Develop a Business Model That YOU Are Excited About!
Many people told me I had to think outside the box. I never understood this expression until one day it dawned on me the reason most people cannot think outside the box is they don't have a box to begin with.
It's as if you went to an office supply store and bought one of those flat bankers' boxes. Even though the instructions are included you still have a hard time putting it together.
Most people in business do not have their box or model in place. Once you put the box together, then you can step outside from time to time and re-examine your approach to managing and growing your business. With a good model in place your fun meter will be on high and your stress meter on low. Here we'll examine the financial side of your model. You should be acutely aware of seven numbers in your business and career.
Your Optimistic Number
What do you need to deposit on a monthly basis to survive? On the basis of how you are running your business at this point and the fees you are charging, how much is realistic for you to deposit? If you could look into a crystal ball and deposit this number on a regular basis, what would your optimistic number be?
Ask yourself two questions every day. In the morning, ask: What am I doing today to reach my optimistic number? At the end of the day, review your activities and decisions made and ask yourself: What did I do today to reach my optimistic number?
The quality of your answers will determine if you are moving towards your optimistic number or moving away from your number. You have four commodities when running your business. Where and how you bet your time, energy, money, and creativity will determine if you ever reach your optimistic number and on a regular basis.
(O.D.I) Owner's Discretionary Income
The second number you want to know is the percentage of your gross deposits or gross profit (depending on your cost of sales) that I call “owner's discretionary income." This is comprised of your compensation and may include your salary, draw, bonuses, retirement contributions, perks, and any expenses that you are legally entitled to and are for your benefit and not required in the “running” of your business.
Review your income statement for the last twelve months and then again for the last three months and determine your owner's discretionary income. Then turn it into a percentage.
Multiply your O.D.I x 100 and divide by your total deposits for that period. Track the total dollar value each month, as well as your percentage of deposits.
What Do You Have In Reserves?
The third number you need to know is your reserves number. What do you have in reserves (besides your business checking account) that will help you weather a financial storm or decline in revenues? Open up a business money marketing checking account. Suggestion: keep an amount equal to one month of optimistic deposits or three months equal to survival deposits.
Net Worth!
The fourth number is your net worth goal. Any person who has a written net worth goal will tell you how powerful that number can become in your financial planning strategies. Here is a good read. Buy a copy of the book, Wealth in a Decade, by Brett Machtig.
Your Investment Barometer
The fifth number is your monthly investment number. What amount are you investing on a monthly basis for reaching your net worth goal? One of the biggest challenges for business owners is the realization that he or she did not adequately plan for the second half of their lives. During their careers they made a lot of money and ran a lot of money through their business and yet have little to show for it. You need to invest in your retirement as well as your business.
Knowing these five numbers and tracking them on a regular basis will help you manage your business more effectively and make better decisions. This should result in a thriving and successful business or independent practice. Of course, I am assuming you have a good product or service. Where are you willing to bet your time, energy, money, and your creativity?
Contact Mark:
Mark LeBlanc runs Small Business Success in Minneapolis, MN and can be reached at (612) 339-4890 or by sending an e-mail to Mark@SmallBusinessSuccess.com. You can order his books, ‘Growing Your Business' and ‘Never be the Same', at
www.SmallBusinessSuccess.comor www.NeverbetheSamebook.com.
