5 Tips for your 2023 Business Plan - Written By Jeff Newkirk

 

The world has been adjusting to the new normal since the pandemic. We have pivoted. Businesses throughout the world are bouncing back from the COVID-19 pandemic and governmental shutdowns.

As a business owner, how can you best prepare for life beyond a pandemic? The answer is simple, but not necessarily easy to implement. Your answer: Develop a business plan. 

Follow these five steps to develop a plan that will help your business to continue moving forward.

Step 1: Know Your Current State

The first step to any good business plan is to fully comprehend your current situation. This means to know your company’s financial performance, sales success (or lack thereof), resource needs, and systems and processes today. Know where you stand currently.

Using a SWOT analysis will help you evaluate all components. Don’t complete this on your own. You’ll need help, especially from those in the trenches.

Step 2: Develop One Year and Five-Year Goals

Developing one year and five-year goals will set the tone for the rest of your business plan. Take time and analyze where your business is now, and then decide where you want to see your business in the long-term. In other words, what is your vision? It is where you want your business to go in terms of financial growth. In terms of Sales. In terms of employees and other critical resources. Do you currently have the operational capacities and efficiencies to help you achieve your vision?

It is always recommended that your goals be quantitative. Tracking and measuring progress are the only ways to determine where you are on your journey to meet your vision. Make sure you include scorecards so you can easily track and report out successes.

Step 3: Strategy Development

You now know where you want to see the business in one year and five-years. But how will you get there? Within each major component of the business, address the needs. You need to know the resources requirements, the sales and marketing efforts that will be needed, and the systems and processes to build efficiencies that will enhance growth and improved financial performance. And, speaking of financial performance, will it cost anything to implement your plan?  Make sure you know what that cost is, and that there is a return on your investment.

Step 4: Communicate

People can’t read minds. Once you have developed goals and have strategies lined up to help you achieve, then let people know. Your team needs to be motivated and inspired to achieve. Your plan will not be fulfilled by happenstance. Rather, you need to communicate all components of your plan and allow for feedback. By allowing your team to provide feedback, you may learn of knew and better ways to achieve. Point is, you need buy in. You need people on your team who will produce. Communication will allow you to improve production and achieve your goals and vision. 

Step 5: Be Agile

Having a plan in place is important. In fact, it is critical to the long-term success of your business. But, like any good plan, it may need some adjusting along the way. That means you need to be flexible. Market conditions may change. Supplier costs may increase. New competitors may enter the market. What will you do? Adjust. Make sure you have the ability, through your team, to changes things as necessary. This will help you stay ahead and continuously move your business forward.

 

Jeff Newkirk

Blanton Advisors

Associate CFO, Executive Coach

5 Ways To Boost Remote Work Efficiency - By Jeff Newkirk

 

The COVID-19 pandemic has pushed millions of employees to work from home. It’s now become the norm, and many businesses are still adjusting to the remote work life and learning what does and does not work. When you’re running your business remotely, there are some challenges we’ve never had to deal with. Connecting with customers and employees through the screen isn’t easy. However, making your business profitable through remote work CAN work. Without intentional efforts from workers and management, remote work—can leave staff feeling distracted, isolated, unmotivated, and stressed.

Here are 5 Ways To Boost Remote Work Efficiency. 

1. Look for specific areas where you can do better. 

Every business can be better…all the time. Working from home changes the culture of thinking proactively, so you have to ask yourself some questions. “Do we have all the resources we need to get the job done”, “how can we improve our communication through a screen and using our phone”, “what limits employees and customers by working remotely and what can we do to address these issues?” Don’t let these issues continue without taking action. Address any concerns before they grow into roadblocks.

Significant areas of concern in remote workplaces and where employees get most frustrated are technology, an area where productivity is lost. For example, many employees say their aging equipment can hinder productivity due to breakdowns, slow downloads, and workarounds. Make sure you and your employees have the best equipment you can afford. This will help productivity and satisfaction with your team.

2. Communication is key. 

Communication is critical when working in any environment, but even more now when working remotely. You must practice as much transparency as you possibly can. If your employee doesn’t have all the information they need, they cannot reach their full potential. Managers must overcommunicate in order to move more productively. Managers must encourage their team and assure them that they can express their voice and ask questions if necessary. Ensure your employees feel comfortable asking questions and giving feedback to complete the work efficiently and effectively. 

You should also be clear with the goals and rewards they can gain from their performance. This helps build more morale which we know results in better performance. 

A weekly touch point is recommended just to remain in alignment. It is very easy to lose touch, and when that happens there is a greater potential for miscommunication. Employees can lose focus and missing priorities. Stay communicated. 

3. Use meeting time wisely. 

Sometimes it feels like you’re in meetings all day long when working remotely. But remember, the more time employees spend in these meetings, the less time they have to complete tasks. That’s why it’s crucial to use meeting time wisely.

Meeting time has increased significantly since the pandemic. But that actually is ineffective when trying to collaborate at our best. When making a one-on-one or group call, try making them micro meetings of 15 minutes for those less complex tasks. Short meetings dedicated to discussing one or two issues can maintain productivity and increase efficiency.

4. Promote a proper workspace environment. 

Remote workers should have a designated area of the home to work where they can concentrate and minimize distractions. Encourage employees to have a separate workspace so they can separate home and work life because sometimes they can combine into one, and work is no longer the number one priority. 

5. Set priorities and stick to them. 

Because demand for workers is competitive, it’s vital for leaders to step in and help prioritize. Things change quickly for reasons that may be out of people’s control. Daily checks and expectations are the priority, saving everyone from frustrations and guiding them in the right direction. You will see immediate results by creating a defined schedule and sticking to it. 

Jeff Newkirk - Blanton Advisors Associate CFO, Executive Coach

Everyone is Talking About Inflation, But Does that Really Impact Me? By Jeff Newkirk, Blanton Advisors Associate CFO & Executive Coach

 

We all dislike inflation, but we have to deal with it. If you’re like me, you think inflation sucks. The current inflation rate is about 7.9%. Now you might say that’s huge. We haven’t had that inflation in years. Well, yeah, 40 years, but it’s not that we have never had that level of inflation. In fact, just after World War II, back in the mid-1940s, we had inflation rates of around 15%. This is pretty high, almost double what we have now. And again, it impacts all of us. It’s real, we need to adjust and plan for it.

There are two levels, first business and then personal. On a business level, if you’re a business owner or a decision-maker, is inflation impacting your business?

If the average inflation rate is 8%, how will you maintain the same level of profitability when your expenses are increasing at least 8%? You have three options. 

1. Increase Price 

If you increase the price, you must know that the market can bear that price increase. So you could increase the price, and your sales volume could go down. If you’re going to increase the price, you have to know that your sales volume will stay the same. 

2. Increase Volume 

If you can sell more at the same price, you’ll have more revenue, and you’ll be able to compensate for some of those increased expenses. But for that to happen, you probably have to take on, at least implement, a good marketing sales and marketing plan or some kind of new promotion. If you grow your expenses to some extent, that’ll help you increase volume At least with that you can maintain sustainable profitability.

3. Decrease Expenses 

If you can’t increase the price and you can’t plan for an increased sales volume, then you can begin decreasing expenses in other areas. If your costs increase 8%, there is no change in anything you’ve purchased, but prices rise 8%. You can decrease expenses in an area to compensate. For example, if you bought $1,000 of supplies, now that $1,000 of supplies will cost more like $1,100, rounding off to a 10% increase. You’ve got to find that a $100 somewhere to save. It might be in another supply, or it might be in some other administrative expense. Whatever it is, you’ve got to be able to reduce expenses in another area.

Unfortunately, many times businesses will hit labor. That means that people will get laid off and lose their jobs because companies can’t afford the same amount of labor costs because costs in other areas are going up. They can’t compensate for that from the revenue side, increase in price, or increase in sales volume.

Does inflation impact business?

Yes, it does, and you need to create a plan. It’s crucial now to plan ahead. Inflation is likely to rise even more. That means that we have to plan for either increasing price, knowing that our goods or services that we’re selling can bear that increased price.

We have to increase volume and sell more or decrease expenses. And the problem with decreasing expenses is you have to find the area where you can find the expense to decrease. In other words, if there are supplies in one place, they will cost more. You might have to reduce supply costs in another area. 

I encourage looking at price, increasing sales volume, and decreasing expenses in every area, except for labor. Keep those people employed. Your employees are the lifeline of your business. They are what make your business thrive. They’re what make your business successful. Don’t touch labor. Richard Branson said it best employees are the most essential component of your business. It all starts with employees. Be sure to care for those employees and address inflation in other areas. 

Your customers come next, then your shareholders or stakeholders. But if your employees aren’t happy, your customers aren’t satisfied. If your customers aren’t happy, you’re not growing your business. 

How does inflation impact you personally and your family?

With an 8% inflation rate, this will impact your household expenses. Your household expenses will go up an average of $300-500 a month. So let’s be conservative and say 300, that’s $3,600 a year. If you have the average or median income that we experience in the United States (which is around 70,000 a year), you make $70,000 a year, and inflation is going up to $3,600 a year; that’s over 5% of your total revenue or your total pay.

If you can save regularly 5-10% of your income, you’re making $70,000. That’s 7,000 that you’re put into savings. Now $3,600 of that will increase costs towards filling your gas tank, groceries, clothing, whatever it may be, it will go up by 8- 10% by the end of this year. 

If you had a vacation plan that would have cost you about $3,600. Now that $3,600 is not going to be put towards keeping your household consistent, meaning you’re not taking on any new expenses. You’re not increasing any expenses into your home. You’re just staying. Everything you purchased before is the same as last year. And this year, it’s just going to cost you $3,600 more. So you won’t be able to take that vacation, or you’ll have to be able to compensate for it.

You have to save even more. If it costs you $50,000 to run your household, like mortgage insurance, groceries, clothing, and education, it’s all now $3,600 more. 

Does inflation impact you?

Yes, it does. And you need to plan for it. Start doing everything you can to decrease your expenses in your household. Try reducing costs by doing the following:

• Look for more favorable insurance rates 
• Switch grocery stores to find lower-priced items 
• Limit your spending habits on clothes and accessories 

Overall, be a bit more prudent and try to impact your household as minimal as possible. Maybe you will have to wait to get that new car or wait a little longer to take that vacation. Whatever it may be, know that inflation is real and won’t be going away any time soon. 

Remember, it won’t last forever, and things will get better, but in the meantime, let’s plan accordingly so we can make it through the next year or two.  

What Are the Most Important Financial Measures - By Jeff Newkirk, Blanton Advisors Associate CFO & Executive Coach

 

As a business consultant, I’m often asked, “what are the most important financial metrics that, as a business owner or decision-maker in a business, you can pay attention to?” 

There are several key financial measures that provide insight to the financial health of your business. I believe reviewing any financial measures is helpful. However, there are three that truly give you a good indication of current performance.

#1: Gross Revenues

Gross revenues measure the total amount of dollars recognized during a financial period from providing services or selling goods. It is important to note that revenues are only recognized when they are earned. A business can’t include any revenues recognized from a good or service that have not yet been earned. 

For example, ABC Manufacturing sells 10 wingdings for $150 each. While there are 15 wingdings available for purchase, only 10 were actually sold during the period. Revenues for this financial period are (10 wingdings x $150) $1500. 

#2: Gross Profit

Referencing the example above, each wingding requires materials and labor to produce. For ABC Manufacturing, each wingding costs them a total of $105. These costs are typically referred to as Cost of Goods Sold. In this example, Cost of Goods Sold is comprised of $75 worth of materials and $30 of labor to put the wingding together. 

Why is this important? Remember that each wingding sells at $150. With a total cost per wingding of $105 that allows for a gross profit of $45 (Gross Revenues less Cost of Goods Sold). Put simply, for each $1 of wingdings sold, ABC Manufacturing realizes a Gross Profit of $.30 ($150 less $105 = $45, $45/$150 = 30%).

Keep in mind that ABC Manufacturing incurs expenses for running the business in addition to the direct costs associated with producing wingdings. Expenses such as rent, utilities, office supplies, administrative labor, advertising, and insurance are all examples of Selling, General and Administrative Expenses. There must be enough Gross Profit remaining to cover all Selling, General and Administrative Expenses. 

In this example, Gross Profit for each wingding is $45. In this period, ABC Manufacturing sold 10 wingdings, which realized sales of $1500, with associated Gross Profit of $450. Therefore, Selling, General and Administrative Expenses must be less than $450 for ABC Manufacturing to realize a positive Net Income for this period. Business owners need to know Gross Profit, so they know the primary efforts of their business will result in a positive financial outcome.

#3: Cash Balance 

Cash is critical. Without cash, a business owner is unable to pay invoices. Without cash, a business owner is unable to pay employees. In summary, without cash, a business cannot survive.

To increase cash balance, a business owner can increase sales. Increasing sales alone is not necessarily the answer though. If 100% of sales are on credit, then cash does not change, but accounts receivables increase. To combat this, invoice faster and reduce the payment terms. In other words, make it financially attractive for customers to pay you in cash and to pay off their outstanding balance.

Decreasing expenses is another obvious solution. Spend less, keep more. Evaluate your expenses and determine those that are business critical (cannot provide business without the expense), business necessary (at some point will be needed to sustain business operations), and business optional (a luxury items that can be eliminated).

Thirdly, how much cash do you really need? Prior to 2020, we would typically advise clients to maintain three months cash to cover expenses. However, that changed with the pandemic. Post-pandemic we suggest six to nine months.

Finally, remember that profitability does not equal cash. A business can be profitable, but with a terrible cash balance. 

~ Jeff Newkirk

Did you know that Cash Flow is the reason over 80% of all small businesses fail?

 

U.S. Bank conducted a study in 2019 that concluded that 82% of all small businesses fail because of poor cash flow management or a lack of cash flow understanding. Do you know how much cash you need to operate should all your sales evaporate? Do you know how to determine that amount of needed cash?

Important questions that need to be addressed. You need to know your liquidity position, or your current cash balance AND you need to know how much you need if you didn’t sell one product or service for at least 3 months.

Cash is more important today than ever. Build your cash reserves – the message for today!

Jeff Newkirk – Blanton Advisors Associate CFO, Executive Coach

EVERYTHING BEGINS WITH YOU!

Zig Ziglar said, “You cannot consistently perform in a manner which is inconsistent with the way you see yourself.” Makes perfect sense, doesn’t it? If we want to change the outcome, then we need to change the process of achieving that outcome. Simple? Maybe. The important point to remember is that the process begins with us. We all need to accept the fact that any movement forward will require a mindset shift. Whatever that mindset may be. We initiate the change because we want to move the situation (any situation) forward. Think about it for a second. Are you aware of any progress made, personal growth achieved, or business success realized without someone initiating a mindset shift? So, if you want something to change, then change the way you are thinking. Have your thoughts align with the outcome you seek to achieve. Go forth and seek change!

Written By: Jeff Newkirk, Blanton Advisors Associate CFO & Business Coach

“Comes in pretty handy down here, bub.” Money that is.

For those who have seen the Christmas classic It’s a Wonderful Life, do you recall the scene where George Bailey is talking with his guardian angel, Clarence? George needed $8,000, but Clarence didn’t have any money on him. He was an angel after all. He didn’t carry cash. Well, we probably all feel a little like George Baily right now. We could certainly use some money. As a business owner or organizational leader, we need to be in full scale leadership mode. This includes knowing how your business is functioning today, right now. In Tilman Fertitta’s recent book, Shut Up and Listen!, Mr. Fertitta recommends that we must know our numbers. We need to know if we have money. That’s the only way we can know exactly how the business is doing, the only way we can know how to make good, meaningful, and long-lasting decisions. Now, what numbers is Mr. Fertitta referring to? Every business is different, but every business needs money to survive.

Here is today’s directive… know your numbers. Conduct a review of your financial statements – income, cash flow, and balance sheet. Answer these questions: What is your net profit? What is your gross revenue? What is your cash balance? What was the increase or decrease in cash from last month and last year? Do you have more assets than liabilities? Compare today’s statements against last month and last year. This is your big picture. Next step is to dive into the details. 

By Jeff Newkirk - Blanton Advisors, LLC Associate CFO & Executive Coach