One of the least understood areas of the business has to do with MONEY! Very few people know how to accumulate money and live within their means.
This is amazing, since one of the major benefits of going into business is to make more money. Yet a great many shop owners had more money to spend when they didn't own anything and worked for someone else.
Most of the money-related problems in the business come from not understanding how to handle and control money, both in the shop and at home.
No Matter How Much I Make, It Never Seems to Be Enough!
Over the years, I've observed an interesting phenomenon where the business grows and yet the owner is unable to take more money out of it. Eventually the owner quits expanding the business, because even though it has doubled its gross sales, the shop is making less and less money!
It is not unusual for businesses to be grossing over a million dollars a year in sales and not have enough to pay the bills!
The solution is to learn the correct way to accumulate money despite the bills and all the reasons why it can't or shouldn't be done. Otherwise, the business will spend every dime and have nothing left over.
My Accountant Says We Owe Lots of Taxes, So Where's the Cash?!
Most shop owners were trained as technicians, not as business people. So when it comes to understanding the financial statements given to them by their accountants, they haven't a clue. Unfortunately, a good many accountants don't either. There are tremendous confusions regarding balance sheets and profit and loss statements.
An example of this is a shop in the Midwest owned by two partners who were told by their banker that they were doing really well and should borrow the money to expand. After they borrowed $198,000 and then found that they weren't making any money, the banker wanted them to sell off their personal stuff (houses, etc.) to pay the note down.
After becoming a Management Success! client, they paid off $40,000 of the debt in 8 months, except now the banker says they're not showing any profit and should go buy inventory so that "the financial statement will look good."
He advised them to go back to the way they were doing it two years before. If they had followed this advice they would be out of business and have no homes!
Their accountant gave them similar information and said they were "not doing it right." (Oh! By the way...they have a new banker and new accountant!)
What shop owners don't understand about financial statements can result in them following bad advice and potentially going out of business. The solution here is to get trained on how to read and understand financial statements!
Sales Are Going Up, But Expenses Are Going Up Faster!
It is very common for shop owners to see their sales increase dramatically as a result of learning to do some marketing and advertising. However, in the course of expanding, their costs can go up just as fast. What is happening here is the owner tends to concentrate on the shop rather than the money.
Part of the process of changing from being a technician or service writer to an executive who runs the business is the realization that an executive must put his attention on THE MONEY! Often, the owner of the shop doesn't know exactly where the business is at in terms of financial matters, and doesn't have the ability to get key data necessary to make good business decisions.
Most owners are shooting from the hip when it comes to the financial numbers. Too often, they leave this area for others to handle. As a result, they are never sure what is really happening, because in the owner's mind, it ain't his job!
NEWS FLASH!!! One of the primary jobs of a business executive is to control the money!
We Make Just About What We Need!
Another common problem is shops that are doing "okay" but never seem to get the full potential out of their business. Often this is because when the business starts to do well, the owner tends to relax.
A common trait among business owners who are at the top of their game is that they don't relax. The key to really getting the most money out of the business is to keep the pressure on and do the right thing at the right time. I also recommend that you never let employees, service writers, or the production department know exactly how well you're doing, or they'll relax too.
The Secret to Getting the Most Money Out of the Business
The real secret to getting the most money out of the business starts with the shop owner and his ability to control the money! The difference in getting 20% out of the business vs. 35% is in the office, and in controlling the checkbook.
A shop owner should know where the business stands at all times, and be able to know everything about the money coming in and where it goes. The successful executive is at least a week ahead in planning, fully understands the purpose and the use of financial statements, and is able to guide the accountant instead of being totally confused by him or her.
Ultimately, the shop owner is responsible for making sure the company is solvent, making LOTS of money and putting LOTS of it away for emergencies, and having a plan to get everything paid off.
Take control of your business; learn what you need to know to guide the business into a strong financial position and personal prosperity, it is your job, but Hey, it's ONLY money ... YOURS!!
MANAGEMENT SUCCESS! Advanced Financial Control Course