Don’t run your business in the dark

If you do not produce a monthly Profit and Loss statement, you are running your business in the dark.
One of the most important indications of a business’s success, or failure, can only be determined from a monthly P&L. If you fail to produce one every month, how will you know if you are making money?
The common excuse used for not having up-to-date financial information is, “I cannot afford an accountant.” My answer to this is, for $25 to $30 an hour, you should be able to afford one once or twice a week. If not, you are probably losing money or not making much of it.
People who tell me they are doing well and do not produce a P&L statement are just kidding themselves.
Let me reiterate, without a proper, detailed monthly P&L Statement, you are operating your business in the dark. To run a business successfully, you need light, and lots of it.
A detailed P&L is a breakdown of income and expenditure that will show your monthly sales and what you have spent to get your sales income, such as your overheads and general running costs.
From this information, you will be able to see sales trends, such as: higher sales in one month and lower in another. This will lead you to investigate if it was because of a holiday period, school holidays, hot or cold weather.
Why did sales drop or increase when they did? If you study and investigate these sales trends, you should find out why your sales were different each month.
Once you have the answer, you can then direct your advertising and marketing to peak periods and reduce them when the sales are low. You can also devise promotional activities when times are good and even when they are bad to help improve sales.
Likewise, your expenses can be looked at carefully to see if you can reduce them at bad times, which will produce increased net profit.
Going through the list of expenses each month will also enable you to look at ways of reducing costs by reorganizing some of the things you do.
One of the reasons why businesses do not make a “true net profit” is they often forget to include one vital cost: their own salary. You must always add in the salary you think you should earn, even if you defer it initially. At least, this will take into account what you want to earn once the business is successful.
If you forget to add in your salary, you will need to make substantial increases to your sales price later, which will cause you problems. Don’t forget to include yourself as part of the overhead, so when the business starts to do well, you will be able to earn a decent salary.
No matter the size, every business needs financial information. If you study it, you will undoubtedly know more about your business.

Sales or Profit – Vanity vs Sanity

Sales or Profit – Vanity vs Sanity
I can’t tell you how many times I’ve heard “my business is doing well; my sales have increased 40%.” Big deal! What I prefer to hear is, “my net profits have increased 40%.”
Any businessman knows (or at least, they should) sales don’t paint the complete picture of how a business is doing, and it can often be deceiving no matter the direction. The focus really should be on ‘net profit’ since it reflects if you truly make money.
Business is all about increasing your net profit, not a gross profit and large sales. No matter how much your sales and market share increase, it’s rather pointless if it doesn’t make you money. I often say, “larger sales are pure Vanity; net profits are Sanity.” It’s your choice to decide which road you desire.
A boss who runs a business without considering the net profit will soon be left behind with large bills, which he is unable to pay.
I had an example of this with a client who ran his business on pure Vanity.
I suggested that he reduced his sales by 30%, eliminating the large multinational companies who always paid late and wanted everything at a lower price. These customers were basically bullies and my client had a big ego and wanted to boast that he supplied the big names in industry!
I said if he followed my advice and reduced sales by eliminating these large companies he would turn a small $3000 net profit into a much bigger amount. However, the task at hand was to get through to him that reducing sales didn’t mean reducing profits; in fact, it would result in the complete opposite.
After much deliberation, he finally sided with Sanity. With this move, even though sales were reduced by $750,000, the net profit increased by 33% to $100,000.
As you can see, you should not be driven solely by sales. Yes, you need sales to generate business, but always consider the value of the sales and look carefully at the net return the sales provide.
If you do this, clearly you are not driven by Vanity but by Sanity. Congratulations!

One word can make your business fail

One word can make your business fail
It is amazing to think that there is one word that can lead to business disaster: Complacency.
To me, complacency is the Cancer of business, and it is usually terminal.
Too often, people who have built a successful business come to crossroads in business. They decide everything is going well and, in turn, lose focus of the business by playing golf, working half days during the week or taking longer holidays.
In theory, this seems OK, but what is the downside to this behavior? Yes, you want to enjoy the benefits of your success, but you have to make sure that you do not pay a high price for this.
To take time away from a business that you have successful created is OK but only if you have trained other people to fill your shoes. I don’t mean staff who can manage under your direction, but people who will make decisions the way that you would. You have to make sure you have continuity so there will be no discrepancy in their future decision-making process.
Continuity is essential, unless you want a change of ideas in your business to bring it to a different level.
I believe that there is a time when you can take time off from your business, but it has to be carefully thought out. Reasons to relinquish authority depend on the situation and/or future objectives you hope to achieve. Do you want others to take the business forward to a new level or in a different direction? Do you want to retire or sell the business? Or do you feel that you have done as much as you can, or want to do? All these reasons are indeed legitimate.
However, be aware that if the business starts to slip, the slope is very slippery. Coming back up the hill is very steep and difficult to climb.
Enjoy the rewards to your success; just be careful to make sure that the enjoyment lasts a long time.

Are Presidential Elections the latest reality show?

Being raised in London and now a resident of California, I cannot help but compare the Electoral system in the UK with the USA.

One aspect in particular is the campaign process of the Presidential election and the incredible amount of time and money wasted by candidates trying to get elected. This comment does not apply just to the potential candidates, but the election of judges, district attorneys, school boards, etc. the electoral process.

By allowing money to influence, and possibly dictate, who should win an election, means that you don’t always get the best candidate. Knowing that, it’s no surprise that this may be the richest person or the candidate who raises the most money. What’s startling is that when you hear news coverage, you’re not just given the content of the politician’s speeches or platform, but also the amount of money they raised as if this was a deciding factor!

Just because someone advertises more than another does not mean they are better suited for public office! If a voter likes the advertisement, they may vote for that person and ignore the actual content of what the candidate is offering to better the country.

Surely, it would make sense to limit promotional expenditure so that the voter can see all candidates on an equal footing and then decide who is the best person for the job, not who spends the most money and makes the best ads, right? It would make more sense if the advertising money was allocated by the Government to ensure that they all had the same amount to spend and dash donor’s expectations of influencing policy in the future.

Another issue that I find strange is that the election process for President takes two years, plus millions, if not billions of dollars. When it comes down to it, this money could be spent in many better and more productive ways to help the country. It would be more sensible if each party decided who they wanted to be their leader outright to prevent money being wasted by numerous candidates seeking election.

Politics has many strange habits perhaps the time is right for some tweaking?