Johnson Michele - Building A Stellar Business : a Structured Guide to Financial Success

Building a Stellar Business

First published in 2016 by

Panoma Press Ltd

48 St Vincent Drive, St Albans, Herts, AL1 5SJ, UK
info@panomapress.com
www.panomapress.com

Book design and layout by Neil Coe.

Printed on acid-free paper from managed forests.

ISBN 978-1-784522-42-1

The rights of Michele Johnson & Lorraine Kennedy to be identified as the authors of this work have been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

A CIP catalogue record for this book is available from the British Library.

All rights reserved. No part of this book may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988. Applications for the copyright holders written permission to reproduce any part of this publication should be addressed to the publishers.

This book is available online and in bookstores.

Copyright 2015 Michele Johnson & Lorraine Kennedy

We wish to thank the following people for their help and support, and at times, dripping sarcasm.

Their mentoring, guidance and friendship helped to make this book possible and we could not have done it without them.

Thank you to Scott Brenner, Carole Epstein, Richard Flaskegaard, Miriam Washington Kendall, Mindy Gibbins-Klein, Kip OBrien, Dr. Dominick Vita and Janet Vita.

And of course, a very special thank you to our children, who make it all so much fun: Christina, Michelle, Clark and Karl.

This book is actually two books in one.

Chapters 1 - 6 cover the financial structure of your business and the why and how it is vital to your success. It helps you to understand what to look for and what to review, and how to see your business from a financial perspective in order to understand where your profits are currently coming from and to then continue to be successful, financially, going forward.

Chapters 7 - 9 cover other, but equally important, financial aspects of your overall business. These include the importance of structure for your employees in your business, building a strong outside support team and learning to utilize them, and then finally some guidelines for protecting all of your assets.

Our goal was to write a financial reference book that, once read, could then be opened up to any chapter for a quick reread and review.

Is your business healthy? How do you know? Are your financials accurate and current and do they tell you what you need to know? Do you have a good filing system and know where everything is or are you literally buried in paper? Are you billing and collecting your receivables on a timely basis? Are you protecting your assets? Do you have a good team of professionals to support and help you grow your business? Finally, do you have the right employees, associates and subcontractors working for you?

As financial business consultants, we are often asked by small business owners to provide bookkeeping, CFO and payroll services. We start off with these kinds of questions every time we meet a new client. But actually, one of the first questions we ask is the only question that really matters, the question that really gives you the foundation to start from and to ask all other questions.

And we usually get one of the following three answers. Answer #1: A resounding Yes. Great, then we ask: Could you be doing better? Where is the money coming from? Do you understand your profit margins on each of your income streams and thus, do you know where you are making the most money? Are you measuring what you need to measure? And what are you leaving on the table?

Answer #2: Usually accompanied by a sad shake of the head, No. We ask, are you sure? Maybe you ARE making money and you just dont know it. If the client still thinks that the answer is no, then we ask why not? Do you have a solid financial system that produces a useful set of financial statements every month? Do you have a business plan or forecast to compare it to? Are you billing and collecting on a timely basis? Do you have too much inventory? Do you have too many employees? Is there another cash flow issue?

Answer #3: For many folks its a most truthful I dont know. We meet new clients every day who really truly dont know how much money they are making. They seem to have money in the bank and are able to make payroll, but beyond that, they dont know if they are truly making money and where they could make more. They might say that they are working harder than they did last year and still dont see it reflected in the bank. Mostly though, thats why they call us and we need to figure it out together.

Sometimes different variables can turn a No answer into a Yes, or a Yes answer into a No, relatively easily if you know what you are looking for.

We had a new client who was showing a strong income and good invoicing, but came to find out, he was not paying himself or his wife (who was doing the books). It was more important for him to show profits so he could tell his colleagues at their annual industry meetings than it was to see if he should have been in business in the first place.

We had another new client with good invoicing but not much profit, and waaaay too much inventory. Turns out he wanted to win the vendors annual sales incentive trip to Italy so he had been over purchasing inventory at the expense of his business.

We received a call from an accountant that we work with who had a client with strong invoicing but much smaller profit than matched their industry. The accountant just figured out that in this case a trusted employee of many years had been stealing from them and could we help them get on the right track.

By bringing in financial professionals to all three of these scenarios, these companies were able to recover and turn around. In these situations our bookkeeping company, Stellar Support Associates, was viewed as a short term fix to the problem, with the intent being to turn the books over to another full-time bookkeeping employee. However, the owners quickly realized that they could not afford to hire full-time help at the level of support and knowledge that we were giving them, and that using us was far more economical. All of them went from worrying about making payroll and running to the bank with every check that arrived to being able to plan on expanding their business, hiring more employees (or paying themselves and their spouses!), paying off their line of credit or some combination of the three. They actually started to think about the bottom line operations of the future instead of worrying about today. They went from being REACTIVE in their financial decisions to being PROACTIVE in their financial decisions. This didnt happen overnight, and for the client with the theft problem, it actually took several years to get out of the financial hole he was in. It takes a lot of hard work, focus, perseverance and collaboration between owners and strong financial advisors to review all aspects of their business for efficiencies and find the right path going forward for them. Having a successful business is more than a numbers game, but having good numbers certainly helps!