SDSASSOCIATES.COM

Cash Flow

2011-11-17T20:14:18Z

Having money is a good thing, having the right amount of money at the right time is a great thing.

Cash flow management is like a calendar of when you will collect money and when you need to pay out money. If you have a $500 supplies payment due Thursday and $25,000 in sales coming in on Friday, you have a problem. You will have plenty of money, but the money is coming too late to cover your expenses in a timely manner. You will have to borrow money for a day, which creates unfortunate interest expense.

Consumer sales are often paid at the time of purchase or when the work is complete. Businesses to business sales usually have a significant lag between the completion of the work and payment.

There really is no shortcut for a small business, you have to sit down with a piece of paper and map out when you make payments and when payments are received. Providing incentives for quick payment is often cheaper than paying interest on lines of credit. It is always financially smarter for business to avoid as much debt as possible. Debt becomes a fixed expense, where incentives vary with the level of sales. Since sales levels in small business often fluctuate significantly, servicing debt can put you out of business if sales lag at the wrong time. Murphy’s Law; if a bad thing can happen, it probably will at some point.

You have to budget for large ticket items that occur on an infrequent basis; such as insurance payments or professional licensing. For these reason, you may have a large cash position at various times, but you have to be very careful to budget money during surpluses to cover future expense; or sometimes more importantly, to cover future growth opportunities (footholds I will discuss later).

Managing your cash flow is a bit tedious, but pays for itself many times over.

Accounting

2011-11-16T16:25:42Z

Accounting is the backbone of the business, but it does not need to be complicated. If your business is generating under $200,000 a year then you can probably just do the books by hand on a ledger. You get a lot better information from an automated accounting program, but it is essential that all transactions are categorized properly. If you mess up the categories, then all the cool tables and summaries in the world will not have much meaning.

Keep it simple in the beginning. Accounting should be completed daily. Basically you just make sure any transfers to or from the business are logged into a ledger (basically a check book register). All receipts should be stored in a daily pouch or envelope. You would also need to log any type of barter transactions or free work that is completed. I also found it is good if you can log your business miles in your transaction ledger. Depending on your number of transactions, all of these entries should be transferred over into categories and summarized weekly and/or monthly. There is no need to categorize everything daily in a small operation.

Categories would include sales, advertising expense, travel expenses, raw materials, equipment purchase, telephone, office supplies, etc. etc. etc... You do not need to be an accountant or have an understanding of the tax system, just log like things together and keep your receipts and information organized by date. At the end of the year, you take your monthly summaries and add up the columns into a yearly summary. You take your yearly summary, monthly summaries, and your packaged receipts to your accountant to prepare the tax return.

Hire an experienced business CPA to complete your tax returns. They will be expensive, but they will end up saving you money and a great deal of grief. Your CPA will re-categorize your information to suit the current tax code. The key is to keep your record keeping as simple and as straight forward as possible. Your CPA will also be the one to help you organize and meet employee regulations and payments. But again, it really isn’t too complicated for you to handle a couple employees with direction from your CPA.

When your business starts generating more than $200,000 (or is particularly complicated financially with tricky real estate deals, employment regulations, or investing transactions), then it is time to start looking at things like bookkeepers and possible incorporation. It is your CPA who will be your best advisor with regard to how your business should be structured, once you are making significant money.

In summary, accounting should be completed daily, kept simple, and logical.

Sales Process

2011-11-08T18:06:31Z

The following is a very basic sales process. It is important to consider this process since not every potential client is ready to buy at this moment in time. It is good to know what process needs to take place to transition a client from curiosity or shopping to actually buying.

Establish Rapport – You need to make some sort of personal connection with a prospective client.

Establish the need – You need to show your prospective client that you understand their problem or educate them to a potential problem.

Show what happens if nothing is done – show the damage that can happen or the lack of a benefit.

Show how ineffectively the problem is being solved – Show the weaknesses in the way other companies are addressing the problem.

Show how your product or service solves the problem – Provide education that will position you as an expert in your field.

Address potential obstacles – This could be a benefit versus cost comparison, or a more detailed picture of the success one could achieve by using the product or service. Help the client picture and see the benefits.

Make an offer – Let the potential client know exactly what you want them to do. Give them a way to shop your products and choose what they like.

Close the deal – Add on some sort of incentive to get the client to make an immediate decision.

Follow-up and obtain referrals – Follow-up with your clients and involve them in your sales process. Stay in contact to increase the likelihood of repeat sales and referrals.

Daily Marketing Plan

2011-11-07T19:04:37Z

If you own a business owner of any kind, consistent daily marketing is essential. You can find technically skilled employees, including sales people, but usually only the owner is constantly aware of the big picture. Employees simply do not consistently think long term. Marketing cannot be completely delegated. You need to do it, and you need to do it well.

I recommend a check off list of five activities that you will complete every day. These activities should be listed the day before, because marketing is usually not a person’s favorite activity. Not all activities are the same, but each one should be directed at obtaining sales from your list of preferred clients.

Most business to business sales are made face to face. You have to research the proper contact person. You have to establish some type of network rapport. You have to make contact with the decision maker in order to set up an in person meeting. Finally you need to actually meet with the decision maker. Several of your daily “activities” might be related to research and establishing rapport. However, you need to focus on meeting with an actual decision maker on a regular basis. Your sales goals will determine have often you need to actually meet with prospective clients.

Consumer sales often require multiple contacts before a consumer is willing to check out your products or buy. Just as with business to business, you have to establish rapport. Then you have to educate them or make them aware of your products. It is best to establish some expertise, and then you can start to really create some sales.

Here is an example from my claims business. My goal was to have a new client each month. I was able to obtain work from almost every one of the companies where I actually met in person with the claims manager. My goal was to meet with one claims manager a month. To get an appointment with a claims manager, I needed ask five to ten companies. It took two to three calls to insurance agents or company secretaries and/or claims adjusters within a company to identify the decision maker.

I completed 5 tasks a day. Most of the tasks were simple phone calls to gain information. Decision makers in insurance companies isolate themselves, unless you know them personally. I always tried to get agents or staff adjusters to make contact with the decision maker for me, that way when I called them it felt like I had a referral. So many of my calls were to agents and or adjusters really just trying to establish rapport and let them know I wanted to pursue work with their company. The goal of my call to a decision maker was always to set up an in person meeting. If months where I was not able to set up any appointment, I tried to take a day where I traveled to insurance companies and dropped off marketing information, including my E&O insurance information and pricing guide. I asked to meet with the decision maker, but rarely got past the secretaries. However, a lot of times I was able to meet with the adjuster or secretary that I had called. I always tried to have some sort of freebie with my company name for them.

Over the course of time, I was able to establish working relationships with companies like Fireman’s Fund, Maryland Casualty, Grange, ANPAC, American States, Safeco, Kemper, Michigan Millers, Zurich, Royal, Western Mutual, Unigard, Mercury and many other insurance companies. Daily activity on a consistent basis works.

Target Market

2011-11-04T18:52:46Z

You now have some basic sales goals, so where are those sales going to originate? Who will benefit most from your product or service? What do your ideal clients have in common?

I hope you noticed I have started this process from a backward perspective. I have started with the outcome I desire, sales. Then I figure out how to get the sales. I am going to assume you have the production capability and cash flow to provide enough service or product to meet your sales goals. It may or may not be true, but I am going to make the assumption, for now, anyway.

My focus, at least early on, is on sales. Describe your ideal client. Specifically, what benefit will you provide to them or what problem will you solve for them?

Make a list of prospective clients. It is best to list actual names of companies or specific industries if you are pursuing business to business income. Create a list of as much demographic information as you can if you are planning to pursue individual consumers.

Now try to group your list by similar traits. Rather than just blindly advertising, you will want to specifically try to attract one niche at a time. So you have to clearly define your niche. This may all require some investigation.

For example, my first business was insurance claims adjusting. I had just recently moved to the area and didn’t even know which insurance companies were being written in the area or which ones might be willing to use independent claims adjusters. So, my first step was to go out and meet, or at least call, the independent insurance agents in town (and surrounding towns). They were not going to be my customers, but they knew who my customers could be and they knew how to contact them.

I asked each agent for a list of their largest insurance companies that they write on a regular basis. Then I asked if the companies had local staff adjusters, serviced the clients from a nearby location, or used independent contractors to inspect losses.

I created a master list of all the companies, but then I highlighted the companies that actually used independent contractors so that I could target that niche. I also tried to get referrals from the agents with regard to the claims managers, so when I called them I already at least had part of my foot in the door.

So the steps to creating your target market include;

Understanding what benefits you provide or problems you solve
Defining the preferred client
Making a list of the potential clients
Listing companies, people, or other common characteristics that might help you locate and communicate with the preferred client.

Set Sales Goals

2011-11-03T16:39:36Z

If you Google “setting goals” you will find endless processes and procedures to help you accomplish the task. For the purpose of business basics, the process is not really that important. What is important is that you set some sort of goals based upon sales. The goals should be yearly, monthly, and weekly.

The goals I am talking about now are based upon sales, and only sales. We are only talking about business basics right now, without consistent sales there is no business. Business owners can easily fill up their day with process and things that don’t really lead to sales. But sales need to be the focus and the number one goal on the priority list.

Don’t stress about the details, it doesn’t matter if you set good accurate goals. Just set some goals that you think, for whatever reason, are reasonable. Take a little time now and write them down on a sheet of paper.

The Basics

2011-11-02T16:14:41Z

The business basics are the regular activities that have to be consistently addressed in order to maintain and grow a business. They include regular goal setting, marketing, cash flow management, savings, continuing education, skills proficiency, process development, and staff development. The basics are general business basics; they are not related to the business’s actual profession or product.

I like to create a check off list of activities that need to take place on a daily basis. It’s kind of like a diet. Sometimes you keep the routine and other times you don’t. Being aware of and keeping the routine, on at least a semi-regular basis, will likely lead to consistent improvement.

This is not a sprint. Think marathon.

Equity Partnership

2011-08-10T21:35:42Z

Nobody wants to come up with an idea, build that idea, and then give up equity. My plan is built on optimizing success not necessarily maximizing success. Any business venture is a huge risk; the idea is to minimize that risk as much as possible.

I have personally owned five businesses in the past 12 years. Only two were monetarily successful, two broke even, and I lost money on one venture (although I might still be able to salvage it). My point is; I work with entrepreneurs. You may have one great idea now, but you will have more. Equity partnerships create teamwork and vastly increase your networking potential. It is simply more attractive for investors and creates a greater likelihood of success.

The goal with any business venture in my model is to create a turn-key business. The goal is to create a true cash flow asset. A turn-key business is run by employees, not the owners. It can be bought and sold as a self-contained asset. This is process of course, and I allow two years to reach the point where the owners can step back a little bit.

A turn-key business is created with repeatable processes and procedures. There is a process for everything from answering the phone to hiring employees that connects seamlessly with the marketing plan and identity of the company. The company’s identity is connected to the benefits customers receive simply by interacting with the company, even if they never buy.

To get the best result, the entrepreneur, investor, and coach work together to build a cash flow asset. It is generally based upon a two year commitment. I only get paid if the venture succeeds.

So you have an idea, what next?

2011-08-09T21:39:22Z

So you have a great idea for a business, what is the first step? The first step is to figure out if you have a market for the product or service. Sales drive any business. It also drives investors.

You have a great idea, now prove it. This usually means giving the product or service away for free or at least at a deep discount, and collect testimonials. The experience of providing the product or service and collecting the testimonials is critical to setting up your business and creating a marketing plan.

Do not buy a computer, software, inventory, or any kind of expensive equipment. You do not yet have a business, nor could you possibly know what to buy.

The first step is to borrow or rent equipment to provide your product or service to at least 20 potential clients. Remember, you are not doing this to make money; you are doing this for feedback and testimonials.

Welcome

2011-08-09T21:06:06Z

SDS Associates puts together entrepreneurs with investors. We build equity partnerships with the goal of building a turn-key business within two years of inception. SDS Associates provides the framework and coaching to take an idea and transform it into reality.

This blog will outline the entire process in a series of articles. The information is currently provided free of charge. But once the content is complete, the articles will be sold online as and automated coaching system. We welcome any comments, positive or negative.

All of these articles are the opinion of the author. They do not carry any type of warranty, written or implied. Use the information at your own risk.