Category Archives: Financial IQ

How to have a win/win financial relationship with your business

Posted on by

A while ago I wrote a blog called ‘your business is not your baby’ where I talked about the importance of treating your business as a separate entity, not as an extension of your family or personal life.

Today in one of the rich and frank Master Moves group discussions, this important distinction came up again.

The conversation came about as a business owner shared that they had been ‘stripping’ money out of the business to fund other projects. Another business owner agreed they had done the same. Which was all well and good until an external factor impacted on revenues, causing an instant and significant drop of income. Then the lack of cash reserves in the business became a problem.

Suddenly he couldn’t pay his contractors on time, and became stressed about their well being as like all business owners, we are always conscious of our responsibility to those who rely on us to make good decisions so they can feed their families and pay their mortgages.

So is it wrong to take the cash out of your business as you go?

My answer is a resounding ‘no’ – it’s not only not wrong but it is important that you do so.  Why would you wait until the end and hope you get your ROI on all your efforts from a sale?  When you can be taking money out as you go and investing it elsewhere, thereby growing your wealth outside of the business at the same time you are growing the business.

But it is critical to do it strategically and in a way that makes your relationship with the business very clear and works for the business as well as you.

Here’s what I shared about how my business was set up and how I learned to have an appropriate relationship with it.

Your business is a separate financial entity and as such needs to stand on its own two feet.  It needs to raise it’s own finance when needed.

It has a responsibility to make enough profit to be able to pay dividends to its shareholders, to give them a fair return on their investment.

It is the job of the CEO to ensure the business performs well for its customers, its staff, its community and also its shareholders.

As the owner, you are the shareholder.

But as an owner operator working in the business you are also the CEO.

It’s good to remember you have two hats – The CEO and the shareholder.

As a shareholder you have every right to expect a dividend paid out of profits

But only if as a CEO you have met the targets and expectations of the business to ensure there is enough capital to do three things:

    1. Allocate a reasonable % of profits to be working capital left in the business for growth and risk management
    2. Allocate a % of profits for profit share/bonus for the key people who have helped achieve the profit
    3. Allocate a % of profits to be declared as dividend pay out to the shareholders

This is how my business was set up and it worked really well.  I was on a salary paying PAYE, that was all I took out of the business until profits were finalised. Then I would receive the agreed % of profits after a capital allocation was made to fund growth and have reserves for tough times, and after key staff had been given a profit share bonus.

The key to win/win

The key really is to always view your business as a separate entity – your job working inside the business is to make sure it’s financially successful so that it can pay you a return that you can use outside of the business.

Take money out yes.  But leave enough money in to feed the business when it needs it… and this my friends is a win/win for you and your business.

I hope that makes sense!

PS. Conversations like this happen all the time in the Master Moves community.  To find out how to join us, hit reply to this email and I’ll fill you in!

Master Moves is a powerful group programme for business owners who really don’t want to keep playing the game alone.  Find out more here. 

3 reasons why your business is not ‘your baby’

Posted on by

babyBefore you read this blog please take a moment to watch this quick video about Kathleen Turner of  Tate’s Bake Shop – the story of a woman who lost it all then rebuilt it – with major success.

I love how towards the end of the video, Kathleen King talks about the reason for success behind her second business was because she took the emotion out. “I knew I had to execute efficiently and grow a viable business,” she says, “I didn’t have the same emotional attachment that I had with my first business.” Her first business was her baby. And after 23 years, when she was emotionally wrung out and exhausted from caring for this demanding baby for so long, she ended up $200,000 in debt instead of financially rewarded. Her baby bit her in the bum.

It’s not personal. It’s business

How many times have you heard someone refer to their business their ‘baby’? Have you ever called your own business your baby? It’s a very common analogy and one we can all relate to given the blood, sweat and emotional tears we put into our business when we decide to take that leap of faith and build our own dream.

But in my view it’s not a good analogy at all. Here are three reasons why I strongly believe your business is not your baby:

1. Babies are dependent on you for at least 18 years

With business one of your primary goals should be to decrease it’s dependency on you. A business is meant to be an asset, not a job. In the first few years, there are some similarities with parenting a newborn for sure – long hours, sleepless nights, relentless giving of your time and energy to name but a few – but this is not meant to last forever. And certainly not for 18 years! Prepare to start cutting the apron strings long before your business reaches adolesence. Don’t get so attached you are not willing to let go.

2. A baby is the single most emotional connection you will ever have

You will love your baby forever, regardless of who they become. I’ll never forget my mother after a few wines the night before my wedding hugging me tight and saying “I loved you the minute you were born. And then you started taking drugs!”   Yes I was a troubled and troublesome teenager (although I like to think there were a few memories in between birth and my first foray into magic mushrooms). But she still had to love me, and thankfully still does.

The emotional connection is what makes parenthood worthwhile. But in business, the emotion can make us weak and cloud our judgment. Remember Kathleen King in the video? She had her first business – her baby – for 23 years and all it did was leave her with $200k in debt. Her second business she did without emotion – just with a clear plan and a determination to execute the plan. She went from scratch to $6 million in revenue, selling cookies in 50 US states in just 8 years.   A far cry from the 23 years of her previous business where she kept her apron strings on right up to the very bitter end.

3. A baby is unlikely to pay you back financially

The days of the younger generation taking care of their parents financially are mostly over. Do you expect your kids to pay for you when you grow old? I know I don’t. That’s why I create businesses with a view to ensuring a financial pay back down the track – so I know I’ll be able to care for myself.

It’s important to view your business as an asset – something that you build to pay you back financially. Sure you have to be passionate about what you do, and love your business for the difference it makes in the world. But don’t be so attached to it you can’t see it for what it really is – one of your primary wealth creation tools. Unlike a baby, it should be feeding you.

In summary

Your business is not a baby. It’s a business. The game is to keep the emotion out of it, decrease its dependency and regard it as an asset that will ultimately feed you financially, not drain all of your resources.

Now, how do you feel about this? Still think your business is your baby?

Love to hear your comments. Post below.

laura-signature

Why I invested $24,000 per annum in external advice in my second year of business… and how it paid off.

Posted on by

money-treeBusiness owners listen up.  I’m going to make a point I believe PASSIONATELY in.  I’m going to share with you the one decision I made early on in business that ensured my success.

The business was my advertising agency, Red Rocks. The decision was to hire two external Directors.  One was a retired advertising guy who added both experience and credibility to my fledgling agency.  The other was a smart and logical businessman who I knew would challenge me.   I had my Yoda and my Dr Spock… both complimentary to my creative, slightly wild approach to business. We agreed I would pay them each $1,000 per month each – not much really compared to standard Director’s Fees.  But for me it was $24,000 off my bottom line in my second year of business.  It was a terrifying decision.  I was barely making that much in profit!  I knew I’d have to seriously up my game in order to afford them.  I was scared, but I was sure with the right action plan and these two men to challenge and support me I could get there.

I can now say with complete certainty that it was the best business decision I ever made.  Business ownership can be a lonely business.  I couldn’t afford to hire senior people to bounce ideas off, to give me feedback on my strategies.  I was naïve when it came to business and needed guidance around the financial goals I set.  I was headstrong and had regular love affairs with my own sense of brilliance (always followed swiftly by equally strong feelings of inadequacy).  My lack of business experience and fleeting spells of over-confidence made me a dangerous force.  But with my two Directors meeting me every month, I had to get my act together.  I had to have a solid business plan, with convincing strategies.  I had to set targets and run a budget.  I had to grow up and learn not to be a solo operator.  With my two Directors guiding, challenging, supporting and motivating me I grew my business rapidly year on year.  My profits grew alongside my sales, thanks to aggressive new business targets and tight control on expenses.  I stopped looking at their fees as an expense and viewed them as an investment.

Now I strongly advise all small business owners to invest in an external advisor of some sort.   You can look for an independent Director like I did, or you can get an Advisory Board.  Or you can bring in a mentor or coach to work alongside you.  A piece of cautionary advise whichever way you go, is to be sure the people you invite into this critical role have earned the right to be there.  They MUST be experienced business people, who have successfully built their own businesses and understand what it’s like first hand to be in your position.  Please DO NOT hire a business coach who has never owned a business or engage a Director who has no experience with governance.

Having been on the receiving end of good external advisors, I know how important it is.  I have a couple of spaces coming up and am looking for a committed, ambitious and dedicated business owner to work with me.  You can be sure I’ll challenge not only you but your business model too. My aim is to see good businesses become exceptional businesses.  If you’d like to talk to me about my mentoring programme click here:

http://www.liber8yourbusiness.com/one-on-one-mentoring-programme/

  From the desk of liber8yourbusiness.  Business mentors and publisher of Liber8 Your Business – The revolutionary business planning technique that will set every business owner free.

If life is a game of soccer, which half are you in and how well are you playing?

Posted on by

Soccer-BallHere is another extract from Liber8 Your Business, the soon to be released must have hand book for every small business owner.  In this chapter I talk about the importance of being a visionary, starting with a concept called ‘The soccer game of life”…

“Earlier in the book I talked about successful people having an ability to see their success ahead of them – and to know deep within that they are capable of creating it. For some, creating a vision for their lives comes easy. Some people can naturally think about the future and see how they want it to look. They then spend the rest of their life merrily heading there. Many don’t think about it all. And most struggle to see more than a few years ahead. For me, now, being a visionary comes naturally. I can see a clear picture of what outcomes I want, and then I can plot a clear course towards that vision. It wasn’t always like this. I spent most of my twenties feeling very lost, not having a clear picture of tomorrow, let alone any further than that. I’ve had to learn how to set goals and build plans to make them happen. These are skills that can be taught, thank goodness.

The soccer game of life

Someone once told me that life is like a game of soccer. It’s a game of two halves. You have the first half, up to age 40, where you are becoming an adult and you’re full of energy. You’re also a bit stupid and you have all your learning experiences and make all your mistakes. And then you have the second half of your life where you accept you are going to die one day and the quality of life becomes important. Your priorities change and the focus of where you put your energy changes.

Where are you right now in the soccer game of life?

Are you less than age 40? Are you still living in the first half? If you are, this is a critical time. The decisions you make in the first half influence how you get to live the second half. If you look at it like a game of soccer and you play your guts out in the first half, score all the goals you can and go into the half time break on top with the other team in defence, then the second half can be much easier. But if you don’t score any goals and you laze around the pitch for the first half, you have to play really, really hard in the second half. If you are less than 40 and still playing the first half of your soccer game, you can make choices now to play a game that sets you up well for the second half. This is a critical and blessed time for you.

If you’re in your forties, there’s still time to ask key questions: ‘What do I want to do now? How can I make sure what I do in the next 10 years sets me up for the rest of my life – so I can really enjoy life and make a difference with that second half of my life?’

If you are already well into the second half, you will be looking for ways to get on top while there’s still time. Smart thinking, clear forecasting and strategic planning should be at the forefront of your game plan. If you haven’t already created your financial freedom, if you are still working hard in your business, NOW is the time to engineer your exit. Smart and fast will be your tactics.

With my liber8yourbusiness programmes, I see the role of mentoring as similar to that of the soccer coach. We can’t play the game for you but we can help you plan a winning strategy”.

So where are you at in the game?  Does this concept unsettle you or motivate you?  How do you feel about the game you are playing? My book Liber8 Your Business is full of strategies to help you play a winning game, no matter which half you are in. To pre-order a copy email me at laura@liber8yourbusiness.com

From the desk of liber8yourbusiness, business mentors and publisher of the book Liber8 Your Business.

Success is a decision – but are you prepared to make it?

Posted on by

sam hazledineLast week I interviewed Ernst & Young’s 2012 Young Entrepreneur of the Year, Dr Sam Hazledine.  His business Medrecruit was started from nothing six years ago and has featured for the past four consecutive years in the Deloitte Fast 50, as well as winning Westpac Business Excellence Medium-Large
Business 2012.

Among other things I asked Sam what he thought stopped some business owners growing their business to it’s full potential.  His answer was that success is a decision and too many business owners simply do not decide to succeed.  They give themselves an out, he told me.  They make excuses, get themselves a part time job to pay bills or settle for less so that they don’t have to put it all on the line.  By doing so, according to Dr Sam, they make it too easy not to grow.

Business success according to Sam is 20% what you do and 80% how you think.

Think about it.  What do you think about success.  Have you made the decision to grow and succeed, or is failure to grow a genuine option for you?

Love to know your thoughts on this.

If you’d like to read the full interview with Dr Sam Hazledine, grab a copy of this month’s NZBusiness Magazine and look for my regular column entitled The Exit Factor.

From the desk of liber8yourbusiness.  Business mentors and experts in small business exit strategies.

Business tip #85 – For the best sales person for your business, look in the mirror

Posted on by

Here’s a question many business owners grapple with as they contemplate their growth goals… “Should I hire a business development/sales person?”

My answer is usually ‘no’.  And here’s why…

Typically you know your business better than anyone else.  You are more passionate about your product or service than anyone else.  You have more at stake than anyone else.  You probably can’t afford someone senior enough to target the bigger clients you really need in order to create significant growth.  You are the one that needs to be out there moving and shaking and creating relationships with prospective clients.  You are the one who can get into see the senior people in the business companies.  Why?  Because you are the owner and you are the best.

Bringing in ‘sales’ people is a good idea if you have a simple, saleable commodity and your business planning clearly shows a sales force as part of your overall strategy.  But if you are selling services and you want to land good sized long term contracts (which should be one of your growth strategies by the way), then you are the one to lead the way.

You are better to hire more people to deliver the service so that you can get out there and bring home more bacon, than you are to stay in the office hoping someone more junior to you will do the selling work for you.

If you want some advice on this subject, feel free to email me at laura@liber8yourbusiness.com

From the desk of liber8yourbusiness.  Business mentors and experts in small business exit strategies.

Business Mentor Tip #81 – Rate your scalability

Posted on by

I had a very enjoyable interview with John Holt (co-founder of HR Software provider Sonar6 which was sold to NASDAQ listed company Cornerstone On Demand) for my regular NZ Business Magazine column.  He said many wise things.

One was about a key factor a potential buyer would be looking for in a business to purchase.  And that was scalability.  Quick Wikipedia definition coming up:

Scalability is the ability of a system, network, or process, to handle a growing amount of work in a capable manner or its ability to be enlarged to accommodate that growth.

Or… does your business model support rapid and sustainable growth?

An interesting question and one I think every business owner should ask themselves right now.  What is your model for growth? And how will a future potential buyer be able to take your model and add it to their own for their own advantage?

Love to hear your comments on what makes a business scalable.

From the desk of liber8yourbusiness. Businses mentors and experts in small business exit strategies.

The best testimonial ever!

Posted on by

One of my last online members raced through the programme in record time and sent me an email to tell me how he’d found it.  If you haven’t done it and ever wondered what its about… read on.  Brynn says it much better than me:

Hi Laura!

I just completed your online course.  I found it really valuable and have already recommended it to friends. I thought you might like to know the bits that helped me:

  1. Team Structure.  I’m in the process of restructuring my team so I don’t have to work in my company.  Seeing how you structured Red Rocks and grew your team has helped me identify what additional staff I need to replace me.
  2. Annual Business Plan. I already have 12 month and 5 year business goals but they weren’t based on budget or EBIT goals.  I’m changing that.
  3. Vision and Goals. We already have Vision and Goals but they weren’t linked to our brand as demonstrated by Steve Bailey in Seminar 6.  We’re now going to go through Steve’s brand development process.
  4. Systems. I’m a strong believer in systems and I’ve automated most of my business but what your course revealed is that I have weak training processes.  I’ll fix that.
  5. Competitive Pitch.  I’ve never had to pitch for larger projects ($200K +).  They get offered to me by friends that need our specialist skills.  However what that also meant is I didn’t know how to pitch for large projects and we only got what was offered to us. Now I’m more confident that I can put together a “top 50” and try to win them as clients.
  6. Presentations. I’ve been developing courses and presentations for more than a decade but after seeing Olivia and Tony’s process I want to rewrite all my presentations.
  7. Interviews. Being able to listen to successful people (mostly kiwis) talk about how they succeeded and what they think is important is invaluable.  
  8. All encompassing.  Your course presents many topics (sales, HR, marketing, strategy, etc.) through practical examples that anyone can understand.  This is probably the biggest thing that differentiates it from other courses.

Those are the main items I got from the course but there’s plenty of other “jewels”.  My next plan is draw your course as a structure and then add my business and processes into it so it becomes the blueprint for the “Spinning Planet machine”
Thanks for the course.  One of the best I’ve done. Brynn.

Thanks to you Brynn.  One of the best testimonials I’ve seen.  Look forward to hearing more about Spinning Planet success!

You can find Brynn’s web company at www.spinningplanet.co.nz

From the desk of liber8yourbusiness.  Business Mentors and experts in small business exit strategies.

Business Mentor tip # 80 – The incredible power of partner marketing… and how to sell glasses to people who don’t need them!

Posted on by

No problem with the marketing vision for the folk at Specsavers.  Not only do they have a very funny ad campaign – the ‘Should’ve gone to Specsavers’ series (my favourite is the father on the finishing line of school kids running race where he thinks the kid who comes first is his and goes crazy hugging him, while his own son plods up last).  They also do some clever stuff with their marketing and sales strategies behind the scenes.  On Friday I got an email from AA (automobile not alcohol version) offering me a free sight test with Specsavers plus $50 of their two for one deals.  I started needing glasses for reading a year or so ago and whilst being content with my $50 pair of reading specs from the pharmacy, I thought an eye test could be a good idea.  So I booked in and today went for my test, which was very thorough and examined my eyes from every angle as well as my near and far vision.

The good news for me is that my eyes are very healthy, my vision is pretty good for an old gal and the cheapo pharmacy readers are all I really need.

The good news for Specsavers is I spent $319 on two new pairs of reading glasses.  Well, it was $50 off a $299 two for one deal.  Plus of course I needed to spend the $70 on non-reflective coating naturally.  I walked out of there somewhat dazed yet bemused by my own shopaholic tendencies. Good eyesight does not necessarily equate to good judgement obviously.

However, I was impressed at the marketing process that got me to spend this money on items I didn’t need.  Let’s just recap:

Firstly the email from AA offering a free eye test.  Specsavers have clearly have a partnership arrangement with this organisation, which has opened up one of the largest databases in New Zealand to them.

Then the offer of $50 off.  I didn’t need to buy glasses.  I was told as much by the professional who tested my eyes.  But she did guide me towards the rack showing the lovely range of glasses they had, whilst telling me how much I’d enjoyed the extra comfort of an anti-glare coating.  It was hard to resist.  I mean $50 off.  Come on.  And the $299 options did look so much nicer than the $199 ones…

And to top it all off, the sales.  Oh the sales.  Yes by all means look at those ones, but have you seen these ones.  And are you sure you don’t want anti-glare coating?  Let me show you the difference, take a look through these glasses.  One lens has the coating the other doesn’t. Have a look in the mirror.  What a difference!  Of course I bloody want the coating. Bring it on.

Sold to the lady with the trembling credit card!

Well done Specsavers on a job well done. Am so looking forward to a life without glare and the best looking readers in the cafe next week!

From the desk of liber8yourbusiness.  Business mentors and experts in small business exit strategies. 

Business Mentoring Tip #76 – Your team don’t suck. You do.

Posted on by

Having frustrations with staff seems to be a theme for the small business owners I’ve been working with this month.   Employees under performing, not taking responsibility for their outcomes, having little initiative and being too content to let the owner do the lion share of the income generation.

Does this sound familiar?

It certainly reminds me of my early days in business.   I remember like it were yesterday the mind blowing frustrations of having to take back project after project and do it myself… because no one else seemed to care enough to get it done right and on time.  The resentment ate away at me like a festering wound as once again I was at work before everyone else and working late on jobs I shouldn’t even have had to look at.   And the harder I had to work the grumpier I got with everyone else.  My fuse was short and my tongue sharp.  Mine was not a happy workplace…  for anyone.

It took me a few years and a nasty personal grievance claim to realise where the real problem was.  And it wasn’t with my staff.

It was me.  I was a crap manager.  I’d been so busy expecting everyone to be like me that I’d overlooked a fundamental life truth.  Most people are nothing like me.  I am actually quite unusual.  I am an entrepreneur.  I see the problem, I leap in with the solution, I get it fixed, I charge onto the next problem, seeing opportunities where others see barriers.  I get impatient with other people when they don’t behave the same way.

And this, my friends, is where the real problem with employees lies.

If you have started your own business there is a very good chance that you are not a great people manager.

Ask yourself this:  why are you not an employee?

Because you are a self starter, you want to be in charge of your own destiny, you want to achieve great things and realise your own dreams, in your own way.  You place high expectations on yourself and are willing to push yourself to make it all happen…Right?  You own your own business because you have taken a leap of faith and let go of the pay cheque.

You also have a lot at stake.  You have to make money to survive, to pay bills and grow your team.  Your customers are everything to you and you will bend over backwards to make sure they are happy.  You will do whatever it takes to succeed.

So why don’t your employees feel the same? Why does no one else work as hard as you? Why don’t they care as much? Where is their ambition? Their initiative?  Their drive?

Here’s a newsflash.  If your employees had all the same qualities as you they would not be your employees, they would be your competition!

You simply cannot expect your employees to have the same levels of drive about your business that you do.

But you can create an environment where they find their own sense of empowerment and passion.  Where their own unique skills are recognised and their efforts rewarded.  Where you see their strong points and use them to the company’s advantage, making them feel useful and treasured. They can come to work with a fire in their belly and work harder than you do to achieve amazing results.

As long as you get out of the way!

If you are struggling with your staff right now, take a look at your management skills.  How is the culture of your company?  Are you expecting everyone to behave the way you behave?  Are you behaving like a resentful parent… picking up after your kids then berating them for being messy?

If you are having team problems, it’s time to change your approach.  My world changed the day I realised that I was the problem.  I knew that my strengths lay in other areas, so I hired someone who was an amazing manager.  She took over the hiring and the management of people and left me to do what I was excellent at… being the leader, the visionary and the inspiration.

Maybe you should do the same.  If you are not ready to hire a General Manager as I did, bring in an HR expert on contract.  Get them to help you re-engineer your culture and your management style so that you get to empower more and work a whole lot less.

If you’d like the names of some excellent HR experts email me at laura@liber8yourbusiness.com

From the desk of liber8yourbusiness.  Business mentors and experts in small business exit strategies.