Financial Aspects of Running a Small Business

Mr. Doug Frankiw

&

Mr. David Hall

4

Types Of Plans

Strategic Plan Business Plan Financial Plan Management Plan

Good planning is very important, but the end result can be very different.

(Mini Golf Construction/ Motel Revenue Theory)

5

Where’s the Problem?

What a great plumber has in common with surgeons, mechanics,and engineers.

6

Homeowner Vs. Professional Fixor As I Like to Call It

“Operating on Myself”Pin-hole Leak/ Several Weeks

7

What Is

Vs.

It seems that with plumbing, and roads, once they are built,someone else has to come along, and fix the problems.

Why not do it right the first time??

We never solve a problem from the same spot (or bend in the road) in which we created it.

It’s always hard to go back to the same spot and figure out why/how we were wrong

9

Problem Solving.

If you have a Problem (Business, or Personal).

“A problem has its origins in the past.

A problem is something that has gone wrong in the past and must be managed in the present and the future.

It is more precise and objective than decision making.”

10

Decision Making

“Decision making is rooted in the Present, with a look into the Future for resolution.

A decision is a commitment to a course of action selected from several alternatives to solve a problem.”

12

Knowing When to Say NODo you ever care about the , only to have/leave the on the table.

No good deed goes unpunished (not true all the time, but unfortunately true many times)

Story of the poor people with pump problems, or what comes up may not go down

14

Worldly Business KnowledgeLeadership Employees

Customer Service

Suppliers

Products/ ServicesAccounts

ReceivableAccounts Payable

Legal

Inventory Marketing

Computer Systems

Financial Structures

Planning

15

What You Know You Know

All Yours

16

What You Know About, But Don’t Know How To Do

World Knowledge

What you know youdon't knowWhat You Know

17

Everything That You Don’t Even Know You Don’t Know.

Everything that youdon't even know youdon't knowKnown

Know you don't know

18

Mark-Up Versus Margin: Clarifying the IssueItem selling price: $1.50

Item cost: $1.00

Does this price-cost relationship represent a 50% mark-up or a 33% mark-up?

Regardless of your answer this example represents a Gross Profit Margin of 33%

19

Mark-Up Versus Margin Cont..

Gross Profit Margin = Gross Profit Dollars(GPM) Total Sales

Since: Total Sales $1.50- Cost of Goods Sold 1.00

Gross Profit .50

Gross Profit Margin % = .50 = .33 = 33 1/3 % 1.50

20

Mark-Up Versus Margin Cont..Definition A (the common definition): Mark-Up = Selling Price – Cost

Cost = 1.50 – 1.00

1.00 = 50%

Definition B (as defined by retailers):

Mark-Up = Selling Price – Cost Selling Price

= 1.50 – 1.00 1.50

= 33 1/3 %

21

Standard (Definition A) Mark-Up/ Margin Table

Margin % Cost Multiplier Mark-Up %

66 2/3 % 3.00 200%

60% 2.50 150%

50% 2.00 100%

33 1/3 % 1.50 50%

25% 1.33 33 1/3 %

26

Thoughts

Thought 1)

-If you do what you’ve always Done, you’ll get what you’ve always Got

Thought 2)

-The lessons of Life are repeated until they are learnt

Thought 3)

-“Thinking is the hardest work of all. That’s why so few people do it.”

Henry Ford

36

A Fishy Outlook On Life Choose Your Attitude

-The fish guys are aware that they choose their attitude each day.One of the fish guys said, “When you are doing what you are doing, who are you being? Are you being impatient and bored, or are you being world famous? You are going to act differently if you are being world famous.” Who do we want to be while we do our work?

Play-The fish guys have fun while they work, and fun is energizing. How can we have more fun and create more energy?

From Fish!

By Stephen C. Lundin, Ph.D., Harry Paul, and John Christensen

37

A Fishy Outlook On Life Make their day

-The fish guys include the customers in their good time. They engage their customers in ways which create energy and goodwill. Who are our customers and how can we engage them in a way that will make their day? How could we make each other’s day?

Be Present-The fish guys are fully present at work. What can they teach us about being present for each other and our customers?

From Fish!

By Stephen C. Lundin, Ph.D., Harry Paul, and John Christensen

39

Finance, Fun & Freedom

Doug goes to school at UBC, and takes a writing course called “Say what you mean, get what you want.”

Dave stays home, and takes some more life schooling.

Education comes in many forms:

$ School $ Life $ Business

43

Sometimes the best laid plans…

2

Banks & Money. What’s up with that? Approval process (ie Dave Letterman) Vs. Order Taking Who makes the decisions, and in what town? Your ability to negotiate Time & Costs involved (Fees, Investigation, Prepayments,

Interest, Differential Fees, etc.) If they think you have no other choice (Pasta Shop)

How long has your Banker been with that institution, and how long have they been in your community?

Banks goals & rates of returns 3 C’s = Character, Capacity, Collateral (Environment)

3

Retirement Chart10 20 30 40 50 60

How Much How Fast How Soon

80,000 + or- to Retirement

IN Vs. ON Theory

(Right Place, Right Time) + (Helpers, employee’s, good or bad) + ( The harder I work, the luckier I get) + (Wrong Place, Wrong Time) + (Accountability)

+ or - + or - + or -

13

Thank you, for watching this presentation. Any comments, questions, or concerns?