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I can't tell you how many times I've heard a
glum participant tell me on the first day of one
of our Profit Mastery workshops: "I'm not
really looking forward to this. I've never been
a numbers person." Or, "I'm only here
because my partner/wife/husband/brother made me
come."
Inevitably,
these are people whose only formal experience with finance was some dismal
accounting class in college taught by a bean counter obsessed with the
whole debits and credits thing.
Yet, by the end of the day, these same people are telling us they never knew numbers could be so fun. They walk out of the room with a spring in their step, excited about the opportunity to apply what they've learn to their own businesses.
How does this happen? After about 20 years of attempting to impart some wisdom on a subject that so many business owners like to avoid,
here are some key things my partners and I have learned over the years:
1. You know more than you think you do. Just like the famous baby doctor Dr. Spock told nervous new parents in the 40's, we tell the same thing to our participants. Chances are your instincts are pretty good in the numbers area. Many times our participants find that what they learn in our workshops
reinforce what they've already been doing instinctively for years in their business.
2. You don't need to become an accountant to be able to manage your numbers. You just need to expect accurate and timely numbers from your accounting staff and then settle for nothing else. There are many competent accounting professionals who can help you when you're ready to make this happen.
3. Many people are so focused on avoiding taxes that they've lost track of what's really happening in their business. Don't get me wrong – there's no sense in paying more taxes than necessary. However, if people spent as much time on improving their profitability as they did in
avoiding paying taxes they'd be a lot better off. Don't wait until tax time to get your CPA's advice.
4. Speaking of accounting professionals: if you can't talk to your accountant because you're too intimated or because they're so focused on their tax practice to take the time to meet with you, it's time to find a new advisor.
5. Sometimes less is more. We tell people to start with no more than 3 areas to focus on for improvement in their business. In most businesses, it's going to be low gross margin, low net margin, or low cash. If you've got a business with a lot of inventory, one of these three areas should be inventory management – watching both your turns and gross margin dollar return on inventory. Once you've found your problem areas, our Road Map can help you diagnose underlying causes and formulate an action plan. Once you make improvements in your three areas, you'll find a lot of other areas of your business will improve as well.
6. For example, the other day one of our Plus Day participants found that his gross margin was lower by 3% than his high profit industry peers. Based on sales of $5,000,000, just by improving his gross margin by that 3%, he could send $150,000 more to his bottom line. He couldn't believe it could be that simple. Simple, yes, easy to achieve, maybe not. It's going to take some discipline and follow through. Worth it? His answer was a definite yes.
7. I'm not a numbers person at heart but I do like stories. Every set of company statements tells a story. The numbers help me learn what that company's story is. Inattentive owner? Unwise expansion? Messy divorce? Bad buying? It's all there, played out in the numbers. What's your story? What will you do from now on to make the story end the way you want it to?
8. Take heart: if your business is in trouble, once you figure out what's wrong and take steps to correct it, chances are it will take a lot less time to make things right than it took to get there.
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