Treating your business like a "business" from the start is the difference between success and failure. Running weekly monthly and quarterly reports, keeps your eyes on the numbers and you abreast of changes as they happen. Using week over week, month over month and year over year report comparisons help you evaluate whether this just a one time occurrence or the beginning or end of a trend.
So many business owners, especially solo-preneurs misunderstand the value of reports. "If I'm the only person in the business, why do I need reports?", one client quipped. My response included the following 3 points: 1) reporting gets you in the habit of running your business like a business instead of an extension of your personal life and finances, 2) reports set a precedent of how operations, meetings and reviews will be conducted in the future as your business grows beyond just yourself, 3) reports give you a collection of data from a finite period in time that is sorted and analyzed based on specific criteria critical to your business.
So what reports are absolutely essential? In some ways, that question is unique to the type of business, the reporting of a retail business will differ from that of a service company. However, in my opinion, all businesses can benefit from the following 3 reports on a weekly basis: 1) A Balance Sheet, 2) A Profit & Loss, & 3) a custom report.
An example of data in a custom report would be the following: using an excel sheet you would zero in on specific numbers in your P & L to create a summary week over week, month over month or year over year report.
For example, the owner of a scuba store that also offers classes may want to view the following information for this week, this month, so far this year Vs 1 year ago for the week, month & year:
Sales
# of classes sold
# of dive trips sold
# of equipment sold(i.e- tanks, masks, suits, etc)
Expenses
Advertising
Labor
Utilities
Supplies & equipment
Seeing this data in a report makes it so much easier to make informed decisions based on actual events instead of gut feelings and I think so there for it is.
Feel free to contact me if you need one on one consulting on structuring reports and using them effectively for your business.
Have a great week!
Showing posts with label small business bugdeting. Show all posts
Showing posts with label small business bugdeting. Show all posts
Wednesday, February 4, 2009
Wednesday, January 14, 2009
Survival Tips for Tough Times
All of the current economic data predicts that 2009 will present many more challenging months for business owners. If you and your business are fortunate enough to have survived the tough times in 2008, here are some tips to guarantee survival in the new year:
1) Ask for Discounts- ask all of your vendors for discounts on purchases, shipping, surcharges and fees.
2) Trim the Fat off Every Bill- Often times bills for recurring services like pest control, phone service, bottled water, web hosting, and certain advertising are laden with charges for extra bells and whistles you can do without in exchange for saving a buck or two.
3) Compare Bills to Prior Months for Price Increases- If you notice surcharges, increases or other fees that are increasing your costs, call the vendor and ask for a waiver or reduction.
4) Renegotiate Interest Rates on Credit Cards- Become an interest rate hawk, call your credit card provider and ask for a rate reduction. Most companies will decrease rates for clients in good standing.
5) Talk to Your Landlord- For lots of businesses, rent is the largest expense, ask for some temporary relief and use the saved cash to establish an emergency fund.
We all know good times are ahead. The smart & savy Entrepreneur business owner who can survive this environment will do very well when the economy recovers. Taking some of these steps will help to ensure you are here to reap the rewards of all your hard work.
1) Ask for Discounts- ask all of your vendors for discounts on purchases, shipping, surcharges and fees.
2) Trim the Fat off Every Bill- Often times bills for recurring services like pest control, phone service, bottled water, web hosting, and certain advertising are laden with charges for extra bells and whistles you can do without in exchange for saving a buck or two.
3) Compare Bills to Prior Months for Price Increases- If you notice surcharges, increases or other fees that are increasing your costs, call the vendor and ask for a waiver or reduction.
4) Renegotiate Interest Rates on Credit Cards- Become an interest rate hawk, call your credit card provider and ask for a rate reduction. Most companies will decrease rates for clients in good standing.
5) Talk to Your Landlord- For lots of businesses, rent is the largest expense, ask for some temporary relief and use the saved cash to establish an emergency fund.
We all know good times are ahead. The smart & savy Entrepreneur business owner who can survive this environment will do very well when the economy recovers. Taking some of these steps will help to ensure you are here to reap the rewards of all your hard work.
Tuesday, January 6, 2009
Reply to Classy & Small Business Budgeting
I always start the new year with a new budget. I use the prior year's actual numbers and increase my expense projections by 3% (the average inflation rate) and increase revenue projections by 10% (a modest growth goal).
If I was just starting a business or creating a budget for the first time, I would speak to my landlord, accountant and neighbors to get some baseline figures for my budgetary expenses. For my income, I would rely on my income projections from my business plan.
An expense that must always be included in every business plan and budget for that matter is the category of owner's compensation or owner distributions. Let's make an assumption, that I would like the business to pay me $60,000 for my services over the course of year. I would then put $5,000. per month in my budget ($60,000 / 12 months= $5,000).
Each month I would treat my compensation, like any other bill that needed to be paid and try to get as close as possible to the payment I promised myself. In the months I did not make my minimum payment to myself, I would record that as money the business owes to me. When the business increased its revenues, I would pay myself the back pay owed.
Many business owners do the opposite, they do not plan how much they want to make, instead they plan how much they want the business to gross and take whatever is leftover. That method is not owners compensation, that is profit. I believe, profit should be an additional distribution on top of owners compensation. It is the pot of gold at the end of the rainbow so to speak that makes business ownership worthwhile.
As a business owner, you must make your compensation a priority. Afterall, you would not work for someone else for free, why are you working for your business for free?
Reply to Classy- I hope the information above gives you some insight on how to budget payments for yourself. The rest is up to you, commit to treat your compensation like any other expense, rent, electric, etc. If you can't afford to pay yourself, maybe you need to be more aggressive on cutting other costs or reducing payments on credit card or other debts to free up some cash.
If you have additional questions, feel free to post them.
If I was just starting a business or creating a budget for the first time, I would speak to my landlord, accountant and neighbors to get some baseline figures for my budgetary expenses. For my income, I would rely on my income projections from my business plan.
An expense that must always be included in every business plan and budget for that matter is the category of owner's compensation or owner distributions. Let's make an assumption, that I would like the business to pay me $60,000 for my services over the course of year. I would then put $5,000. per month in my budget ($60,000 / 12 months= $5,000).
Each month I would treat my compensation, like any other bill that needed to be paid and try to get as close as possible to the payment I promised myself. In the months I did not make my minimum payment to myself, I would record that as money the business owes to me. When the business increased its revenues, I would pay myself the back pay owed.
Many business owners do the opposite, they do not plan how much they want to make, instead they plan how much they want the business to gross and take whatever is leftover. That method is not owners compensation, that is profit. I believe, profit should be an additional distribution on top of owners compensation. It is the pot of gold at the end of the rainbow so to speak that makes business ownership worthwhile.
As a business owner, you must make your compensation a priority. Afterall, you would not work for someone else for free, why are you working for your business for free?
Reply to Classy- I hope the information above gives you some insight on how to budget payments for yourself. The rest is up to you, commit to treat your compensation like any other expense, rent, electric, etc. If you can't afford to pay yourself, maybe you need to be more aggressive on cutting other costs or reducing payments on credit card or other debts to free up some cash.
If you have additional questions, feel free to post them.
Subscribe to:
Posts (Atom)
Posts
