Turning Your Business Into a Cash Cow(Building Wealth Through Owning a Small Business)Owning your own business is not automatically the way to find the pot of gold at the end of the rainbow. According to the SBA, small businesses (companies with less than 500 employees) employ 50% of the private workforce and are responsible for 51% of the GDP, indicating that the entrepreneurial spirit is alive and well. Although 10% of small businesses with employees close annually, it is encouraging that just as many new businesses open each year as those that close. However, tens of thousands of small and mid-sized companies do little more than make a living for their owners. And what about wealth? Can a person become wealthy by owning a small company? Let's look at facts. Here's how the rich got rich:
As you can see, 77% of the rich got rich by owning a business. Building a Cash CowA Cash Cow is a business generating steady dependable cash flow, enabling it to fund growth and development, become a market leader, provide discretionary income, and determine its predictable value. Research confirms our experience that the gap between an average or underperforming business and a Cash Cow can be summed up in five areas. 1. Resources
Yes, you need the necessary resources to work smart and grow your business. But in most cases, you can earn your own working capital and still grow at 50% per year or more. In fact, if one does not possess the understanding to make one’s own working capital, it is very likely that he/she doesn't possess the judgment to wisely spend the working capital obtained from outsiders. So we recommend starting by learning the skill of building your own working capital, that is, making a profit in the top 25% of your industry on a regular basis. Once you make a profit, sound "surplus management" is critical to your wealth accumulation. And the most important decision in surplus management is how to use it to build your business, not how to save it from being taxed! 2. Specialist Skills
It is not necessary to get a business education yourself in order to be successful in business. But you must be prepared to hire those who have the talents you do not. Specialty skills such as finance, strategic planning, competitive positioning, managing people, marketing, and selling are critical to improving the performance of your company. If you don't possess the abilities, hire them. It is not always necessary to hire full-time people to do them. In many cases these skills can be hired on an outsourcing basis while you are growing the business to a size where it can support full-time people in these positions. 3. Engineering the Principles/Strategies
One of the most valuable talents in business ownership is the ability to engineer the business principles and strategies of your company in a way that maximizes its existing resources. Remember, every business owner would like to have more capital. But the really successful ones learn how or hire someone who knows how to engineer business principles and strategies to accomplish your business priorities at any particular point in time with the resources it has. 4. Managing an Organism
When a business has less than 10 employees, communication is easy. All you have to do is shout down the hall. The leader/owner talks to everyone all the time. But somewhere between 10 and 40 people it becomes an organism. And communication in an organism is much more complicated and requires "professional management" methods. That is, it needs a clear mission statement, strategic plans, a sound financial structure, formal written plans, and action planning so every person understands how they fit in and what is expected of them. To keep everyone informed on a current basis, well designed communication systems are needed. And to produce a quality product and exceptional customer service, process systems must be designed to be efficient, be functional, and accomplish the desired outcomes. 5. Purpose
For years people have talked and written about the virtue of a noble purpose. Our experience finds this teaching to be true. We have assisted hundreds of businesses in developing effective mission statements. One of the three components of a good mission statement is Purpose. Years ago we were assisting two brothers in developing their business. They designed creative products and had found a good niche in the market. When writing the purpose in their mission statement, they informed me that their only reason for the business was to make a lot of money. We tried to motivate them to consider a deeper purpose, but they would not move from their single focus of "making a lot of money." Three years later they were out of business. A shallow purpose does not inspire people and therefore will not sustain the human spirit in tough times. One owner of a privately held business put it this way: "people say to me 'it must be nice to have all that freedom' and my reply is 'yep, I am free to work all I want to.'" Yes, it is indeed true that owning your own business is a lot of work. But, it has its rewards - tangible and intangible. However, lots of sales can amount to nothing more than a lot of activity! At the end of the day it is only profit that gives you the ability to build a heritage for your family, employees and humanity. Profit is neither bad nor a noble purpose. But it can be a noble goal. So there is no time like the present to start learning how to build a Cash Cow so you can make your customers, family, employees, community and humanity better off. The Strategic Edge is published by American Business Advisors, Inc. to provide business and personal improvement information and ideas. All material is presented to provide general and broad information only. The information found in this publication does not constitute business, tax, financial, or legal advice and should not be acted upon without seeking the counsel of professional advisor. The following post 5 Proven Tips on Building Wealth See more on: http://www.abadvisors.com via Blogger 5 Proven Tips on Building Wealth
0 Comments
How can I fix them?This is a common plea I hear from business owners about their employees. Does it sound familiar? It’s undeniable that sometimes these employees are the wrong hires and “fixing” them will be like trying to fit square pegs into round holes. But consider: (more…) Lost Cause Employees: The Owners’ Dilemma is available on http://www.abadvisors.com/ via Blogger Lost Cause Employees: The Owners’ Dilemma We just celebrated our nation’s Freedom Day. What could be better than celebrating with barbecues and fireworks? [caption id="attachment_2809" align="alignright" width="167"] Fireworks by Paul Brennan via publicdomainpictures.net[/caption] We Americans love our freedoms; our Independence Day echoes throughout our culture. We celebrate
“Independence!” cry many entrepreneurs.It’s what drives us to open our own businesses. We want to build something of lasting value for ourselves and our loved ones. But, here’s the dilemma facing every business owner: (more…) Our Country’s Freedom Date is July 4, 1776: Do You Have One? is available on www.abadvisors.com via Blogger Our Country’s Freedom Date is July 4, 1776: Do You Have One?
What if you got out of bed in the morning to do a public service for 95 million Americans? Is that enough significance to get you out of bed? Last week, Noreen Harrington shared with the Colorado Financial Planning Association (COFPA) how she did this. Harrington, a Trustee of Adelphia University in New York, is a former managing director at Goldman Sachs, former co-head of Barclays Capital Fixed Income, Compliance Person of the Year (2003) and one of the Top Fifty Women in Finance (1997). She didn’t just wake up one day and decide to do that act of public service for 95 million Americans. Her decision really started with (more…) The Internal Sale: What You Can Start Doing TODAY (Part 1, Your Modeling) is courtesy of http://abadvisors.com/ via Blogger The Internal Sale: What You Can Start Doing TODAY (Part 1, Your Modeling) For those of you who haven’t yet filled out my year-end survey, there’s still time to let me know how I can serve you better! Please CLICK HERE and log your responses; the survey closes Sunday the 11th at Midnight. (When we Bronco fans will be celebrating our win over the Colts!). Survey Spoiler AlertSurvey Teaser: Surfing USA Find more on: American Business Advisors Blog via Blogger Survey Teaser: Surfing USA Build the Best Teams by Using Psychometric InstrumentsMaximizing resources-whether they be people, equipment, or capital-is a goal every business should have. Getting the right people doing the right things is crucial in increasing efficiency and effectiveness. Psychometric instruments are tools that assess personality, behavior, aptitudes, and interests. They are very helpful in recruiting and in forming teams. It is often said, and is true, that there are no "bad" or "good" personality types. However, it is also true that certain personality types are better suited for particular jobs and responsibilities. Take advantage of this valuable information when hiring, promoting, assigning project work, or forming project teams. There are many good instruments on the market. Specific instruments we like to use are the Keirsey Temperament Sorter (personality temperaments), DiSC personal profile (personality behavior), and the IDAK Career Match (interests, talents, and values).
The ABA Insider is published by American Business Advisors, Inc. to provide business and personal improvement information and ideas. All material is presented to provide general and broad information only. The information found in this publication does not constitute business, tax, financial, or legal advice and should not be acted upon without seeking the counsel of professional advisor. The blog post Build the Best Team was first published on American Business Advisors Management Consulting Firm In Denver via Blogger Build the Best Team If you’re a business owner, you’ve undoubtedly had an experience similar to the bipolar experience of a “Top Gun” pilot landing on an aircraft carrier. How so? A naval pilot has to commit 100% to two contradictory courses of action. (more…) The following post Top Gun 101: Mastering the Simultaneous Landing/Takeoff Cycle of Your Business was originally published on American Business Advisors Blog via Blogger Top Gun 101: Mastering the Simultaneous Landing/Takeoff Cycle of Your Business This blog is dedicated to the millennial stakeholders of our businesses. Today they comprise 34% of our employees; by 2020 that percentage will rise to 46% (1). Our firms will have a harder time attracting and retaining them if we aren’t giving back meaningfully but, in fact, are interested only in “taking,” whether that be growing revenue, margin or market share. In the same way that we may be conscious of our carbon footprint, have we considered our social capital footprint? Leaving a footprint in the world is unavoidable. What if we asked ourselves: does our footprint grow social capital or destroy it? This question is no longer a nice thing to ask, but an essential facet of your good business practices. Large corporations sequester this issue under the rubric of corporate social responsibility. Middle market business owners often refer to this notion (more…) The following blog post What’s Your Company’s Social Capital Footprint? Read more on: American Business Advisors via Blogger What’s Your Company’s Social Capital Footprint? We all know the mantra: “Ignore the urgent and do the important.” Why doesn’t this knowledge translate into better living? Why do we continue to answer Urgent’s siren call? I think it’s because “the important stuff” isn’t all it’s cracked up to be. Important sounds, well, important. Important is (more…) The following article Know Your Friend: Intention, Cousin of Important is available on http://www.abadvisors.com/ via Blogger Know Your Friend: Intention, Cousin of Important Your financial statements should be an accurate reflection of your company's operating results and net asset position, but they should also help tell a story about how well you are managing your business from a financial perspective. Fixed Assets — No item on the balance sheet can become distorted more quickly and materially than fixed assets. It is extremely important for income, banking, and property tax purposes to make sure fixed assets are both current and properly reflect your net income and net asset value. To do so, make sure your CPA is keeping two depreciation schedules, one for financial statement reporting and one for tax reporting so you maximize your equity on the balance sheet at the same time you are maximizing deductions on your tax return. Lease Expenses — Many companies lease computers, vehicles, copiers, and all other kinds of equipment. An outside advisor can help you determine if a lease should be capitalized or expensed, which makes a big difference in your net income for your financial statement and tax reporting. It can also materially affect your debt-to-equity ratio, which impacts your lending limits. Working on these areas of your financial statements can help ensure more reliable profit and loss statements, helping you make more informed business decisions and a more reliable balance sheet to reflect the true value of your assets and equity. A good job in reporting these statements will significantly increase your ability to get the funding you need from banks. If you have questions about this, please call us.
The ABA Insider is published by American Business Advisors, Inc. to provide business and personal improvement information and ideas. All material is presented to provide general and broad information only. The information found in this publication does not constitute business, tax, financial, or legal advice and should not be acted upon without seeking the counsel of professional advisor. The blog post Your Financial Statements are Missing These 2 Key Items is available on American Business Advisors via Blogger Your Financial Statements are Missing These 2 Key Items |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |