Managing by the Numbers

~ C.O.R.E. Beliefs ~ Leave a comment

Good morning!  On the downward path towards the weekend.  The younger two are having their last day at school today and tomorrow starts their weekend with Kubae and me!  And then there is Father’s Day, where I will be grillin’ and chillin’ with all 4 boys and Kubae.  Life is awesome.

Does your business often seem out of control?  Do you think you are running around from one crisis to the next?  I used to find myself in a similar situation before I took my vacation from public accounting.  One thing I wish I had started earlier was managing by the numbers.

I don’t mean your accounting numbers, at least not totally.  I mean establishing goals and objectives, quantifying them, and then managing to those numbers.  Let me give you an example.

The first thing I have is my personal calendar.  My “Work day” starts at 7am writing this blog.  First, I plan my articles a week in advance.  I schedule 45 minutes each day to write and edit and I am shooting for under 800 words.  When I am done, I adjust my calendar for how long it actually takes me to complete the task and how many words I wrote.

My articles get written, I know if I am getting out of control and I do not stress out over it.  By setting the “numbers” I give myself freedom to perform to my highest standard and then measure, over time, how close I am to my objectives.

I also have targets for Number of views, number of readers, pingbacks etc.  I use all this feedback to plan future articles and how long I should allocate to research and writing.

My work day is also planned.  I schedule out on my firm calendar what work I anticipate doing and approximately how long I should spend on it.  The Firm has a great practice management system which tracks our time in minutes so I am able to see how long a task actually took me.

By tracking every aspect, I get feedback and can make adjustments to how I work or even what I work on.  This is an incredible tool for not only me, but the firm.  Because the goal is not to keep me (or anyone in the firm) busy, it is to get free time to start working on other things of value to our clients.

So, if your day seems to be a constant firefighting drill, I strongly encourage you to start planning.  Do it simply at first – use Google calendar and start blocking out time during the day for specific activities.  For instance, perhaps set the first hour of your day to be “respond to emails”.  Then, measure the actual time you spent working on it by either changing the calendar time or making a note.

Planning and feedback.  It works the same way in your business.  First, set your goals and objectives.  Do the work and track how it is going.  Then measure how well you are doing against the plan.  Based upon your measurement, consider modifying work processes to either reduce time or complexity.  Then roll out the new plan. If this sounds familiar to you, it is because it is the standard Lean Six Sigma approach of PDCA – Plan, Do, Check, Act.

If shipping on time is important, then set a goal that 95% of all shipments go out on time.  If having your construction team get to the job site on time is important, set a goal of 95% of jobs start on time.  Plan.

Every day, have a list of orders that needs to be shipped out that day.  Track how many actually got out the door.  Have your construction superintendent send you a text when the crews are swinging their hammer. Track the times.  Do.

Keep a running record of the plan and the actual.  Monitor the differences. Think about how to get closer to your goal or, if you are actually beating your goal, consider new goals and new ways to get to the goal.  Measure.

With your new plan and goals in place, train your team to carry out the work the way you planned it.  Yes, track everything.  Act.

As a small business owner, your time is absolutely precious.  There is so little of it and there are so many demands.  Only by planning can you get control of your time and perhaps get back to the real reason you started your business – to have the life you wanted.

If you are wondering how you can get started, I strongly encourage you to talk with you accounting professional.  We have been trained since the beginning of our careers to measure and we track time in exquisite detail.  If you do not have an accounting professional or would like to learn more about Currie & McLain, feel free to contact us for a free no obligation consultation.  We are here to help you get back the life you wanted when you began your journey.

Have a great Thursday.  FYI Under 900 words and 35 minutes.  🙂  I love managing by the number.

 

 

 

Location Location Location

~ C.O.R.E. Beliefs ~ 1 Comment

Good morning and happy Wednesday.  Even though it is a little cloudy, I am certain that it is going to be a great day.  I also updated yesterday’s blog to include a picture of Brendan at his award ceremony.  I am a very lucky dad.

Last weekend while we wandered downtown Portland, Kubae and I got to talking about business locations.  We would see a thriving business on one corner and another that appeared on life support a few blocks away.  We saw businesses that seemed out of place in relationship to the other businesses nearby.  It made us think about the old saying, “A great business in a poor location will fail.  A poor business in a great location will thrive.”  Or, “Location, Location, Location”.

Where you locate your business is a critical element of your strategy. This goes from what part of the country you locate to which part of a neighborhood you occupy.  I have often seen small businesses in challenging locations and when I discuss it with the owner, the answer has been typically, “It is what I could afford.”

I can appreciate the response but I think you owe it to your customers to really give this thought.  For instance, imagine you own a specialty home goods store.  You buy handmade decorative items from artisans in your area.  So far so good.  Now, who is your target customer?

Lets say your target customer happens to be a working couple who have limited time to shop but have lots of discretionary income.  They like shopping at other specialty stores and currently prefer to “touch-and-feel” their way through a shopping experience.  They eat out two or three times a week and prefer nice restaurants over fast food.

Knowing these basics, where are some locations and why might you choose one over the other?

  • A strip mall near a busy intersection with good traffic flow.  The strip mall has a hair stylist, a convenience store and 3 other vacant spaces.  Rent is reasonable.
  • An industrial type warehouse with some manufacturers and truck storage.  It is a little out of the way but the rent is very reasonable.
  • A strip mall located across the street from a major regional shopping mall.  There are other specialty shops such as a children’s boutique, a spa and nail salon, a highly rated restaurant.  Rent is on the high side.

I have given just 3 examples but you get the point.  The right location can help your small business get additional exposure.  It may cost more but the potential for new business may be worth the additional cost.  Think about this in relationship to the spaces above, your business and your target customer.

Chances are, your prospective customer is not going to search for you on the internet; at least not initially.  This business described above is solving a problem that the prospect doesn’t know he has.  By locating in the first strip mall, you might save money but probably will not get the right traffic flow.  The same goes for locating in a warehouse away from every day traffic.  Definitely a potential money-saving move but may not help you generate additional traffic.

If you are certain of your target customer, you might evaluate that being near a highly rated restaurant and other specialty – but not directly competing – businesses might be the right opportunity.  You could get walk-in traffic from before and after dinner or those who were shopping at other specialty stores very close by.  You will definitely pay more but your odds of attracting the right customer, your target customer, will greatly improve.  And getting your target customer in your location is absolutely critical.

So as you plan and budget for your business, think about location and the opportunity for increased sales, not just the cost of the space.  As you are planning, consider bringing in your accounting professional to discuss your budget, your plan and even your target customer.  Your accounting professional has a wealth of contacts and information that can be of huge benefit to you in the planning phase.  If you do not have an accountant or are interested in a second opinion, feel free to reach out to us at Currie & McLain.  We are happy to offer a free no obligation consultation to help you determine if we are a good fit for you and your small business.

Have a great day.

Taking Credit Card Payment

~ C.O.R.E. Beliefs ~ 1 Comment

Good morning.

It is still a little early and I am supposed to keep this is secret from Brendan, but today he is receiving the President’s Education Award.  And on top of that, this is officially his last week of the 5th grade and is moving onto middle school next school year.  I am extremely proud of Brendan for his accomplishments at school and at home as he is just a super-awesome young man to hang around with.  Congratulations Brendan, I love you!

I have updated this post for a picture of Brendan after receiving his award.  He also received recognition for his hard work in band and in their Pride Group.  You are awesome Brendan!

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Small Business and Selling on Terms

One of the more challenging choices a growing small business faces is how and when to sell on terms.  The fact is, the simplest way to run your business is on cash – that is, getting paid with cash or possibly a check when you do something or sell something.  Any other sale is on terms; this includes taking credit cards (as I will explain in a moment).

The closer you are to selling to the end-using person, Business-to-Consumer (B2c) sales, the closer you can get to collecting cash on delivery.  There are 2 key parts to a  cash-based B2C transaction – 1) relatively low unit price and 2) ability to take ownership of the goods/service at the time of sale.  If you are a Food Truck in a downtown area, I would encourage you to stick to a “Cash Only” policy.

“What about accepting credit cards?”, you ask.  “Isn’t that the same as cash?”

No, accepting credit cards is not the same as cash, no matter how much the credit card industry wants you to believe otherwise.  But it can be very beneficial to your small business to accept credit cards from customers.  Now, I am going to apologize because this might get a little confusing but bear with me.

When someone wants to buy from you but doesn’t have the right amount of money on-hand, they have to ask to pay for it later. (Think Whimpy from Popeye’s cartoons where – he will gladly pay you Tuesday for a hamburger today) You are taking them on faith that the payment will be coming when they promised.

From an accounting standpoint, you have created an Account Receivable (A/R) from Whimpy.  The sale of the burger happens today and you collect Tuesday (unfortunately you never seem to sell on a Tuesday so you can collect same day).  Now, the sooner you collect that A/R, the better your cash flow will be.  But what to do when you have other bills to pay and the money won’t be in for some period of time?

You Sell your Receivable

A few years ago, there was a very large industry which specialized in buying – or loaning against – A/R.  This is known as factoring.  These company’s would give you money for your A/R and then collect the face value from the Customer.  You would receive a little less than face value but you had cash today to pay your bills.

This is exactly how taking credit card payments works.  Let’s walk through the Whimpy hamburger sale.

Whimpy buys $50.00 worth of hamburgers a week.  He always pays on Tuesday for the hamburgers bought Wednesday to Sunday.  You still have other bills to pay, so you are wondering what you can do about this.

  • Does it make sense to deny Whimpy his $50.00 of hamburgers if he can’t pay for them daily?  That could be a good percentage of your weekly sales so that might not be a great idea.
  • If you could find someone willing to give you $45.00 every Friday who would then collect the $50.00 from Whimpy on Tuesday, would this help your cash flow?
  • Or, if Whimpy has a credit card, he can buy his $7.00 hamburger every day and we can pay the Credit Card Company $0.25 per transaction (hamburger) and they can worry about collecting from Whimpy on their terms.  Over the course of a week, your this $50.00 of sales costs you $1.75 so you actually net $48.25.  Would this be even more helpful to your cash flow?

For today’s small business selling B2C, selling on Credit Card terms can offer a substantial boost to revenues and profits.  The truth is, most people are not running around with lots of cash in their pockets so your ability to sell to them can be limited on a cash-only basis.  Accepting their ability to essentially “Pay you tomorrow for the hamburger today” may beat “Sorry I would buy from you but I don’t have any cash”.

Now, I am not suggesting that the fees charged by credit card companies are fair or reasonable, or even that they are not as it depends on what you want and need. I honestly believe though, your first consideration as a small business owner is what you can do to increase sales.  Offering a new term to current and potential customers might be an easy solution to get you access to new business.  But remember there is a cost.

Every credit card offered has different fees they charge a merchant and it can be confusing.  You will need to have a conversation with several different merchant services providers and even your bank.  It might also be helpful to bring your accounting professional into that conversation so you get an unbiased, independent evaluation of your credit card acceptance options.  If you do not have an accounting professional or would like a second opinion, contact us at Currie & McLain and we would be happy to have a free no obligation conversation with you about your business and if offering to accept credit cards (or other terms) is right for you.

Have a great Tuesday.

Marketing Expenses

~ C.O.R.E. Beliefs ~ Leave a comment

Happy Monday everyone.

On Saturday, Kubae and I went into Portland for an Urban Hike.  In all, we put in almost 10 miles (granted over 6 hours) and enjoyed an almost car-free downtown experience.

We even caught part of the Rose Parade, but mostly walked the Pearl District with brunch at the Brunchbox – Monte Cristo sandwich and late lunch at the Upper Deck on 13th.  For lunch we split the Fenway Club (which was smart because it was enormous) and lots and lots of fries.

I really enjoy our urban explorations, especially when a city is kind enough to shutdown auto traffic.

In my years of practice, I have discovered that, for the most part, small business owners have been slow to embrace marketing as a means to growing their business.  My observation is that there are two areas of the business which are typically thought about at the last minute when the owner strikes out on his own – accounting and marketing.  I think this is because these are the two areas they were not exposed to in the previous position when they got the idea to go into business.  These are also the two areas that protect the process – the business as you see it – by generating interest in your offering and then making sure that you are profitable.

There is the old saying, “You can lead a horse to water, but you can’t make it drink.”  But what if you had along a “Horse Whisperer”, whose sole job was to constantly whisper into the horses ear – in horse language – “You are thirsty, you are thirsty, you are thirsty…”  I think that by the time the horse was lead to water, it would be extremely difficult to get your horse to stop drinking!

This is the essence of marketing.  Marketing is all about building awareness of your business; what you offer and how customers can buy.  This should not be confused with the act of closing the deal – the sale.  Marketing gets prospects in the door and sales does the easy part… provided that your sales message supported all the marketing you have done.

Marketing is the front end of your business.  It is the telephone, your website, your email address.   It is about how your business looks when a customer walks in the door.  10,000 things that come together to present your business.  Marketing is all the things that give your prospects and returning customers that feeling you totally understand his situation and offer the right solution.

When it comes to marketing, think bigger picture.  Ask yourself how prospects look for products/services you offer?  Do they ask a friend or perhaps another trusted advisor?  Is your prospects first stop Google?  In today’s fast-paced world, you should consider that most new prospects and repeat customers, are going to search you on the internet so you need to be ready for that.

Since we are now at mid-year for most small businesses, I would encourage you to start your budgeting process for next year.  I know, no one likes to budget but it can really help you determine how your limited resources are going to be put to use in growing your business profitably.  By looking hard at what you have and what you want, you can start making better decisions about how you spend money to get the business you want.

Some things to consider:

  • The demographic of your target customer
  • What your target customer likes and dislikes
  • How they find a solution to a potential problem
  • Internet presence and searchability
  • Company phone number versus cell number
  • Email (domain) address – no Yahoo, Hotmail, or Google.
  • 800 number
  • Printed materials
  • Time

Put values on these items, both their cost and their potential revenue.  Be conservative on both sides.  The low dollar investment with high potential pay-out might likely be the area you want to invest your money in to generate new prospects.  But no matter how you want to invest in your marketing, you will definitely want to find measurements that help you know if your investment is working like you planned.

I strongly encourage you to work with your accounting professional and perhaps even a marketing consultant if you have questions.  Remember, your accounting firm’s Principals and Partners have many years of experience marketing and developing their business and can be a very useful resource for you.  And if you would like to have a second opinion or are looking for an Accounting firm that knows small business, feel free to contact us at Currie & McLain.  We would be happy to sit down with you for a free no obligation consultation about your business and how you might find ways to grow profitably.