how you can quickly figure out the financial mumbo jumbo in your business

© Copyright One Sherpa Pty Ltd 2010

How you can quickly figure out the financial mumbo jumbo in your business


Do you find it difficult to work out what your business numbers are saying?


Do the numbers in your business look like ants walking up a page


Do your eyes glaze over when a set of numbers is given to you?


Are you frustrated about the fact that you can’t get what the numbers are saying?


Do you wish there was an easier way of understanding the numbers of your business?


You may not believe this but did you know that the numbers are one of your greatest assets in your business?


The only asset which you can use to see what’s going on when you’re not IN your business are the numbers


If you can just grasp the shape of your numbers then you will gain enormous leverage on your Time and Money


Because they can give youan objective view that’s impossible with just words

Understanding the numbers can help you solve most of the other problems you might be facing…


PROBLEM #1

Has three measures which can show you the shape of your business and help you avoid operating a flawed business model


The first measure is called Customer

Value


The first measure is called Customer

Value

This measure makes sure you are making the right margin on your sales


The second measure is called Transaction

Flow


The second measure is called Transaction

Flow

This measure makes sure you are bringing in the right volume of sales for your business


The third measure is called Money Flow


The third measure is called Money Flow

This measure makes sure you are not leaving profits and cash locked up in your business


These three simple measures will tell you whether you’re wasting your time on a flawed business model and where to focus to get things right


Let me show you how to check these measures in One Minute Business Checkup


PROBLEM #3


The first step in addressing the shape of your business is to ensure that you have the correct margins flowing in your business.


The best way to address this is to find out how much cost you can afford for the CURRENT level of sales.


In the short term you have more control over your COSTS than your SALES so let’s see how to do that


PROBLEM #3

$10,000 off Annual Other Costs


Once you are getting the right margin on the sales that are currently in your business (i.e. Your Customer Value Measure is Correct)…


The next step is to make sure you have the correct volume of sales in your business

(i.e. Address your Transaction Flow Measure)


The reason for this is that to be sustainable your administration costs should not exceed 12 cents in each

dollar of sales.

To calculate the correct volume of business, take the Administration Costs and divide by .12

i.e. $120,000 / .12 = $1,000,000


Adding $200,000 of sales will also require more interaction costs such as product costs , people costs and marketing costs…

so we’ve added $160,000 to other costs in the model


PROBLEM #3

$200,000 more sales

$160,000 more costs


If you are able to hold your working capital to the same level with the additional sales then the model

looks fine


However with additional sales and costs of interaction it is likely that both Accounts Receivable and Accounts Payable will increase


To calculate the likely increase we ratio the increase as follows:Accounts Receivable

Original Accounts Receivable DIVIDED BY Original Sales MULTIPLIED BY New Sales EQUALS New Accounts Receivable

$120,000/ $800,000 * $1,000,000 = $150,000


To calculate the likely increase we ratio the increase as follows:Accounts Payable

Original Accounts Payable DIVIDED BY Original Other Costs MULTIPLIED BY New Other Costs EQUALS New Accounts Payable

$90,000/ $580,000 * $740,000 = $114,827 say $114,830


PROBLEM #3

$30,000 more Accounts Receivable

$24,830 more Accounts Payable


Checkout your own information now.


Using the sandbox you can ‘play with the numbers’ to make sure you aremaking sustainable profits


Go to www.oneminutebusinesscheckup.comand make sure you’re achieving

sustainable results in your business