but it is a necessary evil. I have never heard a surviving spouse or business partner, however, say I wish we had less insurance on a deceased partner. I have for sure been involved with many many situations where businesses have failed because property funded buy-sell agreements were not in place as well as spouses having to sell businesses and other assets prematurely.
As a mature Proactive business person, you must take steps to Protect as you Advance. This Advance and Protect strategy insures that proper planning has taken place to guard against unexpected events that could derail your plan for success. Proper planning is extremely important when it comes to insurance. Independence is vital as is using SPECIALLY DESIGNED INSURANCE when possible. Generally, we are not talking about the retail types of insurance sold by most retail outlets. There is not much difference when considering property and casualty, workmans compensation and general liability insurance. Life, disability and Long-term Care insurance however can and should have multiple benefits creating a no lose outcome. Retail providers generally have “cookie cutter” products that are not always appropriate or competitive.
A proper analysis of an appropriate product often is not centered on cost alone. Possible future tax free income, convertibility issues, reversionary possibilities, assignability issues, and dual or multiple ways to benefit are major considerations.
NOTABLE QUOTABLE – “I would rather earn 1% off a 100 people’s efforts than 100% of my own efforts.” – John D. Rockefeller (A self-made success who began working at the age of 16 to support his mother.)
NOTABLE QUOTABLE – “Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.” W. Edwards Deming (Many in Japan credit Deming as one of the inspirations for what has become known as the Japanese post-war economic miracle of 1950 to 1960, when Japan rose from the ashes of war on the road to becoming the second largest economy in the world through processes partially influenced by the ideas Deming taught)
NOTABLE QUOTABLE – “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” – Warren Buffett (As of March 2017 is the second wealthiest person in the United States, and the fourth wealthiest in the world, with a total net worth of $73.3 billion)
The reason that you as a business owner show up to work everyday is to make a profit. You have defined your goals and now need to measure the net result. There are two different “profits” to measure. Gross Profit and Net Profit. Gross Profit is calculated by the difference between Total Sales less the cost to produce the product or service. Generally this Gross Profit number is also the denominator in the Breakeven calculation (sales – variable costs). Net Profit is the bottom line number taking all expenses from sales and represents the total net results of operations, manufacturing, administrative and marketing. Weekly Profit should be calculated and compared to the weekly goal setup to continue on the path of success to meet your goals. These numbers should be reported on your Proactive Financial Dashboard.
Business owners start businesses for various reasons including the desire to control their own time and destiny. If you work for someone else you are getting paid about 30% of what you are worth. Business owners get paid for 100% of their efforts if they choose the right path and hire the right advisors to bridge the gap of they don’t know what they don’t know. Even if a person owns a business, he or she is a fool if they do not diversify their current asset holdings and future income streams. Never put all your eggs in one basket. Take a percentage of sales and diversify into savings or investments. Harness the power of compound interest and or dollar cost averaging. Plan for a future where you buy back your time and have the ability to work because you want to and not because you have to. Saving out of gross instead of waiting to save out of net doubles your chances of success.