Do you want to make more money? Get to know your financials Intimately.
Most business owners we speak to went into business to generate more money and time … freedom … so they can spend time with their families, and doing the things they love.
When I ask them how well they understand their personal and business financials and what their current financial position is they say things like, ‘Oh that’s not my responsibility, that’s my accountant and financial planners job.’ Or, ‘I only look at my profit and loss at tax time.’
Know how to Master Money so it doesn’t Master You
Unfortunately, most people lack the mindset, skillset, strategies and just as importantly the right money making vehicle and system to be financially self-made and self-reliant. At the heart of every financial success story, is a proven money making and management system. Successful business owners analyse relevant and timely financial statements so that they can manage and control the cash and profitability of the business. They then use the data to make accurate and informed decisions, armed with facts and figures, rather than a gut feel alone.
Get Your Financial House in Order
Successful business owners have an inherent belief and understanding that like attracts like. They mastered the financial principle that when you bring your financial house and habits in order, invest energy and focus on it and manage the money that you already have, you will be rewarded with more money to manage. Essentially, the profitability of the business fundamentally continues to grow. Just like sales and marketing, fiscal literacy is also a learnt skill.
Understanding the facts and figures of the business is a key skill for any successful business owner, regardless of the size of the business.
You wouldn’t build a house on shaky foundations, so why do the same with your financial house?
It’s time to get into bed with your Numbers
As they say, numbers never lie and taking a very close and thorough analysis of your current financial situation can paint a picture of what’s going on, and will help greatly in identifying solutions to plug the profit slippage in your business.
There are 8 common areas that you can be focused on to fill the gaps so that you never miss out on maximising profitability. These are 8 areas that you can focus on to help you avoid missed income, improve your sales conversions, and avoid excess spending, and completely avoiding slippage in your profits.
1. Know Your Economic Drivers
Knowing your economic drivers involves knowing what influences inflation, and the prices of goods and services in your sector. You will also be aware of your prospective clients and the factors that drive them to buy, or scale down on their purchases.
2. Optimising under-utilised marketing and sales assets
What are the people, assets and ventures that you have now that are being under-utilised? What gold-mines are you currently sitting on that could unlock more business and more growth?
3. Have the right pricing structure
Be competitive in pricing but don’t go so far as to deny your company the profits that you are worthy of for the product or service you are selling.
4. Add Value, Not Discount
A lot of business owners want to be the business that gives a discount, just like all the rest. Don’t be that business! Show how your business adds value, and how paying for what you offer provides value. This is the way sustainable businesses act.
5. Negotiate prices from suppliers
Don’t get stuck in paying more for something just because you’ve always been paying that amount for it. Take the time to re-evaluate your contracts with your suppliers to negotiate their prices to unlock potential savings that will increase cash flow.
6. Job costing
Look at the way you have been costing your jobs over time. Track and measure your job costings to see where you can maximise margins.
7. Measure and maximise productivity from current team
When you measure your employees’ productivity and discuss your findings with them, you’re letting them know that you expect them to care about their work, perform it as well as they can, and work toward achieving individual goals that are aligned with company goals.
In addition to revealing how individual employees are performing, these measurements can also reveal where the work flow gets slowed down or stopped due to equipment breakdowns, inefficient processes, poor job training, or lack of communication, among other problems.
When used correctly, accurate productivity measurements can also reveal how well your business is progressing towards its goals and targets.
8. Manage fixed expenses
You know that you have a certain amount of expenses that you can’t get away from paying each month to keep your business running. But where can you go lean and mean in cutting down these fixed expenses while not cutting down on your service or products?
Review what your expenses are, and don’t overpay or be lazy in searching out better options. Pay less for better service or products where you can.
Identifying your gaps will not only help you build a much stronger financial foundation, but you will maximise returns from every dollar made through the business.
Founder – Pravar Group
Are you a Trades, Construction or Service Based Business doing over $1 million per annum and want to release the time and financial constrains in your business and life? Click here for your FREE strategy call and learn how we can help you restructure your business in a way that quickly unlocks growth and profits enabling time freedom and most importantly reconnection with your family.