Where are your sales now and where were they three years ago? While that is important to know, the real issue is how did you get to where you are now? If you can not answer that question, you better start investigating.
If you really want to grow your business, first you need to decide where you want
to go. Then, once you know your goal, you need to develop a plan to achieve it.
One of the first things you need to understand in developing a plan is to understand your starting point and how you got there. From there, you build a plan to get to where you want to be in the future.
When you develop your plan for growth, take note of what you learned about your
current situation. Learn from your prior successes and failures to maximize your
Profits don’t matter.
Am I nuts? Maybe, but let me explain.
Profits, often referred to as earnings or net income, are an accounting measure meant to measure business performance. If profits were the end goal, the standard set of financial statements would not include a cash flow statement.
You can’t pay people or bills with profits, only with cash. Have you ever put profits in your bank account? Or written a check out to ‘Profits’? I would bet that all of you have at some time written a check out to ‘Cash’.
As for what you take home out of your business, it is still only cash that matters. You see, if you take more cash out of the business, that cash has to come from somewhere. And usually, it is in the form of debt. And what is debt? It is a claim to the assets of the business. Debt reduces the net assets or equity, which in economist’s terms is wealth.
Wealth comes from cash, not profits. Generate cash to create wealth.
Tracking and planning for your business’s cash flow is not a luxury, but a necessity.
Cash and only cash matters in the end.
On Monday we observed President’s Day. While the day is officially to recognize all Presidents, it is commonly related to two; Washington and Lincoln. Both are recognized as great Presidents by most; Washington as the father of our country and Lincoln as the savior of the union.
The two have something else in common as well; conciseness and careful choice of words. Washington’s second inaugural address remains the shortest on record at 135 words. Lincoln’s Gettysburg address was less than two minutes long, but he chose his words carefully and it now lives on generations later.
All of you have heard the beginning:
“Four score and seven years ago our fathers brought forth, upon this continent, a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal.”
What we as business people should take away from both of these men is this. It is not the number of words you use, but the words you use that matter. Not thinking about the words that you speak or write can make your message less than memorable. Or worse, evoke something other than what you intended.
Whether it’s managing an employee or developing a marketing campaign, the message needs be clear and memorable. The words you use count!
The fact that the last several years have been rough for many businesses may make it seem like there is not anything to be thankful for. Well there is. Be thankful that you are allowed to own a business or enter a career of your choosing, rather than that being dictated by the government. Be thankful that you are able to earn as much as you can. You should even be thankful that you can lose money. Yes, be
thankful for that. For without our free society, neither of those things would be possible.
A business that for years had been a mainstay of our community left New Jersey in 2010 and relocated directly
across the Delaware River on the Pennsylvaniaside of the border. Reportedly, this was due to the harsh regulatory environment in New Jersey.
Despite the move, this firm ran into state business tax problems. The problems were not in New Jersey or even Pennsylvania, but at the other side of the country, in the
state of Washington. The courts ruled that the company was subject to its business and occupation tax. This meant the firm had to pay taxes on its gross receipts in the state, not profits.
The logic for this ruling was that a couple of times a year, people from the firm would travel to address customer concerns. They were not taking orders as all orders were done via telephone.
So, as can be seen from this example, other states make it difficult on business as well. Simply leaving New Jersey may not be the answer in dealing with a business’s issues with the state.
CFO Magazine recently conducted a survey of CFOs on the attractiveness of the 50 states and their tax environment. Below I summarized the results for New Jersey. This might help explain the low level of job creation we have seen in the state. Of particular interest to me were questions 6, 7, and 8. I would appreciate any comments on this.
Survey Question To CFOs from CFO.com
What is your overall impression of the tax environment in this
How would you rate this state’s stance on asserting nexus positions for corporate income tax over corporations with only an economic presence in a state?
How would you rate this state’s stance on asserting sales/use tax nexus?
Over the next 12 months, how likely is this state to pursue clawbacks of incentives currently enjoyed by your company?
Over the next 12 months, how likely is this state to eliminate or reduce existing usiness tax incentives through legislative changes?
How concerned are you that your state’s fiscal condition will negatively impact your company in some way in the next 12 months?
In the next 12 months, how aggressive do you expect this state to be in its efforts to close its budget gap (if one exists) through additional corporate taxation?
How do this state’s revenue department policies and systems influence your firm’s decisions to locate or expand there?
How would you rate this state’s audit department on its ability to settle “gray issues” at the auditor level, for both sales/use and income issues (as applicable)?
How would you rate the independence of this state’s administrative appeal process (i.e. tax board, ALJ, or tax court, if one exists) from its audit department?
Out of 50 States
Has your business survived the economic downturn? Notice that I used
the past tense. Many economists believe that the recession officially ended
in June 2009. Recessions are very Darwinian in nature; they thin the weakest
out. So if you survived, what is your next step? Take advantage of the fact
that you are a survivor.
So what are some of the ways to do that now? First, develop a strategy
for growth. Think about market trends: demographics, technology, government,
and yes, the impact of this past recession. Analyze your strategy from both
a financial and operational perspective; identify the financial and human resources
you will need to make it materialize.
Second, seek out capital. Banks are lending, but they are not giving away
money. Interest rates are still at historical lows. There is also an enormous amount of private equity sitting on the sidelines ready to be invested. Take advantage of it. Be prepared and go to your lender or investor with a comprehensive professional
loan or investment proposal.
Third, recognize that labor markets are slow to respond to an uptick in the economy. Go out and hire the people you need now while there are great people available at reasonable costs. Get the right people to execute your strategy.
Down the road, you can reap the rewards of your leadership. But now
is the time to act, not hide.
Why does someone start a business? Is it
for the money? Well, it may surprise many,
but most entrepreneurs start their business
for reasons other than making money. It
usually is to pursue something they love
or to control their own destiny. But that
being said, without money coming in,
the dream ceases.
While entrepreneurs often have several traits in common, a passion for their
work, a desire to innovate, or a need to be independent, successful entrepreneurs
do something else. They keep their eye on the ball. In this case, the ball is money.
What do I mean by that? They have the financial infrastructure in place to help
them run the business side of pursuing their dream. There are many aspects to
this, but three of the most critical are:
Internal controls- there is a system of internal controls in place to ensure that
the firm’s money and other assets are being used in line with company policy.
Financial reporting- they know where they make money and where they don’t.
And last, but not least, they have a planning process to let them know how
much money they are going to need, and when.
So how do you manage this while still pursuing the dream? You surround
yourself with the right people to provide you with the proper tools and decisions.
That way, you can focus on pursuing your dream, and I may add; doing what
you do best, which is moving your business forward.
I had the privilege of spending the July 4th holiday at the birthplace of liberty; Lexington, Massachusetts. Lexington was where the first American blood was shed as the British marched towards Concord to destroy the patriot’s arsenal. At
Concord, the first British blood was shed and the British were forced to retreat.
How did the rag tag militias defeat the sizable and well organized British army that day?
By communicating and being nimble!
Thanks to the famous rides of Paul Revere and William Dawes, all of the countryside was alerted to the British advance and were able to respond quickly.
Think of small business in a similar fashion to the patriot militias. Communication is
much easier in a small business than it is in a large corporation. And…
Small business can take action quickly. By utilizing these advantages, small businesses can often effectively compete against their larger adversaries.
Revolutionize your business!
February 11 is the birthday of one of America’s greatest entrepreneurs; Thomas Alva Edison. While best know for his invention of the electric light bulb, and to a lesser extent the phonograph and motion picture, his real legacy lies in the business arena. Like his best friend, Henry Ford, he changed the way industrial companies operated.
Besides founding General Electric, Edison revolutionized the way products were developed. His Menlo Park laboratory was the first industrial research lab. He integrated various scientific disciplines in a single location and combined the process of invention with mass production techniques. By integrating teams of researchers that could focus on all aspects of his inventions, he was able to move them rapidly from research to development to commercialization. These concepts remain in widespread use today, in industries ranging from household goods to pharmaceuticals.
The "Wizard of Menlo Park", as he was often referred to, left his mark on industry and humanity for generations.