More for You!: Create Additional Profit in 2016
By now you've completed all of your financial budgeting and planning for 2016, have it set up on a month-by-month basis, and have organized your financial reporting to be able to measure your progress both on actuals to date and performance to plan. Right? Riiiiiight!!
Perhaps you're not at that point in the financial management of your company. But what is the minimal acceptable standard for financial reporting in a business today? It's an income statement and a balance sheet delivered to you, the business owner, by the 15th day following the close of business of the previous month, every month, period! There is no other minimal acceptable standard.
If you're attempting to manage your business with quarterly, half yearly, or (Good grief!) annual financial statements, you are missing a tremendous opportunity to drive up the financial performance of your business. Accurate, timely financial information that you actually understand is the key to your improved financial success in 2016.
There are no excuses! If you don't like QuickBooks, try Xero. If you need assistance, terrific free counseling is available through America's Small Business Development Center counselors, and there is probably one near you. (To find them go to americassbdc.org.) You will be amazed at what is available to help you get to the minimum acceptable standard of financial reporting.
Give yourself a $50,000 raise
This is your financial assignment for 2016, in case you haven't given yourself one yet. I want you to look inside your business and I want you to find, create, figure out, and implement a 1 percent price increase. If a significant portion of what you sell is incredibly price-sensitive, find something that isn't and increase it by more to ultimately create a 1 percent overall price increase in 2016.
Review all of your Cost of Goods Sold (that is everything you spend before creating your Gross Profit on your financial statement). I want you to find and save 2 percent on all of those costs. It could be that you need to negotiate better with your suppliers, perhaps adjust the pay scale of the people who actually perform the work created by the sale. I don't know what it is for your business. I'm giving you the assignment to go figure it out and do it.
I want you to look inside all of your General and Administrative expenses and find and implement a 2 percent decrease in your Administrative costs across the board in 2016. Review every expense that falls below your Gross Profit line (including administrative wages, bank fees, credit card fees, insurance, rent) and figure out a way to pay 2 percent less for all of it. This requires work. However, the combination of all of the above pays great dividends to you.
Let's assume for a moment that your business generates $1 million in annual revenue. The 5 percent I have just described is your $50,000 raise next year. Today that 5 percent is going somewhere else, not to you. As the owner of your operation it is your responsibility to find it and deliver it back to you and your family.
We teach that not all solutions come from driving up the revenue line. While increased sales volume is important, profit is actually created through the management of careful, incremental controls on all of the expenses that fall between the revenue line and profit line.
More ODP for you!
At Profit Mastery, our goal is to deliver to you more of what we call Owner's Discretionary Profit: the amount of money available for you to do what you want with. Take it home, reinvest in the business, or pay down debt and reduce the risk for you and your family.
Now, if you can honestly look yourself in the mirror and say you have absolutely no idea what I'm talking about and don't understand any of the above terms, I have good news! Finance is not that hard to learn, and it's actually fun when we teach it. If you'd like more information about how to study business finance online through Profit Mastery University, or are interested in having us come and present at an upcoming conference, please don't hesitate to contact me.
Here is the hard, fundamental truth: To improve the bottom line in your company, to drive up profits and cash flow and improve the standard of living for you and your family, you have to improve you. No one else can do it for you.
Rod Bristol is executive vice president at Profit Mastery. Learn more at www.profitmastery.net, 800-488-3520 x13 or write to at Bristol@brs-seattle.com.
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Multi-Unit Franchisee Magazine: Issue 1, 2016