Category Archives: From Chaos to Control

Of Rubber Bands and Catapults: Strategies for Business Growth

A growing small business bears a great deal of resemblance to a rubber band. Left to its own devices a rubber band holds one shape. With the right type of pressure, a rubber band can expand to great lengths as long as the pressure is held steady or carefully stretched more and more. If too much pressure is applied or you lose your grip, the rubber band sails off across the room and someone loses an eye.

 

Apply this analogy to a small business. Sometimes businesses fade away because the owner doesn’t apply the right pressure (or any pressure) to move the business forward. Sometimes pressure to move the business forward is only applied sporadically, leading to inconsistent results. Pressure is applied and the business moves forward. Pressure is slacked off and the business moves back three spaces. Sometimes too many people are applying pressure in different directions, pulling the business in different directions, too. This creates infighting and factions that prevent the business from thriving. And often, small business are “stretched too thin” and find operating day to day outweighs business growth. And cash flow? Suffers every time. Every. Time.

 

Now consider the catapult. When someone refers to “going ballistic,” the catapult fits the bill very well. Using concentrated force, the catapult can hurl fire, take down walls, and make a big splash. Catapults are all about “go big or go home.”

 

If a small business uses a catapult approach to business growth, growth happens forcefully and fast. It’s a tried and true way of getting bigger, faster results. But, this method has its own challenges. First of all, if the catapult is not well-built, it will not sustain the force exerted and will fall apart. Building a strong business before attempting fast growth is necessary. That means having critical skills and competencies in place to build that solid infrastructure. The second big challenge with a catapult approach is to have a plan in place for once the walls are breached. Catapults open the doors to opportunities, but a business has to be poised to capitalize on those opportunities. All those expenses of catapulting and capitalizing can cause cash flow problems, too.

 

So, which business growth plan is better? The rubber band plan or the catapult plan. The answer is that it’s really just having a plan that is the important point. The plan determines the tools and skills needed. Executing that plan often requires the use of both steady pressure and the use of massive force. There is no “one size fits all” plan for business success. If there was, we’d all buy that book. The truth is small business ownership takes constant thought, planning, action, tweaking, and re-engineering. We work in an ever-changing field of endeavor where we must always be on the edge of our chairs, ready to adjust to circumstances as they come. And most of us wouldn’t have it any other way.

 

That Bearded Fellow: A Christmas Parable

I’ve heard a lot of quacking this week about a certain bearded man who said some things that put him in the soup, as it were. Of course, you know of whom I speak. None other than the Patron Saint of Materialism, Mr. Santa Q. Claus. It seems Mr. Claus, also known by the aliases St. Nick and Father Christmas, made a few choice remarks about elves.

Now, if you know your history, you know that Mr. Claus and the elves who work for him have a very special relationship. Mr. Claus relies on them for producing the goods and the elves rely on Mr. Claus to provide secure jobs and good working conditions. So, when Mr. Claus made his unfortunate remarks, the elves were understandably upset.

Mr. Claus’s supporters rushed to his aide touting the Free Speech argument. Mr. Claus was, after all, only exercising his right to say whatever he darn well feels like saying. Meanwhile the Elf Defamation League issued a stern reprimand and PETE (People for the Ethical Treatment of Elves) began a worldwide smear campaign. To make matters worse, the powerful Elf Union immediately voted to strike. The Reindeer Union also walked off the job in support of the elves. Production at the North Pole ground to a halt. It seemed Christmas might have to be cancelled.

In stepped Mrs. Claus, who as we all know is the real brains behind the North Pole Conglomerate. She did what no one ever wants to be forced to do. She sent Santa to his room to think over his actions. She then turned her efforts to damage control. With the entire North Pole shut down by the walkout, and elves and reindeer picketing outside the factory, and the news media sticking microphones in everyone’s faces, she had her work cut out for her.

Her first challenge was to restore Santa’s credibility as a loveable icon in the eyes of the children of the world. Fortunately, over the years the Elf Marketing Department had built perhaps the most extensive customer contact list in the world. Mrs. Claus set about sending out an email blast to all the children of the world letting them know that Santa had a headache and it made him cranky and he said something he didn’t really mean and he was sorry and not to worry, little tykes, Christmas was in no danger of being cancelled as had been reported on all the news-ertainment shows.

With a combination of sweet talking and sugar cookies, Mrs. Claus skillfully managed to get the elves to go back to work and the reindeer back to the barn, promising them an opportunity to fully voice their own views after the busy season was over, and reminding them of the all the sad little faces of the children who would not get their Bill-Buster Duck Rifles on Christmas morning. After hanging Santa in effigy, they headed back to their desks and workbenches, slightly mollified.

Then, Mrs. Claus headed back to the plush condo she shared with Mr. Claus. She called him from his room and sat him down in the living room. “Now, Santa,” she said, “What do you have to say for yourself?” And Santa replied, “Well, Mother, I know I CAN say whatever I want to say, but maybe sometimes it’s wiser to put my boot in my mouth instead.” And I heard him exclaim as he drove out of sight, “I’ve got nothing to say, because that, too, is my right.”

Rejoice! The Season for Budgeting is Upon Us

Caroline Grimm, Cash Flow ElfIt’s the most wonderful time of the year! It’s Budget Time! Oh, how I love budgets. They make me smile and laugh out loud with elf-like glee. No, really. And what’s even better is that my clients get downright gleeful, too. To see business owners get excited about budgeting makes me even happier. I start to dance around in my Cash Flow Wizard hat, the coins in my wizard pockets a-jingling, tossing handfuls of gold nuggets into the cheering throng.

Whoa! Easy does it there, Wizard! Gold nuggets weren’t in the budget!

The reason I love budgeting is that it is the most powerful of all the Financial Power Tools that I keep tucked up my Wizard sleeve. When a business (or a household) doesn’t have a budget, here is what happens: You spend money opportunistically. There’s cash in the bank account, and you just happen to need a hundred different shiny things and in walks a sales rep selling one of them. BAM! You get that shiny thing. Then, a month rolls by and your delivery van commits suicide rather than endure any more neglect. A week later you receive a letter from the I.R.S. chastising you for forgetting to pay your payroll taxes. (Sheesh, you miss one little week, and they get all up in your grill.) The end of the year rolls around, and you find out you paid out way more than you took in. That’s the “Fly by the Seat of Your Pants” approach to business finances. It’s chaotic and crazy, and it’s the way so many business owners operate because they simply don’t know any better.

There is a better way, and it’s all about planning. It’s about making decisions about where the money will go before it ever comes in the door. That’s what budgeting is all about. You make the decisions on a high level prior to getting the money. That way you ensure your business has what it needs. As money comes in, it is already spent on things like payroll taxes, van maintenance, and vendor payments.

Recently, someone took the Cash Flow Wizard to task about budgets. She said, in essence, “You can’t budget for emergencies.” Au contraire! You MUST budget for emergencies. Emergencies happen. “Stuff happens” is the #1 rule of small business. Now, my crystal ball doesn’t tell me ahead of time what the “stuff” will be, but I can guarantee there will be some. If your delivery van is 10 years old and hasn’t been maintained, the probability of it breaking down (or breaking up with you altogether) is very high. You’re already on borrowed time. But budgeting funds for such happenings means that when the “stuff” happens, it won’t bring your business to its knees.

Now, creating a budget takes a lot of the drama out of small business finances, and for those who like the thrills and chills of a chaotic financial existence, that is a total turnoff. For those of us who enjoy smoother sailing, business budgets can’t be beat. And to you smooth sailing fans I say, “Rejoice! Rejoice! It’s budget season. Time to plan for profits and success!”

Need help with budgeting? You can get a real world, crash course in great financial management right here.

A Financial Trail of Tears

No LimitsA local headline reads “Woman Pleads Guilty to Ramada Theft.” The woman referred to in the headline embezzled $80,000 from a hotel where she worked. The article goes on to say that at the time of her arrest for this crime she was also wanted by the police in Escondido, California, for embezzling $100,000 from the Pop Warner Football League. AND she was wanted by the San Diego Sheriff’s Department for embezzling $45,000 from another former employer.

In a newspaper article, we see “just the facts, ma’am.” But, let me take you behind the scenes. I have seen so many cases like this in my long career of Cash Flow Wizardry: large companies, small companies, churches, athletic booster clubs, and piggy banks. No one is immune from the threat of embezzlement. Behind the scenes, it’s always the same story: access without controls.

“We trust Mary. She’s practically a member of the family.”

“Joe handles all our finances. I never have to think about it.”

“I don’t understand all that stuff so I just hand it all over to my accountant.”

When we abdicate responsibility for anything, we place ourselves at the mercy of others. Sure, it might seem like a good idea at the time. Mary or Joe might make you feel totally comfortable with their competency and trustworthiness. They take a huge weight off your shoulders. You can focus on other things. That is exactly why embezzlements happen over and over and over again. Once you place your trust in someone and never give it another thought, con artists and embezzlers have free reign.

What does the loss of $45,000 or $80,000 or $100,000 do to a small business or a nonprofit? What would it do to your business? The losses go far beyond the initial financial losses. It cuts a swath of devastation through a business that can last for a lifetime. Once you are a victim of a swindler, you will never fully trust anyone again.

Every single one of the embezzlement cases I have seen or read about have at the core a lack of internal controls. Every. Single. One. So, it would follow that the best way to avoid your business becoming a headline would be to immediately establish some controls. What do I mean by internal controls? It’s all about checks and balances.

Let’s examine a typical scenario. Pay attention. There will be a quiz at the end. “Mary is our bookkeeper. She’s terrific! She handles all the finances so I can get out there and make the money. She writes the checks, signs them with a signature stamp, receives the money, deposits it in the bank, and reconciles the bank statement. She has a company credit card, keys to the building, and often comes in on weekends to work. She is so dedicated she won’t ever take a vacation!” Quiz Question: “How many ways can Mary steal from you?”

Now, let me add another wrinkle to the tale. Mary is innocent. It’s your maintenance guy who’s actually stealing from you. Mary will get fired because it looks like she’s the culprit. She’ll finally forgive you after years of therapy in jail.

How can you protect yourself and your innocent employees? Here are some suggestions:

  1. Never, ever abdicate your financial responsibilities. You can’t hand them off to someone else. Think about Bernie Madoff. This is exactly what happened to all his victims. You can have someone do tasks, but you always have to follow up.
  2. Be familiar enough with accounting so that you can look at numbers on your financial statements (Profit and Loss, Balance Sheet) and understand what they mean. Does anything seem “off?”
  3. Be familiar enough with your accounting system (e.g. QuickBooks) to be able to “poke around” to get information.
  4. Look at your bank and credit card statements when they come in. Look at your online banking accounts regularly.
  5. Check on your Accounts Payable report to see if there are unknown vendors listed. Ask questions.
  6. Check on your Accounts Receivable reports regularly. Are there customers who usually pay on time but now are showing as way overdue?
  7. If you have a business that gets paid in cash, do you have a system for checking how much comes in and whether it actually makes it to the bank deposit?
  8. How do you keep track of your inventory, tools, and other shiny trinkets?

By establishing a company culture of verification and vigilance, you will send the message to everyone that you are “on the ball.” It’s much harder for a con artist to steal from you if you’re keeping an eye on things. Embezzlers are looking for opportunities. When you remove those opportunities, you protect yourself from a Financial Trail of Tears.

If you’re ready to be “in the know when it comes to dough,” get the self-study course From Chaos to Control, a complete real world financial education in a box.

A Dollar Down and a Dollar a Week

There I was driving down a country road on my way to a client’s office. I was in a Kumbaya kind of mood so I was listening to some folk music, singing along to all the old favorites: Dylan singing Blowing in the Wind, Baez singing Amazing Grace. Ah, the sweet, sweet sounds of the Peace and Love generation.

Then a song caught my ear. It was a bouncy, happy song, and I found myself singing along. “Just a dollar down and a dollar a week, you can have everything you seek for a dollar down and a dollar a week.” It’s a tale of woe. A misguided couple who lives life beyond their means, sucked in by the promise of easy credit.

So long Kumbaya Mood, hello, stern Cash Flow Wizard. I reached into the back seat and pulled out my wizard hat and proceeded to lecture the windshield about the hazards of this approach to managing finances. I see this approach all the time in my line of work. Business owners taking a “fly by the seat of your pants” approach to money management. “I’ll buy it now and hope I have the money to pay for it when the time comes.” It’s a recipe for disaster taken from the cookbook of Financial Insanity. Add to the batter all those business owners who put every one of their financial eggs in a risky basket called business ownership. Second mortgage on the house, personal credit cards bumping at the credit limit, savings exhausted, retirement accounts emptied. It’s enough to keep the Cash Flow Wizard up at night worrying about all this craziness.

The simple, hard fact is this: Without a solid financial plan your business will always struggle and risk imploding (or exploding.) The sooner you understand that the sooner you can start to build a better business. And it is totally possible to do that. Look at successful businesses. You will see a solid plan in place for how to make money and manage money. It’s all about having a plan and having the discipline and flexibility to carry that plan through.

The change starts with you answering some simple questions. What do you want your results to be? Are you there yet? If not, what can you do to get there? Please don’t take the “dollar down and a dollar a week” approach to financial management. It keeps you AND me up at night worrying. The Cash Flow Wizard needs her beauty sleep.

If you’re ready to change the way you manage your finances and you want to inject some of the Cash Flow Wizard’s financial sanity into your business, get a copy of my course From Chaos to Control. We’ll both sleep better…and then maybe I can get that song out of my head. “Just a dollar down…and a dollar a week…you can have everything you seek, for a dollar down and a dollar a week…just a dollar down…”

Mismanaging Credit: I Owe You, You Owe Me

There are two ways to mismanage credit in small business:

  1. Granting credit without wise credit policies
  2. Using credit with no plan of how to pay the bill

Both have a huge impact on your cash flow and are often closely related. Here are scenarios to demonstrate these points.

Granting Credit without Wise Credit Policies

You have two opportunities: You can work on a big project for a corporate client or you can take on several small clients. You might think the big client is the way to go, but how long will it take you to get paid? Often, large companies take their time paying — sometimes 60 to 90 days, sometimes longer. You may find that you’ve tied up a tremendous amount of your time with no cash flow to pay your bills. The smaller clients could provide you with more immediate cash flow without tying up all your time.

Using Credit with No Plan of How to Pay the Bill

It’s easy when times get tough to pull out your credit card to cover your current expenses. But doing this with no plan of how you’ll pay the bill gets many small business owners in hot water fast.

To eliminate these difficulties, consider how you want to manage your credit and create credit policies. Answer these questions:

  • Do you need to extend credit at all?
  • Can you get paid at the time of delivery?
  • Can you get customers to pay by credit card?
  • Can you ask for a deposit up front?
  • Who will you extend credit to and what criteria will you use?

If you’re ready to move beyond crisis-mode money management in your business, I can help. My step-by-step course From Chaos to Control will guide you through every area of your business with fresh eyes so you can diagnose and solve the problems you may not even know you have. Learn more and buy it now at http://cashflowrollercoaster.com/chaos-control/

How to Avoid the Most Common Reasons for Small Business Failure

The lifecycle of the typical small business is short and painful. It starts out with a dream and ends with a whimper. And in between, a struggle of Herculean proportions is played out as the owner tries to figure out why the business isn’t succeeding.

Depending on which survey you read, up to 80% of small businesses fail. Most fail within the first five years, and those who survive the first five are often losing money. Pursuing a career in small business ownership seems like a fool’s footpath straight to failure and poverty.

So, what is the difference between the 80% that fail and the 20% that succeed? When you examine the reasons that cause business failures, you begin to understand that most business failures are preventable. The major missing ingredient is knowledge. Business owners who get expert help before they open a business have a much greater chance of succeeding. Business owners who get expert help as their businesses grow and change succeed more quickly with fewer speed bumps along the way.

Why do businesses fail? A study published by Jessie Hagen of U.S. Bank gives the details of the top reasons for failure:

General Business Factors

  • 78% – Lack of a well-developed business plan, including insufficient research on the business before starting it.
  • 73% – Being overly optimistic about achievable sales, money required, and what needs to be done to be successful.
  • 70% – Not recognizing, or ignoring, what they don’t do well and not seeking help from those who do.
  • 63% – Insufficient relevant and applicable business experience.

Financial Factors

  • 82% – Poor cash flow management skills/poor understanding of cash flow.
  • 79% – Starting out with too little money.
  • 77% – Not pricing properly – failure to include all necessary items when setting prices.

Marketing Factors

  •  64% – Minimizing the importance of promoting the business properly.
  • 55% – Not understanding who your competition is or ignoring competition.
  • 47% – Too much focus and reliance on one customer/client.

Human Resource Factor

  • 58% – Inability to delegate properly – micro-managing work given to others or over delegating and abdicating important management responsibilities.
  • 56% – Hiring the wrong people – clones of themselves and not people with complementary skills, or hiring friends and relatives.

To get your own business on the right side of the 80/20 split, assess your business to see if any of these Failure Flags exist. Then, systematically eliminate them. If you don’t have all the skills you need, hire an expert to help you. The cost of having a professional on your team is far less than watching your business join the 80% club.

Tired of feeling like your business is on the edge of financial disaster? In my do-it-yourself home study course From Chaos to Control, you’ll diagnose specific issues in your business that may be creating problems and develop a plan to banish business cash flow problems permanently. Find out more and buy it now at http://cashflowrollercoaster.com/chaos-control.

Top 10 Record Keeping Mistakes Business Owners Make (and How to Avoid Them)

If you interviewed business owners of failed businesses, a majority would tell you that they didn’t understand or feel comfortable dealing with the “book work.” Your ability to understand and perform day-to-day accounting tasks in your small business is a critical success factor.

One of the day-to-day accounting tasks that you need to do as a small business owner is record keeping. Here are the top 10 record keeping mistakes business owners make:

  1. Not having a record keeping system set up (the shoebox approach).
  2.  Procrastinating on invoicing customers.
  3.  Sticking checks in a drawer and forgetting to deposit them.
  4. Not tracking carefully which customers have paid.
  5. Not tracking invoices that are overdue.
  6. Not following up to make sure overdue invoices get paid.
  7. Putting “book work” at the bottom of priority list.
  8. Sloppiness—not recording checks, recording the wrong amount, etc.
  9. Abdicating all responsibility—“I have ‘people’ to handle that.”
  10. Creating an embezzlement friendly atmosphere—“I have ‘people’ to handle that whom I trust completely.”

Here are some tips to help you avoid the most common record keeping mistakes business owners make:

  1. Set up an accounting system that works for you.
  2. If you don’t have accounting experience, get help from an expert.
  3. Schedule time each day or week to take care of “book work.”
  4. Don’t procrastinate or move “book work” to the bottom of the pile.
  5. If you outsource or hire an employee to perform tasks, follow up to make sure things are happening as they should.

The way you handle record keeping in your business helps to determine whether you have a healthy cash flow or you’re always on the edge of financial disaster.

Tired of feeling like your business is on the edge of financial disaster? In my do-it-yourself home study course From Chaos to Control, you’ll diagnose specific issues in your business that may be creating problems and develop a plan to banish business cash flow problems permanently. Find out more and buy it now at http://cashflowrollercoaster.com/chaos-control/.

Getting Your Tax Return Prepared Shouldn’t be an Errand You Run on Your Lunch Break.

I was in a client’s office one day getting her books closed out for the year so she could have her tax return prepared. I overheard a woman in the next office telling someone, “I’m just going to run out and get my taxes done.” I was horrified. Having your taxes prepared is not something you just “run out” and get done like an oil change. Good tax preparers are like good hair stylists. They have followings. People pre-book them.

If you just “run out” and have your taxes done, who do you think you’ll get as a tax preparer? The best and the brightest? Hardly. You’ll get the first year preparers who haven’t built up a following. The ones who are fresh out of tax class and generally have no experience preparing tax returns or running a business. The ones who don’t have the expertise to know the ins and outs of interpreting tax codes to your best advantage while still keeping you within the law. Sure everyone deserves a chance to gain experience, but do you really want to be the first patient a surgeon operates on?

Hire an experienced, professional tax preparer. Schedule an appointment well in advance of April 15. Then you can focus on other important things. Like getting your oil changed on your lunch break.

Are you ready to move beyond crisis-mode money management in your business? My step-by-step course From Chaos to Control will guide you through every area of your business with fresh eyes so you can diagnose and solve the problems you may not even know you have. Learn more and buy it now at http://cashflowrollercoaster.com/chaos-control/.

Surviving Tax Time: Procrastination is Your Worst Enemy

It’s April 14. You think you probably should get your tax stuff together pretty soon. So, you work late into the night gathering receipts, pawing through stacks of paper, and digging under the seat of your car until finally you’ve got everything you need. Off you go on your lunch break on April 15 to get your return prepared. Your tax preparer, who has been working at a feverish pitch for weeks, has deep circles under her eyes, her hands are shaking from lack of sleep and too much caffeine, and you notice a small stream of drool running down her chin. “Oh look,” she exclaims laughing maniacally, “Another return!” And you think to yourself, “What’s her problem?”

You, my procrastinating friend, are her problem. Now she’s got to frantically race around trying to keep you out of trouble because you didn’t have the courtesy or forethought to be prepared well ahead of the deadline. And then she’ll have to listen to you whine because now all of a sudden you have to come up with thousands of dollars that you didn’t know you owed.

Do yourself a favor; get your return done early. If you owe money, you don’t have to send it until April 15. At least you’ll know that your return was prepared by a tax preparer who wasn’t fatigued, you’ll know ahead of time what you owe, and you’ll have it off your mind so you can focus on other important things.

Are you ready to move beyond crisis-mode money management in your business? My step-by-step course From Chaos to Control will guide you through every area of your business with fresh eyes so you can diagnose and solve the problems you may not even know you have. Learn more and buy it now at http://cashflowrollercoaster.com/chaos-control/