To make a Profit, the business needs to focus, not on breaking even, not on survival, but on business profitability – literally, the ‘ability’ of the business to aim at and produce a specific dollar amount of profit as a percentage of projected gross income. Only when this is the clear business target is it possible to build a business that can deliver profit to the owner year after year. Only then can that business truly become an ongoing, revenue-producing asset for the owner. How is this done? How can a business become a profitable asset? Show me the Money! Most small businesses are inherently profitable. Depending on the business, a reliable profit of 10% to 30% of total annual sales already exists as the potential, ongoing profit return on investment of the company. But where is this Profit? Why is it so hard to see, let alone produce?As a small business consultant for a major consulting practice, I was continually amazed at the number of small-to-medium sized companies operating with a ledger notebook and aluminum box for cash. I was stunned that the computer was used only for internet email, customer letters and office decoration. The accounting software (QuickBooks or Peachtree) was on the computer for tax purposes used by the accountant at tax time. As a consultant I was able to help the small business owners realize the most effective way to run a profitable business was to plan to be profitable. By getting the owner to understand that expenses and sales should be planned towards a goal and events controlled in such a manner as to yield the profit target. By not monitoring the profit and loss statement, the business events control the owners, and management cannot drive process and procedures toward profits. The accounting software packages were then set up to view each product by profit and loss statements on a monthly and annual basis. This allowed the small business owner the ability to react quickly to any deviations from its budgeted plans (cash falling through the cracks). The organization learns from the feedback it gets by comparing budgeted goals to actual results(revenue decreasing). Communication increased throughout the organization about employee expectations towards profitable goals.Owners, when was the last time you updated your business plan, which is probably on your bookshelf where you placed it since you initially developed it. Now, don’t get bogged down in the document, just dust it off and use a red pen to ask your self the following questions:Profit Planning: Budget vs. Business PlanHas the management team updated the business plan to reflect current/future market industry ‘realities’?Does my management team understand the ‘market intricacies’ of each product they sell and service in the business unit they oversee?Does my management team understand the ‘customer’ product needs and wants they sell and service in the business unit they oversee?Have you developed a profit and loss statement for each product? What are your sales revenue, direct costs, and overhead expenses for each product?Have you benchmarked your Gross Profit margin against industry standards? Is it high or low?How are your products sales trending? Quarterly? Is product cost percentage lowering as you sell more volume of products? If not, can workflow be streamlined.Is my business making money? Do I have a simple profitable business model in place for every product?Have you identified your bestselling product lines vs. your worst selling products? Select which product will grow your business?Have your management team created action plans to meet planned product profit specific objectives and goals in target areas?Employees/Operational ReadinessWhat is the current morale of the employees? Who will champion the ‘Profit Program’ that they can believe in?What are the current ‘roadblocks’ to lowering cost and increasing throughput of products? Why?What are the training needs of my employees to achieve profit goals? How will training improve business or morale?Do the employees know what’s expected of them? How will they be held accountable for performance?How will they be rewarded? Plan to give Incentives, increase Profit-Sharing, surprise Bonuses, spontaneous Intangibles?Have your managers and supervisors set specific production objectives and goals in target areas?Are my employees cross trained in key (growth products) production areas? Why not?Do I have financial measurements scorecard posted in work area? Do I have relevant workflow processes posted in work area?Do we have the best technology solution in place to reach profit goals?CustomersHas my customer base changed?Has my product/service offering changed?How often/how many new customers have I obtained in the last year?What product do my customers need to solve their problem? What services can we offer to provide convenience or can we lower product cost?Are there any solutions outside the industry that will ‘wow’ the customer? Is the marketing strategy relevant to customer wants?What is the company reputation to the customer? If low, how can we improve reputation and brand image to the market?Do I know who my best customers are? What do they really want?Do I have more/fewer customers? Why did they leave?Who are the current ‘bad customers/clients’? Money Owed? Should I keep them or sell them?CompetitorsDo I have new competitors? Who?Do I have more/fewer competitors? Why?What are the current competitive threats to my business?How are my competitors resolving the customer problem? Who?What industry has the best innovative solution to address my customers need? Why? Applicable?What technology is a competitive threat to my bestselling product?Evaluate answers against the strengths and weaknesses of your business capability. Formulate your strategy according to the opportunity available in the marketplace. The game is to make money for the long term, not to see how many widgets you can ‘hide’ at the end of the month or play financial engineering games with the books.Price PointsIt is never a good idea to cut your price, even in tough economic times. If you do cut your prices, only do it for a limited time encouraging customers to “act now.” This should be a last resort effort.. The temptation to cut your price in tough times is great. Ask your management team ‘If we cut prices, how will you get the prices up when the tough times are over?’ Stay on the message. Your value doesn’t diminish in tough times. Why should your price go down? Businesses should focus more on customer satisfaction. By focusing on delivering more than you promise, you are putting the customer first. It reinforces their decision to buy.Business PartnersLook for businesses that you can partner with to cross-promote your products and services while sharing the costs. For example, a laundry mat offers free detergent with each washer load and the free detergent is paid for by both the owner of the laundry mat and the supplier of the detergent. The price was not reduced, but there is a unique incentive for the customer with a specific start and end date, which will get the customer to “act now.”Plan to profit with sales this year. Explore new markets, new prospects and new products and pitches. This year, the three Ps of marketing your business are: prospects, products and pitches. All three may need to change a bit to get you to a profitable year.You can do it. Surround yourself with mentors who you can talk to plan for success. It’s amazing the difference it makes just talking through your ideas. Think of planning as preparing yourself for success with a clear profit picture in mind.New MarketsAs you review your business plan, ask yourself where else you can sell your product or service. Go back to those customers who have not bought from you in a while. Have a compelling reason for them to buy from you now, such as improved service, different products or greater customer satisfaction just to name a few. Does it make sense to enter new geographic markets? Have any competitors in that market left or ‘retrenched, waiting for better times’?Update Your OfferingsAfter reviewing your business plan is it necessary to change or update your product or service offering? Will product or service changes or additions allow you to sell more to your existing customers? An “update” here could mean a redesign of your web site, starting a blog, joining a social network. Essentially any way you can expand your reach to potential customers. The reason newspapers across the country are closing is due to lack of readership. People are moving to the internet for their news and information… and to find your business!Improve Your Pitch Thoroughly understand your product and service and why someone should buy it from you. Use written testimonials from some of your satisfied customers.• Tell your story in five minutes or less.• Practice to perfect your pitch “before” the sales call.• Listen well. Ask questions & really listen to the client’s needs and concerns.The bottom line is practice makes perfect. Be a dedicated practitioner in client connection. You are the owner. Your time, care and connection in the sales process will bring results. In these times, you can be tenacious & focus on seeking out new opportunities which will pay huge dividends when the economy turns around.Our nation is experiencing a recession and has been in a prolonged serious economic downturn in the past decade. According to Tom Reilly, MissouriBusiness.Net, “Seventy percent of today’s CEOs have never led a company in or out of a recession and 60 percent of today’s salespeople have never sold in tough times”.On every championship team, great coaches must receive accurate information in order to adjust their strategy to win the game. To be a truly great small company you must operate from a core value of honesty toward strategy and profitability. Remember the old management adage ‘If it doesn’t get measured, it doesn’t get done’ and ‘Lost Opportunity’ (bad decisions) can close your business. Planning profitability is a proven business method that allows your business to measure whether its succeeding or failing, not smooth talking inexperienced senior executives, presenting the latest management theory of the month to the board.Remember, Enron, WorldCom, George S. May International, Arthur Anderson and Tyco.
Think of companies like Google, Facebook and Apple. Did they rely only on their own money for growth? No. Even if you have strong sales and plenty of cash in the bank now, a day will come when you’ll need additional cash support to overcome an unexpected twist in your business. It might be the loss of a key vendor, partner, employee or client, but the companies that beat the odds are the ones who are in position to access OPM to bridge those tough times when they come. They don’t have to rely on their own cash reserves because they followed a clear plan from day one to build good business credit.Most business owners learn the hard way that the day you need credit is not the time to start building it.George Ross, the attorney for Donald Trump said, “The time to go to the banks is BEFORE you need the money.” Similarly, the time to start building business credit is the moment you form your business entity. That is when the business credit bureaus will start developing a file on your business. They say that the best day to plant a tree is ten years ago, and the second best day is today! If you missed that ideal starting point, the time is NOW to build your company’s business credit profile so you’re in a position to help your business grow.These aren’t just opinions. The biggest authorities in the credit world agree that this subject is critically important to small business owners. What do they have to say?The Small Business Administration (SBA) is clear on the importance of a business credit report. “If you are already in business, you should be prepared to submit a credit report for your business. As with the personal credit report, it is important to review your business’ credit report before beginning the [SBA] application process.”According to Dun & Bradstreet®, managing risk is critical to the success of every business. That’s why banks, vendors, suppliers and partners turn to D&B® data to check a company’s creditworthiness before they’ll enter into any contractual arrangement. They advise every lender to check the ability of a business to pay on time before setting credit terms.The Equifax reporting bureau issues similar warnings. “Understand your Business Relationships! Before you sign a contract with a key partner/supplier or ship that big customer order, make sure you know who you’re doing business with.”According to Corporate Experian®, creditors and suppliers are increasingly using business reports to make lending and credit decisions. That’s why it’s important to establish a separate credit report for your business. If your business is new, or if you haven’t yet established business credit, obtaining tradelines (vendor lines of credit) is a great way to begin building your business credit report.They go on to say that, “A small business score is vital for separating your personal and business financial risk. As a forward-thinking small business owner, you know that credit affects your ability to obtain capital to develop your small business.” Your business credit report can influence:
The amount of your loan and what interest rates you’ll pay
The cost of your business insurance premiums
The credit terms your suppliers will extend to your company
Entrepreneur Magazine stresses the importance of keeping business credit reports separate from your personal credit. “Fewer than 10% of all entrepreneurs know about or truly understand how business credit is established and tracked-and how it affects their lives and businesses. Conventional wisdom has been that there are no consequences to using personal credit cards, home-equity line or a personal guarantee for a business. While it can make getting started easier, your personal assets may be at risk if vendors pay late, contracts are put on hold or orders are cancelled.”That’s a sample what the big sources of business credit information have to say on the subject. So, what about the sources of the money? Here’s what the big banks say about the importance of business credit and how they lend money to business owners:Both Citi® and Wells Fargo® are on record as saying that business and personal credit are both important factors when they’re making decisions on business loans and lines of credit. These are the “Five Cs” of business credit approval that Wells Fargo considers:
Character. What kind of borrower will you be for the bank? Their best clue to your character is your personal credit history. They’ll always check to see how well you have managed your personal debt in the past. Personal references, business experience and work history can sometimes substitute if you have no personal credit history, but strong personal credit indicates that you have the willingness and discipline to repay past debts – and future obligations.
Credit. Banks use a credit-reporting agency to look at your payment history with trade suppliers and other business obligations. They also check to see that your payments to other financial institutions are current.
Cash Flow. A bank will generally be a cash flow lender. That means they’ll look at the cash flow of your business as the primary repayment source for the money they lend you. A company’s cash flow is its net profit, plus its non-cash expenses – depreciation and amortization. Our rule of thumb is that for every $1 in total loan payments, your business must generate $1.50 in cash flow.
Capacity. They want to know how you’ll be able to repay the loan in case of a sudden downturn in your business. Do you have the capacity to convert other assets to cash, either by selling them or borrowing against them? This might include real estate holdings, certificates of deposit, stocks and other sources of savings that can be liquidated quickly.
Collateral. Many banks make both secured and unsecured loans. With a secured loan, you pledge something that you own as collateral. It might be personal assets like certificates of deposits or stocks, or business assets like real estate, inventory, equipment or accounts receivable.
So, now that we have some background on the importance of solid business credit, let’s get specific on how it works and how to establish it. There are three critical questions that all new business owners must consider, even before their first day of operation:1. How long does it take to properly build business credit?Business credit is a generic term, but there are two main types – cash lines of credit, and vendor lines of credit (also known as tradelines). When we talk about business credit, most people think of bank lines of credit that are immediately available as cash. Most new companies can’t qualify for these until they build up tradelines with vendors who will report their payment history to the business credit bureaus. It can take 2-4 years to build strong business credit profiles with the big three, Dun & Bradstreet®, Corporate Experian® and Corporate Equifax®.That’s if you do it right and if you work with any vendors that report to these bureaus. There are over 50,000 vendors that grant business lines of credit, yet less than 10% of them report to the bureaus. For this reason, odds are that even if you’re paying all your vendors on time, your scores are low or nonexistent. Establishing tradelines with vendors is not the only way to quickly start building up a business credit profile, but it’s one of the most important ones. That history becomes critical when you to apply cash lines of credit with banks, merchant account cash advances or SBA loans.2. What are the consequences if I make a mistake?This is not like your personal credit score where if something is inaccurate you can submit a letter to either Transunion®, Equifax® or Experian® and they are required by law to reply and to abide by certain standards of fairness and responsiveness.The business credit bureaus don’t have any such rules. The system is far less forgiving and a lot more difficult to navigate. There’s no oversight on how they operate or when and how they update your file based upon the EIN number of your entity. You really have just one shot at building your profile properly from the start. Any mistake, as small as being one digit off on an address (or worse yet, being out of compliance) can “red flag” your business and YOUR NAME as high risk for this and any other businesses you form in the future!3. Is this something I can put off until later?As you can already tell from the previous two questions, waiting until later is extremely risky. Building business credit is a process that requires a system to do it fast and accurately! Following a proper sequence to get the best results in the shortest period of time to is what sets Fast Business Credit apart. The other factor is honesty. When you work with Fast Business Credit, we let you know up front how much credit your business can secure, what types are available to you and how long it will take.No matter what you may have heard, there’s no “cookie cutter” approach out there. Results will vary just as they do in personal finance. This will depend on several factors, including but not limited to length of time in business, gross revenues, net profits, merchant account revenue, your personal credit, how many vendors are currently reporting and much more.Don’t wait! Here are the up-front steps to take to ensure that creditors and suppliers can validate your business information:· Incorporate or form an LLC (Limited Liability Company) to ensure that your company is seen as a separate business entity· Obtain a federal Employer Identification Number (EIN)· Open business bank accounts in your legal business name· Set up a dedicated business phone line in your business name and make sure it’s listedBeing successful in today’s every changing economic environment requires that your business is both credible and fundable and that requires a system to build business credit fast (and with accuracy)! Take the next step and call Fast Business Credit today at 1-888-313-6333 to schedule an appointment to speak to one of our business credit specialists. You will quickly find out what results your business will experience and how simple our system really is and why you will get results too!Creditable sources:http://www.experian.com/small-business/small-business-credit.jsphttp://www.sba.gov/content/business-loan-application-checklist
The construction industry is one of the major commercial domains. As such, the sector exhibits lucrative economic prospect. As the human population on the planet is going to surge further in course of time, requirement for homes, townships, workplaces, factories, churches and educational institutes is bound to increase. However, projects across the sector usually involve huge sums of money. Thus, the stakes in this line of business is usually higher. Moreover, the sector is turning unbelievably competitive these days. Contractors and project owners have to work on hairline profit margins in this competitive milieu.Before commission of any project, extensive effort is made to compute an estimated costing and a tentative deadline for it. For project owners, it is crucial to stick to these predetermined factors so that they can take home a profit margin – though, however thin. Moreover, these folks also require ensuring superior quality of construction work. At the ground level, it is indeed challenging to adhere to the estimated costing and deadlines. This is because myriads of unforeseen adversities arrive at a construction site very frequently. These factors withhold the work progress. As the deadline gets stretched, it invariably surges the project costing.Any ace project owner emphasizes on resolving all these adverse issues at the earliest possible instance. Seasoned players in the vocation are even adept in avoiding the majority of those issues even before those could appear. As such, the scope of building and construction management is indeed challenging. Implementation of the correct strategies at the right moments is the key to success in the construction sector. In a recent development, stakeholders in this line of business are steadfastly depending on project management firms to complete projects successfully on all aspects. The category of service providers shoulders a host of responsibilities to ensure construction projects of their clients are completed successfully, within estimated costing and deadline.The scope of service for the construction management firms also includes task like conducting a detailed feasibility study for an upcoming project. Professionals working at these firms are adept in evaluating the aspect of town planning. The professionals even assist project owners to acquire suitable land and obtain relevant permits from respective statutory bodies. Roping in these service providers also proves effective in resolving friction between engineering aspect and architectural issues, which arise from time to time.To put it in short, professional responsibilities of these construction management services encompass a huge area. Professionals working in such firms need to keep themselves thoroughly updated about all the latest happenings at a project site. Dedicated service of these professionals proves to be equally beneficial to all categories of construction projects cutting across the volume and scope. Hiring these professionals actually proves beneficial for the fraternity of project owners on the monetary aspect. These firms charge nominal fees and provide substantial service in return. Hiring such exclusive service providers is the best bet for project owners to ensure their own profit margins in the long run.The strategy of roping in adept construction management firms is spreading like wildfire. This innovative approach certainly proves helpful for the entire building and construction sector.