by MHolland | Jan 17, 2025 | Business Tips, Cash Flow, Systems
The Ming Vase – A Symbol of Rarity and Value
Imagine I give each of you, as a business owner, a priceless, one-of-a-kind, Ming Vase…
At first, you are speechless. You marvel at its rarity, its delicacy, its beauty.
You treat it carefully, tenderly. You show it off to your friends and family.
It becomes the centrepiece in your living room.
Gradual Neglect – Losing Sight of What Matters
Then, gradually, imperceptibly, over time something happens.
You notice it less and less.
You no longer see its rarity and pricelessness.
You find a new home for it – your daughter’s bedroom. She uses it as an umbrella stand.
It never gets cleaned. If you look closely, it has a small cobweb or two,
The Ming Vase – The Symbol of Your Business
So, what is my point?
This Ming Vase is a symbol of your culture.
Your business was never just a means to make money. It was a creation, a culture, that you built from nothing, and returns you money. It also returns you gratitude, love, respect, joy, purpose, and fulfillment.
Are You Treating Your Culture Like a Priceless Treasure?
Do you treat the culture in your business like a precious Ming Vase? If not, why not?
And here is the thing, a culture is as difficult to form, shape and build as a Ming Vase. And equally as delicate.
A takes a lot of work to build it. And nothing to destroy it.
How Cultures Break – Neglect and Compromise
We know how to break a Ming Vase. Stop caring for it. Drop it.
What about a culture?
The building block of culture is relationship. And how does relationship get built?
Words. The creative word.
The Power of Creative Words
Creative words communicate more than the time of your next meeting. Creative words edify, lift up, empower, inspire, and motivate.
Over time these powerful words build your business culture. They are the oil of relationships – with your customers, your Team, your suppliers – everyone.
And, as I have repeated many times, how you do one thing is how you do everything. You cannot build a culture saying kind words to your customers and then yelling at your Team. That does not work.
The Strength and Fragility of Culture
Over time your culture will be as strong as tensile steel and as delicate as a Ming Vase. It has both qualities. How so?
It has the strength of tensile steel over time because your words, and the words of your Team will become second nature. People stepping into the culture will act out the values of the culture. The culture becomes who they are, what they say, the actions they take. It becomes, as the cliché says, like water to a duck.
On the flip side, this precious culture can be destroyed with a few misplaced words, actions, or worse…
Compromise – The Silent Destroyer
Over time, you stopped seeing the preciousness of your culture (like the example above). You let spider webs creep in. You compromised the culture.
You took shortcuts. (It takes longer to write texts and emails using softeners to maintain your culture). Over time, you, and your Team stopped taking the time to write in this creative way. You saw that your customers, suppliers, and the general business community did not care about culture like you do.
So, you compromised, and over time a degradation seeped in.
And, one day you woke up and realized that your business was ordinary, like everyone else’s. It was no longer a thing of rarity, of preciousness. It was cracked…
Rebuilding a Broken Culture
What to do?
Simple.
Start again. Go back to the beginning and start using words wisely. Speak and write and think with softeners. (“I wonder if you would be so kind to…” … “Thank you for sending me those documents so quickly” ….” Kindly find attached your reports for the month”).
You can rebuild your culture and shape it according to your values.
And, remember this, it takes ongoing care, and awareness to keep your culture going.
Oh, and lastly, what does this have to do with creating a successful, profitable business?
Everything. Everything. Because you are not creating a money-making machine (that is the result). You are creating a magnificent life!
Thank you for reading….
by MHolland | Jan 10, 2025 | Business Tips, Cash Flow, Cloud-based Accounting, Systems
Profitability and cash flow—two terms often used interchangeably—could not be more different.
And yet, countless businesses that report strong profits find themselves scrambling to pay bills, meet payroll, or keep the lights on. How is this possible?
Let us unravel the mystery behind why profitable companies still go broke—and, more importantly, how you can avoid this financial trap.
The Profit vs. Cash Flow Dilemma
At its core, profitability is a measure of what is left over after all expenses are deducted from revenue. It looks great on paper, but it does not guarantee cash in the bank. Cash flow, on the other hand, is about liquidity—the money you have available to cover day-to-day operations.
Here’s how things can go sideways:
Timing Mismatches:
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- Imagine sending out a big invoice for a completed project, but your client takes 90 days to pay. Meanwhile, your suppliers want their money yesterday. Profitable? Yes. Broke? Also, yes.
Overexpansion:
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- Growth is exciting, but rapid expansion can drain cash reserves. Those new hires, bigger office spaces, and fancy equipment do not pay for themselves overnight.
- These are all Fixed Costs that you must have the Gross Profit to cover.
- For every new Fixed Cost planned take the monthly amount and divide it by your Gross Profit Margin.
- Let us say you want to hire a new operations manager; The cost is $7,500 per month. Your Gross Profit Margin is 30% (the amount left over after direct Cost of Goods Sold are deducted from your sales, expressed as a percentage).
- $7,500 divided by 30% equals $25,000. You need at least $25,000 in new sales to cover that new operations manager.
- Do this with every new Fixed Cost to become aware of how much you need to cover this extra cost in your business.
Poor Inventory Management:
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- For businesses dealing with physical goods, tying up cash in slow-moving inventory is a surefire way to squeeze liquidity.
- I once coached a business (not a client; I did it as a favour) that was profitable for 35 years. They could not figure out why they showed great Net Profit and yet were struggling to pay their bills.
- On examining their Balance Sheet I quickly discovered that the bookkeeper had been recording some of the Cost of Goods Sold as inventory purchases. Thus, their expenses were understated and Net Profit overstated.
- The inventory on the Balance Sheet was not real inventory that could be sold.
- The owners were not amateurs; they were just overfocused on the Income Statement and ignoring their Balance Sheet.
Debt Overload:
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- Interest payments on loans or lines of credit can quickly eat into cash, especially if revenue is not rolling in as planned.
- Especially, also when interest rates go up exponentially when debt is up for renewal.
Ignoring Hidden Costs:
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- Costs like taxes, employee benefits, or unexpected repairs often catch businesses off guard, draining available cash.
How to Prevent the Cash Flow Crunch
Now that we have pinpointed the culprits, here are practical steps to prevent your business from becoming cash-strapped:
Forecast Your Cash Flow:
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- Regularly track and predict your cash inflows and outflows. Tools like Xero, ApprovalMax and Fathom can help you stay ahead of surprises.
Tighten Payment Terms:
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- Do not let clients dictate payment terms. Consider incentives for early payment or use tools like Plooto to automate and streamline collections.
Build a Cash Reserve:
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- Aim to keep at least 3-6 months of operating expenses in a savings account. This buffer can shield you from unexpected shortfalls.
- Most personal financial planners recommend this, yet too few businesses follow this same advice.
Control Growth Pacing:
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- Grow strategically. Before making big moves, assess how they will impact your cash flow over the next 12-24 months.
Review Debt Regularly:
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- Consolidate or refinance high-interest debt to lower your monthly obligations. Be mindful of the balance between leverage and liquidity.
Monitor Metrics That Matter:
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- Keep an eye on key metrics like Days Sales Outstanding (DSO), inventory turnover, and operating cash flow. These will give you an early warning of potential problems.
Stay Cash Flow Confident
Remember this – a profitable business is different from a healthy one. By focusing on cash flow, you will ensure your company not only survives but thrives.
Want to dig deeper into your financial metrics or get a handle on cash flow management? Let us talk. We specialize in helping businesses like yours bridge the gap between profitability and liquidity—so you never have to worry about going broke while turning a profit.
Thanks for reading…
by MHolland | Jan 3, 2025 | Business Tips, Cash Flow, Systems
Is a 1% improvement really worth the effort?
Absolutely. In fact, tweaking your margins by just 1% could send your profits soaring by 10%—or more. It is not magic; it is math.
And for businesses with tight margins—like construction companies, property managers, and flower growers—it can mean the difference between barely scraping by and thriving.
Here is how small changes can lead to big results.
Why Margins Matter More Than You Think
Your profit margin is not just a number—it is your business’s pulse. Margins tell you how efficiently you are turning sales into actual profits. When margins are thin, there’s little room for error. But when you tighten them up—even slightly—the ripple effect on profits can be dramatic.
Imagine this: You are running a $2 million business with a 10% net profit margin. That is $200,000 in profit. Increase your margin to 11%, and now you are pulling in $220,000—a $20,000 bump without adding a single customer or working extra hours.
The 1% Fix in Action
Where do you find that magical 1%? Here are three quick wins:
- Raise Prices Strategically
Do not panic—this does not mean scaring off customers. Even a small price increase (1–3%) can have minimal impact on demand while significantly boosting margins. Communicate the added value your business provides to justify the bump.
- Cut Costs—But Smartly
Focus on expenses that do not directly impact quality or customer satisfaction. Negotiate better supplier terms, switch to more efficient tools, or streamline processes to lower labor costs.
- Reduce Waste and Errors
Errors and inefficiencies can quietly drain profits. Automate billing, optimize inventory, and double-check quotes to avoid costly mistakes. Every dollar saved goes straight to your bottom line.
The Hidden Multiplier Effect
What is so powerful about the 1% fix? It is scalable. Once you start thinking in terms of incremental improvements, you will spot more opportunities. Trim expenses by 1%, increase prices by 1%, and boost efficiency by 1%, and suddenly you are stacking gains.
For example: A property management company cutting vacancy times by 1% while raising rents slightly could see profits snowball over a year. Similarly, a construction firm reducing rework by 1% while negotiating better supplier rates can watch margins grow without adding overhead.
Check Your Numbers—And Keep Checking Them
The key to making this work is knowing your numbers cold. Regularly review your financials—especially gross and net margins—to track progress. Look for trends, red flags, and quick wins.
Better yet, work with an accounting partner (like us) who can highlight opportunities you might miss and help you implement changes that stick.
Ready to Boost Your Profits?
Small changes drive big results. Whether it is tweaking pricing, streamlining operations, or cutting waste, the 1% margin fix can deliver the 10% profit boost you are after—without overhauling your business.
Thanks for reading…
by MHolland | Dec 27, 2024 | Business Tips, Cash Flow, Systems
Budgets! That word can imply a lot to many people—extra work, restrictions (who wants limits in business?!), confusion (where do I start?), and procrastination (who has time at this time of year?)
With all that in mind, for those of you ready to create a budget for 2025, here are some simple guidelines to get started.
Know Your Fixed Costs
The starting point for all budgets is your fixed costs. Review the general expenses on your Income Statement for the past 12 months.
These expenses recur every month, regardless of sales volume, and include items such as:
- Rent
- Insurance
- Office and management salaries and wages (production wages can be treated as part of your cost of goods sold)
- Telephone
- Bank charges
- Vehicle expenses
- Marketing (discretionary, depending on goals)
To determine budgeted fixed costs, analyze your expenses over the past 12 months. Either calculate a monthly average or allocate costs by the month they occur (e.g., $3,000 for June insurance).
Take time to review each expense. Ask:
- Are we getting good value?
- Can we switch suppliers to save money or gain more value?
Know Your Other Balance Sheet Costs
Include additional costs not on the Income Statement, such as:
- Capital expenditures for vehicles, equipment, and technology.
- Principal portions of loan repayments.
- Dividend distributions to owners.
Know Your Gross Margin
Gross margin percentage is critical for determining your break-even sales.
Formula:
- Sales – Cost of Goods Sold (COGS) = Gross Profit
- Gross Profit / Sales = Gross Margin %
Example:
- Sales: $100
- COGS: $40
- Gross Profit: $60
- Gross Margin % = 60% ($60 / $100)
How Much Profit Do You Want to Earn?
Next, determine your profit target for 2025.
Example:
- Fixed costs: $120,000
- Additional costs:
- Dividends: $60,000
- Loan repayments: $10,000
- Capital expenditures: $20,000
- Retained cushion: $60,000
Total costs = $270,000 ($22,500/month)
With a 60% gross margin, break-even sales = $270,000 / 60% = $450,000.
Prove It! Work Backwards
Sales: $450,000
- COGS (40%): $180,000
- Gross Profit (60%): $270,000
- Fixed Costs: ($120,000)
- Net Profit: $150,000 (33%)
Subtract other costs:
- Capital expenditures: ($20,000)
- Dividends: ($60,000)
- Loan repayments: ($10,000)
- Cushion: ($60,000)
- Net: $0
The Final Number – Break-even Sales
Break-even sales are your “magic number.” Allocate monthly targets based on seasonality or divide evenly across 12 months.
Share this target with your team! Post it in meeting rooms and make sure your sales team knows your goals.
In Summary
- Determine fixed costs ($120,000 in this example).
- Add loan payments, dividends, capital expenditures, and cushion ($150,000).
- Know your Gross Margin % (60%).
- Calculate Break-Even Sales ($450,000).
Your break-even sales are your success threshold. Maintain consistent gross margins and control expenses to ensure a healthy business in 2025.
Thanks for reading—here’s to a prosperous 2025!
by MHolland | Dec 13, 2024 | Cloud-based Accounting, Remote Work, Systems
Branding Is Essential
A colleague of mine at LeapZone Strategies has written a good Blog on the power of branding…
Here is the start of her Blog:
| “Listen up, in the wild jungle of today’s business world, blending in is the first step to being forgotten. You need a Brand Foundation that’s not just solid, but magnetic. We’re talking about crafting a brand that doesn’t just get noticed – it gets craved. Why? Because in a sea of endless choices and constant noise, the brands that win are the ones that connect on a deeper level. They’re the ones that spark something inside people, something that goes beyond just ‘liking’ a product or service.” |
To read the whole Blog please click here.
AI Is Everywhere
AI is getting a lot of attention these days. It seems to be the constant topic in online business feeds.
A lot is hype.
Some is not.
I have used it for help in writing a Landing page. I gave it to my Team for feedback.
There was no feedback. They loved it. Saved me a ton of time.
Some software claiming to use AI are exaggerating a bit.
What I mean by that is this – ALL software is AI.
It is intelligently helping you be more efficient and productive.
Think accounting software versus a calculator.
But it is just software code, doing what you expect.
And, heck, that is pretty cool when you think back to the dark ages…before computers.
Some, however, is mind blowing.
Don’t believe me? Try ChatGPT.
Here is a good Blog from the Freedom app people, sharing a ton of apps you can explore for a 40% gain in productivity (their claim).
To check it out, click here.
BDC Talks About AI
To prove my point that AI conversations are bursting forth everywhere, I checked on my latest BDC Blog…
And, lo and behold, they are talking about AI.
Please click here to check it out.
Thanks for reading…
by MHolland | Nov 20, 2024 | Business Tips, Cloud-based Accounting, Systems
Today I am going to explore the benefits of outsourcing your internal accounting versus doing it yourself…
Firstly, doing it yourself is draining, time-consuming, and often frustrating. Outsourcing to professionals is not just easier; it is smarter, more cost-effective, and gives your business the edge it needs to thrive. Here is why.
Reclaim Your Time
Your time is your most valuable resource. Do not waste it reconciling accounts or chasing receipts.
- Focus on growing your business instead of managing complex online software.
- Spend more time building customer relationships and driving strategy.
- Let professionals manage the grunt work quickly and accurately.
Outsourcing frees you to focus on the big picture while your accounting is handled by experts.
Access Expert-Level Support Without Hiring
Hiring an in-house accountant can be expensive and time intensive. Outsourcing gives you access to top-tier expertise without the commitment.
- No need to train employees or keep up with regulations—they have it covered.
- Get advice tailored to your business’s unique challenges and goals.
- Collaborate with a team that is always up to date on the latest tax laws, tools, and trends.
It is like having an entire accounting department at your service—without the overhead.
Save Money, Avoid Hidden Costs
Think outsourcing is expensive? Think again. Compared to hiring in-house staff, it is a bargain.
- Pay only for the services you need—no salaries, benefits, or office expenses.
- Avoid costly mistakes that could lead to penalties or missed opportunities.
- Many outsourced firms include innovative software as part of the package, saving you even more.
Better financial management does not have to break the bank.
Gain Impeccable Accuracy and Compliance
Accounting errors can be costly—missed tax deadlines, inaccurate reporting, and even audits. Outsourcing ensures your books are done right the first time.
- Get accurate records every time, with no guesswork.
- Ensure compliance with ever-changing tax and regulatory laws.
- Stay on top of deadlines without lifting a finger.
When professionals manage your accounting, you get peace of mind that everything is in order.
Stay Agile as Your Business Grows
Your business needs change as you scale, and so do your accounting requirements. Outsourcing is built to grow with you.
- Add services like payroll, financial analysis, or tax planning as needed.
- Access advanced tools and technology to streamline processes.
- Stay flexible without being tied down by in-house resources.
Whether you are just starting to scale or managing a multimillion-dollar operation, outsourcing keeps pace with your growth.
Get Strategic Insights, Not Just Numbers
Good accounting is about more than just balancing the books. It is about empowering your business with data-driven insights.
- Spot trends in your finances to capitalize on opportunities.
- Plan with accurate forecasts and cash flow management.
- Make smarter, faster decisions with clear, up-to-date financial reports.
When professionals oversee your numbers, you get the insights to take your business to the next level.
Reduce Stress, Gain Peace of Mind
Let us face it—accounting can be stressful. It is not what you signed up for.
- Deadlines are met. Always.
- Records are neat, organized, and audit ready.
- Your business is well cared for, so you can focus on what matters most.
Outsourcing takes the hassle out of accounting, so you can run your business stress-free.
Thanks for reading…
