Business Growth Simplified
management accounting for your growing business? If it’s not in good shape, chances are it slowing your growth! Many business owners will say, “but growing your business is all about sales.” I’d say that you don’t understand what’s involved in business growth. To grow your business means you must grow every aspect of your business. Often this is referred to as scaling your business. That means increasing your production, sales, marketing, and administrative staff that supports the overall operation. Making all these things grow in the right sequence; using the lease amount of resources and money; and in the shortest time is key. It’s a little more complicated than just increasing sales. Which means you need critical information about your business to successfully grow your business. This is where financial accounting comes in.
Good Management Accounting to Get FundingTo grow your business, you’ll need money. This probably means you’ll be visiting a banker. So, you better have good financial reports to show your banker. If not, you demonstrate a lack of ability managing small sums of money. What makes you think your banker will have confidence in your ability to manage the large sum of money you’re asking them to give you? Get help early. You should seek council from your CPA. If they only do tax accounting, it’s time to seek the assistance of another CPA who does. You CPA should help you get your bookkeeping in order and learn to read the story the numbers are telling. This will help you improve your financial acumen as your business grows.
Setting the Right Targets Using Management AccountingYour bank will want to know how you plan to use the money, then how you will pay it back. This means putting together a business plan. But, before you can put a business plan together you need to set some targets. This is where I recommend you begin tuning your revenue engine. Tuning your revenue engine (TYRE) is an operational management model. It helps you determine how much marketing you’ll need to generate enough sales to deliver enough work to reach your revenue goal. These are questions many small business owners struggle to answer. This approach shows you how to figure this out for your business. While the data you need for tuning your revenue engine does not come from your financial report. It does come from the underlying transactional data used to create those reports. So, you need solid bookkeeping and accounting in your growing business or you will struggle to hit your target.
Business PlanningMost small business owners don’t have a business plan, which is another reason they struggle growing their business. But, a business plan just to get a loan is a mistake. A business plan should help the owner communicate where they are going and what it will take to get there. This comes from one of the most important processes of your business - business planning. You probably have a goal that you set if you’re growing your business. Tuning your revenue engine will help you figure out what you need to do to get there. This is the business planning process. If you document it in a simple to follow manner, then this becomes a powerful tool for you both internally and externally in growing your business. I’ve used this approach countless times with businesses. Bankers love these business plans. In fact, 90% of the plans have been funded, many by the SBA. So, you can have confidence this process works.
Improving EfficiencyOnce you’ve got the business on a consistent growth path, you want to maximize your profitability. Profitability is a measure of your efficiency. So, if you improve your efficiency your business becomes more profitable. This leads us back to your management accounting and tuning your revenue engine. Use your financial reports to evaluate the performance results of your business. Using your TYRE reports to manage your operation looking for ways to get more efficient. Becoming more productive increase your capacity. This allows you to do more with the same resources which translates into more profit. I hope this shows you how your management accounting helps you in ways that you may not even realize when trying to grow your business. Talk with your CPA and see what they can do to help you. If they only focus on tax accounting, then contact Emerick and Company. Our focus is financial accounting and helping you understand the story your numbers have to tell.
How To Grow Your Business Faster With Less Pain!Small business owners tell me all the time, “I want to grow my business.” So, I ask them some simple questions, top line growth, bottom-line growth, market share, etc. They look at me like a deer in the headlights or worse, they say “yes, all of that!” To grow your business you need to PICK ONE!!! You see each of these growth goals has a completely different strategy in which it is accomplished. So you have to pick one. Frequently they can’t decide or are unwilling to do so. This is the first sign that they are or will struggle with the growth of their business. To them I’m a guy they just met or was introduced to by someone they know. So they are skeptical to take my word for it. I understand that, but it is still in my nature to want to help them. Skepticism is something I had t overcome since I started my first business back in 1991. Then after attending a seminar, the light bulb went on. Business growth is not a new concept. People have been studying and writing about it for decades. So I thought why not start there. There are dozens, if not hundreds of growth models out there. This concept was originally introduced to me in way back in 1987when I was getting my MBA. So this isn’t a new. But why isn’t this a more mainstream part of small business knowledge? As I began doing my research and what I found is very interesting. In the weeks to come I will begin share what I found and what I hope is a distilled version that is simpler to apply to your small business growth. First, as I found models out on the web, they came in all shapes and size. I found three stages. I found five stages. I found seven stages. What was the right number of stages for a small businesses growth? As I read the characteristic of each stage I found that they all sort of hit the same areas, it’s just that one author decided to draw their line one place and another decided to draw their line somewhere else. I am sure in some cases it was done for marketing reasons, to differentiate their model from the others. I just wanted to see if those that claim to be the experts agreed on how a small business matures. The surprising fact is that they all pretty much do. Even more surprising than they agree is they don’t all come from the same functional discipline and still agree. Some are finance experts, others are CPA’s, and still others are sales and marketing specialists. They still seem to agree the same characteristic apply as it relates to small business growth. So, what did I settle on? Well, I picked them all! My goal is not to just create another model. It is to make the existing models easier for small business owners to understand and apply to get the results they want for their business. If you want to grow your business I suggest that you watch the video below:
Some of the most difficult work I do with small businesses is getting owners to embrace personal change. We ALL have strengths and weaknesses. It is usually the weaknesses that keep us from performing at our peak potential. When these owner weaknesses are not addressed and the owner is at the helm, the everyone suffers as a result. Our article Leading to New Horizons of Success has a great message along this topic. Personal change is the first phrase of the DE, Inc. tag line. It is also the first step in achieving real success! If you have the talent required to achieve success as you define it for yourself you would have already achieved it. If you're not there yet, the first place to look for success is within yourself. What personal changes must you make in order to achieve that which you seek?
Personal Change is Hard - So Get HelpThis is a challenge we all face. I am struggle with personal change myself. The best way to get through it is with help. Seek the assistance of someone you trust and respect. Then ask them for help! Most people are happy to help a friend in need. Another good place to look is with the assistance of a coach. There are hundreds of coaches out there. Find someone that has the skills you need to help you in the areas that you struggle, whether it's personal or business. Make sure you feel comfortable with them. DE, Inc. offers business coaching services. We would be honored if you had the confidence in us to assist you you’re your transition. The faster you get through this personal change the faster you will realize success. Share your stories of personal change with us here by providing your comments with the positive results that have come from change for you - both personally and professionally. Copyright ©2009 Dino Eliadis
In my post “Are You Holding Your Business Back” I wrote how personal change is needed before you can achieve success. If that’s all it takes then why don’t we just change? Fear is at the core of why we all resist change. Most of us, me included, will say “I don’t fear success, I want it.” Yes, but we fear something required between where we currently are and where we want to be even more. What’s even worse is we are not even conscious of the fear. So if we’re not even conscious of it, how do we deal with it? Become an enthusiast of change! Embrace it and learn to live with it, and slowly, but surely, we become more comfortable with it, and things begin to change. Change is the one real constant in life. The problem is, very early in life most of us learn to fear and avoid change. Thus, we create subconscious coping mechanisms and ways to avoid it. As we become adults and need the skills required to change, we struggle because of unconscious barriers we’ve created in our own mind. How do we get past the barriers? Make a decision that we won’t let fear get in our way. The things we created to deal with these fears in childhood no longer apply. They stand between us and what we want for our lives. So, break past them. This takes bravery and courage, two things you need to be successful. Start with yourself. Be brave and have the courage to go beyond the fear. Success awaits on the other side. If you still struggle you may need someone to help get beyond this fear. Seek the assistance of a coach or therapist. There is no better investment you can make in your business than in yourself. You need to change first before your business can ever change. That’s why our tagline at DE, Inc. is personal change, business leadership, life success, because success happens in that order. What about you readers that have faced the fear and achieved success? You have much to offer. Share your story with our readers by commenting so that they can see they aren’t alone. Anyone that has achieved success has had to face their fears and get beyond them. If you need help contact us. We would be honored to assist you in your journey toward success. If our abilities do not fit with your situation we will help you find the right help for your circumstances. Copyright ©2010 Dino Eliadis
your revenue engine. Let me introduced you to a quick and very simple method to strategically understand the cause and effect of your actions on your business. The "revenue engine" is made up of your marketing, sales, and operations functions. It is what you do to make money in your business. You know how important it is to measure what is happening in each function. But, even more critical is knowing how changes in one function impact the others. For example, if you want to increase sales, how much can you increase sales before you reach your operational capacity? Not knowing this choke point can destroy your business faster than under performing sales! Join us for a FREE webinar to find out the critical values you should be monitoring to make more effective decisions and improve your company's cash flow. Just click the button below to find out more.
When revenue begins to head south what is usually the first response? Cut expenses! Why, will this fix the problem? No, falling revenue is a result of fewer sales or reduced revenue collected per sale.
To make matters worse, often the cuts come in the form of a reduced marketing budget. 60% of the American Marketing Association (AMA) members report that this is the biggest mistake that can be made in an economic downturn. With leads on the decline you need more leads not fewer. It would be interesting to see how many of you have seen or experienced this yourself.
This mistake won’t show up right away. It may take weeks or even months, depending on the length of your sales cycle, for it to rear its ugly head.
Combat this mistake by consistently monitoring your lead volume and your leads to proposal/quote ratio. If these numbers begin decreasing it’s time to ask why. What has changed? Is it internal, which will allow you to do something about it. Or, is it external, the economy, a supplier, your industry etc. which you cannot control. The solution may be different depending on the circumstances. The Revenue Engine Performance Analyzer can help you determine and monitor these metrics.
The key things to recognize here is cutting costs when revenue is in decline does not fix the cause. It only addresses a symptom - declining profits. Cutting cost has no positive impact on the top line (your revenue). In fact, if you cut the wrong thing, like marketing, it may have a negative impact on the top line, as shown here.
Have you had to cut your marketing budget in the current economy? What has been the result for you? Could monitoring the items mentioned here help you make better business decision? Share your opinions and experiences with us. We look forward to the dialog.Copyright ©2009 Dino Eliadis