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What do you need to know…

If you were to lay out your entire business in front of your banker, odds are that she would say, you need to borrow more money, consolidate debt, or some other bank solution. Ask your CPA, they would likely give you a different variation, perhaps with something along the lines of pay off debt. Ask an sales expert, and they may point to changing your brand.  Find any expert, and they will give you their version of a solution to your business.

I have lunch once every couple weeks with a friend who is a top ranked insurance agent in the nation. One of his favorite sayings is when you are a hammer, every problem looks like a nail. That’s exactly what I am trying to avoid!  Are you a hammer or do you have a full tool box?

Finance in Entrepreneurship

Numbers. It seems these days that everyone and everything is data-driven, but how do you make that work for you and your business? How can you learn the skills necessary to create (and stick to) a budget? How are you going to react when everyone’s favorite time of year–Tax Season–comes around?

Check in regularly or subscribe to keep up with our blog series on the finance skills necessary to run a business: Finance Fridays.

Wellness and Entrepreneurship

Many people don’t recognize the impact that their own mental and physical health can impact their business. Because of this, countless businesses have failed due to burnout. The workload of an entrepreneur can lead to a decline in both physical and mental health.

Check in with us regularly to keep up with our blog series with information to keep you and your employees happy and healthy: Wellness Wednesdays.

Lessons Learned the Hard Way – Is it worth monitoring…

I used to be over zealous about monitoring and tracking EVERYTHING… Now I am just zealous. It took me a while, but I have learned that if you are not using the information, why are you spending time to track it? For a numbers junkie like me, that is a very difficult conclusion to reach. However, after years of tracking everything under the sun, I have found the power of a simple and focused management metric system to be an incredibly effective management tool. It allows you to focus your management time on what you have identified as the most important variables in your business and effectively communicate that information to your people.

Don’t get me wrong, it is vitally important to track information in your business, and critical that you collect the correct building blocks of an information management system. It is much easier to enter a few pieces of data once a day than to try and recreate 6 months worth of data, just because you didn’t think it would be useful. But there needs to be a balance. I have seen accounting setups for small businesses with 150 expense account codes and setups with 4 expense codes. It doesn’t matter if you are drowning in information or starving for information, either scenario is ineffective.

So where do you start with figuring out what data to collect? With the goals for your business, which just happens to be next week’s topic. Unless you want to get a jump start and email me with your questions!

Lesson Learned: Analyze what you have and what you need, then strike a balance and make it happen.

Managing by the Numbers: Per Unit Cost of Production

What is a per unit cost of production and why should I care?  A per unit cost of production allows you to examine your business over time as the size of the business increases or decreases, giving you a much more objective way of measuring performance.  Think of it this way, if you add 5 employees to your payroll and your net income goes up, you won, right?  Maybe, maybe not….

If you take your profit and loss statement and divided each line item by the number of employees for that same time period, you can come up with a per unit (in this case, per employee) cost.  Now when you want to look at two time periods and ask are we doing better or worse, you can reliably answer by each line item.  So if in 2011 first Qtr, you employed 10 people and made 10,000 widgets, you would expect 2011 Second Qtr with 15 people to be able to produce 15,000 widgets.  If you actually produced 12,000 widgets, you better start digging into the numbers more.  If you increased production to more than 15,000 widgets, you may deserve a pat on the back!

Now there are a ton of variables that can affect the per unit cost of production – economy, new equipment, training programs, input cost increases – all will affect the per unit costs.  But at least now you have a tool to help you objectively monitor your business by line item on your P&L.  The fun part is in asking the question why.

Per employee is not the only way to look at your production facility – I have seen managers look at per unit cost by total production, employee, per thousand dollars of investment, and many other ways, searching for the best way of describing their individual business.

Here is a  really cool trick for you to play with:  export a report from QuickBooks into Excel.  Now it is just a matter of adding a column to the spreadsheet, figuring out what per unit you want to look at, and creating a formula to do all the work for you.

Piece of cake… I know!  But that is another days blog post….