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Finance

DIYMarketers with Ivana Taylor| Read It and Reap | Building Your Booming Business

DIYMarketers: Read It and Reap

By | Building Your Booming Business, Contact Manager - CRM, David Bryant Mitchell, Finance, Leadership, management, Marketing, Motivation, Operations, Sales, Strategic Planning, Systems | No Comments

I had a lot of fun on this interview…..caution, I had technical difficulties on my end at about 17:12, but check out how I worked around it and was able to get back on the call by 18:34….

Here is what Ivana Taylor says about the book:

“For years, David Mitchell has been coaching businesses and business leaders to success by helping them build the tools and processes they need to make a business successful.

He knows the secrets for why businesses succeed, why customers stay loyal or leave, and how to be an effective business leader.

Unfortunately, it would be impossible for him to coach every business, so now he has written Building Your Booming Business to share the main strategies businesses need if they want to get ahead and stay there in a competitive marketplace. And surprisingly, it’s not all about profit or even having a better product.”

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Entrepreneur's Library with Wade Danielson

Interview: The Entrepreneur’s Library

By | Building Your Booming Business, David Bryant Mitchell, Finance, Leadership, management, Marketing, Operations, Strategic Planning, Systems | No Comments

Entrepreneur's Library with Wade Danielson

I was recently interviewed by the Entrepreneur’s Library Podcast.

We talk about the 5 Foundations every business needs to be successful. I also give a couple of influential books that I’ve read that’s helped me sculpt my personal foundations. We also discuss step-by-step business strategies and advice that will not only take your business to the top, but will help you systemize your business, build an effective team, provide high quality customer experiences, and drive more sales. The goal of the book is alleviate the consequences that come with unmotivated employees, escalating business issues, and an overworked schedule.

Enjoy!!

 

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Ask for what you're worth.

Get What You Deserve

By | Finance, Marketing, Sales | No Comments

My wife and her boss once had a discussion about a bid to clean and repair his gutters. He had shown her three bids and then asked her which she would choose. Not knowing anything else about the bids other than the price, she said she would go with the lowest one. She assumed that the bids were all for the exact same level of service. Her boss, however, said he was leaning more toward the highest bid because he had more confidence that company would do a good job. The difference was only in perception. He assumed a higher price included a higher quality service.

If you are not pricing yourself correctly, you are not communicating to your clients the message that you are better than the competition.

Even better—you are more likely to give better service if you feel you are being paid well for it. On the other-hand, if you are constantly dickering on price, you are more likely to cut corners so you can get to the next low-paying job, where you will be tempted to cut more corners.

How to Determine Your Price

Even if you are in a retail store, you usually have the option of setting your own price somewhere above Manufactured Suggested Retail Price, often referred to as the MSRP (unless you have a contractual agreement otherwise).

If you are already in business, take whatever you are charging and increase it by 10 percent tomorrow for any new clients. Measure the reaction you get from your customers. You’ll be surprised by how little it effects them. What’s more, many businesses can increase their price by 10 percent, lose 25 percent of their customers, and still bring home close to the same amount. Variable costs come down (usually the biggest expense for most businesses) and the stress level decreases. In fact, one client I worked with increased his price by 20% and improved his Net Revenue by 146%.

If you have not started your business yet, ask your market what it would be willing to pay. Do not ask your friends or family—they won’t give you an honest answer and are probably not your market anyway. Once you know what your market is willing to pay, increase it by 20 percent. Your customers are interested in getting a deal, but you are interested in making a profit. In addition, it’s easier to negotiate a new, lower price or provide discounts than it is to raise prices.

Remember: Your price reflects your value and is more than an exchange of goods for cash. It communicates to your market that you are the better choice.

Money is more than a piece of paper or a set of numbers on a check. It’s a thank you note. The more grateful customers are for what you did for them, the bigger the message on the note.

A word of caution: You cannot charge a premium price if your product/service is just like the competition’s.

 

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The Five Foundations

By | Finance, Leadership, Marketing, Operations, Strategic Planning, Systems | No Comments

A business is nothing more than a system of systems that creates value. And every business needs five basic systems, which I call the Five Foundations of Business:

What are the Five Foundations?

Discover the five foundations your organization needs to succeed.

  • Marketing—Finding the quickest path to the sale.
  • Management/Leadership—Identifying the destination, developing the path, and creating a team to accomplish it.
  • Operations—Delivering the service.
  • Finance—Managing the value created through superior marketing and operations.
  • Systems/Controls—The grease and glue that keeps the other four Foundations moving smoothly and holds them together.

Getting these systems to work for you as efficiently as possible is the essence of creating a successful business. Once you have created and fine-tuned the systems, it becomes much easier to sell your product, create viral word-of-mouth, hire employees, lead and manage them, expand into new markets and additional sites, and to franchise. Plus, life is easier and more enjoyable when your business generates income for you and your lifestyle. Finally, the systems make it possible for you to create a business worth selling when you’re ready to retire or move on to your next venture. Of course, within those categories, how the specific systems that create widgets, tools, knick-knacks, food, services, or experiences will work depends entirely on you as the business owner.

If you decide to read Building Your Booming Business, take the time to review your systems. Where is the hand-off from one system to the next? What systems are missing or not performing as well as they could within each of these “Business Foundations?”

Why should you trust me? What makes the material in Building Your Booming Business worth the time to read and implement?

I have always had an entrepreneurial bent. At eleven years old, I used the drawing program on my dad’s IBM 286 to make a half-page flyer advertising that I was available to do a variety of odd jobs. Then I distributed about 100 of them throughout my neighborhood. I had a few calls over the next couple of weeks to mow lawns, babysit kids, and a number of similar tasks. Within a couple of weeks, I was bringing home about $150 a week. A year later, one of my customers, who was the general manager for a local lumberyard, asked me to give him a bid for regularly mowing about two acres of grass around the business. Once I sealed that deal, I was bringing in an additional $120 every ten days. In 1989, that was a lot of money, especially for a twelve-year-old. Don’t worry; I spent most of it irresponsibly.

Since then, I have run business organizations as large as 200 employees, increased revenues by 40 percent in less than three months, and have battled almost every operational obstacle imaginable. I even had to pull a department out of a financial disaster.

More importantly, I have successfully coached scores of other entrepreneurs, managers, and owners on how to be successful doing the same things I have done. Many of them have more than doubled the sizes and profits of their businesses, created more time for themselves, and even sold their businesses for profit.

Why would what I have to share in this book work for you? You’ve probably tried training programs and systems before. You’ve tried seminars, books, coaching, and spent lots of time trying to get your business to break barriers.

The reason I know that what I have to share can help you take your business to the next level is that I have actually implemented, either in my own business or in the businesses of my clients, every concept in this book, and I have seen great successes as a result. Even if you only use one of the strategies I offer, you can move your business forward, or you can apply all of them to make your business boom.

To get a copy of the introduction and the first page, check out http://BuildingYourBoomingBusiness.com

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Get your cash under control

Cash Flow Management

By | Accounting, Cost Controls, Finance, Sales | No Comments
Get your cash under control

photo credit: kenteegardin via photopin cc

The number one reason why banks fail? Cash. Reason why the mortgage and housing business went belly-up? Cash. The real difference between the rich and the poor? Cash.

Let me qualify this. There are assets that create wealth over time. Usually when you think of assets you think of houses, investments, etc. However, you still have to manage the cash that these assets produce.

It’s not enough to take home a profit. Cash in the business will give you flexibility to overcome down-turns and take advantage of unexpected opportunities.

I think it’s a good idea to look at a few strategies that will help you keep a bigger cash reserve and not run so close to the margins.

Collect revenue quickly.

This may sound simple, but I’ll bet you’ve had this problem. A big part of collecting starts before the project does.

You have to develop a discipline of billing and create systems to support it. Most A/R problems happen because of miscommunication or false expectations between the client, the contractor, and the billing office. So set your system and your processes to eliminate both.

Determine your payment policies.

If you are providing large-ticket items that may require you to finance or spread out payments for your clients, how you receive payment should be part of the proposal, explained from the beginning, and carefully laid out in all of your agreements. Deposits and expected payments depend on the size of the job or deliverable. The bigger the job, the lower the overall percent you will need to get the first few weeks of work started. Some jobs you may be able to collect only the material costs up-front and spread out payments as you need them. In many instances you should get half the agreed price up-front.

Regular and prompt invoices.

Again, this depends on the size of the job. For smaller products, invoices need to be delivered and collected the day of completion. On larger projects make sure you are billing monthly or every 15 days. Billing this way eliminates lags in your cash and also prevents sticker-shock for the customer. A side benefit is how much more closely you watch your material and supply costs associated with each job.

Price appropriately.

This is not just to help you win large proposals – this includes the services, materials, and supplies that you provide. A 2% change in your net revenue can mean a 30% change in your profits.
Here is a profit and loss that I analyzed for a small contractor and how I suggested he make changes.

 

A 20% increase in your price can create a 146% increase in your net sales

By increasing what he charged for labor and materials by 20% we were able to more than double his gross profits.

He was concerned that this would lose him bids – it didn’t. Instead he found that he was no longer in a bidding war. His customers were less likely to nickel-and-dime him on every little thing because they could see that he did not cut corners.
What profits are you missing out on by not pricing appropriately?

Review your overhead regularly.

I was sitting with a client not long ago and had suggested to him that he needed to raise his hourly rate. Over the months that we worked on his leadership and organization, he continued to resist raising his price. One day he had an epiphany. He wasn’t making enough money to cover his overhead and was not including his overhead costs in his bids. He decided he needed to raise his prices.

You would be surprised how a 2% change in an overhead cost like insurance can drastically impact the bottom line. Take your P&L and your cash flow statement and take it line-by-line and create a strategy on how to trim 1% from each expense.

While this is not an all-inclusive list, these are some of the easiest areas to review and keep in line.

  1. Labor – Do you have a staffing model that ties labor hours to production/revenue? How often is your staff going into over-time? Are you leveraging your own efforts by delegating properly?
  2. COGS – Do you know exactly how much of your raw materials go into your product? For restaurants this means portion control and strict recipes. For a contractor this means knowing how much material will be scrapped and how much of it you can “up-cycle” (or use in creative new ways?).
  3. Taxes – When was the last time you had a CPA check your taxes and not just prepare them? If your CPA or tax preparer is only preparing your reports and returns and not suggesting tax savings, it’s time to find one who does.
  4. Insurance – Whether it’s your liability, worker’s compensation, or employee benefits, having this reviewed and bid out to several providers every year can drastically reduce how much you pay.
  5. Facilities/Equipment – How much you pay in up-keep and repairs might be more than what it would cost to get new equipment.

By regularly reviewing your overhead as you look at your budget, you can increase your profit by tens of thousands of dollars every year.

A word of caution: Cutting expenses is good stewardship of your business and can really help you focus on what is most important for your continued success. The danger here is that a short-term gain in profitability by cutting expenses can hurt your long-term growth potential if you aren’t careful. Do your research to make sure you aren’t cutting yourself off at the knees.

If you are going to have a successful business, control your money. Don’t be ashamed to get paid what you’re worth. collect it quickly, and then be fastidious about how spend it. Cash is the fuel to your business. Don’t starve it to death.

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The Problem With Your Price

By | Finance, Marketing, Sales | No Comments

chances are you are not pricing yourself correctly.Price is much more than a number that covers your costs and makes a profit. Your price communicates your value.

Take a minute and think back on how you have set or are thinking of setting your price.

Most business owners have two ways to look at what they should be charging for their product or service. Both ways are wrong!

The first method they use is to look at what their competitors are charging and then try to set their price just above, just below, or right at their competitors price. You have no idea if your competitor is actually making a profit! Even if you think he might, how do you know he’s not sinking himself into debt expecting the business to pick up any day?

This pricing method sets you up for a race to the bottom. When your competitor lowers his price, you will too in order to “stay competitive.” You are also not sure if you can even make a profit at that price.

Setting a “competitive price” positions you poorly as well. There is no differentiation between you and your competition. When a customer has no other measure to make a decision, they will base their decision on price. When a customer’s decision is based only on price, it’s a roll of the dice as to who will win.

The second method often used is to total up what it will cost, your time investment, and how much you think you should take home. However, this method does not take into consideration how your customer values your product or service.

Many of the businesses that I have seen determine their costs like this don’t take into consideration hidden costs. Some costs overlooked are their marketing costs, basic overhead like facility costs and utilities, or taxes.

Chances are good that you are undervaluing your own time as well. Most of us don’t value our own time and far undercharge for the time investments we make in the business. You are worth more than you think.

 

 

is a business coach and consultant that works with business owners and managers to create momentum in their business with strategies and tactics that they can implement today. These strategies are based on the five building blocks of business: Marketing, Leadership, Operations, Finance and Systems.

business budgeting

On Paper, On Purpose

By | Accountability, Accounting, Cost Controls, Finance | No Comments

business budgetingIn many organizations, one of the most hated seasons is budget season. Your past performance and ability to stay within projections are carefully analyzed. You are also responsible for developing every detail of your budget for the next year and justifying that amount. Often you are not just justifying your budget to your own boss, but also justifying your amounts to his boss or even a panel or board.

 

Why do good organizations focus on budgets so heavily? There are some basic principles at work here that everyone, big or small, needs to take into consideration:

 

  1. Spending decisions are easier to make when you have decided in advance when you have the time to work through the logic of how to run the business without the emotional pressures.
  2. A budgets is really a goal. Knowing what you expect from your business in terms of sales, revenue and expenses helps you to focus on the activities that are going to make your business the most successful.
  3. The difference between a goal and implementation sometimes is accountability. By continually comparing your performance to your budget, you can hold yourself accountable and keep motivated.
  4. Budgets can also be a communication tool to your employees. By laying out the expectations of the business in terms of black and white numbers, your team can better understand what you expect of them.

Often managers don’t use the budget tools they are given wisely and end up losing their department a great deal of money. Business owners make the same mistake.

 

Dave Ramsey says that every dollar should be put down on paper, on purpose every month. Just knowing your budget numbers for each month and not walking blindly will make a large impact in your success.

 

You have to know where you stand before you can know the direction to take.

 

pie

Aren’t Numbers Fun?

By | Accounting, Cost Controls, Finance, Systems | No Comments

Business Numbers matterNumbers, numbers, numbers.

 

Hate them or love them, they run our world. Material wealth is based on a number assigned to the value of your assets and the revenue they produce. How we feel about something is often reduced to a scale between 1 and 10. Even in social media, you base your “acceptance” on the number of likes, shares or re-tweets.

 

So what numbers matter to you?

 

Some numbers you should track even outside your accounting books. Some numbers many businesses need to keep include sales effectiveness (sales calls/store visitors, positive responses, objections, etc.) or quality measures (Re-dos, refunds, material waste, labor hours) but are often not kept.

 

iContact (the email provider I use for this newsletter) provides me with numbers about how many open the email, how many click through, or how many unsubscribe. I use this feedback to know what content you would prefer to read, how to format it and the best time to deliver it.

 

The challenge with keeping numbers is establishing a discipline to:

  1. Record the numbers
  2. Analyze the number to make sense and
  3. Use the analysis to improve your systems.

 

What do you need to know in order to improve your business?

Know your sales least common denominator

Break Down Your Customer Numbers

By | Accountability, Accounting, Cost Controls, Finance, Marketing, Strategic Planning | No Comments

Walgreens over the last few decades has become the most prominant drug store in the United States. When I was growing up, Rite-Aid and Eckerd pharmacies where the top two “corner pharmacy” giants. Jim Collins, in “Good to Great,” details how Walgreens went from a struggling family-run corporation to a national brand.

 

Know your sales least common denominatorOne of the key components that Walgreens focused on for their growth was their per-customer sales. This is a simple number that averages a store’s receipts per customer. Everything including the location, store layout, sales, and product positioning is sculpted towards increasing their sales-per-customer numbers.

 

It is critically important to know your “least common denominator.” For a primary care medical practice you would use charges and collections per visit whereas a surgical practice would use charges and collections per surgery because of what insurance calls global fees that cover all follow-up visits. Every business should know it’s least common denominator to drive business.

 

When you look at your ratios from your your P&L and Cash Flow statements, you take a 30,000 ft view. By looking at your least common denominator you can begin realizing sales and cost-savings that you are missing on a macro level.

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Know your numbers and ratios

Understand Your Business’s Ratios

By | Accounting, Cost Controls, Finance | One Comment

Know your numbers and ratiosEarlier this week, I talked about knowing your numbers. The key to knowing your numbers is having good ratios that tell you how your business performs relative to your sales.

 

I believe in having strong budgets that tell your money where it is going before you spend it. A budget is created based on past experience and how your numbers have performed in the past.

 

However, sales and performance are not always predictable. So having your ratios set up help you to know if your expenses are in control and appropriate for your sales.

 

First, make every expense a percent of your total sales. While reviewing these ratios, determine what the ratio SHOULD be. Next (this is the hardest part) make a plan to get that ratio into the right range.

 

A quick example: in most restaurants, the food cost as a percentage of sales should be about 33%. If your food cost is around 40%, then there are several factors to investigate. There is spoilage (buying too much and not selling it before it goes bad), portion control, your pricing is too low, complimentary meals, theft, etc.

 

You can’t fix it if you don’t know there is a problem. . . .