by Dr. George | Cash Flow and Cash Management, Entrepreneur 2.0
Ever trying walking up stairs with just one leg? (Okay, I’m going to assume you are not a single amputee; if you are, then you already totally get the message I’m trying to convey here).
Here’s a simple exercise that illustrates the point I want to make:
- Get up from your chair right now and walk to the nearest set of stairs.
- Now walk up the stairs, say 10 steps or so, then turn around and walk back down.
No big deal, right?
Now, lift your left foot so that your heel is nearly touching your buttocks and you are standing and balancing totally on your right foot.Okay, round 2:
- While maintaining your balance, hop up the stairs as far as you can go (without hurting yourself!)
Totally different experience, almost ludicrous, isn’t it?
But you know, this isn’t much different from how many entrepreneurs attempt to build their businesses:
They focus so heavily on getting more clients, customers, and fans that they avoid keeping track of how much money they are bringing in and spending.
Many of you have heard me refer to my colleague, Joan Sotkin, who wrote a book called Build Your Money Muscles. I’ve read it, applied it, and recommend it highly. But let’s get back to your exercise of walking up the stairs with two, then one leg.
You see, muscle is composed of fast-twitch and slow-twitch fibers. When you walked up the stairs in exercise #1, your slow-twitch fibers were firing. If you sprinted up the stairs, your fast-twitch fibers would have kicked in. Both are important to use and develop. In exercise #2, you only had the benefit of the slow-twitch muscle fibers in only one leg, so you had less than half the power.
Similarly, there are two types of “money muscles” that every entrepreneur must train and develop:
1) Money-making muscles
2) Money-managing muscles
Let’s talk about “money-making muscles” first.
Making money is one of those urgent things that get in your face. It’s exciting and there are lots of training programs out there on how to make money faster, easier, with less work. (Heck, I just finished giving away my $600 program on “rapid revenue acceleration” for free to almost 300 entrepreneurs.) The prospect of making money with more intelligence and proficiency is alluring. It’s almost a “no-brainer” for us to continue working on our money-making muscles.
Now let’s address your “money-managing muscles.”
We all know managing our money is important, and yet this essential practice often gets overshadowed by the “instant gratification” of money-making tactics.
Have you heard the saying, “The universe will only give you as much money as you can handle?” Said differently, the universe will not give you more money than you can manage. I’ve seen the truth of that first-hand, repeatedly!
Therefore, if you are going to make more money (on a consistent basis), you must build your “money-managing muscles” and become an excellent money manager.
But Do I Really Have To?
Here’s the thing: When we lack confidence and comfort in managing money, we subconsciously (and consciously) won’t feel strong and capable of making more money.
The resulting self-doubt erodes the quality, quantity, and focus of the actions we must take to make more money, as well as the consistency and accuracy of how we manage it.
So yes, you really have to! Just like getting up a flight of stairs is easier using two legs, both making money and managing money are inextricably tied. It’s the yin/yang balance that’s needed in every business.
If you’re ready to start building your “money-managing muscles,” I invite you to join my business partner, Dan Bowser, and I in a conversation and exploration of what it takes to build your money management skills and habits.
We’ll share our collective experience of working with micro-businesses, multi-million dollar companies, and Fortune 50 giants. And we’ll help you get pointed in the right direction with your own business money managing systems and best practices.
Remember, few very entrepreneurs are doing this well or at all. This is your chance to strengthen your core, so both of your legs are available as you climb the stairs of success.
Register below and start building both sets of your “money muscles:” Money-making AND money-managing.
by Dr. George | Cash Flow and Cash Management, Entrepreneur 2.0
(NOTE: This is a follow-up to a previous blog posts about business cash flow and money management; read the previous ones here)
In the pitch black of a cloudy, moonless night on October 2, 1996, a Boeing 757 with 70 passengers and crew took off from Lima, Peru.
Barely three minutes into the flight, the pilots recognized in horror that their basic flight instruments were behaving erratically, providing conflicting information about airspeed and altitude.
Over the Pacific Ocean without the benefit of moonlight or city lights, they had no ground reference for guidance. In the midst of the confusion, multiple alarms sounded, signaling problems with windshear (the winds were calm) and the airspeed (being both too high and too low.) Even the autopilot system was inoperative.
Back on land, the Lima control tower was unable to provide accurate, timely information about the plane’s airspeed or altitude. Before a chase plane could be dispatched to lead them to safety, the troubled plane’s left wing and engine hit the water. After the initial impact, the aircraft climbed 300 feet, inverted, and plummeted into the sea, sinking immediately with all crew and passengers aboard.
The post-crash investigation revealed that masking tape was covering the external ports that the cockpit instruments need to determine altitude and airspeed. During washing and polishing of the aircraft, a maintenance worker had placed adhesive tape over the ports and neglected to remove it. This resulted in catastrophic malfunctioning of the airspeed indicator and altimeter, which led to false and conflicting flight data. Since the control tower’s flight data came from the aircraft’s system, the tower was unable to assist the pilots effectively.
Confused, overwhelmed, and unable to properly determine their airspeed and altitude, the pilots were unaware that their plane was descending at a 10-degree angle when it first hit the water.
So what does this tragic story have to do with your business?
Think of your business as a high-performance jet, capable of flying at high speed and great altitude. After all, your business is your greatest asset and the easiest one to crash. With that metaphor in mind, you must ask yourself…
- How high and how fast are you flying? From our experience in working with hundreds of entrepreneurs and small business owners, we know there are a lot of you who are flying your ‘business jet’ without a clue as to how high and how fast you are flying. You don’t even know in what direction you are headed. As a result, you might end up in a dive, headed for the mountain. And you won’t know it until it’s too late.
- What are your fuel (cash) reserves? If you don’t know what your reserves really are, what your cash “burn rate” is, you aren’t really in control of your business.But you say, “Wait, I’ve got my book of business and good financial records.” Sure, you might know your income and expenses or your balance sheet and/or a cash flow analysis for a given time span.Yet chances are you’ve only got a part of your instrument dashboard working.
- How are your engines revving? So you say, “I know how high and how fast I’m flying. And, I know where I’m headed! Just to prove it, I’m going to rev up my engines.”Hold on a minute. Before you touch that throttle, do you have the instruments that tell you how your engines are doing?The alternative to flying your business blindfolded is having financial dials and gauges that tell you where you are and where you are headed.
What we’re talking about here is the need for a Strategic Financial Dashboard.
A Strategic Financial Dashboard is a set of metrics, or indicators, that tell you about the health and performance of your business. They are also known as key performance indicators (“KPI”).
Here are examples of a few basic indicators:
Cash Flow. Cash flow is the movement of cash into, and out of, your business. Understanding the flow of cash in your business tells you when you will have the cash available to pay bills and to pay yourself. Cash often moves out before it moves in. Cash flow projections enable you to strategize on how you will cover the gap.
Revenue (actual and projected). Revenue or sales are the income that your business generates. Historic actual revenue tracking and forward-looking projections of revenue are important indicators for planning cash flow into your business.
Expenses (actual and projected). Tracking expenses provides a means for understanding where money is going. Anticipating expenses in advance enables planning of the cash flow out of your business.
Assets = What Your Business Owns. Assets take the form of 1) cash that is immediately available, 2) things that can be converted to cash, and 3) things that make you money.
Liabilities = What Your Business Owes. Liabilities take the form of 1) money owed to others or 2) obligations for which you are responsible, such as rent or advertising.
Equity. Sometimes referred to as “Net Worth” or “Net Wealth,” equity is the difference between assets and liabilities; that portion of your business that you actually own. In a healthy business, equity is positive and growing every year.
These are just some of the key performance indicators that show the true picture of how you are doing. There are three primary financial benefits from managing via your KPIs: First, profitability goes up; second, value goes up, way up; and third, risk goes down. In addition, your confidence increases because you are dealing with information, not guesses. In turn, your presentations and presence become stronger because your self-confidence is higher. Summing up, you and your business move to a higher level of performance.
Having shared all of this information with you, we must also offer a note of warning: These key performance indicators are nothing new. But far too many entrepreneurs don’t pay attention to them or know how to track them.
And, even if you do track them, most people aren’t financial types who can interpret what they mean.
When it comes to quantifying the variables and measuring the results, there are a number of assumptions that you need to make. There are also a host of limitations and pitfalls in collecting, analyzing, and interpreting the data. Nevertheless, used properly, these measures can mean the difference between a mediocre business (or worse, a failed one) and a phenomenally successful one.
The Bottom Line on Business Financial Performance:
The airline pilot must continually refer to and measure the fundamental indicators of engine, controls, and navigational performance if he or she is to arrive safely at the desired destination. The same is true of every business.
Measuring, tracking, and analyzing fundamental metrics gives you command and control over a critical part of your business. Doing so will help you to make the best strategic decisions to maximize your revenues and profit and increase value.
After all, when it comes to flying your “business jet,” we want you to reach your destination (goals) safely and successfully.
Rapid Revenue Acceleration and Wise Money Management Go Hand-In-Hand…
If you’re ready to explore fundamental principles and best practices of money management that entrepreneurs like you and I must know and use, please join us:
by Dr. George | Entrepreneur 2.0, Productivity
(NOTE: This is a follow-up to a previous blog post about business cash flow and money management; read it here)
Clearly, we need money for basic business purposes: turn on the lights, buy supplies, fix things, hire help, grow our clientele through marketing, pay taxes, and pay ourselves. These are all practical reasons to manage our finances carefully and intentionally.
Yet isn’t it strange how very few actually manage their money well?
I’ve been studying these types of phenomena for years, marveling at how we unconsciously struggle to eat better, workout more, and become organized with our finances. And yet, the vast majority of people who want to adopt a healthier diet, who want to move their bodies regularly, who want to manage their business finances more effectively, can’t, don’t or won’t.
It takes someone with incredible fortitude, awareness, and humility to say, “I’m ready to tackle this mountain and I have no idea where to begin.”
This is what happened in my plastic surgery days. When I walked in the door each morning, I knew the rent and overhead for my office exceeded my revenue.
I feared looking at the numbers because I already knew it was ugly.
After amassing more than $350,000 in debt within a couple of years, creditors with nasty attitudes were harassing me, even paging me in the operating room. Naively, I didn’t know who to deal with first or how to “right the ship.” Family and friends sensed what was happening, but they didn’t know how to help. As much as I studied what to do, how to better manage the money that came in, it was clear I wasn’t going to get through this alone. At this point, the woman who became my wife, Denise, bravely stepped in and helped me manage the mess. I’m eternally grateful to her for doing that for me and our future.
Perhaps your story resembles mine. Perhaps, like me, you can muster the courage to face the numbers, but you aren’t confident about where to put your energy. Your biggest obstacles are probably: “where to begin,” “how to begin,” and “what to do”. Chances are you’d give anything for someone to bail you out!
In my previous blog post, I spoke about how the lack of financial clarity causes burnout and a sense of failure, even despite obvious successes. Here’s what else comes with being confused about your money: a debilitating sense of self-doubt.
Self-doubt leaks out in all kinds of ways and can be felt by those with whom we associate. When I pick up on self-doubt in one of my clients, I’ve learned that it means they’ve lost connection with their purpose. They forgot how to express their deepest values.
I’m here to tell you, this isn’t a life sentence. I’m living proof, along with countless colleagues and client entrepreneurs I’ve worked with, that we can take control of our financial health once and for all, without being at the mercy of circumstance and chance.
Taming the financial beast is possible! This victory will not only save our lives, it will refuel our mission and purpose like nothing else.
This leads me back to the beginning of this blog post.
We think we need better money management and cash flow to run the basics of a business. Does this old business saying sound familiar? “The primary purpose of a business is to make a profit.”
Undeniably, a business must turn a profit.
Yet, I believe that “turning on the lights,” “buying supplies,” “paying for help,” and so forth are accurate, yet superficial reasons for turning a profit and the root cause of why we continuously ignore this crucial crusade.
Instead, when we return to the WHY of our work (our reason for being, our vocational mission), guess what happens? — Motivation suddenly appears! We must clean up the financial health of our business for the sake of others and the importance of our passion.
Some believe that when they focus on their finances, it detracts from their mission.
If this is true for you, then THIS is where we should part ways. If you believe that fulfilling your mission means ignoring your money matters, then seriously, go directly to the unsubscribe link on any email I’ve ever sent to you.
But if this conversation stirs you up inside, then congratulations! Something is waking up inside of you.
If you’re interested in continuing this dialogue, then sometime in the next few days, I’m going to be asking for your help, your input, and your opinions. I’ll ask your thoughts on how my business partner, Dan, and I can best help you kick-start your journey to overcome “financial vagueness” and understand fundamental principles and best practices of cash flow and financial management.
Whether you’re avoiding the numbers altogether, unhappy with your current management system, or simply want to keep improving what isn’t quite yet perfect… stay tuned for some unprecedented guidance and simple tools.
Until next time, consider this: Think about what happens when we go into a grocery store without a shopping list and we’re starving. What happens? We wind up buying unnecessary items and spending way too much.
This is what the majority of us do every single day with our business finances: Without knowing where we stand with our money, it’s all too easy to justify buying another gadget, gizmo, doo-dad, or yet another business training program. Let’s stop the insanity together, unravel this intricate, financial knot, and find a practical cure for “financial vagueness syndrome*.”
*Thanks to my good friend and colleague, Joan Sotkin, who coined the phrase “financial vagueness syndrome.”
by Dr. George | Cash Flow and Cash Management, Entrepreneur 2.0
As entrepreneurs, we spend lots of time learning about marketing, networking like crazy, reaching out for new clients, and becoming “known” and connected on social media.
Yet there’s an elephant in the room that only a few are willing to acknowledge. He’s not as colorful as the images on Instagram, he doesn’t “LIKE” your quotes on Facebook and he certainly isn’t writing your next blog post.
I’m talking about the least sexy part of your business and also the most crucial to the vitality of your vocational bliss… your finances!
Every business person must pay attention to the numbers in order to thrive, but it seems much easier to avoid the pain of what we might find behind the curtain. Whether earning a health income or not, this kind of denial can be devastating mentally, emotionally and even physically.
This post is a “shout out” to those who no longer want to ignore their numbers or allow their finances to remain obscure, or a disorganized mess. It’s time for us to grow stronger roots and rise up with new financial strength on behalf of our vision, clients and the incredible passion we bring to our work every day.
When working with clients privately, I’ve seen those who don’t or can’t manage their numbers consistently (or intentionally). They don’t know what kind of financial production is enough or how many more clients they actually need.
They don’t have specific financial goals they’re shooting for or have a way to know when they’ve “arrived.” Consequently, they can’t ever relax because they think they continually have to be working on getting more clients and making more money. It’s a game that no one can win, not even the best of us. Inevitably, this causes serious burnout.
Entrepreneurs are notorious for choosing to “go with the flow.” We can’t be tied down. We want to live “in the now,” yet this flexibility often makes us choose poorly.
Over the next few weeks, I’ll be sharing information and training to help you understand foundational principles for cash flow and cash management and how to build money management best practices into your business (without pain or suffering). This is the kind of information every service oriented professional needs to have, yet very few actually do have it.
Clearly, those who take it on enjoy significant advantages!
This is such a critical topic that I’m bringing in Dan Bowser, my business partner in another endeavor (one that involves financial analytics with a Fortune 50 manufacturing company and its suppliers), to contribute his expertise and wisdom on this topic.
Here’s my promise to you: Nothing from us will be laced with complicated lingo. Entrepreneurial service businesses don’t need the kind of complexity or sophistication that Dan and I use when we’re analyzing multi-million dollar companies.
You need simple straight-forward and practical advice. You don’t have to be a rocket scientist or plastic surgeon (wink wink). All that’s required is a commitment to fulfill the dream on which your business is built.
So if you’re ready to ramp up your game and take your business to another level of freedom, contribution, AND profitability, stay tuned. We’ll be back with more details in a couple of days.
