Photo by JD Hancock via Flickr

If you are reading this, the Mayan calendar was off at least by a few days and the end of world did not come as it was predicted.   And, hopefully you’re enjoying the Christmas & Holiday season and reflecting on the year as it comes to a close.

Speaking of reflection… we were having an interesting conversation last week about some businesses who despite the overall disposition of the economy experienced not only growth but a very a profitable year in 2012.   The conversation reminded me of the first few years that I owned my equipment dealership; the fiber optic boom was moving at lightning speed (pun intendedJ) and our equipment was very instrumental in getting it put in the ground.    Our customers were enjoying very profitable years and the dealerships that provided equipment to install it benefited as well.

It was very easy to get pulled into a cycle of reckless spending, because you start convincing yourself it is the “new normal” and the additional revenue will just keep coming.   But the reality is almost everything has a cycle, some are not as severe as others, but the growth arrow seldom points upward 100% of the time.

The closest thing I had to a “business coach” when I owned my own business was the dealership where I cut my teeth in business.  And that dealer had not only been a good leader as my former employer, but continued to be a trusted advisor, mentor, and friend as my dealership was growing.   A couple things he often stressed about growth were the importance of having controlled growth and the importance of reinvesting profits back into your business.  (By the way – this particular idea was one of the big findings from Jim Collins latest book – Great By Choice…we wrote about that a few months ago in 5 Ways Your Business Can Fall Off the Cliff).

The controlled growth mindset keeps you from doing things like over staffing the first time you get a backlog or opening a new branch in a high growth area without researching it thoroughly before implementing.   It is mostly about asking more questions before you make a decision that is going to have a significant financial impact on the business.

But reinvesting profits back into the business was without question the best advice he ever gave me.   His experience was, the best stock he ever put money into was his own business.  So as my business grew that was the approach I took.  It may sound simplistic, but it takes a lot of willpower, especially when things are going great and you see others splurging.  Successful business owners are often tempted to take profits out of the company and start “diversifying their interests”.  Those “interests” will range from other businesses, to lake houses, boats, and real estate.  And trust me you can find all kinds of reason to justify every one of them.

But I poured the profits back into the business, we paid down debt where we could and built up a reserve of cash so if the economy turned south we wouldn’t be overly exposed.   As it turned out, it was a great move - things changed quick when the dot.com bubble burst and 9/11 happened.  The tide turned, sales plummeted and it became survival of the fittest.   Many equipment dealers had over built, they had bloated inventories (guilty!), and stretched credit lines.    Thankfully, we  had been practicing  controlled growth and reinvesting profits as a consistent part of our business plan.  And because of  those two strategies we were better positioned to navigate the downturn and maintain a healthy business.   It wasn’t easy, but relative to many others we were in good shape!  I will say that until that downturn happened, that rainy day, it was really hard to keep from “diversifying my interests”.  Thanks,  John!

How about you, do you have a plan to save for a rainy day in your business?    As always we enjoy your comments & Merry Christmas and Happy Holidays to all.

Chris Steinlage   Kansas City Business Coach

A “Do-Over” takes on many shapes and forms in business; warranty work, improper billing, improper invoicing, arriving at the wrong address for an appointment, shipping to the wrong address, wasted materials…you get the picture. Unfortunately as a business owner (especially with employees) the opportunities to excel in this expensive and unwanted category are almost endless.

Obviously the goal of every business is to shrink this category to a level of irrelevancy. That’s why you focus on building good systems and procedures with appropriate checks and balances so errors are reduced before they ever happen.  These are critical and costly issues and if you don’t get a handle on them, they can drive you out of business.

But if you have employees, how do you get them to understand how to value a mistake that cost the business $50, $500, or $5,000 or even more? It isn’t their money and often it’s hard to make it seem real (although it’s definitely real to you as the owner).  Even if your business has a strong profit sharing program most employees don’t easily connect the link of the cost of a mistake to less money in their pocket. The larger the business, the harder it can be for a single employee to quantify how his/her “Do-Over” is making much of a negative impact on the overall business.

One simple technique that can be very effective is to use a visual of money burning. Everyone values cash and the thought of it burning creates a clear picture you have entered a point of no return as far as every being able to use it again. You can use this technique individually when a “Do-Over” happens or cumulatively if you are effectively tracking this as a line item in your business.  The idea is to visually paint a picture of real money going up in smoke.

Try This:

The next time a significant, preventable, “Do-Over” occurs with an individual, on a project, or within a department of your business consider this approach. In addition to reviewing your policy and procedures that allowed the mistake to happen in the first place, gather everyone involved together and explain what just happened was the equivalent to taking that same amount of $1 bills ($1 bills create a bigger pile) piling them up in the middle of room, (yard/street, etc) and burning them. Let them know, no matter how hard we work that money is gone forever. If you can get them to visualize the mistake as real money and not just a number on a spreadsheet, you will create a connection that will resonate deeper.

We would love to hear your thoughts on this topic. Share them in the comments below.

Chris Steinlage  Kansas Business Coach

Photo by Images_of_money

The end of the year is a great time to think about money – today we have a guest post from Carolyn K. from the BlogContentGuild.com – take it away Carolyn.

The holidays have descended upon us, and the end of the year is rapidly approaching. If you are a business owner, you’ve probably noticed how difficult it can be to manage cash flow around this time of year. One of the greatest things about November and December is that your sales usually go up during these months. One of the worst things about this time of year is inventory management and order management become more difficult largely because of all the sales you you’ve made.

Here are some tips to help you control your cash flow this holiday season:

1. If you sell goods, double-check your inventory every day. Don’t solely rely on the stock information logged in the computer. Clerical errors are easy to make, and you could end up thinking you have enough of a product to go around when you simply don’t.

2. Make sure you ship orders or deliver services to customers in a timely fashion. Customers don’t want to wait around for you just because it’s a busy time of the year. They expect what they ordered to reach them as soon as possible, just as they would expect any other time of the year. You and your employees may need to work overtime around the holidays to ensure that customers are satisfied with your swift service.

3. If your customers pay you on a monthly basis, make sure you call or email them to remind them about their payments in November, December, and January. These months are when customers are least likely to pay you on time because they have a lot going on in their lives and many of them are low on cash. However, the health of your business during the holidays may depend on payments received.

4. Have a talk with your employees about stepping up their game around the holidays. Everyone at the company needs to be on the same page and devoted to accomplishing all necessary goals before Christmas and in between Christmas and New Years. You might want to ask employees to work overtime for a few Saturdays just to make sure everything gets done.

5. Don’t be too hard on yourself. Mistakes happen. If you and your employees work your absolute hardest during the holiday season, your company’s cash flow situation will remain favorable.

Some great ideas from Carolyn – we’d love to hear your thoughts on holiday cash concerns.  Let us know what you think in the comments below.

Shawn Kinkade  Kansas City Business Coach

Photo by TibChris

It’s that time of year – the end of the calendar year and for most the end of the fiscal year. For many businesses, when it comes to their financial statements, it’s the time of year spent reviewing their “numbers”. 

In fact, it’s likely that small to medium sized business owners spend more time looking at their financials between Christmas and New Year’s, than any other time of the year. Why? Because it tends to be a slow time of the year (unless you’re in retail), it’s planning time for next year, and everyone is anxious to see how their year ended, even if everything isn’t entered yet.

However, if you’re like most business owners, you probably didn’t get into business to spend all day looking at financials. You got into business to deliver your product or service. The financials are just a by-product and your accountant pulls information off them to keep Uncle Sam happy. Sound familiar? You are not alone – most business owners have a real fear for numbers!  You know they’re important, even if they’re sometimes baffling, but it’s likely you aren’t really learning what you need to from those numbers…!

Try This

The basics are important…but you need to go deeper than just the accounting reports or the tax impacts that your accountant is looking at.  This year, as you look at your Balance Sheet, Profit & Loss, and Income Statements, try focusing on questions like these:

- Did I really make any progress this year?   (How do I know?)

- Why do I have less cash in the bank but my sales increased?

- What areas of my business generated the most revenue?  The most profit?

- Is my spending in line with other companies that provide similar products and services?  (If you’re not sure…we have a really cool financial benchmarking tool that can help you figure that out – call us!)

- Are my employees, department, or staff generating acceptable amounts of revenue for our industry?

- What kind of Return on Investment did I get on my marketing investment this year?  What worked the best?  What was worst?

The list of potential questions is long and they are all valid and yes, there are answers. Unfortunately instead of buckling down and finding the answers, many business owners get overwhelmed and shift their focus back to delivering their product or service, because after all that is why they got into business in the first place. Right?

If you want your business to succeed long term, don’t fall into that trap. If you don’t understand what the numbers mean, raise your hand and get some help. If you do understand your financials, but you aren’t sure if they mean you’re doing good or bad or you struggle to figure out where the opportunities lay for improvement, get some assistance. A fresh detailed Financial Analysis of a business can be an incredibly enlightening and profitable experience for a business owner.  Sometimes a 3rd party can see things that you’re too close to (or help you ask questions you might not have thought about).

Do you know what to look for in your financials? Besides sales and profits, what are the drivers that you scrutinize? Feel free to share your comments below.

Chris Steinlage, Kansas City Business Coach

Photo by MeddyGarnet

  photo by lrargerich 

When you get some quiet time, when you have a few minutes to yourself and you think about your business, do the numbers scare you?  Whether it’s your bank account balance, your taxes, your profitability – are those financial numbers scaring you?

Do you ever wake up in the middle of the night sweating because of the numbers?

While that may or may not be true for you, it is sadly true for a lot of business owners.  They love their business, their clients and even their employees but they don’t have a good relationship with the financial numbers around their business.

The good news is there are ways to deal with the fear (and the numbers) and if you can get past this issue you will find your self in a position of power and control that is probably hard to imagine right now.

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