Tracking your progress.

As a small business owner and business coach, I am busy and I mean real busy. I try to juggle two businesses, family, friends, ministry and more. There are never enough hours in everyday. Don’t get me wrong, I love it. I get meet so many people and everyday is a different adventure. Some days I sit back in the evening and reflect and think, I sure was busy but was I busy doing things right or busy doing the right things. I tend to loose focus from time to time and become reactive to my environment instead of proactive.

I have found that if I set some measurable goals that are in writing and keep them within view all the time, I deliver better results. With our tooling business, it is all about sales dollars and sales volume. The margins are set and do not change nor do our expenses. On the other hand, with our business coaching there are several revenue streams that compete for our attention with differing margins and investments of time and networking and this causes conflicts for us at times. I still keep track of daily progress associated with sales volume and expenses. If this is difficult as an owner, how do you think it is for your team?  We have worked to develop some Keep Performance Indicators (KPI) for each team member and we review them regularly. They say you cant expect, what your don’t inspect. We track a lot of things but keep our eyes on only a few key indicators. Each day we begin with the end in mind. Our goal is to grow repeatable sales, profitably and long-term. We then tie our actions to our goals and measure the outcome. More sales calls over time results in better relationships and opportunities to serve. We know we can’t sell people any service or product they don’t need. As we get to know clients and understand their needs, we then can customize and adapt our products and service to meet these needs if the fit is right. The following is a list of items I gathered from a new book by Mark Thompson and Brian Tracy called Now … Build a Great Business. Pick three or four of these items and track your progress and watch your company grow in the areas that are strategic to you:

1) Sales of all products from all sources (your top line)

2) Other revenues of all kinds (nonsales activities)

3) Cost of goods sold (all inclusive)

4) Expenses (every cost of doing business)

5) Salaries and wages ( usually the biggest single expense)

6) Lead generation (number and cost per lead)

7) Conversion rate from lead generation

8) Cost of customer acquisition

9) Average size of a sale

10) Average gross profit per sale

11) Average gross profit margin as a percentage

12) Average net profit per sale for each product or service

13) Average cost per sale (specific total cost per product)

14) Average number of times a customer buys

15) lifetime value of a customer

16) sales per employee (average)

17) Sales per day, week, month, or even hour

18) Sale per specific product or service

19) Average size of up-sells or cross sales

20) Average number of referrals received

21) Average sales per square foot (retail)

22) ROI (return on money invested and working in the business)

23) ROE (return on owner’s equity in the business)

24) ROS (return on sales, or net profit from sales after all expenses

25) Amount of receivables and how long outstanding

26) Amount of payable and when due

27) Amount of money in the bank

28) Amount of money drawn down on credit lines

29) Amount of debt in total owed by the business

30) General trend of key numbers

31) Number of order for future fulfillment

32) Number and size of bed debts and past-due payments

33) Daily active users of your website, your services, your products.

Three common small business errors

After hosting Dave Ramsey's Entreleadrship Simulcast on Friday, I was asked the same question twice. What are the three most common errors you see small businesses make? Great question.  The three most common I see in my office are all related to each other.  First I see entrepreneurs mixing personal and business expenses. I will confess that in the early years I was guilty of the same thing. I would pay the car insurance bill out of the business account and fill up the car with the business credit or debit card. Commingling funds hides the true state of both your business budget and your household budget. Having separate budgets for both home and business are critical. How can you know how much profit you have at the end of a month if you cannot record all of your costs correctly? Likewise, how do you know how much it costs to run your home if you are hiding costs for items such as insurance, gas, utilities and more within your business. In fact, if you have an LLC or are incorporated, you could be compromising your personal veil of protection if the government deemed that you have used business fund to support your personal lifestyle. 

This leads to the second huge error I see, not setting aside money for personal and business taxes. Please don't get me wrong, I don't like paying taxes and I don't want to pay more than I owe, but I do know that I must pay taxes on every dollar of income or profit that I take in. What I see happen every week is that people do not set asset at least 25% for quarterly taxes and use the money as if it were their own to support a lifestyle that is a little more than they can afford. Then when taxes come due, they have a huge number to come up with. Please just start the habit of opening up a separate account for taxes and set aside 25% each month. This will reduce your stress.

The last mistake is debt. The late Larry Burkett stated that 60% of all businesses become unprofitable once their interest rates reaches 15%/. Think about it, most business are considered a success if they have a 5% to 10% profit margin after taxes at the end of the year. Now add an additional ten to fifteen percent debt burden and the company is now operating to pay debt payments. We win and loose sales and contracts by just pennies on the dollar. If your company has to carry a large debt burden it may not be in the position to successfully and profitably gain the next order.

This is just what I have seen from my side of the desk and as the owner of two small businesses and business coach. Remember, we are not just in the business to make money but also to keep some and enjoy it.  

Wisdom in Counsel of many

As independent business people we literally have to make thousands of decisions a month. Most of the time, since the responsibility for the outcome of those decisions rests on us, we usually make the decisions our selves.  Wisdom tells us, that there is wisdom in the counsel of many.  Let me ask you a question, where do you turn for advice for you business? In the past I did it alone. I did not burden my wife or my business friends with my issues or problems or even my successes. I have learned that the more information I can share with my wife, the better she can help me process my situation. Since at the end of the day, most of the decisions that are made, she get to live with the results and with me (good mood or bad mood). I have learned that many times she has an intuitive insight that I don’t see many times. We have joked that every time I don’t listen to her insight it costs us money. 

I have also learned to develop a working group of other business leaders that have gotten to know me and something about my business. I have asked this group to hold me accountable to goals and standard we have all developed together. This has helped to keep me humble and not believe what the market is saying about my business during both great times and down times. As a person of faith I also look to the Bible for wisdom concerning decisions I make both at home and at work. For me the Bible gives me great insight into whom really in running “my” business. I have made it a habit to read one Proverb a day, everyday of the year. You would be amazed at the wisdom the writers of the Bible had for today’s business situations. If you would like help in developing your advisory board contact us at www.lighthouse-coaching.com and set up a free 45 minute consultation.

The More you Make the More you spend

The more you make the more you spend.

In the past 28 years I have sold millions and millions of dollars of products and services. I have been on compensation programs that included base salary plus a small commission to the 100% commission and everything in between. If you are like me, the more I tend to make the more I tend to spend. The $200 weekends at home can turn into $5,000 family ski trips to Colorado. The one mistake I made early in my business and I see in my office every week is that people take too much money out of their small businesses. Small business owners tend to ratchet up their take home pay as business increases or they keep taking the same take home pay when the business is hit with decreases in sales and profits such as what many of us just experienced during the last two years.

My question to you would be, how would you feel as a small business owner if you had three to six months of business expenses set aside?  There is no doubt that I am a big Dave Ramsey junkie, but when I changed the business models for both of our companies to include a percentage of income to be set aside for retained earnings, my stress level decreased 50%. I say 50% because I still work in the real world and things are changing all the time with end users, principles, distributors and clients. I now have a sense of peace that we will be OK if there is another downturn in the economy or if something goes wrong with one of the company cars or if we are fired by a client. There is no doubt it will hurt but having a fully funded retained earnings account gives me the security to take my time to make a good sound financial decision for the company instead of a move of desperation driven my the fear of failure.

 The hardest part about establishing a retained earnings account is the habit of spending every dollar that comes in the door on your business or yourself. There is always something that you may need or want for the business and we all can do the math and justify the expense. As we all know, most of it is tax deductible and we can write it off (touchy topic for another blogg). We need to emotionally embrace the benefit of having the reserved funds account and start to set aside a percentage of each months profits for the account. You don’t have to do it all at once but think about building it up to three months expenses over a year to 18 months. The peace of mind and the reduced stress is an awesome experience. The stress we live under running small businesses is tremendous and anything we can do to eliminate it can extend our lives and the life of our small business. Set a goal and make this a part of your business model. 

The Deadly Dozen small business questions

It the book of Proverbs is says"the wise see trouble and take refuge, but the fool proceeds and are  punished". In my office I get to see it all. So many times the solution was easy a few weeks or a few years ago and there was little or not cost other than the change in habits or direction.

 In Larry Burkett's book Business by the Book, he states that 60% of all businesses become unprofitable once their interest rate reaches 15%. Debt is surely a slippery slope that some business owners manage but there are other key areas that we also need to make sure we have a plan to address.  We see so many people who are so busy working in their business they never get to work on their business. 

We have compiled what we call the deadly dozen to motivate you to work on your business. This list of 12 question are for small business owners who want to take refuge and change their direction. If you can not answer yes to most of these questions, what are you going to do when something happens like a death of a partner or something to your physical health. If you need assistance coming up with a plan and then help implementing your plan, stop in and see us or give us a call at 330-808-3905 or visit our web site at

 www.lighthouse-coaching.com. Don't wait till it is too late. Take control of your future before someone else does.

Small Business quiz

Answer yes or no to each of the following questions

1) My business has a monthly written budget we use as a guide?

2) We have written job descriptions for each employee and job?

3) We have partner/lose of key man insurance to cover us in the case of the death of a key team member or myself?

4) We have checks and balances in place to protect our assets against an employee or accounting service from embezzling or stealing from us?

5) We have a board of “advisors” you can turn to for wise counsel?

6) We have a plan to become debt free and stay debt free?

7) We have a plan for setting aside money for quarterly taxes ?

8) We have a plan to develop or do you have six months of expense in retained earnings?

9) We have a plan or strategy for succession planning?

10) We have short and long term disability insurance?

11) We have a program in place to develop our future leaders? 

12) We are pleased with the lifestyle we  are currently living?

What question would you add to our list?

What question keeps you awake at  night?

Calculating Risk.

How much time and effort do you spend worrying about your financial future?  In the beginning days of my first business, I was too busy to worry about it and honestly, I had no other options. I was on the trapeze without a net. If I missed a connection, it was all over. Not a smart way to go for the long run and it was very risky. The second time around, I did worry but I always had a back up plan plus some. When I started the second business I did not quit my first job and go all in on one hand. I kept working during the day and did coaching in the evenings and weekends. I have read that other owners such as David Green from Hobby Lobby and others have done the same thing. In fact, David Green did not make the transition to full time at Hobby Lobby until his third year in business. I also read about Sr. Richard Branson and some of his risky moves that were not all that risky.  You see, when Mr Branson started Virgin Airline, he cut a deal with an airline manufacture that if the company did not make if off the ground after the first year that he could return the plane and walk away. 

This is a great example for any small business owner. Never have “everything in one hand” that if it went bad, you are out of business.  Learn to make calculated risks. I always try to calculate my odds of surviving a deal based upon both the “best case” and “worse case” scenarios. Once we had to say no to a deal that would have over doubled our business. In my head we could not successfully recruit and train a sales and support team to pull the deal off in the amount of time needed without risking our relationships and service with our existing clients.  I have never regretted that decision and we have had the opportunity to grow at a pace where we can sustain our service levels, train good people and keep our culture in tact. As you look upon the horizon of your businesses future, what decisions do you have to make and can your business withstand a “worse case” scenario?  Are you calculating risk into your financial calculations as your grow your small business successfully?

Is it time to feed the ducks ?

Is it time to feed the ducks ?

What kind of question is this? I thought this was a Small Business Blogg? I own and run two small businesses. I regularly put in 60 to 70 hour weeks working many evenings and Saturdays with Coaching clients while doing sales, marketing and calling on end users during the day. Like most of you I am driven by my desire to do things with excellence, written goals, lists and so one. Sometimes I catch myself being tired and overwhelmed just running to the next appointment or answering E mails and voice mail. It is like I am working so hard and it seems like I am not being as effective as I am at other times. I catch myself being short with my team or my wife and I am not taking time to work out or eat healthy. I think Stephen Covey calls this “Sharpening the Saw” in his 7 Habits of Highly effective people. I had a great boss who called it “stopping to feed the ducks.” This boss used to call me up to work with me back in the days when I worked in the corporate world. I was one of his best sales guys but I tended to get a little high strung and short with the inside sales and engineering people who obvious did not have the same high standards for customer service or quality that I did (I used to be a real jerk, now I am just a flake). This boss would not pull me aside and chastise me, he would simply take me golfing. We would take our sticks out and play a round of golf and he would help me to relax and “sharpen my saw.”  Many times after these rounds of golf we had and a good steak dinner, I was back to my old self. Little things became little again. I was not accepting every invitation to a fight that I was offered by a customer or customer service person. I was patient and caring again. It like a lumberjack swinging away at a tree with a dull axe. It may take him an hour and 300 hits to take down the tree. If he stops for an hour and sharpens the saw it only takes 30 minutes and 150 swings to take down each tree for the rest of the day. 

There is no doubt there is a lot of work to do being a small business owner, but how much more effective would you be if you took some time off during each day or during each weak to sharpen your saw or to take a walk and feed the duck? I know when things get too stressed out during the long hours of coaching and serving, I think about “feeding the ducks” and I smile and schedule my next visit away from the business. It helps me become effective again.