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Business Management Today Newsletter
Copyright © 2008, Archer Management Group. All Rights Reserved.

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A Free Monthly Publication of Archer Management Group
http://www.archermg.com

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C O N T E N T S                                Back to Contents
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>> Editor Notes

>>  SUCCESSFUL BUSINESSES HAVE A PLAN

>> What Successful People Believe

>> KNOW YOUR MARKET

>> UNDERSTANDING AN INCOME STATEMENT

>> DEVELOPING A STEADY CASH FLOW

>> Subscription Management


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E D I T O R   N O T E S                      Back to Contents
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The editorial staff would like to welcome  our  readers -- new and old, and express a huge thank-you to all our readers for allowing us to be a part of your lives. We value your readership.

Perhaps the most powerful single factor in your financial success is your beliefs about yourself and money. We call this the Law of Belief. It says simply this: Whatever you believe, with feeling, becomes your reality.

What's your reality?  You can't be a channel for success when the channel is obstructed with disbelief.  Prosperity flows like water.  Don't dam it up.  Let it flow.

I hope you enjoy this month's edition of Business Management Today.

Have a prosperous month.


To Your Success!

Terry Mayfield
mailto:editor@archermg.com


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SUCCESSFUL BUSINESSES HAVE A PLAN                            Back to Contents
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96% of businesses will fail within 5 years. All that work, all that effort, all that heartache and all that money!

Want to buck the trend?

Then you need to understand what your business is really about.

And let us be honest it is only about one thing.

It is all about making a profit.  Every business in the world is the same as every other business; except one.  Yours is the only business that has you as the owner.

Whether you are already in business or just about to start,  there is one thing that you must understand above everything else. Your business is different to every other business in the world, and all other businesses in the world are the same except:

Your business has you, and every other business does not.

Is it true that the difference between success and failure is:

Maybe.

But more likely the difference between success and failure is you.

The problem with most businesses is that they do not work, but the owners do.

And they work very hard, and they fail, 24-out-of-25 times they fail.

The owners work hard, but the business does not work at all.

If you want to succeed, you must do the following:

 

1. Decide what your overall objective is

Not an amount of money, not quality of product, not a nice store or a beautiful office, car, house or spouse!

What do you want your business to give you?

Deep down, what do you want your business to do for you?

When you have done with your business, what do you want it to have done for you?

How does your business make you feel, right now?

How do you want your business to make you feel?

The difference between the two is your business plan - Write it down.

 

2. What does your business do?

If someone walked through your door and asked your receptionist or your store staff, "What does this business do?", what would they say?

Do all your people say the same thing?

Do all your people work for the same business?

If someone asked you to tell them what your business does would you start with one line, then start to clarify?

Would you start to expand?

Would you start to explain why your business is different?

Why your business is better?

Why your business is already great but is going to be greater?

Why your business is THE business that everyone should be dealing with?

Would you and your business eventually become more interesting?

There are very few uninteresting businesses, but there are a considerable number of owners who make theirs that way.

Tell your customers what you really do and what you could do for Them!

So now, what do you want your people, your suppliers, your financiers, and your customers to say about your business?

Do you think they say at the moment?

The difference between what they say and what you want them to say is your marketing plan - Write it down

 

3. Consistency

What is the difference between any great business you can think of and all the others?

Let us consider McDonalds.

Now we know that your business is more sophisticated than McDonalds.

We know your business has better products

More discerning customers

How could you possibly learn anything from McDonalds?

Well, go and sit in McDonalds right now, there will be one near by!

The customers know what to expect.

The staff, who all probably started there in the last month, know what to do

The products are consistent.

The ambience is the same.

The  parking lots look the same.

The stores look the same

They are consistent -- Relentlessly so.

Now, do you have customers who are consistent?

Do you have suppliers who are consistent?

Do you have staff that are consistent?

Or can you not get the staff, the customers, the suppliers that you want?

Why?

McDonalds has a simple product. They have customers who will eat anything and they can get anyone to work for them.

They may well succeed in thousands of locations in hundreds of different countries and cultures; but they are not you.

You, surely, could not be that consistent.

You, surely, could not sell your products in a clear, well-defined manner.

You, surely, could not get your suppliers to supply you consistently.

You, surely, will always have poor staff, poor morale, shaky leadership; that is what happens in 96% of businesses.

What is the difference between where you are now and where you would be if, magically, you could become the McDonalds of your industry?

That will be your organizational plan - Write it down

 

4. Money

How much is your time worth?

If you really got paid what you were truly worth, how much more money would you have?

Are you the only person in the world who gets less than they deserve?

Do you know someone who is grossly overpaid for what they do?

How can this be?

The facts are simple, none of us truly get the amount of money our talents deserve. You get less and I get more.

True?

The only way to get the return you deserve is therefore simple, get other people to earn it for you.

Nearly every failing business has a common theme, the owner is indispensable.

The business cannot do without them, they are irreplaceable, nothing can happen without them and everything happens because of them. And the owner is convinced that they are not getting the returns they deserve.

Every penny that your business earns that you were not involved in is free money.

The only way to get that free money is to make sure your business and your people are earning it

and you are getting it.

Are you earning enough?

Could your business earn more for you?

The difference between working for your business and your business working for you is your personnel plan, and your financial plan, and your business plan and it is the difference your business should be making to your life - Write it down

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Comment or suggestion? Please, feel free to contact us.
Your feedback is always welcome. mailto:editor@archermg.com
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What Successful People Believe                           Back to Contents
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By Brian Tracy

Perhaps the most powerful single factor in your financial success is your beliefs about yourself and money. We call this the Law of Belief. It says simply this: Whatever you believe, with feeling, becomes your reality.

Whatever you intensely believe becomes your reality. That we have a tendency to block out any information coming in to us that is inconsistent with our reality. What we've discovered is that successful people absolutely believe that they have the ability to succeed. And they will not entertain, think about, or talk about the possibilities that they'll fail. They do not even consider the possibility of failure. 

You always act in a matter consistent with your beliefs. The most important belief system you can build is a prosperity consciousness where you absolutely believe that you are going achieve your financial goals. We call this positive knowing versus positive thinking. Positive thinking can sometimes be wishing or hoping. But positive knowing is when you absolutely know that no matter what, you will be successful. 

Another principle related to your beliefs is willpower. We know that willpower is essential to any success. Willpower is based on confidence. It's based on conviction. It's based on faith. It's based on your belief in your ability to triumph over all obstacles. And you can develop willpower by persistence, by working on your goals, by reading the biographies of successful people, by listening to audio programs, by reading books about people who've achieved success. The more information you take into your mind consistent with success, the more likely it is that you will develop the willpower to push you through the obstacles and difficulties you will experience. 

Remember that success is rare. Only one person in one hundred becomes wealthy in the course of a lifetime. Only five percent achieve financial independence. That means that the odds against you are 19-to-1. The only way that you're going to achieve your financial goals is if you get really serious. To succeed, you must get serious. You must get busy. You must get active. You must get going. Remember, everything counts. 

Resolve To Achieve Greatly.

Self-mastery, self-control, self-discipline are essential for anyone who wants to achieve greatly. And control over your thoughts is the hardest exercise in self-mastery that you will ever engage in. See if you can talk and think about only what you desire and not talk or think about anything that you don't want for 24 hours. Then you'll see what you're really made of. It's a hard thing to do but with practice, you can reach the point where you are thinking about your goals and desires most of the time. Then, your whole life will change for the better



Here are two things you can do to build a belief system consistent with the financial success you desire: 

First, continually repeat to yourself the words, pictures and thoughts consistent with your dreams and goals. Whatever you repeat often enough, over and over, becomes a new belief. 

Second, set a goal for yourself to think and talk only about the things that you want for the next 24 hours. This will be one of the hardest things you ever do. But if you can keep your mind on what you want and off of what you don't want for 24 hours, you can begin to change your entire future. 

Brian Tracy is a leading authority on personal and business success. He is the best-selling author of 16 books and over 300 audio and video learning programs. Brian addresses more than 250,000 people each year, has spoken in 23 countries, and speaks 4 languages.  





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KNOW YOUR MARKET                             Back to Contents
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There have never been so many opportunities to start and build a successful small business than there are today.

ONE MILLION EVERY YEAR
Ambitious individuals like you, with dreams and hopes, are starting new businesses today at a faster rate than ever before. Over one million new enterprises are being launched each year, and the rate is accelerating. The opportunities for finding or developing a new business idea are all around you, and with proper preparation, the possibilities for your success are enormous.

NO BETTER TIME THAN TODAY
As many as 80 percent of all the products and services in common use today at home, in business and in organizations large and small, will be obsolete in five years. They'll be replaced by new and better products and services. The rapid development of new technology and the desire of people for new or better or cheaper products or services means that you can start your fortune easier today than at any other time in history.

AVOIDING FAILURE, ASSURING SUCCESS
However, we know that 80 to 90 percent of new businesses fail in the first three years due to a variety of factors. One of those factors is managerial incompetence. It is an inability to sell the product or an inability to control costs or both. Another major reason for failure is offering the wrong product at the wrong price to the wrong market at the wrong time, or a combination of these. In which case, even the best marketing efforts and cost controls won't help you.

DETERMINE THE NEED
The first principle with regard to selecting any new product or service is to determine that it fills a genuine, existing need, that it solves a problem of some kind for the customer, or that it makes the life or work of the customer better in some way. You must be very clear about this.

SELL A QUALITY PRODUCT OR SERVICE
The second principle for success with a new product or service is that it must be of good quality at a fair price. And if it is in competition with other similar products or services, it must have what is called a unique selling proposition. It must have some beneficial feature or attraction that makes it different from and superior to its competitors.

YOUR AREA OF UNIQUENESS
We call this its area of uniqueness. And it is central to success in business. No product or service can succeed unless it is somehow unique and superior to any other product or service like it. There is seldom any real opportunity in what is called a "me too" product - one that is just the same as all the others. At the same time, the safest business strategy is to start off with an accepted product that you can improve. In other words, instead of trying to invent a whole new business or industry, start off with something that people are already doing, people are already buying and using, and find some way to improve it.

Determine exactly what is different and special about your product or service that will cause people to buy it in competition with similar products or services. Build your entire sales and marketing around this unique selling proposition.

Investigate before you invest. Be prepared to look at a variety of different business opportunities until you find one that really excites you before you make a decision to get started.

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UNDERSTANDING AN INCOME STATEMENT                    Back to Contents
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The income statement is a presentation of the results of a company's business operations for a particular period of time. By reading the income statement, you can determine the inflow of new assets into a business and measure the consumption of assets that result from the production of revenue.

As with most elements of financial statements, the key to quality assessment of an income statement is looking for trends over time. Compare the most recent statement with those of like periods in prior years to gauge the direction and progress of a company's business operations.

Revenues and expenses are recorded on an income statement at the time they are earned or incurred, regardless of when actual assets change hands. 

We'll list each element of an income statement with a brief discussion below 

Sales or Operating Revenues: Net sales or service revenues.

Cost of Goods Sold: The amount the company paid in the production of goods it sold. Costs may include labor, materials, overhead, and depreciation.

Gross Profit: Total revenue of a business less cost of goods sold and selling and administrative expenses. Gross profit does not include income from incidental sources.

Operating Expenses: The expenses incurred in running the business. Operating expenses include selling and administrative expenses but exclude interest, taxes, and cost of goods sold.

Operating Revenues: Revenues from any regular business source.

Operating Income: The difference between normal business revenue and operating expenses. Excluded are expenses such as interest and taxes, as well as any unusual income such as gains from selling a subsidiary.

Other Revenues: Increases in assets resulting from transactions not directly related to operations. Interest earned on investments is an example of Other Revenues.

Other Expenses: Decreases in assets resulting from transactions not directly related to operations. Debt interest is an example of Other Expenses.

Income Before Taxes: Reported income before deducting income taxes.

Income Tax Expense: Provision for taxes on pretax income.

Income From Continuing Operations: After-tax income from operations that will continue.

Discontinued Operations: After-tax gain or loss on a portion of the business that is intended to be sold.

Extraordinary Items: After-tax gains or losses on nonrecurring transactions.

Net Income: The sum of all reported gains and losses.

Earnings Per Common Share: Net income divided by the average number of shares outstanding.

Diluted Earnings Per Common Share: Net income divided by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of common stock.

That wraps up the introduction to the income statement. Tune in next week and we'll put each category under the electron microscope for a much closer look.

Sales Revenue = Price x Quantity
Revenues are the proceeds a company receives for its merchandise or services. They are usually recorded at the time of the sale or completion of the service, providing the earnings process is substantially complete and the collectibility of the revenue can be estimated. Sales revenue equals the price of goods sold multiplied by the quantity of goods sold minus returns.

Earnings Process
The earnings process is the sequence of events necessary to complete the sale of goods or services in order to be recorded on the income statement. The following criteria must be met to substantially fulfill the earnings process:

 

1. The buyer and seller have agreed on the price of the merchandise or service.
2. The buyer is not a middleman, withholding payment until a resale occurs.
3. The product or service is delivered in full.
4. The buyer and seller are not related (such as a parent and subsidiary).

Collectibility of Credit Sales
If the collectibility of a sale cannot be estimated, revenues are recorded only as the customer makes payments. This deviates from the accrual basis of accounting, recording sales when the cash is received, rather than when it is earned. There are two methods used when recording revenue as the customer makes payments: the installment method and the cost-recovery method.

Installment Method
Under the installment method, revenues and, in turn, profits are recognized in proportion to the percentage of the sale price collected in a given accounting period.

For example, if Graney's Extra-Glossy Dental Floss sells Dr. Smiley one thousand cases of shiny dentifrice with a total cost of $4,000 for a sum $5,000, to be paid in five annual installments of $1,000 each, Graney's would record annual revenues of $5,000/5, or $1,000 from this transaction. Given annualized costs of $4,000/5, or $800, Graney's would record annual profits of $1,000 - $800, or $200.

Cost-Recovery Method
The cost-recovery method matches revenues with costs until all of the costs associated with those revenues have been recouped. After that point, profits can be recorded on the income statement.

Using the example given above, Graney's Extra-Glossy Dental Floss would need to collect $4,000 from Dr. Smiley before any profits could be recorded. Annual revenues of $1,000 would match annual costs of $1,000 during the first four years. With the cost of the floss fully recovered at the end of the fourth year, profits of $1,000 will hit the income statement in the fifth year.

Long-Term Contracts Revenue
Companies that provide services on a long-term contract generally record revenue under the installment method. If dependable estimates of selling price, construction costs, and degree of completion are obtainable, revenues will be recorded as the work is performed. This is known as the percentage-of-completion method.

An example might be a three-year contract to construct a warehouse that will house Graney's lustrous lace. The first year we estimate that one-third of the project will be complete, therefore the contractor will record one-third of the estimated total revenue from the contract in year one. Years two and three would be treated likewise.

If dependable estimates of selling price, construction costs, or stage of completion are not obtainable, revenue is not recorded until the project is completed. This is known as the completed contract method.

Unearned Revenue
Unearned or deferred revenue is sales revenue for which the company has not completed the earnings process.

For example, if Graney's Extra-Glossy Dental Floss has been paid to train future Dr. Smiley employees on the finer points of polished floss use and has received cash for this training up front, the company will not record the sales until the time of service. However, Graney's will create a liability account on the balance sheet, such as Advances from Customers, to properly account for the cash that has been received.

Bad Debt
Uncollected credit sales are accounted for as bad debt on the income statement, as well as a deduction of accounts receivable on the balance sheet. The amount of bad debt is estimated out of necessity since it must be recorded in the same year as the original sale. It will often be another fiscal year before actual determination of un-collectible debt is possible.

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DEVELOPING A STEADY CASH FLOW                   Back to Contents
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A steady cash flow is the lifeblood of any company, but it's particularly critical for small businesses that often depend on prompt payments just to stay solvent. 

Finding the capital you need to finance your business can be a confusing and complicated process. Many great ideas stumble at this stage of business building. 

Yet, moving through this stage breathes life into your business - giving it forward momentum like a roller coaster barreling down the first big hill. Finding money is just a matter of being informed and choosing the right path for money to enter the business. 

There are several options available to you when searching for financing. Some methods of raising funds are less difficult than others, but all require some planning. Basic planning requires that you know the answer to these three questions: 

1. What will you use the money for?
You must know exactly where the money will be used. You must be specific, as generalities are recipes for disaster. Carefully identify the areas where money should flow into your business. 

2. How much money do you need?
You should calculate your needs to carry you through initial startup and into your first several months of operation. It's necessary to have a realistic picture of your needs. Many businesses fail because the money runs out before the business reaches profitability. 

3. How will you pay back the money?
You must have adequate cash flow from your business to repay the money to your source. Before asking for funds, make sure your fiscal projections and business integrity are soundly argued in a good business plan. 

An integral part of a good business plan are financial statements for your business. You need to show sufficient cash flow in your business for repayment. You do this with information as found in an income statement, a balance sheet, and a projected cash flow statement.

SOURCES OF MONEY

Here are some options for funding your small business:

==> Credit Cards
One form of personal debt you should avoid is cash advances on your credit card. It's very tempting and very easy to get cash this way. If you do this you should pray. Pray with vigor. Then ask for forgiveness. This option is very expensive and extremely risky. Credit cards should only be used for short-term expenses, and not as a means to entirely fund a start-up business.

==> Friends and Family
Borrowing from your friends and family, especially the rich ones, is a good way for new businesses to get money. It's not uncommon for relatives to make low interest or no interest loans to family members. Just make sure all parties are aware of any risks. You don't want to alienate your family if the business falls on hard times and you have trouble repaying the loan. 

==> Personal Savings
You can use your personal savings or assets that can be converted to cash. If your savings are already low, put off that vacation, drive your old car a bit longer, avoid large purchases -- be thrifty in all areas and you can save faster for your business. Keep in mind that most lenders won't finance 100 percent of your business, so you'll need to invest some money yourself.

==> Line of Credit
If you have good credit, you may be able secure a line of credit from your bank. This can be handy in providing you with a source of working capital in the opening round of your business.

==> Bank Loan
Using collateral, such as the equity in your home, you can approach your bank for a loan against your business. This may or may not be an option for you, since some banks prefer to separate personal equity from business debt.

==> Venture Capital
People with lots of money love to make lots more money. Your job is to convince venture capital providers that you and your business can help them make lots more money. 

You must be able to show you've got a real winner. You must do it without fluff or a "come on, dream with me" embellishment. Therefore, you need a business plan. A good one that shows you've done your homework and know the "lay of the land."

Venture capital providers want to be sure their investment is sound. They generally do this by taking ownership over a pretty big part of the company, and often require control of major portions of the business. This is so they can look after their investment.

Do they mess around with the little guy? On the whole, they don't want to fool around with little investments and they are bully on companies that have high-growth potential. You have to think big with these guys!

==> Angels
An angel, or private investor, is a person looking for good investment vehicles. This person could be your next door neighbor, your dentist, or a local business owner. Overall, angels are not loan-makers, they are investors. As such, the degree of control and terms under which you receive seed money for your business will depend on the arrangement brokered between you and your angel.

The key to finding an angel in your area is networking. While you may not have an angel in your personal pool of contacts, by networking with others you can create a word of mouth campaign that reaches the ears of private investors. 

==> SBA Micro-loans
The Small Business Administration may be helpful in connecting you with a Micro-loan. These loans are administered by non-profit organizations that want to foster economic development in your area. Contact your regional SBA office for information on this loan program.

==> Small Business Investment Companies
The SBA or your local Chamber of Commerce may be aware of Small Business Investment Corporations operating in your area. These organizations are interested in reviving depressed portions of your community, bringing employment to places with high unemployment, or even helping certain minority groups. They will work with new businesses if you meet the criteria they expect. You can visit the American Economic Development Council for a list of organizations in your area. 

==> Business Incubators
Business Incubators help build new businesses. They can provide help in all phases of start-up, including funding. Investigate whether or not an incubator exists in your area with the SBA, Chamber of Commerce, local universities, or your local municipality.  http://www.sba.gov/financing

==> Your Future Customers
Your future customers may be a source of money. This is a less conventional method, and your timing must be right to coordinate this type of deal. You simply take advance orders for your product and collect at the time of the order. If you take enough orders, you can search for a lending institution which makes loans against accounts receivable. 

In the final analysis, the name of the game is perseverance. Get your name and idea out there in the real world. Start talking to people about your intent and become a player. Have your business plan ready, be aggressive, and you can get the money you need. 

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S U B S C R I P T I O N M A N A G E M E N T                    Back to Contents
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