Ability to Make Money and Keep it is the Lifeblood of Your Business

Ability to Make Money and Keep it is the Lifeblood of Your Business
"Money is a terrible master, but an excellent servant." ~
P. T. Barnum

You need money to pay your workers, pay the rent, buy
supplies, and pay other overhead. Money provides the
business owners' lifestyle and is essential for the
business to be able to continue. Without enough of it, your
business dies.

Your understanding of money is crucial because you must
have and understand money to survive for any length of time.

Knowing the Numbers

If you want to plan effectively, as a business owner or
professional you must "know the numbers." Knowing the
numbers means that you fully and completely understand the
financial aspects and financial condition of your business.

Below is a list of the financial facts you must know about
your business:

1. Gross income: the amount of total income from all
sources.

2. Gross expenses: the total amount of money spent to run
your business except for income taxes. Gross expenses
include wages, salaries, cost of inventory, phone, office
supplies, etc.

3. Net income: gross income minus gross expenses. Sometimes
this is also called gross profit.

4. After-tax income: net income minus anticipated state and
federal income taxes for your business. This is also called
net profit.

5. Fixed expenses: those expenses that do not change a
month to month, regardless of how much product or service
you sell. For example; rents, officers salaries, insurance,
or anything that has an unchangeable, fixed cost.

6. Variable expenses: these are expenses that change
according to the amount of product or services that are
sold. For example, the costs of the product (it cost you
four dollars to produce each CD that you sell), sales tax,
wages (hiring someone because you are selling more CDs),
marketing, etc. These expenses are also called marginal
expenses.

7. Those areas of your business that are most profitable:
each of your products and services will produce income and
have expenses associated with it. You need to be able to
identify the income and expenses that are associated with
each product and service so that you can determine what
products and services are most profitable.

8. Net profit from your workforce: the amount of profit
produced by workers. Certain workers will produce products
or provide services that will bring in revenue. Subtracting
the cost of having those workers will result in your net
profit from your workforce. It is obvious that if you are
not making a net profit from certain people, you need to
carefully assess your reasons for keeping them in their
present position.

9. Opportunity cost: this is the time and money it takes to
make and deliver a product or service. This time could be
spent elsewhere if you are not making or delivering that
particular product or service. You want to be delivering
the most profitable item or service in order to make most
profitable use of your resources. This is not actually a
number, but is something you need to recognize when
analyzing the financial condition of your business.

These are the basic numbers any business owner like you
must know to effectively make decisions about your
business. One of our jobs as a coach and your accountant is
to ascertain what pieces of the financial puzzle you
already know and what areas you need to obtain more
complete information.

THE LIGHTER SIDE

"I'll tell you what I tell every taxpayer who sits in that
chair," said the IRS agent at the beginning of Brown's
audit. "It's a privilege to live in this great country, and
you should pay your taxes with a smile."

"Thank goodness," said a visibly relieved Brown. "I thought
you were going to ask for money."

Wishing you a prosperous and balanced life

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Stan Mann, C.P.C. supports business owners, top executives
and commission salespeople to substantially grow their
business and have a balanced life. He is a Certified
Professional Coach. For additional articles and resources
please visit http://www.stanmann.com I deliver customized
coaching programs to help you become the leader of a highly
successful and highly satisfying business.