Business Operations

When to Outsource Your Accounting

When to Outsource Your Accounting

Guess what gets pushed to the back? Accounting.

I see this a lot in business. The owner thinks “I’ll get to that later”, but there always seems to be something more important. Some immediate fire to put out. After a while it becomes a bigger project than you have time for so you continue to ignore it until it’s tax time or your banker needs a financial statement.

How to Grow a Business Worth Selling

How to Grow a Business Worth Selling

Many small business owners see their business as a retirement plan. If that’s the case for you then you need to start thinking about how to get the most when selling your business.

These are ideas and strategies that need to be in place long before you’re ready to sell. A buyer will want to see at least the last 3 years of financials.

The One Thing That Can Make You More Profitable

There is one thing that separates your business model from a well-oiled machine. No, it’s not marketing, or branding, or a dynamite product, or even customer service.

It’s one simple thing. Processes. More importantly, written processes.

If you want to…. Hire Grow Add new locations Scale Add Investors Sell your business

You need written processes.

Strategies to Grow Your Business

Growth can come in many different forms (even in pruning… more on that another day). If you’re planning to grow your business this year you need to get very clear on the HOW. How are you going to grow? That can be the overwhelming part, so let’s simplify it! There are three easy growth areas to consider.

Volume - Increase the number of sales you make Volume is all about the quantity. You want to sell more of the thing you already do. This strategy usually involves acquiring new customers which can be costly because it requires more spending in marketing and getting new customers in the door. Be sure you are creating lasting customers and not one time customers.

Price - Increase the price of your service If you want to increase your prices you need to be sure that your value aligns with the price increase. The value you deliver should out weigh your price. This results in delighted customers! If you’re not comfortable with a direct price increase think about how you could add value, then increase the value and the price. Is there a way to enhance the customer experience (this is golden)?

Services - Increase the number of services you offer Adding new services is a great way to increase sales. Figuring out what to add can be simple, but many businesses don’t do it. What is this simple step? ASK. Simply ask your current customers what else you can help them with. What are their biggest frustrations? Now figure out how to solve their frustrations.

These three strategies can be used alone or together. But remember, Focus is key. Depending on your size, your team, and your goals, you should only focus on one to two things at a time. Focus is what gets work done!

What are you going to do to grow your business this year?

If you’d like to grow your business but you’re not real sure where to start, contact us for a free consultation, and we’ll see how we can help you reach your goals.

Growth Cost Money- Avoid the Unexpected

I was recently talking with a client who is at the end of year 1 of his 3 year growth plan. We were recapping with an After Action Review (a report of what worked and what didn’t), and I was surprised by some of his comments. Although, in the beginning of year one he created a written plan for growing his business, he never thought about the additional costs he would have to support that growth.

Fortunately for him, he had savings socked away so he didn’t have any hiccups in his plan. But without that savings his growth plan could have been a flop.

So what costs can increase when you’re growing your business...

If You're Adding New Services-  Many times a business will grow by adding new services. This requires an investment in education, new processes, and marketing for the new service. Learning will not only cost money but time as well. Be sure you have planned for both!

If You're Hiring-  Many times if you are increasing your business volume you will also need to hire. You’ll need to budget for the increased salary as well as payroll taxes, benefits, paid time-off, and workers comp insurance.

If You're Increasing Sales-  If your growth is coming from increased sales you will probably need to increase your marketing budget. This will involve time and money. Will you outsource this or do it in-house? Are you growing online or in a new region? Aligning your marketing needs with a marketing budget will help you plan accordingly.

If You're Increasing Production-  If you’re developing new products, or producing more products, you'll not only need to invest in more equipment but you'll also need more raw materials on hand. This could also lead to hiring, and increased marketing, which increases your upfront costs.

If You're Adding Locations-  If you are scaling your business by opening new locations you need to be aware of not only the upfront costs to open a location but also the ongoing costs. When adding locations you need to be focused on process development and improvement above all else. Clear and concise processes are the only way you can get your business to run without you there… and isn’t that the ultimate goal?

It's important to not only understand these costs but to also have them at the forefront of your growth plan. Failing to plan for these extra costs can be detrimental to your business if you don’t factor them in.

If you’d like to grow your business but you’re not real sure where to start, contact us for a free consultation, and we’ll see how we can help you reach your goals.

Growth Companies: 4 Numbers You Need to Know

Service-based business owners have no problem focusing on new customers and serving current customers. But many don’t know how to take their business to the next level. If you’re looking to grow your business, you must pay close attention to your financials and key metrics. Key metrics are financial numbers that you need to hit in order to reach your overall goals. When planning with clients I always tie a goal to a metric or target. How else will you know you achieved the goal?

Here is a list of 4 key metrics that are important to track in your service-based business.

Sales Close Ratio. You get this number by dividing the number of sales proposals made by the number of proposals you closed. This tells you the percentage of proposals you win. Obviously, you want this number to be high, but not too high. Chances are if you’re closing 90%-100% of proposals you make, you are walking away from money on the table.

Project Margin. This metric measures the profit you will make on each project you undertake. It is the percentage of project revenue - direct costs you will pay to complete the project. The higher the number the better!

Profit margin metrics will help you with making profitable proposals and driving overall profits. I recommend determining your lowest acceptable project margin. Then, when you are giving new proposals be sure to never go below your minimum.

Monthly Operating Expenses. Your operating expenses are the expenses you have every single month. Why should you know this number? Because this is what you will have to spend each month just to keep the doors open. You’ll spend this even if you have zero collections. I suggest taking your annual operating expenses and dividing by 12. This gives you a monthly average.

You can also use this number as a target for how much you should have in savings. In an ideal world having 3 to 5 months cash set aside would be sufficient. In reality, it takes dedication and time to get that built up.

Billable Utilization. This rate will help you track productivity. On an annual basis you’ll divide the employee’s total billable hours by 2,000 hours. This gives you each employee’s productivity. You should monitor this to determine if you have space to add more client work or if it’s time to add more employees.

However, I don’t think this number should be monitored by itself. An employee can have a low utilization rate but it’s out of their control. You must also look at overall profit, prospects in the pipeline, and marketing budgets.

Why are these numbers important for growth? Because growth cost money! Your business goals must be aligned with your resources (time, money, and energy) or you’re setting yourself up for failure.

If you’re struggling to monitor and track your financial information, contact us and we can schedule a free consultation to see if we can help get you on track.

3 Reasons Your Business is Not Growing

This was the year! The year you wanted to grow your business. However, you're just not seeing the results. You started the year out strong with high hopes but quickly got busy in the day to day activities. Being busy turns into exhaustion and before you know it you're burned out. Then the last thing you want to do is think about growing a business you're burned out in. Unfortunately, this is pretty common for business owners. Several (aka: a million) things went wrong in the business growth.

Here's the top 3 reasons I see for a business not growing:

  • No Clear Plan. When growing a business you should have a clear, concise, and communicated plan in place. And not just an annual plan. You need a plan that is broken down into quarters, then into months, and then into days. Yes, I said DAYS! You and your team should know what needs to be done each day to move you one step closer to the target.

  • Competing on Price. Unless you happen to be Wal-Mart, you should NOT be competing on price. Wanna know why? Because Wal-Mart will win on price every time. EVERY TIME. Competing on price is a race to the bottom. If you offer a low price this week, next week the guy down the street will go lower, then the following week you'll go lower, and so on. Before you know it you'll be wondering why you're not making a profit.

  • Shiny Object Syndrome. So you did happen to have a written plan for growing then... SQUIRREL! Letting yourself get distracted by the latest and greatest will stall growth. I know new technology is fun or a new business opportunity sounds terrific, but if you constantly get derailed and can't stick to a plan already in place, you won't be able to grow your business. Strategy is about what you need to say NO to.

So do any of the above reasons sound familiar? If so, don't beat yourself up over it. Recognize the issues, make a plan, and move forward. Make today the day you start growing!