Profitability Tips – The Soundbite Coach

March 5, 2015

Influencing Your Word-of-Mouth Results

Just about every business relies on “word-of-mouth” marketing to get the vast majority of its clients. If this is true for your business, then it just makes sense to figure out how to boost your referrals from all sources. Referrals are almost always easier to sell and they keep your marketing costs low. But how can you do that?

The first step is to make sure that you know who your best current referral sources are. If you’re not already asking the question to new clients “How did you find out about us?” then I’d recommend you implement that right away.

If you do know the answer to that question for each customer, then you can make a list of your referral sources. Take a look at the list, and see what these referral sources have in common. Here are some questions to ask:

Are they all customers?
Do they all have a profession in common? For example, are they all lawyers, massage therapists, plumbers, or pediatricians?
Have you properly thanked each of these individuals? If not, you can send out a thank you card or take them to lunch with no other agenda.

The last question to ask yourself is “where can you find more of the same type of people that are referring you?” If you discovered that you get a lot of business from dog groomers, then you may want to consider visiting every grooming salon in your zip code. You may also want to present a speech to a dog groomers Meetup group that you find.

You really can be proactive about your referrals so that business comes to you more easily. Try these tips to boost your referral sources in your business.

January 22, 2015

Five Ways to Streamline Data Entry

Are you manually entering data into your accounting system? If so, there may be a way to enter that data that’s faster, cheaper, and better. Data entry automation has come a long way. Here are five common ways to automate data entry so that it no longer has to be manually entered.

1. Bank feeds or online banking

b. The brand new, more modern and completely free way is through bank feeds, which are available when you move to a cloud accounting system such as QuickBooks Online or Xero. Bank feeds are not available in desktop accounting systems.

2. A smart scanner

If a lot of paper flows across your desk, you can scan it in using a smart scanner that can parse the document and enter it straight into your accounting system. You will usually have a chance to edit and accept the data, which is far better than entering it from scratch.

3. Import and export functions

If you ever convert from an old accounting system to a new accounting system, this method will come in handy to get you historical data moved.

4. Interfaces and programmers

If you have a high volume of transactions that need to move from one place to another on an ongoing basis, it may make the most sense to employ programmers who can build an interface. Alternately, some systems can talk to each other already; they just need to be plugged into each other correctly.

5. Smartphones, tablets, and field service hardware and software

Mobile accounting apps are where to look for this form of data entry automation.

No more manual data entry

In 2015, consider taking on the goal of no more manual data entry. If we can help, let us know.

October 30, 2014

How Understanding Assets vs. Expenses Can Make You Rich

Assets and expenses both have a “debit” balance on the financial statements, but that’s where their similarities end. Spending on one can make you rich and spending too much on the other can leave you broke.

An expense is money you may need to spend, but after a year, there is nothing lasting to show for it. An asset is a tangible resource that is still worth something after a year or more and that belongs to you or your business. The best assets grow in value over time, but some lose their value too. Real estate typically goes up in value, while a car loses value, or depreciates heavily, in its first few years.

The best example of an asset versus an expense is spending on a mortgage versus rent. When you pay a mortgage, you own more of the property than you did last month. One day, you can sell your ownership in the property and get cash or another asset in trade. When you pay rent, there’s nothing left at the end of the month. There’s no accumulated value.

Generally speaking, spending on an asset builds or at least better preserves your wealth. Spending on an expense drains your worth because you don’t own anything at the end.

The path to building your wealth is to spend on assets when you have a choice and minimize expenses when you can.

In the book “The Millionaire Next Door,” one of the top examples to build wealth is to avoid replacing your car as long as you dare. It used to be a habit for some families to replace their car every two years. With today’s reliable models, you can go between five to ten years without having to replace your car. Although a car lasts more than a year and is considered an asset, it still loses value every year.

Investing in assets and reducing expenses will build your business’s net worth and increase profits. Look for ways you can apply this to your business and watch your money grow. As always, reach out if you’d like to know more.

February 6, 2014

Is Your Business Using the Right Accounting System?

Have you ever tried on a shirt or jeans and found they didn’t fit at all? They looked great on the hangar, but that was the end of it. Accounting systems come in all sizes, shapes, and colors just like clothing; and just like clothing, some accounting systems fit your business better than others. It’s not that easy to spot in a mirror when an accounting system does not fit a business, but there are other signs that will give it away. Here are five of them:

Numerous Workarounds

A workaround happens when your current system cannot do all the things you need it to do. A workaround can take the form of a spreadsheet, a report, a program, or a database that is created with extra time spent every month so you can get the information out of your system and manipulate it the way you need it to run your business.

Since no accounting system is a perfect fit for any one business, it’s normal to have some workarounds in place to meet your unique business needs. If you have too many, it might signal that you’ve outgrown your current system and need to find an accounting system that provides you with more functionality.

Downtime or Wasted Time

If you are unable to access your system when you need to do your job, then you are experiencing downtime in one form or another. You may be waiting for a file to be fixed, or the system may actually be down. If your system runs slowly, then that’s another form of downtime that wastes your time. If you have to take time to make backups and perform restorations, this type of activity does not add value to running your business. When you have too many of these time-wasters, it could be time to look for a better way.

Old Technology

If your accounting system is more than about three years old and you’ve chosen not to update it, then you may be missing out on newer time-saving features that could help you reduce the amount of time you spend doing your accounting. If your accounting system is more than six or seven years old, then you are definitely losing productivity. It’s time to bite the bullet and learn a new system so you can experience better profit margins in your business.

Limited Users or Security

If your current accounting system does not provide you with enough users, then you might have more expensive employees doing lower level jobs, which is costing you more in payroll expenses.

You may also need certain user permissions to be more granular than they are in your current system as you grant access to certain parts of the system to different users. If you’re on QuickBooks, that’s a really easy fix, so please talk to us about this.

We find that user access is a hot button with a lot of business owners, so if it’s true for you, please reach out and let’s have a conversation about this.

Limited Physical Access

If your accounting system is located on a private PC or server in your business, this limits access to your files. If you have more than one business location, you like to work from home, or your employees work from their homes occasionally, then you may want to look for a system that accommodates “anywhere, anytime” accounting. This is a pretty easy fix too, as this requirement is now quite common with business owners today.

The same can be said for mobile access. New apps enable many accounting features to be completed from your mobile phone, such as checking bank balances, approving a bill, and taking a picture of a receipt and uploading it, to name a few. If you want to do you accounting from your mobile phone, ask us about mobile apps that we can link to your system to enable this functionality.

Boosting Your Accounting Productivity

We might be a little biased, but accounting has gotten to be a lot more fun in the last few years with advancements in technology. If you see any of the signs listed above, it might be worth a conversation to see if your accounting system is the best fit for your business. Just reach out anytime.

December 12, 2013

Optimize Your Revenue Mix for More Profits in 2014

Many small business owners focus on generating more revenue every year, and that’s a great objective. But not all revenue is created equally. If you sell more than one product or service in your business, then you can benefit from looking at your revenue mix.

Although it’s fun to watch our revenues grow, it’s the profit number that really matters. If your expenses grow faster than your profits, then you have a lot of activity going on, but you don’t get to keep as much of what you make, which is what really matters.

An insightful exercise to try is to take a look at your revenue mix. Then you can ask “what if?” to optimize your profits.

Your Revenue Mix

Let’s say you offer three different services: Services X, Y, and Z. Your revenue pie looks like this:

X: $1.4 million or 70% of the total

Y: $0.3 million or 15% of the total

Z: $0.3 million or 15% of the total

Total: $2.0 million

In this example, Service X is clearly the service making you the most revenue in your business. But is it making you the most profits?

The profit you receive from each of these service lines is as follows:

X: $160K

Y: $20K loss

Z: $60K

Total: $200K

While Service X is generating the most profit volume for your business, it’s actually Service Z that’s the most profitable. Earning $160K on $1.4 million yields 11.4% return on Service X, but earning $60K on $300K yields nearly double the return at 20%. Service Z generates the most return. And if possible, Service Y may need to be discontinued or turned around.

Optimizing Profits

Your strategy for a more optimum revenue mix might be to sell as much of Service Z as possible, while eliminating or fixing the problem around Service Y.

It’s fun to experiment with different revenue mixes. And of course, there are many more variables besides profit, such as:

Which service do you prefer to work on?
Are you able to sell more of the most profitable service or are there marketing limitations?
Is one service a loss leader for the others?
Are you able to adjust price on the lower margin services to increase your profits?

There are many more questions to ask and strategies to consider to make you more money, which is why we love our job!

A New Year, A New Mix

We hope you’ll spend some time analyzing your revenue mix and having fun asking yourself “what if?” If we can help you expedite the process or add our perspective, please reach out anytime.

October 17, 2013

Avoid the Three Biggest Sales Mistakes and Close More Business

Every sales lead is precious. It takes a lot to get people’s attention these days, and once a lead or prospect comes in your door, you’ve accomplished that hurdle, but now you have another one: getting the business. To ensure you can turn those prospects into paying customers as often as possible, here are three mistakes we can all learn from and avoid at the very beginning of the sales process.

#1 Tech-Speak

Every industry has its own vocabulary. For example, pool service companies talk about “shock,” booster pumps, and cyanuric acid levels. If the salesperson starts slinging too many of these words around, the new pool owner is going to freak out.

Worse, you can end up going down a technical conversational path that derails the sale and has you answering all sorts of educational questions that the prospect doesn’t even need to know about if they hired you. It’s a sort of foxhole you don’t want to go down, at least not during a sales call, and especially not during the very first interaction with a prospect.

Continuing our example, a pool owner’s goals are usually that they want their pool looking awesome and safe to swim in. Although your business is likely to be far more complex than your prospect realizes, they will be scared away if you overwhelm them and sound like you will be difficult to work with. Instead, focus on their goals and how your services meet their goals.

#2 Lack of Interest

If your staff is tired when they answer the phone or if they simply answer the questions of the prospect and wait for them to ask the next question, then you’re likely to make a ho-hum impression on that prospect. It will feel like your company is not interested in them.

A great salesperson – or even receptionist — will answer a prospect’s questions, and will go further to find out more about the prospect’s situation. Establish a rapport by finding something in common with your prospect. Perhaps you went to the same college, grew up in the same neighborhood, or attended the same church.

Then find out about the business issue to be solved. What are their goals? Ask them for the big picture so that you understand where they’re coming from before you get into the details. This will make for a great start to the sales process as well as your relationship.

#3 Lack of Preparation

You may have called a vendor in hopes of finding out more about what they have to offer, only to discover they are not ready. This typically happens with new business owners or new staff. If the staff does not know the answers to the most basic of questions, then you could have a problem.

Prepare a list of questions that your staff is likely to get, and write in the answers so they will have this cheat sheet in front of them when they field calls. This will allow your employees to speak more confidently and more accurately with prospects.

Be sure they also know how to best handle the question we all love, “How much do you charge?” Providing a good answer to this question requires extra skills. You might consider putting together a sales script to handle that question or even putting your employees through some basic sales training.

Check to see if you need to avoid any of these three selling mistakes, and you’ll be on your way to more sales.

October 3, 2013

Five Fall Projects to Refresh Your Financial Results

As we move into the fall season and the final quarter of the year, it’s a perfect time to commit to a project in your business that will help you reach the year’s end in better shape. Here are five ideas:

1. Back-to-School Time

If payroll expenses are one of the higher costs in your business, then it makes sense to boost your team’s productivity and maybe also your own. Fall is back-to-school time anyway, so it’s a natural time of the year to take on a course, read a business book, or hire an organizer to help you get more from your workspace.

If you spend a lot of time doing email, consider taking a course on Microsoft Outlook® or even Windows; learning a few new keystrokes could save you tons of time. If you need more time, look for a book or course on time management. Look for classes at your local community college or adult education center.

2. A Garage Sale for Your Business

Do you have inventory in your business? If so, take a look at which items are slower-moving and clear them out in a big sale. We can help you figure out what’s moving slowly, and you might even save on taxes too.

3. Celebrate Your Results

Take a checkpoint to see how your revenue and income are running compared to last year at this time. Is it time for a celebration, or is it time to hunker down and bring in some more sales before winter? With one more quarter to go, you have time to make any strategy corrections you need to at this time. Let us know if we can pull a report that shows your year-on-year financial comparison.

4. Get Ready for Year’s End

Avoid the time pressure of year’s end by getting ready early. Review your balance sheet to make sure your account balances are correct for all transactions entered to date. You will be ahead of the game by getting the bulk of the year reviewed and out of the way early.

Also make sure you have the required documentation you need from vendors and customers. One example is contract labor that you will need to issue a 1099 for; make sure you have a W-9 on file for them. If we can help you get ready for year-end, let us know.

5. Margin Mastery

If your business has multiple products and services, there may be some that are far more profitable than others. Breaking these numbers out to calculate your profit margins or contribution margins by product or service line can help you see the areas that are adding the most income to your bottom line. Correspondingly, you can determine if you have any items that are losing money; knowing will help you take the right action in your business.

Refresh your financials this fall with your favorite idea of these five, or come up with your own fall project to rejuvenate your business.

September 5, 2013

Do You Know Your Small Business Vitals?

On a doctor’s visit, the first thing the nurse does is take your vitals: your temperature, blood pressure, pulse rate, and respiration rate. These basic measurements are the first place doctors look to see if something is wrong with our health.

Knowing your vital signs, and especially when they are out of whack, is good for your health. In the same way, knowing your business’s vital signs, and especially when they are out of whack, is good for the financial health of your business.

Vital Measures

If you’ve been in business a while, you might already know the “vitals” you like to track. Here are some common ones for a small or new business:

Checking account balance(s)
Amounts owed (bills, payroll, and loans)
Revenue for the month and year-to-date
Sales by customer so you can see the top five to ten largest customers

As time goes on and your business grows, you may want to add some of the following:

Revenue for the month and year-to-date compared to last year
Net income for the month and year-to-date compared to last year
Days Sales Outstanding which is a measure of how long it take to collect on an invoice from a client
Revenue by service or product line in a pie chart

These are just a handful of the many options there are when it comes to measuring the results of your business, and it would be difficult for us to list all of them here. The point is to decide proactively what you’d like to track on a monthly basis. Then you can set up the process it takes to get those numbers delivered to you in the format you prefer.

Once you decide on the numbers you need to run your business, you’ll be able to take your “vitals” whenever you want. But you can take this to the next level with one more idea: exception reporting.

Being Exceptional

It’s great to glance at your numbers periodically, but there can be a lot of data to wade through. How about getting a report that tells you only when the numbers go out of range? This is called exception reporting, and requires that you set ranges for each measure you want to follow. If the measure stays within range, you do not have to be alerted. However, if it falls out of range, then you can get a report to tell you what’s going on so you can take the right business action.

Exception reporting is not all that common in small business, but can save a busy owner a lot of time.

A Clean Bill of Health

By determining the vitals you want to watch for your business and putting a process in place to monitor that information, you will be helping your business stay healthy. If we can help, please reach out and let us know. The doctor is IN.

August 22, 2013

Five Ways to Rev Up Your Referrals

In the vast majority of industries, referrals are the most cost-effective way to gain new clients and grow your business. When you attract new clients through referrals, your marketing costs are lower, your selling process is easier and more effective, and the referral usually makes for an excellent client. It’s just good business sense to look at how we can proactively increase our referrals. Here are five ideas.

1. Your Email Signature

We know it can be embarrassing or uncomfortable to ask your clients and friends directly for referrals. A great compromise is to add a line to your email signature that takes care of it for you. Here are a couple of wording options:

Your referral is our greatest compliment!

Referrals are the lifeblood of our business. We thank you for yours.

We appreciate your referrals.

Adding one of these lines to your email signature file is a subtle notice to everyone you email that you are open to taking referrals. It’s indirect enough to where no one feels put on the spot, and it takes all of five minutes to implement.

2. Acknowledge Your Referral Sources

When you find out someone has sent you a referral, be sure to acknowledge that person with a thank you note or a gift. (Be sure to check any licenses you hold so you know what restrictions you are under concerning gifts to clients; some industries disallow it.)

You might want to reward your top referral sources with more than a thank you note. If you are not sure who your top referral sources are, we can help you create a report in your accounting system so you can track that information on a regular basis.

3. Set Up a Referral Program

Creating a formal referral program generates several benefits:

It formalizes the process of asking for referrals. This lets clients know you’re serious and interested in referrals.
It gets the word out to everyone without anyone feeling pressured.
It is cost-effective and still far lower cost than using other marketing channels.
It is not too time-consuming and produces results.

To set up your referral program, decide how you want to reward your referral sources. It could be as fun as awarding prizes such as Kindles and tablets to clients who send the most referrals to you. The cost of the prize is a small price to pay for the lifetime revenue of several new high-quality clients. Send a letter or email out announcing the program, and then set up a process for tracking.

If you’re in an industry where prizes and programs are simply not done, then a simple letter requesting referrals will work too. Be sure to include a description of the specific type of client you are looking for; you are far more likely to get referrals when clients know who to look for.

4. Develop Referral Sources

One way to truly quantum-leap your business is to find new sources of referrals. Your clients are a great source, but they each know so many people. If your clients have been with you for a while, your referrals could stagnate because your clients have referred just about everybody they are going to.

Keep your referrals growing by tapping into power partners. These are small business owners that have the same type of client you do, but are not competitive at all. The best way to reach out to them is to send them a referral!

5. Set Up Referral Processes

There’s a lot your back office can automatically do when it comes to referral processes.

You can remember to ask how a new lead heard about you when they first call. Then you can record and track that, so that you will know where your top referral sources are.
You can systematize the thank you notes and gifts so they go out timely and automatically.
You can regularly schedule times with power partner to keep them up to date on your business changes and opportunities.
You can systematize a referral program or related communications to keep everyone informed.

Once you set up these processes and delegate the tasks, you will grow your referrals and subsequently your revenues.

Oh, and by the way, we appreciate your referrals!

August 8, 2013

What Does Popeye Have to Do with Accounting?

You might have heard the terms “cash basis accounting” or “accrual accounting.” Your net income number can change depending on which method your books are set up for. Here’s a simple explanation of the difference, with a little help from one of the most famous cartoon characters in history.

Popeye and Wimpy

You might recognize Popeye the Sailor Man from the television cartoons or other media. His sidekick, Wimpy, was the one who was always hungry and always out of cash. One of his favorite sayings was, “I’ll gladly pay your Tuesday for a hamburger today.”

It’s All in the Timing

Let’s make today Thursday. If Wimpy wants to pay us Tuesday for a hamburger today, here’s how it would be done for a restaurant on cash basis:

Cash basis recording Wimpy’s hamburger purchase

Both the sale and the receipt of cash would be recorded on Tuesday. Companies on cash basis only record the transaction when the cash is received.

But, if the restaurant’s books were on the accrual basis, it would be a different story:

Accrual basis recording Wimpy’s hamburger purchase

Wimpy’s hamburger sale would be recorded on Thursday, the day he ate the hamburger. The receipt would then be recorded on Tuesday, assuming Wimpy made good on his promise to pay.

You might be asking why a few days is such a big deal. Outside of cartoon life, a couple of extra twists can happen. It can be far more than a few days from the time you do the work to the time you get paid for it. And often, these dates span different months and even years, affecting the amount you have to pay in taxes to various agencies. Manipulating these dates (legally, of course) is one of many tax planning strategies that we can help you with.

Choosing for Your Business

In many cases, the government has chosen which method you must use when it comes to sales tax, payroll taxes, and income tax. That’s part of the reason we make the required adjustments to your books at year end.

To help you run your business in a forward-thinking way, the accrual method is best. You can record invoices for work you’ve done even though you haven’t received payment yet. You can enter bills you need to pay before you pay them to forecast cash requirements. Using accrual accounting, you can budget for cash flow needs as well as see more accurately what your revenue and income is looking like.

For clients who remain behind in their bookkeeping and just want to catch everything up once a year, the cash basis is adequate. However they lose out on all the good information they could have had throughout the year to run their business better.

For other businesses, a hybrid approach between cash and accrual accounting can be the most cost effective.

A Little Help from Popeye the Sailor

What would Popeye say about all this accounting talk?

“That’s all I can stands, cuz I can’t stands n’more!”