growing your business managing cost, funding, customer satisfaction - final

Growing your business- Managing Cost, Funding,

Customer Satisfaction

(c) Copyright Expressive Business Strategies 2007-2010

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Financial Management

• Decide “rules”– What are your revenue sources?

• What are the “billing items” that make up the revenue sources?

– What are your expenditures?• What are legitimate business expenses?

(c) Copyright Expressive Business Strategies 2010 - 2012

Accounting

• “Keeping the books”– Bank account

• Handling money – Availability of money (demand accounts vs saving)

– Writing down (registering) income• Collecting Money• Depositing money into bank account

– Writing down (registering) expenses• Payment Terms• Paying expenses


Financial Reporting

• Income statement– Determines profitability– Determines amount of taxes to pay

• Balance sheet– Assets, Liabilities and Equity

• Cash Flow– Understand difference between cash and

profitability.


Sample Income Statement


Sample Balance Sheet


Why are these reports important?

• They give you a quick picture of the “health” of your business.– You should look at your income statement and

balance sheet monthly.– You should look at your cash flow daily.

• Let’s talk about Cash Flow…


Cash is King!• You need to understand “cash” and how important it is to your business.

– Sales do not pay bills, cash does– Cash is the gasoline that makes your business engine work.– Most businesses fail because they run out of cash through losses or other poor

management practices.– 100% of businesses that run out of cash - FAIL!!


CASH Flow


Ask your accountant to construct a cash flow statement. Proper cash management begins here:

• Cash flow is defined as cash receipts minus cash payments received over a given period of time.


CASH Flow defined

• Collect your receivables faster.• If you have a product business get extended credit from

your vendors, maybe 60 or 90 days.• Sell inventory faster and keeping your inventory levels

low. Know what sells well and what doesn’t.• Encourage your customers to pay with credit cards.• Give customers cash discounts for paying there bills on time.• Ask customers to pay a deposit or advance for services before

you perform them.• Bill customers as soon as you perform the service or deliver

the product.


Improving CASH Flow

© Expressive Business Strategies 2008- All Rights Reserved

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Debt Collection • When you accept purchase orders and grow your receivables, you

are extending credit to your customers, make sure you establish credit practices that are 1) fair enough to your customers under any applicable laws, and 2) strict enough to ensure that your business will get paid.

• Have a set procedure in place that your business will follow if customers don't pay when they're supposed to, i.e. overdue notices, demand letters, and collection notices.

• A measured approach to debt collection is better in the long run than immediately going to a collection agency or court

• Remember that a REAL customer is only one that pays their bills in the agreed upon time.


A final thought on Cash Flow

Funding your Business


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Funding your business

• Understand your business, Understand your market, Understand your risk, understand your competition… These are all the fundamentals of a business plan. You need a business plan to raise capital.

• Let’s look at the process…


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Raising Capital is dependent on:• Government

– Business codes– Laws– enforcement

• Culture– Risk-taking– Saving vs debtor– Interest friendly

• Business type– Product vs service– Key asset– Large vs small– Risk level


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Dependence (con’t)• Business climate

– Competition– economy

• Size of deal• Investor type

– Family/ friends– High net worth individuals (“angels”)– Other businesses (e.g., partners)– Professional investors (e.g., venture capitalists)– Lenders– governments


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A word about Partnerships

– Choose Partners carefully• Do they complement what you do?• Are they of a like mind?

– Equally yoked versus unequally yoked

• Understand the value of what they bring. – Don’t just “go for the money”

• Understand how you would resolve conflict should that arise.


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When raising capital what people forget….

• Two factors are frequently overlooked by those raising capital, and weigh heavily on investor decisions:– Threshold amount– Liquidity


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Threshold Amount

• The threshold amount is that sum which is needed to fund the company until it can either:– Raise more capital– Ensure liquidity


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Liquidity

• Liquidity is necessary for an investor to profit from an investment

• Liquidity events could be:– From profits– From the sale of assets– From the sale of the business– From becoming a Public company (allowing the

sale of an individual’s stake in the business)


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The Funding Deal Structure

• Can alter risk, threshold amount and liquidity• Should be specific to the investor audience• Thus, multiple versions of a Business Plan may

be appropriate


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How investors decide….

• Investor decision making is primarily a process of “due diligence”

• Due diligence is often an investigation of why a business will NOT succeed. It is a hunt for “horribles”

• Your role is to provide independent evidence that “bad things” will not happen


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Managing Due Diligence

• Do not emphasize your own convictions. These are opinions. Investors want evidence.

• Use research and analysis, the more independent, the better.

• Keep a record of all possible concerns• Respond only when prepared• Follow up on all concerns (thoroughly)• Admit risks or unknowns


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The Decision

• Remember, investors decide to invest when “they” conclude the business will succeed, not when “you” conclude it will succeed.

• Focus on the “lead”• Follow up aggressively, but not obnoxiously• Be flexible• Be prepare for a long process


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Use of Funds

Funding provides cash that fuel business growth.

Let’s look at ways to grow your business


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Customer Satisfaction: Growing your business

• Simply defined, growing your business means to generate more revenue and increase your profits.

© Expressive Business Strtegies, 2012.

All Rights Reserved.

How do you do that?

1. Gain new customers or clients2. Increase the profits associated with each

sale, transaction or contract3. Increase repeat business (keep current

customers / clients coming back for more)

© Expressive Business Strategies, 2012.


New customers / clients

• Requires a lot of resources and effort– Branding– Longer sales cycle– … money

• (Obviously) If you have a completely new business, you do need to focus all of your efforts in gaining new customers.



Increasing profits for each transaction

• Reduce costs– Must add up everything that goes into the cost of

a business transaction• Costs of raw materials, salaries of workers• Don’t forget rest of the costs – for example, rent, taxes,

all other salaries, marketing, travel

– Be careful not to sacrifice quality!!!

• Raise prices (very difficult to do in tough economic times)



Repeat business

• Much easier to sell more to current customers – Relationship is already established

• They know who you are• Trust is established• Like your products or services



Reaching current customers

• You need a method of telling customers when something new is available, a sale is occurring, etc – Have them sign up for a mailing list– Gather their email and mailing addresses– Sign up on Facebook or your website– Get their phone number

• Use the method of reaching your existing customers that makes sense for your company



Reaching current customers – Customer satisfaction

• No point trying to reach current customers or clients if they are not happy with your products and/or services!



Achieving customer satisfaction

“The customer is always right”•Take their complaints and learn from them – use the information to make your process or product or service better



Retaining existing customers

Do not assume that your customers will keep buying just because they’ve purchased from you beforeCustomers:•Must feel there is a perceived value•Want consistency of products and services•Need to feel listened-to



Survey your customers

Find out about their experience / satisfaction with a product. Use this information to improve AND to know you’re doing the right thing•Offer product reviews on your website •Comment card on restaurant table•Coupon for filling out survey •Email a survey •Call once a service has been completed to make sure it was satisfactory



Customer satisfaction

• Provide good value for the price• Provide excellent service• Listen to your customers• Pay attention to the details

– Often it’s the small things that make a difference

Ask yourself – would I be satisfied with our customer service and the quality of our products?



Key to Growing your business

• The easiest sale is to your current customers / clients, keep them satisfied.

• Don’t be so focused on gaining new customers that you ignore your customer customers / clients



Summary

• Business is about risk. It’s a risk to start a business.• Understanding your risk, market, business and

competition helps you with business planning• With a good plan you can raise money to fuel

growth. • Grow your business and keep your customers

satisfied.• The Result: Success!


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