Harzog Beverly Blair - Simple numbers, straight talk, big profits!: 4 keys to unlock your business potential

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

Published by Greenleaf Book Group Press
Austin, TX
www.gbgpress.com

Copyright 2011 Greg Crabtree

All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the copyright holder.

Distributed by Greenleaf Book Group LLC

For ordering information or special discounts for bulk purchases, please contact Greenleaf Book Group LLC at PO Box 91869, Austin, TX 78709, 512.891.6100.

Design and composition by Greenleaf Book Group LLC and Alex Head
Cover design by Greenleaf Book Group LLC

Ebook ISBN: 978-1-60832-239-8

Ebook Edition

Save yourself a million dollars and read Gregs book.

When I launched my business, I grew it from $500,000 to $1 million to $2 million to what was supposed to be $4 million in revenue in 2001; then 9/11 hit and I was days from losing my business (and our familys home). Not only had I lost a million dollars within eight weeks, all along the way I was dutifully losing money each yearmoney five of my friends had loaned meand justifying the losses because I was investing in the growth of my business.

It was then that I became serious about paying myself, improving my margins, and paying back my investors. The first thing I did was heed the advice of my advisors, who kept warning me that my gross margin was too low. So my critical number for 2002 was to raise my gross margin from 43 percent to 55 percent. I also started having my accountant report my cash position to me each day.

Through a lot of hard work and focus, my team and I did it. And with the increased gross margin came our first profitable year ever, helping me generate enough cash to repay my investors and make good money ever since.

In this book, Greg has distilled key lessons for making serious money in your businesslessons I had to learn the hard and painful way. One warning: he doesnt add a lot of fluff to his points. He tells it like it is, starting with the first page. More importantly, he highlights some truths about business Ive yet to see articulated in any other book on growing a business, starting with the fatal mistake of thinking youre making a great profit without accounting for a reasonable salary for yourself.

Ive known Greg for many years, first as a student of mine in the Entrepreneurs Organizations Advanced Business executive program at MIT and today as a colleague and friend who helps firms navigate the challenges of growing a business.

Greg also gives his time to the Accelerator initiative in the Entrepreneurs Organization to help firms under $1 million in revenue obtain the necessary escape velocity to surpass the $1 million mark and join the Entrepreneurs Organization. And his tips are universal for much, much larger companies.

Greg has helped hundreds of companies, and he can help yours. Hes that rare accountant who can see beyond the numbers. Tap into his wealth of experience and put it to work in your business.

Verne Harnish,
Founder, Entrepreneurs Organization
September 11, 2010

I can only dream as far as I can see...
And when I get there, I can always see farther.

Anonymous

Every business starts with a seed of an idea, but only a few entrepreneurs can visualize the field all the way through harvest, much less through many successive seasons. By seeing beyond the numbers, I have laid out the basic principles that can help entrepreneurs create a realistic vision of their business from the beginning through many bountiful harvests.

I will share my experience on how to lay a solid foundation to build and manage your business, which is based on hundreds of real businesses, not cocktail party advice. We start with your dual role of key employee and shareholder and how something so seemingly simple can mess up so many businesses. We then move to learning the connections among profits, cash flow, and the productivity of labor.

If you feel that your business is sucking the life out of you, youll learn why the black hole phase of business exists and how you can get beyond it to smoother sailing. With profitability comes taxes, and I will show you how to fearlessly face the tax monster under your bed. Once you get the broken parts of your business fixed, you need a monitoring system that is simple and constantly pulses the right data at the right time. At this point, youll understand the economic value of your business and have a clear vision of whether you should offer stock to partners or employees, sell the business, or keep it healthy and harvest the profits to build your own wealth.

This book is primarily aimed at business owners from startup to $5 million in revenue. However, you should read this book before you even start a business. Many of my peers in the Entrepreneurs Organization who have a business with revenue beyond $5 million have found the concepts clarifying and valuable.

I come by the farming references honestly because I was raised on a chicken farm in Northeast Alabama and learned at an early age what I did not want to do for a living! I was fortunate to have worked for great mentors in both public accounting and a bank before I started my own CPA firm, where I focused on helping entrepreneurs see beyond numbers.

After becoming a member of the Entrepreneurs Organization in 2001, I became connected with entrepreneurs from around the world who communicate by sharing experiences instead of theory. As I grew my firm, I learned that sharing stories was a far superior method of communicating how to build a better entrepreneur. It also allowed me to develop and grow my team of new college graduates and fill their heads with fresh ideas without having them unlearn baggage that might hold them back.

I get to see intimate data from hundreds of businesses that are the basis for the stories and ideas included in this book. I have changed the names and details to protect their identity, but not enough to change the meaning of the data.

This material was developed from the sessions I have taught for the Entrepreneurs Organization chapter learning events and their Accelerator Program for businesses that are not yet large enough to join the Entrepreneurs Organization. It is my hope that this book helps you dream farther because you can see farther!

SECTION 1: THE FOUR KEYS

The four chapters in this section outline the solutions to the main recurring problems I see in businesses that are between startup and $5 million in revenue. It is important to review these chapters in sequence since the concepts build on each other.

You must get owner compensation right to know what your true pretax profit is. Once you know your true profit, you can set your sights on the correct target.

When you know what you are aiming for, you must establish an understanding of how to manage labor productivity to meet your goals. As you become more profitable, prioritization of your cash flow becomes a strategic endeavor instead of a fire drill with no exits.