WARNING: The more things change the more they stay the same unless
Every Friday we just want to stop the world for a moment and give you a couple of real tips to think about that will make a real difference to your business and in your life.
So we’ve reached the end of another week and we are now hip deep into February – already! 2017 is off to a very fast start and if we’re not careful we may become too busy to keep learning and improving our businesses, lives and business lives.
However, there are some things you can change to make sure you don’t fall back into repeating mistakes from years past or simply missing out on the opportunity to build momentum. Alright, some tips, then.
Protect your profits
Profits are like the most endangered species – from a small business perspective of course. As soon as we spot a profit, large or small, we can’t help ourselves – we capture them and then they’re gone. Profits become an instant answer to a short-term operating cost issue; a quick and easy way to make a payment; lunch money – whatever. And then before you know it (or reach the end of the month or the quarter) they’ve vanished. “What happened to my profits? They were right here!”
TIP: Take your profit and set it aside first. That’s the reward for your hard work – keep it safe.
Concentrate on where you add the most value and outsource what you can
Google just informed me that a team of artisan bakers can produce up to 5000 loaves a day. So why would we spend hours of our own time baking bread unless we wanted to? This doesn’t just apply to baking bread it applies to making money too.
If you have some highly sought after skill or product, pour your time into that instead of sacrificing family time or leisure activities.
TIP: Start by outsourcing your bookkeeping and spend more time doing the things that are really important.
Learn how to win at the numbers game
Visiting your accountant can be like watching TV: mildly entertaining if they’re the cheery, chatty type but worst case scenario it can be a bit a like a documentary on erosion without the time-lapse photography. All you’re doing is watching something play out while you sit there. Understanding the numbers is the key to changing all of this. When you “get it”, you’ll become more involved in driving the positive indicators, not just during your visit but most likely, every day. And that’s a good thing.
TIP: Ask your accountant to teach you about what’s going on with your numbers, not just “report” on what’s already happened. You’ll be glad you did.
Okay, the weekend is almost upon us, have another read of this week’s tips on making a change and have a great one.
How to avoid partnership PANIC!
Everything ends badly. If it didn’t, it wouldn’t end…
That is a very pessimistic view – let me say that right out of the gate. But is it the view of a pessimist, a realist or perhaps a pessimistic reali… I’ll stop. Take for example the fairly recent case of Mercedes Corby’s business partnership with her “bestie” that went horribly and quite probably, irreversibly wrong!
Here’s the link. Yikes!
If you don’t think you can stomach the news clip or are simply averse to broadcast journalism – here’s the skinny.
Going down with the (partner)ship
The two ladies, by all accounts very good friends, went into business under the partnership structure (as opposed to a trust or a company structure) suffered some business-related adversity, turned on each other and the business is now in tatters. Presumably, aspects of their lives may also be in disarray and this is an all-too-common occurrence when people enter into a partnership with ineffective or zero, safeguards, by-laws, advice…
No doubt partnerships are absolutely the right business structure for certain entities but even so there will be good times full of laughs (Boston Legal – old school but funny) and trying times full of fears and paranoia (Suits series 1 – forever).
Avoid sleepless nights and ugly fights
After the proper due diligence and talks with trusted advisors a lot of people opt for the relative safety and peace of mind that a Trust or Company structure can offer. In very basic terms (and please do contact us/ if you want to learn more) these structures protect you and your personal assets from aggrieved stakeholders, workers, teammates in the business and so on.
On the other hand those locked into partnership business structures may lay awake at night wondering if an oversight by one of their partners may mean a teary farewell to a chunk of their assets.
Sleep on it (if you can) and maybe give us a call for a chat if you are thinking about which business structure might be best for you.
Driving your business: A car for you or your business?
For business or pleasure? That’s a question you still get asked at customs desks around the world but it should also be a question we ask ourselves whenever we roll up to a car dealership.
As with everything in the car yard or showroom, there are pros and cons and this is especially true of the question, “should I buy my next car in my company name, or my personal name?”
The short answer
The short answer – it depends. The more useful response is to ask yourself what the car is being used for. If your answer is something along the lines of “I will be using the car for work: getting to meetings, picking up stock, deliveries…” there is only one answer: YES. And yes, it’s all in capitals. To be clear, if your answer was yes, stop reading and move onto signing that paperwork.
No wait. Come back. Let’s look at the slightly longer answer which is made up of a number of short questions.
Ask yourself…
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- Can I / my business afford this car?
- Unfavourable financial positions are rarely, if ever, improved by the purchase of a vehicle, if your answer here is no, then the company car question is an issue for another time.
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- Should I / do I need to be registered for GST?
- Yes. Mainly because once your business is turning over more than $75k p.a. you need to be registered for GST and this will be reflected in your quarterly BAS (business activity statements). We’ll come back to GST and cars in a moment.
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- What’s the downside of not registering my work vehicle as a company car?
- Well aside from the fact that all expenses, upkeep and registration costs associated with the vehicle could fall entirely on your shoulders, you’ll end up paying more. Or more precisely, you won’t be saving as much tax.
A brief anecdote on how I saved thousands by making the right choice
December before last I bought a 2015 Ford Ranger to say, “well done Ben, that was a great year…” or something like that. Happily, 1/11 or 9.09% of all new vehicle prices are made up of GST. (Small businesses can claim that sum of money the moment you finalise the purchase by either by paying for the car upfront or confirming your finance arrangements with a bank – they pay for the car in full, for you.) So I bought my car in December 2015 and within 3 weeks I had submitted my BAS and claimed the GST which took care of the first few repayments as well.
GST can work for you as well and that is something to be considered when you are thinking about registering your new vehicle for company or private use.
Of course everybody’s circumstances are different but by and large there are only two rules to remember: if you use your car for business, your registration should reflect that and secondly, get on the phone or flick an email to someone that understands how best to put money back into your business.
Why not test drive an accountant today.
The art of making the weekends count
The traditional “week-end” is becoming a fading memory for a lot of the business owners we get to speak with and hear from. That’s not to say that they aren’t getting any time off to enjoy life and/or spend time with family but the consensus is there’s less time to do the things that matter.
Ok, you’re hearing that a lot lately – it’s not new news.
But many of you will also know that we built this business with two goals in mind:
- To ensure that business owners we deal with and their families reap maximum benefit from their efforts, sacrifice and dedication; and
- Provide a service where our clients aren’t charged according to the time sheet instead, our value is assessed by the difference we make for your business (more on this later).
The first point: in thinking over the weekends count about the benefits to society of family and the preservation of family life, something really struck home.
And it’s ironic.
So many business owners are so committed to providing their loved ones the best possible life that they freely accept that things are going to be hard. As a result, many cultivate a “just get on with it” attitude.
Which is commendable in one sense but it can blind people to what might be the “easier way” and ultimately a better way.
The “easier way” has a bad reputation
And it’s not fair – on anyone. Yes, business owners should be prepared to give it their all but this shouldn’t blind them to the opportunities that outside expertise, automated systems and good old fashion advice provide.
Which brings us to point number two.
One of the reasons people shy away from chatting about their business circumstances with their accountant is because it can cost a lot of money.
Why talk through some potentially complicated business scenarios in your life and rack up a bill in the hundreds of dollars, when you could just suffer through hours of leg work yourself for free.
Stress doesn’t cost you anything does it… or does it?
It sounds a bit cheeky and flippant but unfortunately, at one stage or another, this is what goes on in the mind of the average small business owner.
Giving back is something we can help you do – for you
We love hearing about how people reach a certain position in life and not only are they able to give back to their community but they actually do it.
With the right advice from trusted partners and service providers it is possible to give back to those that mean most to you.
For example, many of our clients have already benefited from an improved cash flow position within their business as a result of our time together.
In turn, they have chosen to “pay back” their families and loved ones (with interest… compounded daily in some cases) by being available to them, by being able to inspire and capture special moments.
That’s why they got into business in the first place and that’s why we got into this business.
We hope you had a memorable weekend (even a sneaky long weekend for some of you) and we look forward to inspiring you daily.
Make it Rain. Invest in Multiple Buckets. Create automatic cash flow
This article contains the revolutionary secret to beating the ever growing statistics of Business’ not making it after their first couple of years. These five simple steps will change the future of you and your business forever.
Step 5 – Invest in Multiple Buckets, create automatic cash flow.
Remember Jesus first miracle?
He turned water into wine.
You’ve got cash in your Profit War Chest; now it’s time to turn profit it into Wealth
Step 5 – Invest in Multiple Buckets.
The act of wealth creation does not require divine favour nor is it a method limited to a select few.
It’s simply a series of small multiplications over time.
But the outcomes are nothing short of miraculous.
To illustrate.
Imagine a chess board.
It has 64 squares.
If you started with one grain of rice on the first square of a chess board.
Doubled it on the second square.
And kept doubling it on each square.
How much rice would you have on the 64th square?
Lots.
18,446,744,073,709,551,615 grains of rice.
Imagine now that rice was $1, and each square represented the remaining years of your life.
This is actually a true story about the Inventor of Chess.
He presented the game to the Emperor of India.
The Emperor was so impressed he offers the inventor any reward he wants.
The Inventor asks for a single grain of rice on the first square of his chess board,
2 on the second,
4 on the third,
8 on the fourth
and so on.
The emperor was amazed at the modesty of the inventors request, and thinking that it can’t be that much rice, granted his wish!
But he soon becomes enraged as the court treasurers report that by the 64th square, he would need to deliver a heap larger than Mount Everest!
Unfortunately, the inventor lost his life.
But not before making the point that exponential growth rapidly leads to results we can hardly believe.
Here’s the recipe for Wealth.
Profit + Good Debt x Return On Investment = Wealth
So ask yourself, are you using the wealth equation to turn profits into wealth?
“Your first priority in any budget should be to set aside a fixed percentage of your income for savings. The rule is PAY YOURSELF FIRST.”
- George Clason, Author “Richest Man In Babylon”
- “Give me a lever long enough and a fulcrum on which to place it and I shall move the world.” – Archimedes
- “Compound interest is the 8th Wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” – Albert Einstein
- “Wealth is measured in Time, not Dollars” – Robert Kiyosaki, Author “Rich Dad Poor Dad”
NEXT STEPS:
- Book in a Quick 10 Min Chat here with an Inspire Chartered Accountant to talk about Tax Saving Strategies that will work for you.
- Attend our Cash Rich Business Workshop where we will spend 2 hours walking you through the exact step by step process to become a far more profitable business than you currently are. https://inspireca.com/events
Make it Rain. Get a Bigger Bucket. Generate repeat business
This article contains the revolutionary secret to beating the ever growing statistics of Business’ not making it after their first couple of years. These five simple steps will change the future of you and your business forever.
Step 4 – Get a Bigger Bucket by generating repeat business
Step 2 asked HOW FAST.
Step 3 asked HOW MANY.
Step 4 asks HOW MUCH & HOW OFTEN.
Or put another way
Your reservoir of cash is building.
The cash is flowing faster than ever before.
And your river has widened to a breadth that equals your happiness because you’re working every day with the customers you love.
Now let’s go DEEP.
HOW MUCH, HOW OFTEN.
Imagine an iceberg, whose bulk is submerged deep under water.
What appears above the water line represents profit, and below the line are expenses.
Deep are the costs of acquiring a new customer.
Marketing, PR, Sales, Meetings, Proposals, Events, Networking etc.
You know that the majority of the iceberg is actually hidden under the water’s edge.
Same too with most small businesses.
They expend a HUGE amount of energy, time & money getting new customers.
A small amount of profit sometimes appears through the waters edge.
But the peak remains small as the entrepreneur has often moved on to the next sale before the peak of profit has a chance to develop.
Expending more and more resources, below the water’s edge, focused on new sales.
Profit is in repeat business.
If you don’t have repeat business you probably don’t have much profit either!
Before you drop a NEW sale to move on to the Next.
Recognise the opportunity at your very fingertips.
What has emerged out of the waters edge is just the tip of the iceberg.
So ask yourself –
How much do people spend with you?
How often do they spend?
What additional value would I need to add to increase HOW MUCH & HOW OFTEN?
Up next, Step 5 – Invest in Multiple Buckets, produce automatic cash flow.
https://inspireca.com/bigger-bucket/
NEXT STEPS:
- Book in a Quick 10 Min Chat here with an Inspire Chartered Accountant to talk about Tax Saving Strategies that will work for you.
- Attend our Cash Rich Business Workshop where we will spend 2 hours walking you through the exact step by step process to become a far more profitable business than you currently are. https://inspireca.com/events
Make it Rain. Fill the bucket. Attract more customers.
This article contains the revolutionary secret to beating the ever growing statistics of Business’ not making it after their first couple of years. These five simple steps will change the future of you and your business forever.
Step 3 – Fill the Bucket by attracting more customers!
Learn with us how to attract more of the right customers! But first let’s review what we have learnt so far:
Step 1 was about ensuring more flow in than flows out.
Step 2 was about HOW FAST the cash flows.
Step 3 is about widening your river, by attracting more customers. (Or should I say more of the customer you WANT.)
You see in the early stages of business we would take on anyone with a chequebook and a heartbeat.
Just to put food on the table!
Sell, Sell, Sell!
Which solved a short-term problem, cash flow.
But at the same time created a long-term problem, cash flow.
If they pay late, it hurts cashflow.
If they are high maintenance, it hurts cashflow.
If they don’t appreciate your service, it hurts cashflow.
If they are not your ideal client and they’re referring more ‘not your ideal’ clients, it hurts cashflow.
So before you fill the bucket by attracting more customers, ask yourself:
Who could go?
How could you Create room for more of the clients you love?
How can I increase the quality and quantity of my clientele?
There are just 4 numbers and 4 questions to think about for filling your bucket.
The higher each number. The wider your river.
- Leads; How many in your pipeline?
- Conversion; How good are you at getting a YES?
- Clients Referrals; How often are your ideal clients referring?
- Retention; How many have you got, that you want to keep?
Here’s the formula/ recipe for attracting:
More Customers = Number of leads x Conversion rate
Current Clients = Number of existing customers x Retention rate
The magic recipe for how to Fill Your Bucket:
NEW CLIENTS + CURRENT CLIENTS = TOTAL CLIENTS.
And here’s the recipe for my favourite drink
1 Part Gin + 3 Parts Tonic + 3 blocks of ice = Happy Days
So if you want to fill your bucket, fill it with more of the right clients, but before you do that, make sure your current clients are ideal – if not, make room.
Up next, Step 4 – Get a Bigger Bucket, Get Repeat Business.
https://inspireca.com/bigger-bucket/
NEXT STEPS:
- Book in a Quick 10 Min Chat here with an Inspire Chartered Accountant to talk about Tax Saving Strategies that will work for you.
- Attend our Cash Rich Business Workshop where we will spend 2 hours walking you through the exact step by step process to become a far more profitable business than you currently are. https://inspireca.com/events
Make it Rain. Control the tap. Get paid faster.
This article contains the revolutionary secret to beating the ever growing statistics of Business’ not making it after their first couple of years. These five simple steps will change the future of you and your business forever.
Step 2 – Control the Tap & get paid faster!
Imagine a river. A river flows. From high ground to low ground. The higher the ground, the faster the flow.
Step 2 is about HOW FAST cash flows out of your pocket, through your business and back in.
Many businesses suffer at Step 2 with a phenomenon we call “Growing Broke”.
Growth requires cash.
Lot’s flowing OUT. But slow to flow back IN.
And so it’s true when people say, “it takes money to make money”.
Our advice, don’t take too long!
Your speed of cash flow is driven by 4 cycles, measured in days.
1 – SELL IT
How many days does it take for me between first presenting my value and to when the client says YES?
2 – MAKE IT
How many days does it take to either produce my product / service or how long does it sit on the shelf?
3 – DELIVER IT.
How many days does it take us to deliver the final product from when the client said YES?
4 – BILL IT.
How many days does it take for us to bill the client after they say YES and then how long does it take for the money to arrive in the bank?
Cash Flow Days = SELL IT + MAKE IT + DELIVER IT + BILL IT.
So how many days is your cash flow cycle?
Remember: What you measure you treasure.
So let’s crunch some numbers to understand the impact of Cash Flow Days.
Here’s a business who has counted the days of their 4 cycles.
30 + 18 + 10 + 61 = 119 Cash Flow Days. OUCH!
That’s how many days they’re out of pocket.
The flow is slow.
Brainstorm ways to reduce those days.
Most ideas will fall into one of 3 categories –
Shorten Cycle Times
Eliminate Mistakes
Change the Business Model
If the consistent struggle and grind of living cheque to cheque wasn’t enough, think about what a cash flow day costs you?
Let’s work it out.
Annual Revenue / 365 days = A Cashflow Days
For a million dollar business.
$1,000,000.000 / 365 days = about $2,700.
The cost of 1 Cash Flow Day.
So a 119 day Cashflow cycle means you’re out of pocket $321,300 ($2,700 x 119). – SUPER OUCH!!
Find a smart way to reduce your cash flow days by just 15 days, and that’s an extra $40,500 in your account. BOOM!
And with that, you can –
- Sleep at night
- Pay down your debts
- Make a deposit to your Profit War Chest
- Invest in business growth (see step 3 + 4)
- Turn $1 into $2 (see step 5)
- Build a rainy day fund (3 months Business expenses)
- But it all starts with knowing your days.
Join me next week as I share with you how to widen your now fast flowing river:
Up next, Step 3 – Fill the Bucket, Get More Customers.
https://inspireca.com/fill-the-bucket/
Remember, there’s no point turning up the tap if you still have holes in your bucket!
How Inspire Can Help You – Step 1 Take Your Profit First:
Become a Cash Rich Business [Workshop] is a short course for small business owners in Cashflow Acceleration:
- Know your numbers (am I bleeding profits? If so how much and where from?)
- What healthy look like (for my turnover how much should I be paying – Profit, Owners Pay, Taxes and Operational Expenses?
- For my current numbers, how do I get healthy again? (a simple step by step method to get on top of your numbers, build a 3 month cash reserve and put your profit first)
The next Become a Cash Rich Business [Workshop] dates –
At the Cash Rich Business workshops, we teach you how to take your profit first.
Find out when we will be in your city –
Make it Rain. Stop the leaks. Take back control of your money
This article contains the revolutionary secret to beating the ever growing statistics of Business’ not making it after their first couple of years. These five simple steps will change the future of you and your business forever.
Step 1 – Stop the leaks and take your profit FIRST!
This might surprise you, but the Profit equation you were taught is wrong.
Sales (minus) Expenses (equals) Profit does not work.
If it worked you’d have more money in your account than you could poke a stick at!
But statistics (and daily emails) says tells us that cashflow is tight, and profit is a distant memory.
Why doesn’t the Old Profit Formula work?
Because of an economic principle called Parkinson’s Law.
Parkinson’s Laws says that “an available resource will always be used up”.
For example, when you eat a meal.
You fill up your plate.
Then you eat everything on the plate.
It’s human nature. (Especially if you’re a kiwi like me!)
It’s how we’re brought up.
It’s Parkinson’s Law.
So in the OLD Profit, you sell sell sell & the money (food) goes into one bank account (plate).
Then we incur all the expenses we think we need to incur in order to deliver on our promises.
Rent, Payroll, Taxes, Subscriptions, Marketing …
And BOOM!
Like magic.
It’s all gone.
No, or little profit leftover for all your hard work.
It wasn’t a magic trick.
It’s Parkinsons Law.
All available resources will be used up!
Or using the plate analogy, we fill our plate; we eat until the plate is empty.
Sometimes whether we we’re hungry or not!
So knowing that it is very, very hard to change human behavior (ever tried and failed a diet? I have!)
We simply recommend eating from a smaller plate.
The New Profit formula is Sales (minus) Profit (equals) Expenses.
Action:
Commit now that a certain percentage of EVERY DOLLAR that comes in goes into a separate bank account at a separate bank.
Start with just 1% if you have to.
Putting Your Profit First is more about the habit than the amount.
Start now no matter how big or small the amount.
AND we encourage you to do a self-analysis in these 5 areas of your business. Rate yourself between 1 and 10. 10 being you are Extremely happy with where things are at, 1 being you just are in desperate need of help.
- Revenue – How happy are you with your current revenue?
- Profit – How happy are you with how much profit you have sitting in your profit war chest?
- Expenses – How happy are you with the percentage of tax you are paying?
- Expenses – How happy are you with your current owner’s salary?
- Expenses – Operational Expenses (Wages, Rent & Subscriptions) – How happy are you with your current level of expenses?
Up next, Step 2 – Control the Tap, Get Paid Faster.
Make it Rain – 5 step plan to make your business work for you
Step 1 – Stop the leaks
- Revenue – How happy are you with your current revenue?
- Profit – How happy are you with how much profit you have sitting in your profit war chest?
- Expenses – How happy are you with the percentage of tax you are paying?
- Expenses – How happy are you with your current owner’s salary
- Expenses – Operational Expenses (Wages, Rent & Subscriptions) – How happy are you with your current level of expenses?
Step 2 – Control The Tap
- Sales Cycle – How long does it take for me between first presenting my value and to when the client says YES?
- Make / Production & Inventory Cycle – How long does it take to either produce my product / service or how long does it sit on the shelf?
- Delivery Cycle – How long does it take us to deliver the final product from when the client said YES?
- Billing & Payment Cycle – How long does it take for us to bill the client after they say YES and then how long does it take for the money to arrive in the bank?
Step 3 – Fill the Bucket
- Leads – How would I rate the current quantity and quality of leads in my pipeline?
- Conversion Rate – How would I rate my ability to convert a lead into a sale?
- Current Clients – What proportion of my current client base would I consider as IDEAL
- Retention Rate – How frequently are my existing clients making referrals or introductions to my ideal clients?
Step 4 – Get a Bigger Bucket
- How much room is there to increase my prices?
- How much room is there to increase the number of times my clients engage my product / service?
- How much room is there to increase the number of services or products my clients engage me for?
Step 5 – Invest in Multiple Buckets
- Debt – What proportion of my debt accelerates me towards growth vs takes me further away?
- Assets – What proportion of my assets consistently puts cash into my war chest vs takes it out?
- Lifestyle – How happy would I be if my current lifestyle was maintained?
- Greater Purpose – How clearly could I answer this question “If money wasn’t an issue, what would I be doing with my life?”
Get Cashed Up
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