Christopher Reeve is a hero to many people. His unbelievable courage after a terrible accident was truly an inspiration to many. Here’s a quote from him that I admire:

“I think we all have a little voice inside us that will guide us…if we shut out all the noise and clutter from our lives and listen to that voice, it will tell us the right thing to do.”

How true it is! And this “little voice inside us” captures the essence of our new gift book, Walk the Talk, by Eric Harvey and Steve Ventura. It reminds us that having values is very important, but it’s much more important to live them.

So sit back, turn up your speakers, and enjoy 3 minutes of inspiration from our new movie…Walk the Talk. Just click here …and don’t forget to share it with your friends and your team.

If you are too proud to ask for help in your business, you are missing out on many valuable learning opportunities. Mentoring is an essential tool to utilise in business. Mentors, business associates, friends and family can all provide valuable insight to assist you in your business success. Mentoring is one of the best sources for quality information and business wisdom on an ongoing basis and is simple to arrange.

Choosing a mentor is an important decision. Start by searching for someone in your business field that is currently in the place where you would like your business to be. Ask for a small amount of their time on a weekly or monthly basis, either in person or via a teleconference. Mentors are generally business owners who have more experience than you, who have achieved a higher level of success and who can become a trusted advisor to you and your business; and, their time is often free.

As a business owner, you are generally on your own. No more bosses to ask advice from and often few employees to bounce your ideas off of. Every business owner needs to have a great sounding board and sometimes they need emotional support throughout their business journey. Read my article, Why it Pays to Have a Network of Advisors, for more information about choosing the best mentor.

Learning from the business mistakes that your mentor may have made may help you avoid those same mistakes while you are growing your business. A mentor’s perspective and past experiences will help you to propel forward quicker in your business strategy.

Business mentors can also offer you access to an extended social network, offering you and your business access to senior decision makers to help you along. People like to help other people, and mentoring is a primary way for successful business owners to give back to the business community.

Mentors provide you with a no pressure and no ulterior motive relationship. This level of openness fosters better communication and a comfortable learning environment. The establishment of trust is something that typically grows into a long term trusted business relationship.

Don’t be afraid or too proud to ask for help in business. Mentors are a tremendous resource for any business owner, at any stage and will help you go further than you would be able to go on your own. Seek out a mentor to begin moving your business forward.

Good financial management is essential to the survival and success of every business. 

Unfortunately, many small business owners have relatively limited exposure to financial management and are unaware of how strategically important it is to their business’ performance.

In general, financial management deals with the procurement of funds for a business and the effective use of those funds in the operations of the business.  It also involves using accounting numbers to measure the financial health of a business; to understand the reasons for the current financial position; and to make strategic decisions that will improve the general performance of the business.

The best way to demonstrate the importance of good financial management is to describe some of the tasks that it involves:

• Taking care not to over-invest in fixed assets         
• Ensuring that there is a sufficient level of short-term working capital to sustain and manage accounts receivables and inventory
• Setting sales revenue targets that will deliver growth
• Increasing gross profit by setting the correct pricing for products or services, reducing the costs of raw materials, negotiating supplier prices, and managing other factors that influence the costs of production or service provision
• Controlling the level of general and administrative expenses by finding more cost-efficient ways of running the day-to-day business operations
• Tax planning that will minimise the taxes a business has to pay
• Managing employee benefits
• Performing financial analysis using numbers generated from financial statements.

Good financial management begins with a solid book-keeping system that will allow for the production of accurate financial statements.  It requires knowledge of how to use the figures in the financial statements to the business’s advantage. 

For example, a good financial manager should know that a positive net profit and an increase in sales does not automatically translate into financial success.  If the business’ borrowed capital has increased at a rate higher than the increase in profits or sales, it means the company is financially worse-off than it previously was. 

Are you and your management team aware of this? 

There are many other strategic mistakes that managers who are unfamiliar or untrained in financial management make.  Over time these mistakes can become detrimental to a business’s success and survival so it is crucial that you learn as much as possible about how to financially manage your small business. 

If you have trouble with this, you may want to consider soliciting the services of a professional who knows the ins and outs of the process.

For more information on financial management, have a look at my article “Impress your bank manager! How to read your profit and loss account report”.

Owning your own small business isn’t just a normal job, its 15 jobs or more all at once. You have to be your own PR specialist, marketing manager, bookkeeper, and receptionist in addition to the overseeing the primary product or service of your business – be it website design, marketing consulting, or pottery production.

It is highly likely that you work 16 hours a day and only have time for the bare necessities. Maybe you even miss dinner every other day and hardly have time for your family.

Does owning your own business really have to be this way? The answer is no, but you need to learn how to better manage your time. If you don’t start valuing your time, who will? Your customers sure won’t. They only see and care about the final product, not what goes on behind the scenes.

Time management is vital to your work-life balance, but it can also lead to higher operating efficiencies for your business.

A very important step in better managing your time is delegation. You need to learn to let go of some of the tasks you are currently in charge of and allow other people to take care of them for you. Many small business owners refuse to delegate their tasks, their reasoning being that other people won’t do as good a job or that it would waste too much time showing another person how to do the job right.

These are normally just excuses because the truth is, most of them are afraid to lose control over the tasks. They fail to realise that no matter who is actually doing the job, they still have the final say over it.

You may also be hesitant to delegate because you’re concerned that the costs associated with it will be too high. That may or may not be the case depending on how you approach it. If you spend enough time researching who the best and most cost efficient provider is, chances are you will not incur the high costs you fear.

Also, remember that delegating would allow you to concentrate and spend more time on the jobs that you are better and more efficient in. Finally, delegating doesn’t have to mean that the quality of your tasks will suffer. Sometimes, if the provider you choose is a specialist in the job, he or she may be able to do an even better job than you could ever have done.

For more information on how to better manage your business have a look at my article Leverage your Time and Use it More Productively or go to to www.secretstobettertimemanagement.com.

For those of you who are constantly looking for ways to better manage and improve your business, key performance indicators could prove to be a good solution. Key performance indicators, also known as KPI’s, are financial and non-financial measurements that help a business understand how much progress it has made in achieving its goals. Before KPI’s are established, however, a business must clearly establish its mission, goals, and stakeholders.

Key performance indicators will vary from organisation to organisation and will depend on what the overall goals of the organisation are. For example, a call centre whose goal is to provide the best possible customer service to its clients may use “the number of inbound calls that are answered in less than 30 seconds” as a KPI to measure progress towards that particular goal. A college whose goal is to produce highly-qualified graduates may use “the number of students who find a corporate job within 1 month after graduation” as a KPI. A business whose goal is to achieve a high level of customer satisfaction with their product may use “the percentage of sales that are generated by return customers” as a KPI.

For key performance indicators to be effective indicators of an organisation’s progress, they must be specific, quantifiable, and achievable. KPI’s such as “To be the most well-liked company” are useless because there is no concrete way to measure that. Likewise, a KPI such as “gaining new customers” is too vague because there is no way to differentiate between old and new customers. It really is a classic case of “what you can’t measure, you can’t manage”.

Because key performance indicators are measurements that are used over a longer term, the way in which they are measured should not be changed too often, if at all. They have to be measured in the same way over their life span. In addition, very precise targets for the KPI’s must be set that can be easily understood by all parties involved in its achievement.

If the appropriate KPI’s are established in the correct manner, they can help a business track its overall health and growth meticulously. They can help to identify problems and inefficiencies quickly and will allow you to zoom in on the underlying causes with a greater clarity. For small businesses, KPI’s would be ideal in tracking net profit, sales revenue, production efficiencies, and market positions. Even if you think you have a pretty good overview of your small business, the use of KPI’s could further enhance the understanding you have of it.

If you’re interested in the subject of analysing a business’s overall health, have a look at my article called “The Top 5 Warning Sings that Your Business is Declining”.

The little details can make a big difference in the world of business. It is more likely that a small business will experience a surge in profits due to its implementation of a series of small cost-cutting strategies rather than the acquisition of a huge new client.

Cost cutting strategies for your small business don’t have to be complicated, they just require that you pay attention to some of the more trivial aspects of your business.

Here are some ways for you to reduce the costs of running your business and increasing your income:

1. Buy in Bulk
Identify the items that your business needs and uses on a continuous basis. A good way to do this is to observe which of your office supplies you always seem to be running out of.

Shop around amongst warehouses, wholesalers, or even mail order wholesalers to see which seller can provide you with the most attractive wholesale price for your supplies. When you buy large amounts of supplies at once, you will usually get much larger discounts.

2. Borrowing vs. Renting
If there is a specific piece of machinery or equipment that your business only needs periodically or for a short period of time, it would probably be a good idea to rent it instead of buying it. You may rent the equipment from a private entity or a rent-it-all store. Again, make sure you do some comparisons to see which provider offers the most economic prices.

3. Saving on business equipment
Does your business really need to have the latest in equipment, software, or technology gadgets? If not, why don’t you consider buying an older model? Because technology moves at such a fast pace, so many new products are flooded into the market every year. That doesn’t mean last year’s model isn’t any good. You can save a lot of money by buying slightly outdated equipment that serves its purpose more than adequately.

4. Pay your credit card bills on time
Most credit card companies will charge you a hefty late fee if you don’t pay your debts soon after the monthly bill arrives. Sometimes, these charges can be ridiculously high. Pay attention to when your bill comes and make sure to pay it soon after to avoid these unnecessary costs.

For more information on how to successfully run a small or home-based business, please see my article Proven Tips to Improve your Cash Flow.

Financial skills are one of the most important skills to master in business. You will need financing at some stage in your business; beginning, expansion, or for equipment purchases. Understanding what a lender will be looking for and being able to provide it, will improve your chances of financial success.

Financial Ability to Repay
One of the most obvious things that a lender will be interested in is the ability of you to financially repay the loan that you are requesting. Before you present your loan request, create a current list of assets, income and liabilities. Create this list for both your personal finances and your business finances; the lender will want to see both.

Include your business’ assets as well to show the progress that your business has made if you are requesting an expansion loan. Lenders will be impressed with growth.

Lenders also like to see assets that will protect them in the event of a defaulted loan and a Borrower that is organised and proactive in preparing this information will be impressive.

Expertise
A lender is often not just betting on your financial ability to repay a loan, but on you yourself. Prepare an updated resume of your business experience, successes and business skills to support your business case to the lender that you are a good risk.

Your personal presentation is a sale. Sell yourself as a reputable, honest, experienced and valuable investment for them to consider loaning money to.

Business Plan
Prepare an updated and detailed business plan showing where your business came from, where it is currently and where is headed. Include accountant prepared and audited cash statements when possible to the lender, the show detailed and realistic cash flow projections.

Lenders are going to want to see progress and momentum towards a positive business future. Include in your proposal the amount of the loan that you are requesting, what the money will be used for and the expected business success for repayment that will occur as an end result.

One of the most often overlooked factors for business owners is insurance. Lenders want insurance for loans in the event of a default. Life insurance, disability insurance, business insurance and plan to protect business partners from each other are all important factors to have prepared to show a potential lender.

Strong financial skills are essential to possess and maintain as a business owner. To read more about how to prepare for a lender presentation, read my article, “Business Loans- What a Lender is Looking For”.

Setting up effective terms and conditions can be a challenge for many small business owners when they are formulating their payment infrastructure. Extending credit can be an effective small business strategy as it allows your business to establish customer loyalty and to increase sales with customers who would not do business with your company otherwise. Consider the following tips when you are setting up your small business terms and conditions:

Understand the Legal Parameters
Each country has a separate standard for credit terms and you will want to familiarise yourself with those laws as you are setting up your small business terms and conditions. What are the legal requirements for customer returns or customer complaints? What are the customer’s rights and privacy laws in your country for small businesses? What disclaimers must your business post to do business with customers?

Establish Procedures
Establish systems and procedures within your small business and across departments to ensure a consistent business approach as it relates to terms and conditions. Consider what your current process is and what the gaps are when establishing procedures and practices in your small business. Define and set up a customer credit policy and communicate it to other team members to ensure a consistent work flow. Develop an application form and consider making it available on your company website for new customers to fill out when they are requesting credit from your business.

Establish a Credit Policy for Your Business
Establish a credit policy for your business which will include the circumstances that you will offer credit, the process to determine a customer’s credit and the terms and conditions that your small business is offering. Select and establish a collections policy for any customer that does not pay or is slow and communicate this process to all employees who would be involved to ensure consistency.

Create a Credit Term Discount
Consider creating a term discount for credit customers such as a 2% net 10 policy to encourage customers to pay their invoices early.

Establishing terms and conditions for your business will help to improve work flow and can enable larger customers who only work on credit to establish a relationship with your business. I encourage you to post a comment about your ideas or practices as it relates to effective terms and conditions that have been effective for your small business. Also, if you are not already a subscriber to my website, enrol to day so that you can continue to receive valuable small business tips such as this.

If you are relatively new to the business arena, you’re probably not too good at reading financial statements. But for someone who is planning to start a small business, it is crucial to learn how to read financial statements and understand what they mean.

Today, we are going to discuss one type of financial statement called the profit and loss statement. A profit and loss statement is a summary of your income and expenses over a certain period of time, usually a quarter or a year. The profit and loss statement is important because it helps you to understand the profitability or financial condition of your company over that certain period of time.

The main components of a profit and loss statement are:

Sales – Constitute the total revenue received from the sale of a good.

Cost of goods sold – These are the costs directly linked to the production of the good.

Gross Profit (Loss) – Results when the cost of goods sold is subtracted from sales revenue. The gross profit represents the profitability that is generated by the sales revenue.

Operating expenses – These are the general and administrative expenses that are incurred in the day-to-day running of your business; some examples are employee salaries, advertising costs, and rent.

Operating Profit – Results when all the operating expenses are subtracted from the gross profit. The operating profit represents the profitability that is generated when the daily operating activities of the business are taken into account.

Other income and expenses – These are earnings or expenses that a business would not normally have in its day-to-day operations. A good example could be rent earned from a property or interest that is paid on long-term debt. The expenses are subtracted from the earnings in this component to arrive at a net figure.

Net profit before taxes – Results when the net figure for other income and expenses is either added or subtracted from the operating profit. Net profit shows how profitable the company is after all the different types of expenses have been deducted, that is, before it pays it’s taxes.

Income taxes – This is the amount of taxes the company is obliged to pay.

Net income (loss) – Results when the income taxes have been subtracted from net profit. If the net income is positive, the company has been profitable over the accounting period. This figure represents the overall profitability of the company when every single cost of the business has been accounted for.

The net income is essentially the bottom line and constitutes the amount of money that the company has left at the end of the period.

As a business owner, you should be able to understand how profitable your company is. From the profit and loss statement, you can easily identify which types of costs took the most away from your bottom line and start thinking of ways that you can curb them.

The profitability of your company will also be of interest to banks and lenders. A profitable company shows that it is adept at making the most out of borrowed funds and will have less of a problem securing funds in the future. Now that you see how useful it can be to develop your understanding of this type of financial statement, it would definitely be a good idea to do some additional reading up on the subject.

To get a bigger picture of how some of the components of a profit and loss statement can be used in a budget, have a look at my article called “How to Prepare a Budget”.

If you want to do well as a small business owner, it would help you if you could understand the basics of how to read a balance sheet. The balance sheet is an indispensable part of a business accounting information and is essentially a snapshot of a company at a specific point in time.

The balance sheet lets you know what a company owns (“assets”) and what it owes (“liabilities”). It will also tell you how much the business is worth.

The company’s assets can normally be divided into current assets and non-current assets. Current assets have a high liquidity value and can be turned into cash quickly. Some examples of current assets which are stated in a balance sheet are cash, accounts receivable (also called debtors), and inventory.

Non-current assets, on the other hand, cannot be easily converted into cash. Some examples of non-current assets are machinery, buildings, or real estate.

The company’s liabilities can also be divided into current and long-term liabilities. Current liabilities are debts that the company must pay back in less than a year. Some examples are accounts payable and 12 months of interest payments on longer-term loans. Long-term liabilities are debts that are due after a minimum of one year.

Shareholder’s equity is made up of the money that was invested into the business at its start and retained earnings. Retained earnings are profits that are not paid out to the company’s owners but are re-invested into the company. Shareholder’s equity is the company’s net worth.

So now that you understand the basic components of the balance sheet, let’s take a look at what types of analysis can be generated from it.

The information in a balance sheet is used to generate many different types of financial ratios. Though we will not get into the mechanics of these ratios in this article, it is important that you understand that they are used to gain insight into many diverse aspects of the business.

Debt-to-equity ratios, for example, will show how extensively the company relies on debt to finance its growth. Financial strength ratios will tell you how good the company is at repaying its debts.

In conclusion, the balance sheet’s purpose is to let you know the business’ financial health and liquidity at a selected point in time.

Investors and lenders prefer that the current assets of a company are higher than the current liabilities because it means the company will remain solvent in the immediate term. Cash shortages are then unlikely and the company will not have to rely on additional funding to meet its obligations.

If you dig a little deeper into the types of analysis that can be done with balance sheet items, you just might be fascinated. With a little basic knowledge, you’ll impress you bank manager and even your accountant!

If you are interested in learning more about how to measure the health of a company, read my article called the “Top 5 Warning Signs that your Business is Declining”.