how you can radically improve the lack of profits in your business

© Copyright One Sherpa Pty Ltd 2010

How you can radically improve the lack of profits in your business


Have you started your business then found you’ve got stuck and can’t go forward?


When you start a business there seems to be so much to do and so little time to do it so….


Are you feeling like you’re drowning in too much work?


Are you wondering how to move forward?


Are you wondering what your priorities should be?


Are you frustrated at the lack of progress?


Are you worried that you’re running out of money and there isn’t any momentum showing in your business yet?


In the early stages of a business you must be sure that ALL your effort is in the right direction


Using your resources wisely at the beginning of a business is so important because…you have no room for error while you’re not making profits


It’s so easy to waste resources in areas that don’t matter and find you don’t have enough to really help with momentum


Thinking like a business owner and NOT an employee will change your priorities


The single biggest area where we see small business owners fail is when they get their business model wrong and…as a result push much of their effort in the wrong direction


It’s hard enough to get a

IMPOSSIBLE if you waste it on a flawed business model

business going when your effort is in the right direction and…


PROBLEM #1

Has three measures which can tell you whether you’re wasting your time with 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 Business Model 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.


Make sure you have checked the measures for your business


If you don’t know where to find the numbers then at least take a guess


Using the sandbox you can ‘play with the numbers’ until you get the right shape to aim for


Go towww.oneminutebusinesscheckup.com

and make sure you’re aiming for the right business model TODAY