Cash flow- Cash is King
This is one of the the concepts that beginners get wrong. They think of of profits that is if I buy something for a pound and sell it for two pounds then have made 100% profit.
Therefore if I sell one million of them I have made a million. What could be easier.? I have been asked by people how much profit I make on things I have never been asked about how much money I have actually made.Their idea of profits seems to be unconnected with anything else. They will point to one item or one piece of work and say. How much profit did you make on that?
They obvious have no idea that it is entirely lined ot your productivity over year and one ite i isolation mean nothing. each year as the year progresses you can only guess on previous performance.
They understand that you can sell and not get paid but they do not think about not getting paid quickly enough. Dragons Den on television show up how people think in business particularly when they are beginners.
They are focusing on the idea and manufacturing the idea. They then want more money to building more of them or the more savvy how to market it.
Selling and marketing seems to be an after thought. They know they have to do it but it seems to comes a long way after the idea and the maing of the product. They sometimes seems to think that they cannot proceed any further util they have a warehouse full of these products of a container load at the depot.
You can spot immediately when the pitch is going well usually the presenter will say something like I have sold a hundred of these units in the last year and I now have an order for 10,000 from Marks and Spencer or Tesco. It then dawns on the panel that ! These things can be sold " These things can be sold before they have been manufactured because we have an advance order.
They then know that the money they put in will not be wasted on marketing a product that has not been proven. It has been proven all they need is to build more of them to order.The cash flow is then a good prospect.
The biggest problem most self employed people have is setting aside enough money for their taxes both income and vat. It is easy to finance the business by putting off paying the tax to the last moment or at all.
Each day first thing in the morning I check my cash flow. i look at both my business and personal account to see my current balances.I know how my bills are going as they are paid on a regular basis so my balances are a good indication as to how healthy the business is.
I have overdraft limits on all my accounts and my credit card so between the three of them I have a considerable amount of credit available. The idea is always to be in the black but I have the back up if I hit a tough patch. If I am constantly things are not going in the red which has not happened I will know well. I will be able to use the credit facilities in the short term and then have time to reorganise affairs to get back into a positive cash flow
In my office I have traditionally just used bills delivered and paid for as an indication how well I am going. This is a reflection of the health of the business. If the bills are delivered then I am busy . If they are paid for then the cash is flowing in.
The only other indication which can easily be hidden is work in progress. WIP is the best place to look for increasing profits. if you are holding too much unbilled work you are eating into your profits.
If you squeeze you WIP it is a great p[lace to crease profits. It is work you have for clients who ware ready willing and able to pay you. Your job is to finish the job and bill them.
I now take money on account of costs and bill them regularly before doing any more work. It means that the clients feel happier because they know how things are going and they do not have a large bill to deal with at the end of the transaction.
Complaints can arise out of billing procedures and the amount of the bill. if they have been billed as they go along and they have paid you have cut down the potential area of complaint considerably. All you then have to do is a good job.
I had someone ask me the other day about a tenanted property Do you think we should consdier putting the rent up every year. I said I think about it every day.
It is the same with cash flow You have to be thinking about it and acting upon it every day all day
Tuesday, 13 March 2007
Clear, hold and dominate
Business lessons from Jungle Warfare Experiences and Encounters by JP Cross
Clear, hold and dominate
The British in Malaya and then Borneo beat the communist insurgents by adopting completely different tactics to the Americans in Vietnam.
In conventional warfare the combatants use roads, railways ,water and air by contrast guerrilla warfare roads ,railways and rivers are the ambushers' paradise. Troops who only move secretly, mostly in small groups only arriving at the precise moment of battle cannot be ambushed.
The Gurkhas in Borneo were able to out guerrilla the guerrillas as they were well trained infantrymen. The Americans had a policy of search and destroy. They would do this then go back to their base. The Gurkha technique was to Clear Hold and dominate.
The Gurkhas would live in the jungle for weeks by winning the hearts and minds of the people and planting agents in the villages known to be unfriendly. The Gurkha carried his base on his back, and it consisted of a featherweight plastic sheet, a sackful of rice and a pocketful of ammunition.
The jungle belonged to him: he owned it, controlled it and dominated it by day and night for nights on end.
They dominated the jungle by ambush which is one of the most powerful weapons of both the guerrilla and the Gurkha. It is fighting from ground of one's own choosing and it depends on complete surprise. The enemy must be unaware that he walking into a trap.
The objective was to dominate the jungle week in week out day and night unlike the Americans in Vietnam. The sure way to beat a guerrilla is to operate more quietly, smoke less and talk less to possible enemy agents before an operation.
The Americans were too technologically tied. In Malaya and Borneo the enemy were equally as formidable as Vietnam. There is no other way to win wars at the ground level Sweat still saves blood.
Patience, patience ,patience and yet more patience is the secret of success.
Clear, hold and dominate
The British in Malaya and then Borneo beat the communist insurgents by adopting completely different tactics to the Americans in Vietnam.
In conventional warfare the combatants use roads, railways ,water and air by contrast guerrilla warfare roads ,railways and rivers are the ambushers' paradise. Troops who only move secretly, mostly in small groups only arriving at the precise moment of battle cannot be ambushed.
The Gurkhas in Borneo were able to out guerrilla the guerrillas as they were well trained infantrymen. The Americans had a policy of search and destroy. They would do this then go back to their base. The Gurkha technique was to Clear Hold and dominate.
The Gurkhas would live in the jungle for weeks by winning the hearts and minds of the people and planting agents in the villages known to be unfriendly. The Gurkha carried his base on his back, and it consisted of a featherweight plastic sheet, a sackful of rice and a pocketful of ammunition.
The jungle belonged to him: he owned it, controlled it and dominated it by day and night for nights on end.
They dominated the jungle by ambush which is one of the most powerful weapons of both the guerrilla and the Gurkha. It is fighting from ground of one's own choosing and it depends on complete surprise. The enemy must be unaware that he walking into a trap.
The objective was to dominate the jungle week in week out day and night unlike the Americans in Vietnam. The sure way to beat a guerrilla is to operate more quietly, smoke less and talk less to possible enemy agents before an operation.
The Americans were too technologically tied. In Malaya and Borneo the enemy were equally as formidable as Vietnam. There is no other way to win wars at the ground level Sweat still saves blood.
Patience, patience ,patience and yet more patience is the secret of success.
Friday, 9 March 2007
DO NOT Become Emotionally involved- its only business
DO NOT Become Emotionally involved- its only business
One of the most difficult aspects of business is not becoming emotionally involved.
It starts from the clients or contacts being unreasonable. This can reflect in a couple of ways.
The most common is when you ask them to do something they want to question it. It is easy to think that what they are doing is questioning your judgement when all they want is further reassurance.
Most people have a vague understanding of what is going on and they feel powerless when they have to do things that they do not understand. Because a lot of people now have some education and some have a lot they think that all situations can be understood and reasoned through.
They do not want to take advice that they do not understand. as a result they become difficult and demand their rights. Their rights usually consist of questions why things are the way they are.
It takes a lot of patience when you have to keep explaining to these people what is going on. Particularly when they speak to you and they ask for the same explain again. They do not want to understand the problem they want to reiterate their view of the problem and particularly that they are being hard done by.
I find clients pick on the least important part of the transaction to become embroiled in.
Throughout all of this I have to remain detached as otherwise the stress becomes too great. One of my secretaries was riling on about what people had done. I reminded her not to be emotionally involved as it is not worth it. The clients are paying us to do a job not make ourselves ill worrying about things we cannot change.
Amateurism
I now regard it as a mark of amateurism if someone who I regard as a professional in their job or line of business spend too long getting embroiled in insignificant detail.
They are not stopped form asking such questions or making such remarks but they should just do it in passing and not make it a cornerstone of what is going on. A lot of transaction falter over a few hundred pounds when they are spending hundred of thousand on the deal. They then take a position and mention principles.
One of the most difficult aspects of business is not becoming emotionally involved.
It starts from the clients or contacts being unreasonable. This can reflect in a couple of ways.
The most common is when you ask them to do something they want to question it. It is easy to think that what they are doing is questioning your judgement when all they want is further reassurance.
Most people have a vague understanding of what is going on and they feel powerless when they have to do things that they do not understand. Because a lot of people now have some education and some have a lot they think that all situations can be understood and reasoned through.
They do not want to take advice that they do not understand. as a result they become difficult and demand their rights. Their rights usually consist of questions why things are the way they are.
It takes a lot of patience when you have to keep explaining to these people what is going on. Particularly when they speak to you and they ask for the same explain again. They do not want to understand the problem they want to reiterate their view of the problem and particularly that they are being hard done by.
I find clients pick on the least important part of the transaction to become embroiled in.
Throughout all of this I have to remain detached as otherwise the stress becomes too great. One of my secretaries was riling on about what people had done. I reminded her not to be emotionally involved as it is not worth it. The clients are paying us to do a job not make ourselves ill worrying about things we cannot change.
Amateurism
I now regard it as a mark of amateurism if someone who I regard as a professional in their job or line of business spend too long getting embroiled in insignificant detail.
They are not stopped form asking such questions or making such remarks but they should just do it in passing and not make it a cornerstone of what is going on. A lot of transaction falter over a few hundred pounds when they are spending hundred of thousand on the deal. They then take a position and mention principles.
If You make the calls you get the business- If you take the calls you get the business
Selling to your existing customers- Make the calls
An estate agent who mainly dealt in higher priced properties took on a new negotiator.
They had never bothered to market themselves as lower priced property sellers. They only had sixteen properties on the books but had a lot more people looking for properties.There other work was commercial properties. Country houses and commercial properties has kudos in the estate agency world as it makes you appear clever and exclusive.
The partner concerned could not be bothered or was not interested in lower priced properties because the fees meant he had to do a lot more work for his money.
They decided to take on a negotiator who had worked in the mass market. I said she will be able to double that number of properties in no time
Incredulously I was asked she how would do that. I said "Answer the phone." I was told we answer the phone already. What I meant was use every opportunity of people phoning you to take on more business.
When someone rings you about anything to do with your business it is an opportunity to hook a client. They have people looking for properties so you the opportunity of keeping in touch with them and updating their requirements.
I today heard the negotiator's first task was to ring all existing applicants to see if they were still interested. The clincher was to ask them if they were selling a property and how that was going. She took on three new properties in a week. That is significant proportion when you only have 16 properties to deal with.
I would think at that rate she will have easily doubled the number of properties on the books in about right weeks. so in two months business would have doubled.
One member of the firm said disparagingly that's not really this firms style by which she meant looking for business. I presume it will be there style to go out of business for lack of business or to spend the profits when they come rolling in.
In the last couple of years we have bought 30 properties. We told all the estate agents what we were doing. Most of them totally ignored us even when we have bought properties from them.
One particular agent starting doing business with us and supplied us with exactly what we wanted. I went to their office and asked why they were so successful.
He pointed to his cards with client's details on. I just phone everyone from those cards.
The moral is
If you make the calls you get the business
If you take the calls you get the business
An estate agent who mainly dealt in higher priced properties took on a new negotiator.
They had never bothered to market themselves as lower priced property sellers. They only had sixteen properties on the books but had a lot more people looking for properties.There other work was commercial properties. Country houses and commercial properties has kudos in the estate agency world as it makes you appear clever and exclusive.
The partner concerned could not be bothered or was not interested in lower priced properties because the fees meant he had to do a lot more work for his money.
They decided to take on a negotiator who had worked in the mass market. I said she will be able to double that number of properties in no time
Incredulously I was asked she how would do that. I said "Answer the phone." I was told we answer the phone already. What I meant was use every opportunity of people phoning you to take on more business.
When someone rings you about anything to do with your business it is an opportunity to hook a client. They have people looking for properties so you the opportunity of keeping in touch with them and updating their requirements.
I today heard the negotiator's first task was to ring all existing applicants to see if they were still interested. The clincher was to ask them if they were selling a property and how that was going. She took on three new properties in a week. That is significant proportion when you only have 16 properties to deal with.
I would think at that rate she will have easily doubled the number of properties on the books in about right weeks. so in two months business would have doubled.
One member of the firm said disparagingly that's not really this firms style by which she meant looking for business. I presume it will be there style to go out of business for lack of business or to spend the profits when they come rolling in.
In the last couple of years we have bought 30 properties. We told all the estate agents what we were doing. Most of them totally ignored us even when we have bought properties from them.
One particular agent starting doing business with us and supplied us with exactly what we wanted. I went to their office and asked why they were so successful.
He pointed to his cards with client's details on. I just phone everyone from those cards.
The moral is
If you make the calls you get the business
If you take the calls you get the business
Wednesday, 7 March 2007
Do it every day
Your to to do list will tell you what you should be doing every day. The hard part is doing it every day.
Most of the work is dull and routine a bit like exercising and dieting you know it will work but you have still got to do it.
Opening the post is a vital and routine activity in my office. It dictates the urgent things of that day. I am always there unless I have been called away that minute. I open it, I then find the files, then I read it. I don't read it as I go along because you are then reading it twice.
You take possession of it and dictate a reply that day if possible. I see people read it commnet on it, take it to their room and no doubt go through the same process again.
How is that possible if you are that busy,handle each piece of paper once preferably but not too many times. Rereading it does not progress matters and you will only get paid for reading it once.
My first partner had a lax attitude to the work. His working day was
10.00 Arrive at work
12.30 Go to lunch for a couple of hours
15.00 Maybe come back after a few drinks
Spend the afternoon not in fit state to work. He would do this a few days and then stay later until seven o'clock once a week to catch up on all the work he had not done during the week
He would loudly boast that he had to stay in the office until seven just to keep up with the work
If anyone came to the office unannoounced he would would do his best not to see them unless they were his mates and he would promptly go to lunch with them for a few hours.
Needles to say I don't think he is in business today and has had quite a few run ins with the authtorities. Usually he has been lack in sticking to the rules to hide his clients under hand tactics or acting for more than one person in breach of conflict of interest rules. He would do this to keep the fees cheap and not have any outside interference.
The moral is Do all the routine stuff every day whether your like it or not.
Most of the work is dull and routine a bit like exercising and dieting you know it will work but you have still got to do it.
Opening the post is a vital and routine activity in my office. It dictates the urgent things of that day. I am always there unless I have been called away that minute. I open it, I then find the files, then I read it. I don't read it as I go along because you are then reading it twice.
You take possession of it and dictate a reply that day if possible. I see people read it commnet on it, take it to their room and no doubt go through the same process again.
How is that possible if you are that busy,handle each piece of paper once preferably but not too many times. Rereading it does not progress matters and you will only get paid for reading it once.
My first partner had a lax attitude to the work. His working day was
10.00 Arrive at work
12.30 Go to lunch for a couple of hours
15.00 Maybe come back after a few drinks
Spend the afternoon not in fit state to work. He would do this a few days and then stay later until seven o'clock once a week to catch up on all the work he had not done during the week
He would loudly boast that he had to stay in the office until seven just to keep up with the work
If anyone came to the office unannoounced he would would do his best not to see them unless they were his mates and he would promptly go to lunch with them for a few hours.
Needles to say I don't think he is in business today and has had quite a few run ins with the authtorities. Usually he has been lack in sticking to the rules to hide his clients under hand tactics or acting for more than one person in breach of conflict of interest rules. He would do this to keep the fees cheap and not have any outside interference.
The moral is Do all the routine stuff every day whether your like it or not.
You are not obliged to be nice-continued
The favour I was asked to do was give her husband a reference.
It was to confirm the period that he had been self employed. I have no idea why she though I could do this. She gave me no information and it was not something I had any knowledge of.She was obviously desperate and my name came up.
What normally happens is that they give me instructions and I repeat whatever my client tells me. This fools the unwary as the client has pulled a fast one. They have tried to legitimise their assertions by getting me to put in a solicitirs letter.
I declined to do it because it is an accountant's quesiotn. I can only assume that they either had not done their accounts and paid their taxes or they had not paid their accountant.
They cast around for some poor mug who they could use and it happened to be me. Also whatever they paid me for such a letter would be cheaper then paying their acocuntantor their taxes. Also no doubt they wanted a free letter for old time's sake.
If people who I have not heard from for a long time contact me on a personal level it is usually because: 1 They want a free favour (not they have given me any) 2 They have taken their work elsehwere and are now asking me questions about what went on before.
On both occasions they do not expect me to bill them. The think my time and expertise is free.
I liked the quote in Inherit the Wind about journalism it is to
Comfort the afflicted and afflict the comfortable.
My variation of that is Comfort the afflicted and bill them and Afflict the Comfortable and bill them
The moral is don't upset those who can do you favours.
It was to confirm the period that he had been self employed. I have no idea why she though I could do this. She gave me no information and it was not something I had any knowledge of.She was obviously desperate and my name came up.
What normally happens is that they give me instructions and I repeat whatever my client tells me. This fools the unwary as the client has pulled a fast one. They have tried to legitimise their assertions by getting me to put in a solicitirs letter.
I declined to do it because it is an accountant's quesiotn. I can only assume that they either had not done their accounts and paid their taxes or they had not paid their accountant.
They cast around for some poor mug who they could use and it happened to be me. Also whatever they paid me for such a letter would be cheaper then paying their acocuntantor their taxes. Also no doubt they wanted a free letter for old time's sake.
If people who I have not heard from for a long time contact me on a personal level it is usually because: 1 They want a free favour (not they have given me any) 2 They have taken their work elsehwere and are now asking me questions about what went on before.
On both occasions they do not expect me to bill them. The think my time and expertise is free.
I liked the quote in Inherit the Wind about journalism it is to
Comfort the afflicted and afflict the comfortable.
My variation of that is Comfort the afflicted and bill them and Afflict the Comfortable and bill them
The moral is don't upset those who can do you favours.
Monday, 5 March 2007
You are not obliged to be nice
I am frequently amazed that people I meet are in business. They do not seem to display and of the business like attributes.
I think maybe they are in a business that cannot fail or they have found a formula that works for them. A couple of years ago I met someone locally at a luncheon club.
I had no particular view of her but she was introduced to the club via someone who was noted for being bombastic and was generally thought of as a bit of a buffoon.
She was running some sort of telephone martketing organsiation in a little office. She was also selling things on the side such as ink cartidges and party gifts.
She was there for a while and seemed to have different people in her office on the few occasions I went there. She then approached me although I did not encourage it to do some work for her.
She then came across as rude, domineering and opinionated.We finished the job and fortunately no more work came our way.
She moved out of the area and set up this business of ink cartidges somewhere else. My staff had told me that she had been rude to them,This surprised me as she had come to us and we had not courted her work.
She was also in a people person business being in marketing and even on one occasion she had asked me where I got my ink cartridges. I sidestepped the question.
The other day she rang me and wanted a favour from me even though I had not heard from her in over two years. She then told me her business had failed.
I was not surprised.
I think maybe they are in a business that cannot fail or they have found a formula that works for them. A couple of years ago I met someone locally at a luncheon club.
I had no particular view of her but she was introduced to the club via someone who was noted for being bombastic and was generally thought of as a bit of a buffoon.
She was running some sort of telephone martketing organsiation in a little office. She was also selling things on the side such as ink cartidges and party gifts.
She was there for a while and seemed to have different people in her office on the few occasions I went there. She then approached me although I did not encourage it to do some work for her.
She then came across as rude, domineering and opinionated.We finished the job and fortunately no more work came our way.
She moved out of the area and set up this business of ink cartidges somewhere else. My staff had told me that she had been rude to them,This surprised me as she had come to us and we had not courted her work.
She was also in a people person business being in marketing and even on one occasion she had asked me where I got my ink cartridges. I sidestepped the question.
The other day she rang me and wanted a favour from me even though I had not heard from her in over two years. She then told me her business had failed.
I was not surprised.
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