A great business-vehicle with a great driver and lots of fuel in the tank allows you to create more great work.
In the past 15 years as a Business-Life Coach I’ve worked with many architects and designers of all types. Design practices and studios are a special kind of business with special challenges around making money and growing. I’m not entirely sure why that is, but I think it has something to do with the design side of things.
Architects have a profession and a set of skills and their business is often built around that set of skills. In that, they are no different than plumbers, mechanics, bookkeepers and lawyers. Their businesses also rest on a set of specific skills and both sell their expertise to their clients. But architects (and designers) often have a passion for their profession that goes deeper. For many architects, architecture is a calling for them. Architects and designers often want to leave their mark on the world with their work. They live for their art as it were and the commercial demands of business can sometimes feel like they are at odds with their art. Making money as an architect is often considered suspect.
Vincent and Pablo
But it doesn’t have to be that way. Of course, we all know the examples of artists who died in poverty and obscurity only to achieve fame and fortune after their death (Vincent van Gogh for example). But equally there are many examples of artists who created great art, left a mark and were commercially successful in their lifetime (Think of the greats of the Italian renaissance or Pablo Picasso in more recent times). Great art doesn’t have to be created in poverty, and nor does great architecture and design.
I like to remind my clients that making money is never the point of business, whether the business is a plumbing business or an architect practice. A business must make money, and generate good cash flow, otherwise it’s a hobby. But the reason it must make money is so that it can achieve it’s Mission… So that it can make good on it’s Purpose in this world.
I recently worked with a client who is an architect. He employs 4 staff who are all architects or interior designers. The business has only just scraped by for a few years now. The practice creates great work and my client is excited about the potential for making his mark on the world of architecture in the future. But he has only just been making ends meet for the past few years. As a consequence he pays himself very little, less than his staff even, and worse, he may well lose some of the staff he loves so dearly in the future, because there is not enough opportunity in the practice for them to develop and grow professionally. My client feels caught in a dilemma. Focusing on making money and growing the business, he believes, means the work will suffer, and he can’t allow that to happen. Hence the needs of the business come second.
I told my client to think of business as a vehicle. The point of a vehicle is to take us from A to B. But the vehicle can only perform that function, if it’s in good state of repair, if it’s filled up with fuel and if the driver knows how to operate the vehicle safely.
Fuel in the tank
Business is just like that. The point of my client’s business-vehicle is to allow him to deliver great architecture for his clients and to make his mark on the world of architecture in general. In order for his vehicle to be able to do so effectively, it needs to be healthy, in a good state of repair, he needs to be a good driver and it needs fuel in the tank. Money is the fuel of business and my client needs to learn what it takes to be a good driver, a good business owner in other words.
The demands of business do not have to be in conflict with what you’re passionate about at all. It is perfectly possible to create great architecture, and beautiful design, while making making great profits and building a healthy growing sustainable business at the same time. As a matter of fact, a healthy profitable business allows you to create great art, if you let it… I promise you.
Why it matters what you pay yourself as the business owner.
Business owners often don’t pay themselves at all, but just draw money out of the business account when they need it. At the end of the year, the accountant adds up all the “draws” and books it to something appropriate in the balance sheet to make the Tax Department happy and it’s all good. Sp why does it matter how much you pay yourself, why should you pay yourself at all and how much should you get paid?
Clearly, a big factor in how much profit your business makes and whether or not the business has the cash to pay it’s bills is how much money you draw out of the business at any one time. If your business turns over half a million dollars and you have 4 employees and an office and you pull out $200K yourself every year there may not be enough money left to pay for Cost of Sales, staff wages and overheads (or tax, for that matter), and if you pull out nothing at all, it might look like your business is enormously profitable. Your wages, drawings or dividends are a significant factor influencing the health of the company.
So wat’s wrong with letting your drawings depend on whether there’s enough money in the bank to pull some out?
If your business doesn’t make profit, it’s a hobby.
A healthy small business ought to make somewhere north of 5% net profit before tax, every year. I generally advise my clients to aim around 10% as a guideline. (10% of revenue… so for every $100 in sales, the business ends up with $10 of net profit). There is no golden rule about this number, but it’s a useful guideline in most cases.
Net profit is the money that’s left after all costs of the business have been paid, and you, the owner of the business are absolutely one of the business’ costs, a major one at that. And you rightly should be a cost to the business, just like the electricity and the rent and the mobile phone bills and the staff. Without you the business can’t function. You are the CEO and general manager, the head sales person, the chief cook as well as the bottle washer. In any other business, all those people would need to be paid and probably quite highly, and so should you. If you do not pay yourself a proper wage, you’re not professional and nor is your business.
Dribs and Drabs for the boss
I recently started working with a client in an architecture business. The client has 4 staff plus himself and he pays his staff and all his other costs, but he only gets paid in dribs and drabs when there’s money available. He showed me his P&L and proudly pointed to the net profit his business made last year. But when I asked him how much the business was paying him, it turned out that he just drew out some money every now and then and that his drawings didn’t show up in the P&L. In effect, if he were to pay himself as much as his lowest paid staff member, he would have made a loss last year. In other words:
My client wasn’t running a business at all, he was running a hobby.
My client has now implemented a weekly minimal wage for himself, run through the books as a wage, showing as a wage in the overheads and we’ve updated his business targets to be in line with the new reality. The business is not out of the woods yet, but there is a new air of professionality in the practice and my clients is learning to think like a business owner rather than a hobbyist.
How much then?
The second question therefore is: How much should I pay myself?
Again, it may seem that there is a certain arbitrariness to this question. But the answer is actually quite straightforward:
You should pay yourself as much as it would cost you to pay someone else to take over from you.
Assume you want to go on sabbatical for a year and bring in a CEO to run the business for you… Doing everything you do for the business now… What would that cost? $80K, $100K, $120K? Whatever the answer to that question is, that’s what you ought to pay yourself.
This may well be unachievable right now, (it is for my client… He can only manage about $60K right now), but it’s certainly something you should work towards over the next year or so. It will put the business on an entirely different footing and every time I introduce this discipline with my clients, the business starts to change completely… guaranteed.
Making money in your business isn’t rocket science, it’s all about the basics
Making more money in your business isn’t rocket science. If you spend less than you earn, you’ll end up with more money in your bank account. Even Donald Trump knows that (although…).
I know I know I know… Business finance doesn’t operate like a simple household budget, you may need to borrow investment funds, finance your cashflow, obtain working capital, factor your invoices… Banks and investors exist for a reason, but even so, in the end, to make more money in your small business, you need to generate more profit (margin) and spend less cash than you pull in.
So here are the Ten Key Strategies to Make More Money in your small business. Look at each of the strategies in turn, and set aside time in your diary over the next months to implement the actions I suggest for each one and I absolutely guarantee you’ll make a lot more money this year than you did last year.
I’ve also written in great detail about making money in your business here
Someone showed me this strategy early in my years as a business coach, and I still wish now that I’d come across it in the early days of my life as a business owner. Have a look at the PDF you can download with this link here. It shows that if you make an overal improvement of only 5% across your business, your actual profits will double. It seems like a magic trick, but it isn’t. It works, always. If you make a 5% improvement in revenue, a 5% reduction in Cost Of Sales and a 5% reduction in your overheads, your profits will double. Try it out, stick your own numbers in the little table and see what happens… Try 2% or 1% and see what enormous impact even such small improvements have.
Go ahead and do this today:
Pull out your P&L for the past 6 months or a year and work your way through it from top to bottom… How can you make a really small improvement across the board in your business in the coming year?
2) Someone has to be the most expensive, it might as well be you
Recently I worked with an artist, a sculptor. She was getting ready for a group exhibition at a prestigious gallery where she was showing 4 pieces of her work. At a group exhibition like that, there’s a lot of art vying for attention and it can be hard to be noticed. We talked about how to stand out from the other 8 exhibitors and I suggested to her to double her prices, or rather, to aim to have the most expensive pieces of work in the room. If your pieces are the most expensive in the room, you can be sure that people are going to take note. Anybody who has ever opened an exhibition catalogue, has quickly run their eye past the prices, at the cheapest and especially at the most expensive pieces, and they’ve gone and had a look at the expensive ones, guaranteed. And a journalist who comes to covers the exhibition opening for the newspaper does so too. Being the most expensive sends all kinds of marketing signals about quality and specialness.
My client swallowed, took a deep breath, and doubled her prices. She did turn out to be the most expensive “in show”… And she did sell one of her pieces… For twice as much money as she’s ever made before… Nice one.
Go ahead and do this today:
Have a look at your prices… Why couldn’t you be the most expensive? Is there actually a good reason to be cheaper than the competition? Is your stuff worth less? No, I didn’t think so… So let’s get your prices up… Starting next week.
3) Collect Collect Collect
It doesn’t matter how much profit you make, if the cash doesn’t end up in your bank account. Money that’s not accessible to you is worthless. Many business owners make the mistakes of invoicing late, not setting payment terms, or setting lax ones and not enforcing whatever payment terms they do have. A very large percentage of businesses that struggle or go broke, do so, not because they’re unprofitable, but because they don’t collect their cash in time and run out of money. Cash flow stress is especially problematic in growing service based businesses. I’ve written in much more detail about cash flow and collecting here. I often tell my clients that if they allow their customers to pay late, they’ve suddenly become a bank and as bankers, they suck. As with so many things in business, the first thing to do is to design a system, a collections system, and then, enforce it, religiously.
Go ahead and do this today:
Run a report in your bookkeeping system called the Aged Debtors report and have a look at who owes you outside of your trading terms. Starting with the low hanging fruit, pick up the phone and simply ask this question: “Hi there mr customer, I just noticed that you owe us $12,536.24 and that this amount is overdue. Could you let me know by what day we can expect payment? Next week Wednesday? Thank you, that would be great, have nice week.”
Whatever date the customer promises to pay his bill, make a note on the following date in your diary. On this date, check if the payment has been made and if not, remind yourself that the customer has now proven himself to be a lier and hence, immediately fire off a stern email. Refer the customer to your conversation and remind him of his promise, and give this client 48 hours to pay up… or else. In 48 hrs, commence final warnings and be prepared to forward the debt to a collections agent. Run this simple procedure next week, with each and every one of your overdue debtors and I guarantee you, you’ll halve your outstanding debts in a matter of weeks at most.
4) Discounting is for dogs
Nothing good ever came of trying to make more money by discounting. IT . DOES . NOT . WORK . EVER
I know I know I know… It seems to work for Woolies and Coles, right?… Well that’s arguable, but more importantly, you aren’t Coles. You don’t sell 15,000 different convenience products in 2500 stores all round the country (and you’re not competing against Aldi)… You’re probably not even in retail. So if this article was written for the CEO of Woolworths, I might have to tone down my language. But it’s not, it’s written for you, and if you think you can make more money in your business by offering discounts, you’re sadly mistaken. You’ll increase your problems, decrease your margins and heighten your stress and truly no-one ends up happier. Just don’t… Trust me on that.
Go ahead and do this today:
Get an A3 Piece of paper and a thick black texta and write in capital letters across the whole page: I SHALL NOT DISCOUNT and hang it up above your desk.
5) Delegate Delegate Delegate
Your time, your braincells and your health are the most valuable resources in your business. Everything else you can buy, borrow or steal more of (more here). If you want to make more money in your business, you need to learn to maximise your own time. You should always be asking yourself: Is this thing I’m about to spend my time doing, the most valuable use of my time, right now, or is there something else more valuable I could be doing. If there is, then look for the best way to give this thing you are about to do, to someone else. Delegating the lower value tasks to others is one of the sure fire ways to start making more money in your business.
Go ahead and do this today:
In the process of deciding how to use your time, there is a simple tool called the 4 Quadrants of Time Management. Originally designed by general Eisenhower and made famous by Steven Covey in his book “The seven habits of highly effective people”. You can read more about getting the right things done here. Read the article and have a look at your week ahead. What can you delegate next week?
6) It’s Gross
There is one key number you have to focus on every week and every month if you want to start to make more money in your business and that is Gross Margin or Gross Profit (more here). I often refer to Gross Profit (GP) as the King of Numbers. If you only focus on one number in your business, make it Gross Profit. Revenue is meaningless, Net profit is confusing and you have little direct control over it and many of the other numbers in your business will give you a partial insight as best. Gross Profit or Gross Margin (expressed in dollars and as a percentage) can actually tell you just about everything you must know on a weekly and monthly basis about the health of your business. It’s got to be your target: “Every week we must make $xx in gross profit at xx% of revenue.
Go ahead and do this today:
Run a P&L report for the last 6 months or the past year. How much Gross Margin did you make? At what percentage of sales? Was it enough to cover your overheads and expenses and did you end up with a percentage of net profit left over? If not, how much Gross Profit should you make every month to pay for the overheads and have something left over? Now, once you have decided on that number… Stick it on the wall, (next to the note about discounting) and ask yourself: How can I make sure we hit that number every month this year?
7) Specialise Specialise Specialise
If you sell what everyone else sells, all you can do is compete on price and you know what I think about that, right? (have a look at the wall in front of you, with the A3 note about discounting). A key strategy for making more money in your business is to niche your business, to become the expert in a small section of the market. Make your expertise an inch wide and a mile deep. I read a famous book a while ago “Blue Ocean Strategy, how to make the competition irrelevant” (I wrote about it here), and it’s become increasingly clear to me that the most effective effective strategy for making more money in your business is to become a recognised expert in a small niche. It gives you a perfect opportunity to become “The most expensive in the room” (see above) (More about finding your niche here)
Go ahead and do this today:
So, get yourself a note book and brainstorm, what are you really really good at? What specific problem do you solve better for clients than anyone else? What are you passionate about, really passionate about? What do you get out of bed for in the morning? Remember, customers do not buy what you do, they buy the solution of a problem they have.
8) Vilfredo Pareto
Vilfredo Pareto was an Italian engineer at the end of the 19th century. I don’t believe mr Pareto was especially good at making money but he made some very clever observations on matters of commerce. Pareto is known especially for the 80/20 principle. The 80/20 principle is about the observation that inside economic systems most things are unevenly distributed. (for example, Pareto observed that 80% of the wealth of Italy was held by 20% of the population, in his time). This is how that’s relevant in your business. I am willing to bet that in your business, 80% of your profits come from 20% of your clients and worse, 80% of your losses also come from 20% of your clients. If you want to make more money in your business… That last sentence is where the low hanging fruit is to be found.
Go ahead and do this today:
Ideally of course you’d have a business management system or business intelligence system that could run a report for you with the answer. It’s certainly something to be aiming for in the long term to install such a system. But I’m guessing you don’t have such a system yet or it’s not fully operating yet. So it’s going to have to be a manual exercise, probably a spreadsheet or a simple notebook. Set some time aside and do the number crunching. Where do you lose your money? It might be to do with certain categories of customers, or with specific customers, or instead it might be certain products or services you sell that always cost too much. Whatever it is, find it. And then… once you found it… Stop doing it… STOP IT… AS SOON AS POSSIBLE.
9) Systemise Systemise Systemise
Systemise, automate, productise. It’s what made McDonald’s heaps of money. Far be it from me to suggest your business should be another McDonald’s (read about my problems with McDonald’s here), but it’s certainly the case that systemising parts of your business is a great strategy for making more money. Anything you do in your business that can be standardised should be considered for systemising. When you systemise something it means you can start to get more efficient and employ lower cost staff to carry out that part of your operation.
Go ahead and do this today:
Set aside an hour to look at all the operations in your business and select three to develop a system for. I’m not necessarily talking about very complicated systems. small things such as how we answer the telephone, or how we go about ensuring we have supplies of printer ink, or how we respond to quote requests. Write out the system for each of the three things and roll them out throughout your business.
10) Do you want fries with that?
As we were talking about McDonald’s already, this is another strategy they’re famous for. It’s actually a system in itself of course. The up-sell. Effectively, the up-sell is the only discount you’ll ever make money on. The principle behind the “Do you want fries with that” question is that for a small amount of extra money, the client gets a bunch more value. Normally fries cost $2 but in an up-sell situation the customer gets to buy a portion of fries for only an extra dollar. This may seem like a discount and therefore to be avoided at all cost. But it isn’t. The fries in question cost McDonald’s virtually nothing, probably as little as 10 cents, when added to the larger transaction, so they make an extra 90 cents profit from each customer that accepts the up-sell.
A client of mine, an electrician, has trained his employees to ask customers they do repair works for, whether they’d like their smoke alarms tested while they’re at it. In nearly all cases the batteries need replacing and the electrician charges a small fee for replacing the batteries. The customers are very happy (and safe) and my client makes an extra $25 profit per job on average. Everybody wins. Judiciously practicing up-selling is a great strategy for making more money in your business.
Go ahead and do this today:
What can you offer your customers as an up-sell? Think about it… The trick is to find something useful/valuable for the customer that costs you very little to add to whatever you’re doing or delivering for the customer already. I have come across hundreds of different examples in my years, feel free to email contact me to brainstorm if you like.
Bonus: Profit first
I’m sure you agree with me that profit is important. You might have heard me say before that if your business doesn’t make profit and generate cash, it’s a hobby. So let’s just leave it at that, we want to make profit in our business. But if we all agree it’s so important, why do we leave the whole profit thing to last? After everything else is paid for we cast a hopeful look in the bottom of the bucket to see if there’s any profit left over. Let’s turn that around. Let’s take the profit out of the bucket first and set it aside in another bucket. The profit first principle is a really useful way to help you focus on the importance of making profit. More about profit first here
Go ahead and do this today:
So this is what I suggest you do, next week. Go and open a special bank account. A bank account that it’s easy to transfer money into but a bit more challenging to take money out of again. Then, decide how much you think you can take out for profit out of every invoice you send off. (5%? 10%?). And then from every payment that hits your bank account, automatically transfer that percentage into your profit account. If you do this religiously, better yet, if you delegate this job to your bookkeeper or accounts person, you’ll start to build amazing value and wealth in your business… trust me on that.
Focusing on making more money in your business is a great discipline. It will lead to stability and sustainability in your business and your life. There are many other strategies to make more money in your business of course. but if you focus your energies on these ten in the coming year, I guarantee that your business and your life will start to look entirely different.
I’d love to hear how you go, so drop me a line some time.
Getting help, Business Life Coaching, external support
Building a Beautiful Business starts at home…
What does it take to build your own Beautiful Business and Life? What is Business-Life Coaching anyway? What are the Principles of Business-Life Coaching? How is Business-Life Coaching different from any other form of business support or guidance. And above all, why should that matter to you at all?
Business-Life Coaching… It’s about everything
When thinking about building a Beautiful Business, we tend to think about:
And possibly a bunch of others I’ve yet forgotten.
When did you last look in the mirror?
Which of those are the most important, do you think? Which of these matter more than any others?
They’re all important, no doubt, but the key factor in developing a Beautiful Business and Life isn’t in the list above. The aspect of business that “Rules them all”, in the words of Gandalf in The Lord of The Rings, is looking at you in the mirror… That’s right, You… Little Old You.
More money, more time, more balance, more life…
The Principles of Business-Life Coaching can be expressed in this statement:
If you want something you’ve never had before,
First, you’ve got to be someone you’ve never been before.
As you’re reading this page, I imagine you want the future of your business and your life to be different than it is now. You want to grow, make more money, find more time, have greater work-life-balance, retire (with a bunch of cash), make the world a better place, be proud of the stuff your business produces, and make a difference.
And that’s great, I love supporting people that have exciting dreams and want to make a splash. It’s what I get out of bed for every day.
Are you the kind of person?
But none of us can have any of those dreams, unless we’re prepared to become the kind of person who builds the kind of business that makes the kind of profit you dream of, or that makes the kind of difference we dream of, or that is sold for the kind of dollars we dream of. Would you like to Discover what’s possible for you and your business?
Hence my focus on Business and Life Coaching. The “hard” skills as well as the “soft” skills of developing your business. I will teach you about the latest business management thinking, and we’ll design new systems customised to your business. We’ll create business and marketing plans that work and implement them. We’ll get clear about the Purpose of your business, you’ll implement controls and get good at numbers so that you have your fingers on the Pulse every day. We’ll get your staff firing on all cylinders. We may develop new products and come up with innovative solutions to bust past the hurdles that have held your business back.
You’ve Got All Da Moves…
We’ll do all that and much more besides, but at the same time we’ll be working on what it takes to be a great business owner who builds a Beautiful Business and Life. We’ll work on leadership skills, self management skills, developing your vision, prioritising what’s most important in your life, goal setting, strategic thinking, planning, communication, people management, how to get out of crisis management, and above all we’ll work on how to look after yourself.
Building a Beautiful Business and Life, is a journey out of your comfort zone. It means you have to be prepared to look at yourself, acknowledge that you’re the bottleneck that holds your business back and say:
This is the tenth post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The tenth Priority is about Managing the marketing. The introduction to this series on The Ten Priorities is here.
The second rule of Seth Godin is to make sure lots of people know about your great product or service.
It may seem obvious. No matter how great your products, your people, your systems, your visions and your plans are, if nobody knows how great they, there will be no business.
Many business owners will go out of their way to build a great product, but forget the second Rule. (BTW, the inverse is also true, more about the two different types of entrepreneurs here)
But both rules are equally important.
A business owner who wants to build a great business must learn that in business:
Marketing is everything, and everything is marketing.
A great business owner asks himself about the marketing dimension of every aspect of the business. Marketing is as much about the way the business goes about collecting its debts, or about the way people answer the telephones, or about its product warranty, as it is about the Facebook advertising campaign it’s running.
In fact, it can be said, that any activity in the business that does not have a marketing dimension to it, is a waste and should be stopped immediately. (more about the basics of marketing here)
When you learn to ask yourself about the marketing aspect to every decision you make, every system you develop and every action you take, every day, your business will flourish… I promise you.
Now that you’ve finished Ten Priorities, find out more about yourself and take “The Entrepreneur Type Survey”
This is the ninth post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The ninth Priority is about your Managing the quality of your Products or Services. The introduction to this series on The Ten Priorities is here.
One of the most insightful modern business gurus I know, Seth Godin, said it really well:
“To do well in business you only have to do two things:
Deliver a great Product or Service
Make sure lots of people know about it”
As usual Seth Godin nails it, and the last two Priorities are about those two simple rules of Seth’s.
Because the problem is, they’re a lot easier said than done.
To have any hope of following Seth Godin’s 2 Rules, you have to have gone a long way to covering Priorities #1 through #8 first.
It’s really hard to be uncompromising about the quality of the thing you sell, in the face of the day to day challenges of business. The temptation to let a less than perfect widget go out the door, because a customer is screaming at you, can be hard to resist.
But resist it you must.
If you give the customer his widget and it turns out to be not quite right, the customer won’t be happy and tell his friends that the widgets you sell aren’t always quite right.
Come what may, your business must deliver what it promises. You don’t have to build Rolls Royce motor vehicles, but if your company name happens to actually be Rolls Royce, you better not build any Hyundais.
Not until you’ve mastered the arts of:
Looking after yourself
Giving yourself the time to think
Ensuring that business is Fun
Asking for help
Having your people do great work
Will you be the kind of business owner who can build a business that delivers what it promises, all day, every day… I promise you
This is the eighth post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The eighth Priority is about Managing your People. The introduction to this series on The Ten Priorities is here.
Great businesses employ great people that deliver great work.
Business owners who want to build great businesses must get good at managing people. There is no way around that.
But for many business owners, people are a source of great stress and anxiety. They spend their days hoping things will go ok, and practice the ancient art of:
Management by keeping your fingers crossed
And that’s because they Abdicate, instead of Delegate to their employees.
Abdicating is giving someone a job and hoping they’ll somehow get it done right.
Most people feel good when they have an opportunity to do good work. Human beings (and employees are in fact human beings, I promise you) get a lot of satisfaction from doing good work, but the problem is, they often don’t know what constitutes good work. They’ve not been given clear outcomes, and they’re given conflicting priorities and feedback. And so, they flounder, they make it up themselves, they disengage, and the job does not get done right.
Delegating, on the other hand, is about discussing the job with the employee; explaining to them what the required outcomes of the job are; making it clear what good work looks like; asking for input and buy-in on the job; asking what the person needs to be able to deliver the required outcomes; agreeing on time frames and check-in points, and finally, agreeing on reporting and KPI’s for the work. (More about engaging your staff here)
When you learn how to delegate while keeping your fingers on the pulse as opposed to keeping them crossed, you will start to build a great business… I promise you.
This is the seventh post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The seventh Priority is about Managing the Money. The introduction to this series on The Ten Priorities is here.
I’ve said before (in priority #3), that a business must make profit, or it’s a hobby.
But in Priority #7 we’re not talking about profit, we’re talking about financial management.
Most business owners outsource the bookkeeping and accounting functions of their business. That’s great, but there are two problems with that:
Business owners often misunderstand what accounting is.
Reporting arrangements are often inadequate
The misunderstanding is that business owners generally don’t appreciate that there are two different types of accounting:
Financial management accounting
Compliance accounting is simply about how much tax the business must pay. What matters about that, is that it is done properly and timely. But compliance accounting is only the tip of the iceberg.
The most interesting part of the iceberg
The rest of the iceberg, the most interesting part of the iceberg is Financial Management accounting. Accounting that answers questions such as: “Last month, what percentage of our income went to wages?” Or, “In the last six months, which have been our 10 most profitable products?”
And that leads to the second of the problems I mentioned before:
You must get regular reports that give you the answers to the financial management questions that matter to you. And those reports must arrive promptly. I tell my clients to insist that the financial management reports about last month arrive on their desk no later than the fifth day of the new month.
When you sit down with your accountant and bookkeeper and explore with them the financial management questions you need answers to, to build a great business, and insist they give you those answers, every month, your business and your life will never be the same again… I promise you
This is the sixth post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The sixth Priority is about not doing it all on your own. The introduction to this series on The Ten Priorities is here.
Do you have a little voice on your shoulder, that whispers in your ear?
Most of us do.
And a lot of what the little voice whispers in our ears is not very nice, is it?
The basic message from the little voice, is that we suck.
We’re not good enough. We’re not cutting it as parents, as lovers, as friends and especially we’re not cutting it as business owners.
And for most business owners that little voice goes from whispering to yelling, the moment we even consider committing the heinous crime of asking for help.
Asking for support in business, is almost guaranteed to get the little voice on our shoulder extremely excited.
Deep down we all believe that being a great business owner, an inspiration to our staff and customers alike, means we must do it all ourselves. We seem to think that business success is only meaningful if we’ve done it all alone.
Hogwash… Utter nonsense.
It takes a village to build a great business. One of my most successful and oldest clients has built a whole team of specialist advisers, coaches and mentors around him. (more about getting external help here)
I guarantee that no matter which inspiring business role model you interview, they’ll all tell you their success is due partly to the support of one or more mentors, coaches or advisers.
No-one can do it all alone.
You need other people to:
Hold you accountable to your plans and goals.
Brainstorm with you and be a sounding board.
Support you when you stumble.
Give you honest opinions, advice and feedback.
There are many ways to get outside support. You can join a business support group, get a business coach, or mentor, start your own advisory board, or all of the above. But whatever you do, dropkick your little voice…Forget trying to do it all on your own… You can’t … I promise you.
More about the various forms of business support, guidance and advice that are available to small business owners here