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Zusammenfassung von Simple Numbers, Straight Talk, Big Profits!

Name: Simple Numbers, Straight Talk, Big Profits!
Rating: 4.2 (27 reviews)
Author: Greg Crabtree and Beverly Blair Harzog

Greg Crabtree and Beverly Blair Harzog

Four Keys to Unlock Your Business Potential

4.2 (27 Bewertungen)

18 Min.

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Unternehmertum Kleine Unternehmen

Inhaltsübersicht

Simple Numbers, Straight Talk, Big Profits!
in 8 Kernaussagen verstehen

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Kernaussage 1 von 8

What’s in it for me? Learn simple but vital metrics to determine your firm’s potential success.

You own a small business and things seem to be going well. You’ve managed to survive the first few turbulent months and have even started to grow the business a little. What should you do next?

Common wisdom would suggest that you focus on revenue and maximizing sales. You borrow, you hire more staff and take all the orders you can, anything to keep the money coming in.

Yet that’s not the right path. These blinks show you how sticking to this common yet flawed strategy will lead you toward ruin.

Far from the money you think you want to come in, it’s the money going out that matters. Revenue means nothing if you are spending more than you earn. Profit is king, and these blinks show you how to go about securing it.

In these blinks, you’ll discover

why every business leader should pay themselves what they deserve;
why you should never, ever go into debt; and
why you should pay your staff like a winning NFL coach would.

Business owners should always pay themselves the correct market wage.

Here’s a surprising figure: 90 percent of small business owners pay themselves less than a fair market wage.

And in many ways, this is a rational choice: After all, by lowering their own wage costs, business owners can make pre-tax profits look much healthier.

But despite this, business owners should always pay themselves the correct market wage. There are two reasons why this should be the case.

First, not paying yourself (or your employees) a market-based wage actually undermines your business. Pre-tax profits and labor expenses are key figures which affect important financial measures such as labor productivity, or the percentage of pre-tax profits to revenue.

As we’ll see in later blinks, these two metrics are crucial in defining the success of your business. And artificially altering them could affect your ability to grow your company.

You should also know that the U.S. Internal Revenue Service has included this tactic – that is, underpaying wages – in a list of “dirty dozen” tax scams used by closely held (or “S”) corporations. Accordingly, the federal tax agency is increasingly choosing to audit firms suspected of employing this practice.

Second, paying yourself a market-based wage is crucial when it comes to selling your business or making an exit. That’s because a firm’s profitability is a key factor in determining its fair market value.

So when an outside party looks at your books prior to purchasing your company, artificially lowered wages could cast doubt on your company’s value in the eyes of a potential buyer.

Alternately, paying yourself a market-based wage from the outset will spare your business cash flow problems (and the nasty surprise of diminished profits) if you decide to make an exit and replace yourself with an outside CEO who’s expecting to earn market wages.

Focusing on healthy profits will guide your business through its critical adolescent years.

At some point, every business risks falling into a black hole. We aren’t talking about space travel: A black hole is when a firm’s revenue first surpasses $1 million and there’s an increased demand for staff, but not enough capital to pay for new employees.

At this point, many business leaders will focus on balancing the budget, but that’s not good enough. If you want to escape the black hole, you have to aim for 10- to 15-percent pre-tax profitability.

Keep labor costs down and protect ten percent of your profits by implementing a salary cap.

As we discussed in the previous blink, 10- to 15-percent profitability should be your company goal. But how can you achieve it during that black hole period, when you’ll need to hire new staff to fulfill growing demand?

First, you need to understand the relationship between labor expenses and profitability.

Increasing labor productivity is a crucial part of meeting your salary cap and achieving profitability.

We’ve learned that often you’ll need to focus instead on enhancing the productivity of your existing employees instead of just hiring new staff.

But what does it actually take to increase and maintain labor productivity?

Pay attention to the four forces of cash flow: tax, debt, core capital target and distributions.

Labor costs aren’t the only thing involved in running a healthy business. If you want to stay solvent, understanding the four forces of cash flow is crucial.

So here they are – the four forces:

If you need to raise capital, it’s better to live off your savings than go into debt.

As we’ve learned, maintaining 10- to 15-percent profitability is the best way of raising capital.

But couldn’t you also borrow to raise money? If you can avoid it, do so. Debt is dangerous, so it should only be your last resort.

Regularly monitoring key measures will allow you to spot trends and quickly take action.

The secrets to your company’s success are already there, they’re just hidden in the data. And that’s why constantly monitoring key measures will help your business thrive.

Don’t overwhelm yourself with too many numbers – find just a few, ones that are important to your company’s survival and positive development and growth.

Carefully monitor metrics to forecast your cash flow and identify problems before they pop up.

Once you’re in the habit of regularly monitoring key metrics and looking for trends, you can also implement forecasting to dynamically manage your firm’s growth.

Cash-flow forecasting might sound daunting, but it’s easy to master. Here’s how it works: When you take your profit-and-loss (P&L) statement, you’ll note several future key costs that you can predict with some certainty, like rent. And you’ll see other costs, like labor, over which you have significant control.

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Worum geht es in Simple Numbers, Straight Talk, Big Profits!?

Simple Numbers, Straight Talk, Big Profits! (2011) outlines the essential, interconnected elements you need to know that affect your company’s longevity and growth. Through a series of simple steps, you can create a more productive workplace to ultimately boost performance and build greater wealth.

Bestes Zitat aus Simple Numbers, Straight Talk, Big Profits!

If you have debt, you wont even find opportunities. The people with cash always win.

—Greg Crabtree and Beverly Blair Harzog

Wer Simple Numbers, Straight Talk, Big Profits! lesen sollte

Entrepreneurs thinking about starting a new business
Business leaders working for companies in an early growth phase
Start-up founders

Über den Autor

Greg Crabtree co-founded a certified public accounting firm that advises and assists entrepreneurs.

Beverly Blair Harzog is a credit card and debt expert, and a prominent public advocate in the area of personal debt and lending.

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