How to Stop Spinning your Wheels and Moving Towards Profitability
When I was growing up my parents owned their own business; Stewart Homes. They built and remodeled homes in the Central Bucks region. They worked hard seven days a week. They poured their hearts into the business. They built beautiful homes which still stand today. Their reward, they had to close the business. Despite their hard work and beautiful product, they could not create sustained profitable gains. Their problem is one that I see in many businesses today. They were so concerned with keeping the lights on and paying the daily bills that they did not make the time to plan; they did not make the time to look at the financials to see where the problems were, where they were leaking money, or to prepare for developing problems. Is your business the same? Is planning and looking at financials something that you tell yourself every day that you will do tomorrow?
The good news is that with just a few minutes of effort each day, you can change your future; you can build your business; you can grow your brand. It all starts with your financials. Think of them as the gauges in the dashboard of your car. When you drive from point A to B you are constantly looking at your car’s gauges. How fast are you driving? Is the engine getting too hot? How much gas do you have? Spend a few minutes each week looking at your business gauges. Your balance sheet tells you how much money you have in your accounts and what the value of your business assets are. Its the equivalent to your gas gauge. Looking at his will tell you if you have enough money to cover future expenses and profit distributions. Are your balances going up or down and if so, why?
Next is your Profit and Loss statement; your speedometer. Are you making more than your expenses? Are there places where you can cut expenses? Where can revenue be generated? Now compare this to the previous month, and the month before that. Is there a trend? If so, why?
Look at your Accounts Receivable report; your engine temperature gauge. Is the amount of money people owing you increasing or decreasing? If its increasing, its time to make some collection calls. Get the money you are owed before your clients run out of the ability to pay. Their problems should not be yours. If you go too far into the red the engine will blow up. A little heat is good; too much is bad.
Do you have a budget? You should. Its the same as your car’s GPS. A budget allows you to start to forecast and tells you if you will reach your destination in time. Compare your expenses this year with last year. If you are spending more than last year it could be a problem. How can you cut expenses unless you know what they were? A budget makes you plan on what you want to make this year and track that each month. Are you on track to make what you want this year? Why wait until December to find this out. If you know each month if you are on target, you can take the appropriate action now.
Finally, a business plan. This is your dashboard itself. This brings all of the various gauges together. A business plan plan sets out the vision for your business and address the 7 parts of your business; sales, marketing, people, plant, factory, metrics and the owners themselves. A proper business plan will require to take the information from your financials and determine what you need to reach your goal. You will write out exactly how much in sales you will need each month to reach your income target; how many clients each month will be needed by marketing to generate those clients, what marketing you will use and what you think that marketing channels you will use and how many clients each marketing channel will produce, what personal development courses you will take, what training your staff will need, what technology needs to be replaced and when, what you will do each month to reach your goals.
Hope is not a plan. Make a plan. Review the plan. Make daily, weekly and monthly adjustments in a logical and measurable way. Stop spinning your tires and actually move towards your ultimate destination.
