‘How To’ Coaching series – Activity 12

Who controls your financials?

Chapter 2 – Financial Control – Rule your money

This is part of the ‘How to’ coaching series.  An ongoing series of activities to make your business successful.  Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.

Activity 12 – I know on average, how much I make on each sale

How do you work out how much money you have made from each of your sales?

For some businesses it is relatively simple to work out how much profit has been made on a sale.  For others, especially with a mix of products and services, it can be more complex.

It is important to know how much is made from a sale to understand the profit margin (or if any money is actually being made).

Speaking to a business owner many years ago, they were producing a product that they were selling for more than the components’ cost; but not taking into account the costs for the business, or their salary.  So, they were really making a loss per each sale.  When they understood the reality, they changed their business model.

You wouldn’t sell yourself short would you?  I’ve seen business owners do it more often than I’d like to.

The ‘How to’ bit:

The two key profit types we are looking at in this example are gross and net.

If you want to understand the amount you are making against direct costs, calculate income from the sale verses the cost of sales.  Cost of sales would typically include materials and associated costs, but exclude operating costs.

To understand your net profit on a particular sale, add the costs of running your business to the costs to make/supply the product (or provide the service), against the income made on that sale.

Sometimes it’s quite complex to make the calculations, so an average profit could be a better approach for you.   For a large retailer, it could be easier to work out averages over time.  This could be because an item may not sell until much later than the ‘acquired by, or produced by’ date.

As well as being able to see that you are making a profit (or loss), you can see trends and what products and services are your most profitable.

If you’d like help with working out the best approach for calculating how much money we make from each sale, follow this link and Contact Us

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‘How To’ Coaching series – Activity 11

Who controls your financials?

Chapter 2 – Financial Control – Rule your money

This is part of the ‘How to’ coaching series.  An ongoing series of activities to make your business successful.  Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.

Activity 11 – I know my daily/weekly/monthly Overhead costs

Do you know how much your business is costing to run?

It is easy to wait till you get your bank statement at the end of a month and see if you had more income than outgoings; but that doesn’t tell you the reality of how much your overheads are.

Many clients get quite a shock when we work out how much it costs per ‘hour they are open’ to run their business.  Imagine a shop or cafe, how much per hour does it cost to be open verses being closed?

Think of the costs incurred during opening times.  For instance, lighting, heating/cooling, any cookers, coffee machines, lit display stands, the products you sell, the services you provide; and that’s before the staff costs, insurance, rates and much more.

For businesses producing products, there may be significant machine and tooling costs.  Also, long lead times from when something is produced, till it is sold, and then payment received.

Why would it be useful to know your costs?  Let’s keep it simple.  Are your takings more than your outgoings?

Apart from knowing your costs verses your takings, it is a great way to analyse which are your profitable opening times.  Some businesses choose their trading days and resource allocation based on customer footfall.

Some businesses are season driven, hence a month by month analysis will be more useful. If you know that your income will be less than your outgoings at a particular time, you may need more cash reserves to cover the temporary shortfall.

The ‘How to’ bit:

Work out all your outgoings for running your business to an hourly rate.  i.e. take your annual insurance cost and divide it by how many weeks/hours you are open for business.

For those providing a service out of a home office, base the calculations on how many hours a week you work (track your actual hours for a month and take an average).

For those starting off, decide how many hours and weeks you choose to work.  Remember to be realistic as to what you can achieve.  You will need to account for holidays and any non-work days. Work out your average hourly income based on the previous year’s trading; or forecast of your expected income.

When you know your numbers, you will have a powerful tool to assess how well your business is doing, and if you have a profitable business.  Also, how much operating cash you need at any one time to cover the costs.

If you’d like help with working out the overhead costs for your business, follow this link and Contact Us

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‘How To’ Coaching series – Activity 10

Who controls your financials?

Chapter 2 – Financial Control – Rule your money

This is part of the ‘How to’ coaching series.  An ongoing series of activities to make your business successful.  Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.

Activity 10 – I know how to calculate Break-Even and I know where my business stands in this regard

Over the years I’ve discussed with business owners about when they will break-even. Some didn’t know, and some made the mistake of forgetting to include the total fixed costs in the equation.

The best way to look at your break-even position is when all the bills are paid; including your salary, operating costs, production costs and all the other business costs.

The break-even point is when the amount of sales needed to achieve a Net income of zero is reached.

The Break-Even point is when a company’s revenue equals total fixed costs plus variable costs, over a given timeframe.

To calculate your company’s break-even point, use this formula.Fixed Costs ÷ (Item Price – Variable Costs) = Break-Even Point in Items.

For example – If your Fixed costs are £18,000; and the Price of your product is £200; minus the Variable cost of producing the item at £20; your break-even will be 100 items.  If you sell 100 Items at this price and cost, your business is said to be at break-even.

£18,000 ÷ (£200 – £20) = 100 Items

So, do you know what sales you need to make, and by when you will break-even?

The ‘How to’ bit:

The calculation above is simple, yet it can be a complicated process if you haven’t got your financials organised.

Work out all of your costs (Fixed & Variable), determine the prices of your products (service), and work out how many sales you need to make.  Part of the exercise is to decide the sales ratio (mix) of your products (services) that will bring your business income verses outgoings to a Net value of zero.

If you would like help with determining your Net Break-Even point, follow this link and Contact Us

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‘How To’ Coaching series – Activity 9

Destination photo

Chapter 1 Destination – choose your own way

This is part of the ‘How to’ coaching series.  An ongoing series of activities to make your business successful.  Follow it step by step and see positive results as you develop a robust business model set on a solid foundation.

9 – We have a culture statement

What is the culture of your business?  Do you know what your team say about the business and how it feels to belong to the organisation?

If you want to get everyone on the same page, and be true to the team values, the culture needs to be defined and written down by, and for, everyone.

For example, your values may include ‘Integrity’.  How would you ensure that all the team operate in this way? By defining what ‘Integrity’ means to the team, all can understand how to work to that value across what they do within the company.

The culture statement is a set of values that the company operates to and hold as sacrosanct.  “It’s how we behave towards ourselves, our colleagues, and especially our customers. You are more likely to get engagement with customers who share the same values as your company.

The ‘How to’ bit:

This is definitely better as a team exercise.  Work together to define the values that you want to work to.  These will be different for each company.

Make a list of 10 to 15 values and define what they mean to you and your team; and how they will be adhered to.  These are the rules by which your companywide play.

When you have new starters, they need to join in with the company values too, otherwise the values will be diluted to the point they are no longer relevant.

…If you would like some help defining and implementing your company’s values into your business, follow this link and Contact Us

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Anchors away – cut those chains!

Are you stuck on something in your life?  Is there some goal you’ve been trying to achieve for years and years?  Sometimes in life we have a specific thing we say we want to achieve.  But the truth is that we are not ready, or prepared, to do what is required to complete the task.

It might be, to learn how to play a musical instrument, to make that key sale, get our business in order. For me, a key life goal is to be the weight I was when I got married… over 30 years ago.

Over the years my weight has fluctuated to being close (ish), through to being way above a healthy weight.  The truth is that I have been at an unhealthy weight for around 25 years.  Well I don’t accept that anymore!  This time, unlike all the other times, I have found my reason to cut the anchor chains away. Last year I had a serious health problem.  To say it was a shock is more than an understatement.  Without being melodramatic, I nearly didn’t make it!

Now I have a real driver to be successful with getting fit and healthy again.  It was something I chose not to recognise before.

So, what is the thing holding you back?  Now be honest with yourself!  What are the anchors and chains that you have chosen to accept that are stopping you? I’ll restate that; you have chosen to accept the wearing of these chains on your shoulders.

Because, let me tell you from my own traumatic experience, all the reasons (excuses) I came up with are rubbish.  There are people I know who have achieved more than I; and they have a lot more to cope with than I do.

These are the true, day to day, heroes we usually never hear of….  The physically disabled guy who never gives up, works hard and has a life; the lady suffering daily with an incurable and debilitating disease, yet still has a positive outlook and is forever laughing; the physically and mentally scarred girl who has made a difference to the world.

So, given any honest practical restrictions on what you can actually achieve, what could you achieve if you got a ‘mental’ hacksaw, and cut your anchor chains?

I’m happy to talk with anyone who would like to explore how to move forward.  If I can help at least one person have a better and happier life, it will all be worthwhile.

By the way, as at the time of writing this article, I have reduced my weight by 15 Kilos since July 2018. It has required me to change my outlook on life, food and exercise.  And it needed a kick up the rump to get my attention!  I have another 15kilos to go to reach my target weight; half way there 😎

Life is not a sprint, it’s a marathon!  Make your life count for something.

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‘How To’ Coaching series – Activity 8

Destination photo

Chapter 1 Destination – choose your own way

This is part of the ‘How to’ coaching series.  An ongoing series of activities to make your business successful.  Follow it step by step and see positive results as you develop a robust business model set on a solid foundation.

Activity 8 – I have a documented Mission Statement

Your mission, should you choose to participate, is to make your business a success.  Mission possible!

Whereas your company’s Vision is a set of defined aspirations and goals for the ‘envisioned’ future, your Mission Statement is of the ‘now’; used to drive yourself and team; as well as helping your customer gain a better understanding of what you’re about.

A Mission Statement is a short statement of an organisations ‘why’, their purpose.  It identifies the goals of the operations, what it provides to it’s customers. The Mission Statement also states the ‘how’ it goes about providing its service or products.

For example:  you could have the following…

Our Mission is to be the 2ndbiggest car hire company in the world by the end of the current financial year!’  This is based on a car hire business that realised it wasn’t going to be the biggest at that time; ‘so we choose to stand out by providing a better service, by trying harder.  Why? Because that’s how the customer deserves to be treated.’

Or,

“Space the final frontier. These are the voyages of the Starship Enterprise, her five-year mission to explore strange new worlds, to seek out new life and new civilization, to boldly go where no one has gone before.”       –  Star Trek’s USS Enterprise

The ‘How to’ bit:

Firstly, identity the purpose of your business, the ‘why’ you do what you do.  Then work out the ‘what’ your company will provide/deliver; then define ‘how’ it will be delivered.

It is useful to add specific targets to your Mission Statement to indicate the size of the job ahead.

There are many great examples to be inspired by – Take a look at the JFK speech to the world about going to the Moon.

…If you would like help, and are ready to take on the challenge, of building your own inspiring Mission Statement, follow this link and Contact Us

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‘How To’ Coaching series – Activity 7

Destination photo

Chapter 1 Destination – choose your own way

This is part of the ‘How to’ coaching series.  An ongoing series of activities to make your business successful.  Follow it step by step and see positive results as you develop a robust business model set on a solid foundation.

7 – I have a documented Vision for the business

The key to any journey is knowing where you’re headed and knowing when you’ve arrived.  A clear Vison statement gives your business direction. It focusses on the future of the business and gives it purpose.

Successful companies invest significant effort in understanding and stating their vision.

Your vision needs to be in-line with your values and ethics.  A well-crafted vision will help you and your team understand where, and what, the business stands for.  A strong vision will also help your customers know what your business is about.

To lock in the vision, publish it, especially to all the team.  Make it part of your marketing message. Your website is a good place to share it too.

The ‘How to’ bit:

Creating your vision starts with the business owner. To enrol and inspire your team, get them involved in the process too.

A good way to develop the shared vision, is to have a team ‘brainstorming’ session.  Make it fun and ensure everyone participates.

Share the vision via your prospects and clients.

Your Vision should include: the aspirations of the company, solutions to problems for the greater good, and also cover the ‘who’ and ‘what’ you are looking to inspire change within.

For example: Boeing in the 50s: Become the dominant player in commercial aircraft and bring the world into the Jet age.

…If you would like some inspiration and guidance on developing your Vision, follow this link and Contact Us

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