by Adam Litster | Dec 19, 2024 | Profit First, VPS, Entrepreneurship Newsletter
Navigating Your Numbers: A Practical Guide to Financial Clarity
In this issue:
- Understand Key Metrics: Discover which numbers—beyond just revenue—truly reflect business health.
- Spot Trends & Risks: Learn how comparing statements over time can uncover opportunities and highlight warning signs.
- Practical Action Steps: Use insights to fine-tune pricing, reduce expenses, and make informed decisions that support a cash-first, profit-focused approach.
If you’ve ever opened your financial statements and wondered, “What exactly should I be looking at?” you’re not alone. Even seasoned business owners can find the numbers overwhelming. Understanding the right metrics and signals in your financial reports can help you not only gauge what’s going well but also spot areas for improvement and guide your decision-making with confidence.
1. Revenue and Profitability: More Than Just the Bottom Line
It’s easy to fixate on top-line revenue, but true financial health is revealed when you look deeper. By prioritizing profit and managing cash intentionally, you gain a clearer picture of where your business stands. We get what we focus on, and our goal is to help every business owner earn a healthy CASH profit every single month. Systems like Profit First help you move beyond traditional accounting methods—so even if you find financial statements confusing, you can still maintain healthy margins and consistent cash flow.
Key Indicators to Consider
- Gross & Net Profit Margins: Check how efficiently you’re operating and where costs need to be trimmed. Your net profit shows what’s left after all expenses, but remember that net profit doesn’t always translate directly into cash.
- Current & Leverage Ratios: Evaluate your ability to cover short-term obligations and understand how debt impacts your risk and long-term growth.
- Cash Flow Metrics: Reviewing a Statement of Cash Flows can show where your money really goes, but if that’s too complex, Profit First provides a simpler way. By allocating funds into dedicated accounts for profit, taxes, and expenses, you can track, control, and forecast cash without being an accounting expert.
If you don’t currently know how your business is performing with respect to these metrics, I’d recommend sending an email to your bookkeeper or accountant today and asking them for these. We unfortunately don’t have room in this newsletter to really go deep into the best key performance indicators and how they work, but we’d be happy to guide you through this if you are interested in applying them to your business. You can just reply to this email with any questions, and we’d be happy to help! There are also dozens of great online tools/software providers that can give you a report on your business KPI’s automatically each month/week.
2. Why Profit First?
Profit and cash flow aren’t the same thing. You might be profitable on paper while still struggling to pay bills on time. One of the most common questions we hear from entrepreneurs is, “I see a profit on my P&L, but where’s the cash?” This is a key distinction that is essential to understand. Your Profit and Loss statement shows the income and expenses relating to the operations of your business, but doesn’t necessarily show where your cash is going in the end (i.e. loans, equipment purchases, owner’s distributions).
Profit First ensures that you manage your cash more effectively and get visibility into all the places your cash is going. You are the most important employee of your business! Profit First helps you to pay yourself first and always set aside profit before anything else. Rather than hoping money is left after expenses, you reframe your business finances to guarantee profit every month. With this system in place, you can make informed adjustments—like raising prices, negotiating better terms, or streamlining offerings—confident that you’re growing sustainably, without a degree in accounting! If you haven’t read the book yet, step #1 – get the book and read it this month!
3. Turning Insights Into Action
As you refine your understanding of key metrics, use them to make strategic moves:
- Adjust Pricing and Sales Strategies: If your gross margin is slipping, consider raising prices, seeking cheaper suppliers, or streamlining the service offering.
- Optimize Cash Flow: If cash is tight, aggressively review and reduce your cash expenses (especially debt!), focus on faster collections, negotiate better payment terms with suppliers.
- Direct Investment: Identify which products, services, or segments are most profitable and direct resources towards their growth. If something consistently underperforms, consider whether it’s time for a pivot.
4. The Bottom Line
Your financial statements are rich sources of actionable insights. By focusing on margins, trends, and cash flow (through Profit First, you can transform what might seem like a stack of complex numbers into a roadmap for informed, strategic decision-making. With a clear understanding of where you stand, you’ll feel more confident charting the course forward and seizing new opportunities to grow your business.
We have really enjoyed writing this newsletter this year! We will be taking a break next week as our team celebrates the holidays. We wish all of you happy holidays and a great new year!
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Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
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by Adam Litster | Dec 13, 2024 | Profit First, VPS, Entrepreneurship Newsletter
Stop Surviving and Start Thriving:
5 Steps to Break Free From Misaligned Business Strategies
In This Issue:
- Identify the Survival Trap: Understand how reacting to crises can pull you away from your ultimate business vision.
- Spot & Correct Misaligned Actions: Learn how to evaluate crisis responses and redirect your efforts toward profitable growth and long-term goals.
- Stay Focused on Your Vision: Discover tools to prune unnecessary distractions and say “no” to opportunities that don’t align with your business mission.
Escaping the Survival Trap: Stay True to Your Vision
As an entrepreneur, it’s natural to do whatever it takes to keep your business going when crisis hits—be it a sudden cash shortage, the loss of a key employee, or a major client walking away. I’ve found that crisis can sometimes even be more subtle or persistent (i.e. struggling to bring in enough business to cover your business and personal expenses). While quick fixes or drastic action often feel necessary in the moment, they can sometimes carry you further from your ultimate vision rather than closer to it. This phenomenon is known as the “Survival Trap”.
What is the Survival Trap?
The Survival Trap occurs when you repeatedly respond to urgent problems by taking actions that solve your immediate issues but misalign you with your longer-term strategic goals. These crisis-induced tactics might secure temporary relief, but they can gradually push your business off-course. Instead of moving toward your envisioned brand identity and market position, you get stuck juggling short-term “fixes” that fail to build sustainable momentum. This cycle of crisis and desperate action often results in a persistent feeling of anxiety and self-doubt.
An Example in Practice
Imagine the owner of a landscaping company aiming to become a high-end, cutting-edge provider in the community. Faced with an unexpected cash crunch caused by the loss of a major recurring customer, the owner scrambles to fill the gap and keep the business going through deep discounting. While these strategies bring in cash and keep employees busy, they also dilute the brand’s high-value image and steer the business away from its ultimate goal, not to mention threatening the business’s financial health and profitability. This entrepreneur is surviving, but not thriving—and certainly not moving closer to the desired vision.
Breaking Free from the Survival Trap
If you are feeling trapped in this cycle and have no idea how to get out, I want to first let you know that you are not alone. Everyone goes through this process of struggle and growth as they take on the challenge of entrepreneurship. I find myself in the survival trap far more often than I would like. The great news is that there is a way to overcome it! To escape the Survival Trap, you’ll first need a clear picture of your ultimate vision. Without a strong understanding of where you want to end up, it will be difficult to take any kind of decisive or effective action to get there. You’ll also need a structured way to assess how your decisions affect your long-term direction. Now let’s take you through the process of realigning your actions. I’ve also included a free fillable worksheet in this email to help you as you work through overcoming your personal survival trap.
1. Define Your Ultimate Vision:
Start with your “why”. Why does your business exist? Just saying, “We exist to make money” is not enough of a “why” to inspire others. People want to feel a sense of significance, a sense of a greater purpose, and will buy from and associate with companies that make them feel that.
You should include answers to other questions that describe your ideal vision such as: What do you want your brand to stand for? What type of clients do you want to serve? What do you want to be known for in your market? What does your ideal company culture look like? What is your ideal financial position? Your own role in the company. What are you doing day to day? What lifestyle are you living as a result? Describe your ideal workday.
Don’t rush this process. Having a solid vision is just as important as setting a sure foundation for a building. Take the time to really get to what you want most in your life and write it down.
2. Identify the Crisis and Your Typical Responses:
Now that we are defining our vision, let’s talk about how we can adjust our crisis response behavior. Consider a common crisis you face—say, for example, you run a seasonal lawn care business and we’re getting into the winter months. Sales and cash are starting to dry up as they usually do this time of year. List the actions you usually take to relieve the pressure. Are these actions consistently moving you toward or away from your defined vision?
3. Map Out Your Actions:
Using a tool like the Survival Trap diagram attached to this email, place your ultimate vision on one side and your immediate crisis on the other. Plot your usual responses around the crisis and note their direction. The goal is to visualize which moves push you closer to your vision and which pushes you further away.
Continuing with our example of the lawn care business, let’s say your usual response during winter months is to take out a loan to shore up your cash reserves and get you through to the spring. If part of your vision is to build a business that achieves 15% profit each year and is debt free, you would likely put the response “taking out a bridge loan” on the left side of the diagram (further away from your ultimate vision). You are in effect doing something that would sabotage your ability to improve your profitability and be debt free, since you are signing up for months or even years of costly debt payments and interest.
4. Select Better Solutions:
Next time a crisis arises, remember your vision. Ask yourself: Can you solve this problem in a way that supports your long-term goal? In the example of a manufacturer, instead of discounting high-end products at a bargain outlet, could you strategically partner with a boutique that respects your brand’s integrity, or adjust your product mix to prevent overproduction?
5. Say “No” to Misaligned Opportunities:
Entrepreneurs are often bombarded by new ideas. Not every idea is a good one; some are mere “shiny objects” that distract from your Sweet Spot—the intersection of your best clients, your unique offering, and the most profitable, systematized parts of your business. “Shiny objects” can come in the form of clients, products, investments, subscriptions, or anything else that can distract or even prevent you from achieving your vision. By rigorously filtering opportunities against your vision and mission, you learn to say no more often than yes.
Pruning Away What Doesn’t Serve You
This process isn’t just about responding to crises differently—it’s also about pruning away clients, products, or services that don’t fit your Sweet Spot. By eliminating those low-value, off-vision elements, you free up resources to focus on the most profitable, high-potential areas that align with your goals. We understand this seems counterintuitive and can be a daunting and scary thing to do. Can firing your troublesome clients or eliminating some offerings really help my business? The answer is YES! Over time, pruning ensures you nurture only the parts of your business that will help you flourish. We have seen it in dozens of clients that we’ve helped in the past, and they all can attest that pruning was one of the most influential decisions they’ve made.
Reclaiming Your Direction
Escaping the Survival Trap isn’t about ignoring the real challenges your business faces. It’s about addressing them in ways that move you closer to your ultimate destination rather than sidetracking you. By consistently choosing solutions that fit your vision, you transform crises from distractions into catalysts for meaningful progress.
In short, it’s time to break free. Stop merely surviving and start intentionally steering your business toward its envisioned future, one decision at a time.
We’d love your feedback as you do this analysis for your business! What insights did you gain? What would you like help with in the future? We’re here to help you, so don’t hesitate to reach out!
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Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
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by Adam Litster | Dec 6, 2024 | Profit First, VPS, Entrepreneurship Newsletter
Welcome to our weekly entrepreneur newsletter! Is there anything in your business that is keeping you up at night? Let us know! We’d love to help and provide our advice/experience in future newsletters.
What Makes a Good Bookkeeper—and How to Choose the Right One for Your Business
In today’s newsletter:
• Key Qualities of a Top-Notch Bookkeeper: Experience, accuracy, and strong communication.
• Must-Have Credentials & Skills: Relevant certifications, industry familiarity, and tech-savvy know-how.
• How They Help You Succeed: Providing clear financial insights that inform confident decisions and drive growth.
• Tips for Finding the Right Fit: Ask for referrals, interview thoroughly, and start small to test compatibility.
When it comes to running a successful business, having the right financial support team isn’t just a nice-to-have—it’s essential. Among these key players, a qualified and trustworthy bookkeeper can make all the difference between feeling confident in your decisions or feeling constantly anxious about how your business is doing and what to do next.
Why a Good Bookkeeper Matters
Think of a bookkeeper as your financial navigator. They help guide you through the numbers so you can clearly see where you’ve been, where you’re headed, and how best to reach your destination. With accurate, timely bookkeeping, you’re not left guessing if you can afford that new hire, upgrade your equipment, or invest in a new marketing campaign. Instead, you have solid data that informs your choices, helping you move forward with clarity and confidence.
Beyond just accuracy and timeliness, having a solid bookkeeper in your camp gives you access to a mentor that can guide you through understanding your business financials and mentor you in how to use that information to better your business and your life.
Key Qualifications to Look For
- Relevant Certifications & Experience:
A strong bookkeeper typically holds certifications—such as from the National Association of Certified Public Bookkeepers (NACPB)—or equivalent credentials in your region. They also should have a background in accounting and business, usually in the form of a college degree. These credentials indicate a foundational knowledge of accounting principles and best practices. Just as importantly, look for experience working in your specific industry. Industry familiarity can significantly reduce onboarding time and increase the usefulness of their insights.
Unfortunately, it is extremely easy for someone to take a class or two and call yourself a bookkeeper. There are a vast number of bookkeepers in the market, and in our experience, most don’t have a solid accounting foundation or background to be able to give you accurate financial data or guide you in understanding your financial statements. As a result, it is all too common for business owners to be burned by a bad bookkeeper, resulting in costly cleanup, stress, and uncertainty.
2. Attention to Detail & Accuracy:
Errors in your financial records can lead to misinformed decisions and even legal complications. A good bookkeeper is meticulous, double-checking entries, ensuring data is recorded consistently, and maintaining up-to-date reconciliations. That level of precision helps protect you from costly mistakes down the line.
A mistake many bookkeepers and business owners commonly make is focusing primarily on tax deadlines when scheduling bookkeeping. The challenge with waiting until tax time to get your books in order is that you lack insight into the health and profitability of your business until long after decisions need to be made. If you don’t know whether your business has enough cash to purchase a key piece of equipment, or don’t know if one of your products is making a profit, you will end up making poor business decisions and will often end up in a cash crisis sooner than later.
It is essential that you find a bookkeeper that is able and willing to update your financials at least monthly; weekly is even better!
3. Technological Proficiency:
Today’s financial world is driven by cloud-based accounting software and integrated platforms. A bookkeeper who’s skilled with tools like QuickBooks, Xero, or other industry-specific solutions is more efficient, accurate, and responsive. This technological edge also means you’ll have real-time access to up-to-date financial information—no more relying on outdated spreadsheets.
4. Effective Communication & Collaboration:
You should feel comfortable asking your bookkeeper questions, discussing reports, and seeking their guidance. The right professional takes the time to explain financial data in plain English (not jargon), making it easier for you to understand your numbers. They should also actively listen to your goals, challenges, and concerns, then tailor their support accordingly.
Many bookkeepers who don’t have a strong background in business and accounting will often avoid discussing your financials with you in favor of just sending monthly reports through email. We have seen some even restrict the business owner from accessing their own QuickBooks account! We believe it is crucial to have a bookkeeper who can help you understand your own business and be a guide to you as you make decisions.
5. Forward-Thinking Mindset:
A top-tier bookkeeper goes beyond the numbers. Rather than just reconciling your transactions each month, they provide insights that help you make proactive business decisions. Whether it’s pointing out trends in your spending, identifying cash flow bottlenecks, or highlighting high-margin products, their input can shape your strategy and steer you toward growth.
How to Find the Right Fit
Start by asking for recommendations from peers, networking groups, or professional associations. Hearing firsthand how a bookkeeper has helped another business thrive can give you confidence in your choice.
- Interview & Ask Tough Questions:
Don’t hesitate to conduct thorough interviews. Ask about their approach to deadlines and their experience in your industry. Look for someone who shows genuine interest in your business’s unique situation and cares about you and your personal and professional goals.
If possible, start with a smaller project or trial period before fully committing. This approach lets you see how quickly they respond, how accurately they handle your books, and whether their communication style matches what you need.
Pricing is generally a big issue when it comes to engaging a bookkeeper. We have all seen the signs offering bookkeeping for $20/hour or even per month. You will find a wide range of pricing as you search the market for a good bookkeeper. Our guidance to you would be to consider the value of what you are getting in addition to just the cost. We pay for what we get, and paying for a $20/hour bookkeeper will most often result in poor quality and costly cleanup. Find a bookkeeper that is fairly priced but provides the value that you want and need. Excellence in quality does generally come with a premium, but you will save in the long run, both financially (i.e. reduced CPA bills), and in peace of mind.
We recommend that business owners with less than around $100K in annual revenue and who have the capacity should look into doing their own bookkeeping first. It may be a daunting task, especially for those with no background in accounting, but we’ve seen tremendous benefits when business owners do the work to learn how to understand the fundamentals of bookkeeping and accounting, navigate QuickBooks, and take charge of their business finances from the beginning. Those who do this will rarely struggle to make good business and finance decisions and will have the tools and foundation to grow a thriving and profitable business.
Setting the Foundation for Growth
Your bookkeeper plays a key role in building a stable financial foundation. With the right professional by your side, you’ll have greater peace of mind, more time to focus on growth, and the knowledge that your decisions are rooted in solid financial intelligence. In short, choosing the right bookkeeper isn’t just another administrative task—it’s an investment in the future of your business.
Whether you keep your current bookkeeper, engage our firm to do your bookkeeping, or find someone else, our hope is that you have the best support and foundation you need to succeed in reaching your professional and personal goals. Let us know if you have any questions or would like help navigating the search for a good bookkeeper for your firm!
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Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
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by Adam Litster | Nov 22, 2024 | VPS, Entrepreneurship Newsletter, QBO, Profit First
Are Your Business Finances Ready for Year-End?
In today’s newsletter:
• End-of-year prep is crucial: It ensures your books are accurate and ready for tax season.
• Consistency saves time: Use tools and systems to organize receipts, track cash expenses, and reconcile accounts.
• Most Important of all – Visibility matters: Clean financial records provide insights into the health of your business and support better decision-making.
As we approach the end of the year, organizing your financial records does more than just prepare you for taxes. It provides clarity about your business’s performance, allowing you to spot opportunities for growth or areas that need adjustment. Reviewing key areas such as accounts receivable, inventory, and liabilities ensures you’re making informed decisions for the year ahead.
Here’s why year-end bookkeeping matters:
• Clean Financial Reports: Gain insights into the health of your business and make smarter decisions for the year ahead.
• Streamlined Tax Prep: Stay organized and ready to provide accurate information to your accountant.
• Bonus: Giving your CPA clean financial statements can significantly reduce your tax accountant’s bill and put more money in your pocket; PLUS, your tax accountant is enabled to focus more on what they do best – determining the best strategy for reducing your tax liability.
Key Steps for Year-End Prep
From reconciling accounts to organizing receipts, our Year-End Financial Reporting Checklist has you covered. I’ve attached the checklist to this email, but here’s a sneak peek:
• Reconcile Accounts: Checking, savings, credit cards, and loans to ensure accuracy.
• Document Large Purchases: Keep records of any equipment or assets bought this year.
• Review Accounts Receivable: Identify overdue invoices and decide whether to collect or write them off.
• Adjust Inventory: Make sure your books reflect your actual stock levels after accounting for loss or damage.
Need Help Cleaning Up Your QuickBooks?
We’re here to make year-end easier for you. If you need assistance organizing your books or preparing for tax season, give us a call at 816-500-5779 or use the link below to set up a free strategy session. Together, we’ll ensure your business is ready to shine in the new year.
Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
Visit Our Website!
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by Adam Litster | Nov 15, 2024 | Profit First, VPS, Entrepreneurship Newsletter
The Hidden Cost of Rising Expenses: Protect Your Business with Smart Pricing and Expense Management
Hi everyone, a big thank you to everyone who has been reading our newsletter! I hope that the content is providing value and support to you as you work to build the business of your dreams!
In this issue, I will focus on:
• Rising supplier and operational costs can eat away at margins, but there are two key ways to combat this: manage expenses and adjust prices.
• Regularly reviewing expenses, cutting waste, and finding innovative ways to provide value can protect cash flow and profitability.
• When paired with strategic pricing adjustments, these steps help build a resilient, profitable business.
Inflation has been a major challenge for small businesses over the last couple of years, fueled by ongoing political and economic uncertainty. Rising supplier costs, higher wages, and fluctuating interest rates are squeezing margins tighter than ever. Unfortunately, it looks like we’re not done with inflation just yet, which means now is the time to take proactive steps to protect your business.
By focusing on managing expenses and making necessary pricing adjustments, you can shield your margins and build resilience. Let’s dive into how you can take control, even in challenging economic times.
Step 1: Get Serious About Expense Management
Managing expenses is about being proactive and innovative with your investments. Every dollar spent should work toward growing your business or improving customer value. Here’s how to ensure your expenses are working for you—not against you.
1. Understand Every Expense
Take a deep dive into your expenses and categorize them. Which costs are essential, and which aren’t adding value? This clarity will help you identify areas for cuts or renegotiation.
Pro Tip: Review recurring costs, such as software subscriptions or supplier contracts. Duplicate or unused services can add up quickly.
2. Cut Waste and Renegotiate
Regularly evaluate costs and negotiate with vendors to lower rates. If a supplier isn’t willing to work with you, consider alternatives. Every dollar saved is a dollar added to your cash flow.
3. Innovate to Create Value
Look for ways to deliver more value at the same or lower cost. For example, streamline processes, adopt cost-saving technologies, or bundle products or services in ways that increase customer satisfaction without increasing your costs.
4. Make It a Habit
Expense management isn’t a one-time activity. Set a regular schedule—monthly or quarterly—to review your spending and look for opportunities to improve efficiency.
Step 2: Adjust Pricing to Protect Margins
Once you’ve managed your expenses, the next step is to ensure your pricing reflects the value you deliver and keeps your margins healthy. Here’s how to approach pricing changes confidently:
1. Link Pricing to Value
Rising costs mean you’re likely providing the same or even more value at a higher expense. Your pricing should reflect this. Customers are willing to pay for quality, reliability, and expertise.
2. Communicate with Confidence
Transparency is key when introducing price changes. Share with your customers why the adjustment is happening. Emphasize your commitment to maintaining quality and the value you provide. Most customers understand that rising costs affect everyone.
Example Script
“To continue providing the quality you expect, we’re adjusting our prices to account for rising costs in materials and operations. This change ensures we can maintain the high standards you’ve come to rely on.”
3. Start Small and Test
If you’re nervous about raising prices across the board, start with a small increase on select products or services. Monitor customer reactions and adjust as needed. Incremental changes are often easier for customers to accept.
Profit First Insight: Combine Innovation with Simplicity
The Profit First system emphasizes visibility and control over your finances. Managing expenses is just as important as increasing revenue. By regularly trimming unnecessary costs and finding ways to innovate, you can not only maintain profitability but also create a lean, efficient business that thrives.
Strategic pricing adjustments combined with disciplined expense management ensures your profit margins remain strong—no matter how costs fluctuate.
What’s Next?
The combination of expense management and smart pricing can transform your business. By cutting waste, negotiating better deals, and finding innovative ways to deliver value, you’ll have more room to adapt to rising costs. And by confidently adjusting your prices, you’ll protect your margins and maintain a healthy cash flow.
Remember, success isn’t just about making more—it’s about keeping more. Let’s focus on building businesses that are both profitable and resilient.
Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
Visit Our Website!
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by Adam Litster | Nov 10, 2024 | Profit First, VPS, Entrepreneurship Newsletter
Summary:
• Profit First isn’t just for struggling businesses—it’s for anyone who wants greater control over cash flow, less stress about finances, and higher profits.
• Even highly profitable businesses often lack visibility into their spending, which can lead to waste.
• By implementing Profit First, businesses can unlock even more growth and enjoy a streamlined, stress-free approach to financial management.
Achieving profitability is a milestone, but maintaining and even increasing profitability? That takes a powerful system. You might wonder if Profit First is necessary for a business that’s already turning a profit—and the answer is a big yes! Here’s why Profit First can take a successful business to the next level, with an example to show just how transformative it can be.
Why Profit First Matters, Even for Profitable Businesses
1. Gain Control Over Cash Flow
Profit First brings visibility to cash flow so you know exactly where your money is going. Even the most profitable businesses can lose track of expenses or cash flow patterns, leading to waste.
2. Increase Profits Through Simplicity
Profit First is a straightforward way to consistently boost your bottom line by ensuring that profit comes first, expenses come second, and cash flow gets tracked closely. This process can make financial management easier and more rewarding for any business.
3. Build a Business that Supports Your Vision
With Profit First, business owners gain peace of mind, clarity, and confidence in their finances. This system ensures you’re always aligned with both business and personal goals.
A Real-Life Example: A Chiropractic Practice Transformed
One of my clients, a highly profitable chiropractic practice, had strong revenue, a healthy profit margin, and high owner’s compensation. Despite this, they were spending cash freely, often unaware of where the money was going. With operating expenses already near Profit First standards, they assumed they didn’t need to change a thing.
But here’s what happened when they started using Profit First:
• Visibility Increased: They quickly discovered duplicate or unnecessary costs eating away at profits.
• Confidence Rose: With better control over cash flow, the owner felt more secure about their decisions, knowing they were building a financially resilient practice.
• Profits Improved: By trimming down expenses and adopting Profit First principles, they’re now set to achieve profit levels well above the industry average.
This client has seen a total transformation—not only in their business’s financial health but also in their peace of mind and alignment with their vision. Profit First isn’t just about making more; it’s about feeling confident that your business is set up for long-term success.
Even the most profitable businesses can benefit from Profit First. By gaining visibility, simplifying cash flow, and streamlining expenses, you’ll take your business’s profitability and resilience to new heights.
If you’re ready to make a similar transformation, Profit First might be just the thing your business needs to thrive!
Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
Visit Our Website!
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by Adam Litster | Nov 1, 2024 | VPS, Entrepreneurship Newsletter, Profit First
In recent weeks, we have been exploring several valuable insights from the book Surge by Mike Michalowicz to help businesses grow effectively. I wanted to take a break from that today to address a very relevant and pressing topic many of our clients have been dealing with lately, cash flow shortages from seasonal demand shifts. We’re nearing the winter season where many businesses, especially in the outdoor or home services industries tend to struggle. I would like to provide some actionable insight and suggestions to help confront these issues.
Summary:
- Proactively managing cash flow during slower months helps keep your business running smoothly.
- By building a cash reserve and creating a seasonal budget you can reduce the stress of cash flow challenges.
- A little preparation goes a long way toward helping you maintain consistent cash flow year-round.
Every business faces seasonal fluctuations, but with a bit of planning and strategy, you can avoid cash flow crunches and stay on top of your finances. Here’s how to keep cash flowing steadily even when things slow down.
- Build a Cash Reserve Before the Slow Season Hits
Every business experiences good months and bad months, but seasonal businesses tend to experience low months for extended periods of time each year, which can really hurt. Whether you deal with a bad week occasionally, or have 3 months of low sales every year, one of the best ways to avoid cash flow issues is to create a cash reserve during your busiest times. Here’s one of the most common mistakes business owners make when times are good: When revenue is really strong for a month, the owner will often take the extra cash windfall the results and spend it. This practice of increasing spending in line with revenue often makes it difficult to bring the spending back down when revenue drops again.
Setting aside a percentage of your revenue in a designated account provides funds to cover essential expenses when sales dip. We’d recommend you work toward a reserve that covers at least three – six months of operating costs, depending on your business needs.
How to Do It:
- Set a goal for your reserve fund and commit a percentage of revenue during high-earning periods.
- Treat this reserve as an essential “expense” each month to ensure you stick with it. If you are using profit First, add an account and update your allocation percentages to include the new reserves account
- When you have unusually high revenue months (months that exceed the level of revenue you’d need to meet the business needs), transfer a portion of that extra cash to the reserve account to be used for low months/emergencies.
By doing this, you can now act as your own bank during cash flow shortages. You have cash available when you need it and don’t have to pay any interest!
2. Create a Seasonal Budget and Stick to It
Mapping out your cash flow needs over a full year helps you understand when expenses might need to be trimmed. A seasonal budget lets you identify areas where you can cut back temporarily while still meeting necessary costs.
How to Do It:
- Identify predictable expenses across a 12-month timeline.
- Flag slow months and adjust discretionary spending during these times to conserve cash flow.
3. Offer Subscription Services or Additional Seasonal Offerings
Adding a subscription-based service or expanding your offerings can keep cash flowing consistently, even when business is slow. Subscriptions create a steady revenue stream and help maintain customer loyalty. If subscriptions aren’t a fit, think about other offerings to introduce in slow months that fit with your existing business.
For example, one of my clients in the window cleaning business typically experiences a slowdown in winter. In the past, they’ve had to rely on high-interest loans or credit cards to cover operating expenses. To counter this, they began exploring winter-specific services like indoor window cleaning and Christmas light installation. Not only does this boost their income, but it also helps retain their customer base throughout the year.
How to Do It:
- Brainstorm subscription or retainer-based options that add ongoing value to your clients, such as maintenance packages, consulting, or VIP memberships.
- Look at seasonally relevant products or services that could create a boost when your primary offerings are less in demand. Even small add-ons or “off-season” versions of your popular services can help generate additional income.
4. Use Short-Term Financing Only as a Last Resort
While it’s ideal to rely on cash reserves, short-term financing can be an emergency backup in unexpected crunches. Options like a business line of credits can give you quick access to funds. Use these sparingly and only as a last, last resort; and have a solid repayment plan to avoid compounding expenses.
Additionally, avoid using credit cards to cover cash flow shortages at all costs! If you use credit cards as if it is cash, you can easily find yourself with massive credit card debt and interest charges that make you lose sleep at night. Credit cards can be used strategically for benefits such as travel points or cash back, but only if they are controlled and used wisely. When you use credit cards for purchases, ensure you always separate funds enough to pay off the card in full. This way you will never have a runaway card balance.
A quick side note: I’d recommend business owners never consider invoice factoring as an option to cover cash flow needs. This is a costly and often ineffective system that will do more damage than good to your business.
What’s Next?
Cash flow management during slow seasons takes planning, but it can ease the financial stress and keep you ready for growth opportunities year-round. Whether it’s building up a reserve, refining your seasonal budget, or adding steady revenue streams like subscriptions, a proactive approach can make a big difference.
With the right preparation, you’ll stay focused on what matters—serving your customers and growing your business in every season.
Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779 – Option 2
adam@betterbizinfo.com
Visit Our Website!
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by Adam Litster | Oct 28, 2024 | Profit First, VPS, Entrepreneurship Newsletter
In this edition:
- Refining is all about making small, meaningful adjustments that show your top customers you “get” them.
- When you fine-tune your products, services, or customer experience to reflect what your best customers care about most, you make your business even harder to resist.
- With just a few thoughtful changes, you can boost customer loyalty and keep your high-value clients coming back for more.
In recent editions, we’ve been exploring the S.U.R.G.E. process, a method to grow your business by connecting with your top customers in powerful, targeted ways. Each letter in S.U.R.G.E. represents a step in the process. Here’s a summary of topics covered in the last couple of weeks, with links to the related articles:
Now we’re at R for Refine. This step is about taking what we’ve learned and making thoughtful adjustments to improve the experience for those top customers. Even if you’re just joining us now, this edition will give you actionable ways to build a stronger, more customer-focused business by refining the details that matter most.
What Does “Refine” Mean for Your Business?
Refining your business is about tailoring it to fit your top customers better. Think of it as fine-tuning your approach, using what you know about your most valued customers’ preferences, challenges, and values. The goal is to strengthen customer loyalty and keep them coming back, while also appealing to new customers who fit the same mold.
Here are a few core areas where refining can make a big difference:
- Products and Services: This is about understanding what your top customers value most in your offerings. Are there features or customizations they would appreciate? Even small product adjustments can show your customers you’re tuned into their needs.
- Customer Experience: Look at the experience from your customers’ perspectives. Are there points in the buying or service journey that could be smoother? Improving response time, simplifying the ordering process, or streamlining customer service can make a noticeable impact.
- Pricing and Payment Options: If you’ve noticed that your top customers prefer certain price ranges or payment flexibility, consider adjusting your options. This could mean anything from offering payment plans to introducing loyalty rewards.
- Marketing and Messaging: Based on your top customers’ values, adjust your messaging to emphasize what resonates with them. This builds a stronger emotional connection and makes your brand feel relevant to the people who matter most.
Steps to Refine Your Business for Your Top Customers
Here’s a simple process to help you refine in a way that’s intentional, manageable, and impactful.
- Get Feedback from Your Top Customers
- Whether it’s through casual conversations, feedback forms, or CRM data, gather insights from your top customers to pinpoint what they love and where they see room for improvement.
- Look for recurring themes, like requests for specific features or feedback about service touchpoints.
- Prioritize Small, High-Impact Changes
- Not every improvement has to be massive. Sometimes, it’s the little things that matter most—like faster service responses, clear instructions, or product packaging that reflects your brand’s personality.
- Start with changes that directly address the top needs of your best customers, especially if those needs align with your business goals.
- Test and Get More Feedback
- Try testing any larger changes on a small scale first. Offer a new feature to a select group of customers, for example.
- Gather feedback and use it to fine-tune the offering before rolling it out to everyone.
- Focus on Value Adds
- Look for small, valuable “extras” that make a difference, like product tutorials, extended support, or surprise discounts for loyal customers. It’s the little perks that can go a long way in strengthening relationships with your best clients.
- Measure Results and Keep Refining
- Track customer engagement, repeat purchases, or feedback to see how your refinements are performing. Refinement is an ongoing process; adjust as you learn what resonates most with your high-value customers.
What’s Next?
“Refine” is about building deeper relationships with your top customers by making your business fit their needs more closely. These tweaks set the foundation for the next stage of S.U.R.G.E., Gather, where you’ll use what you know about your top customers to expand your reach in the places they congregate.
by Adam Litster | Oct 18, 2024 | Profit First, VPS, Entrepreneurship Newsletter
| Finding Your Top Customers: The Key to Unlocking Market Opportunities |
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| In this edition:
• A quick recap of the S.U.R.G.E. process and why it matters.
• What the “S” in S.U.R.G.E. stands for and how it can help your business grow.
• Practical steps for identifying your top customers and understanding where they hang out.
• Tips on how to engage with your customers in those key places.
As I’ve been diving deeper into Surge by Mike Michalowicz, I’m learning how the businesses that thrive are the ones that recognize opportunities early and know how to ride the wave. It’s an exciting concept that I want to share with you. Today, I’m breaking down the first step of the S.U.R.G.E. process—Separate. We’ll talk about how to find your best customers, figure out where they hang out, and how you can use that info to grow your business.
A Quick Recap of the S.U.R.G.E. Process
We’ve identified a five-step process for spotting and riding the waves of market demand. Here’s a quick rundown of what each step means:
1. Separate: Identify your top customers and study where they gather.
2. Unify: Look for what your top customers have in common so you can reach them more effectively.
3. Refine: Perfect your product or service based on what these customers need most.
4. Gather: Build your marketing strategy around the places your customers gather.
5. Expand: Use what you’ve learned to scale up and grow your business with confidence.
Today, I want to zero in on the first step—Separate—and show you how identifying your top customers and understanding where they congregate can set the foundation for everything else.
What Does Separate Mean?
The Separate step is all about getting crystal clear on who your top customers are. These are the people who love what you do, value your service, and keep coming back for more. But knowing who they are is just the beginning. You also need to find out where they spend their time—both online and in person—so you can meet them where they are and engage with them more effectively.
How to Identify Your Top Customers
Here’s a simple process you can use to figure out who your top customers are:
• List Your Customers by Revenue: Start by creating a list of your customers ranked by the total revenue they’ve brought in. Focus on the top 10-20 customers. This is likely where you’ll find your best customers—those who consistently come back and invest in what you offer. Now, take that list and put a smiley face  next to the clients who make you excited to do what you do—the ones who appreciate you, align with your values, and are a joy to work with. Then, add a frowny face  next to the clients who make you cringe every time you interact with them (i.e. the cringe-worthy clients). Your true top customers are the ones with both the highest revenue and a smiley face!
• Spot the Patterns: Take a closer look at these top customers. What do they have in common? Are they from the same industry, location, or do they have similar challenges? Understanding the traits of your top customers will help you recognize others like them.
How to Find Congregation Points
Once you’ve figured out who your top customers are, the next step is finding out where they spend their time. This will help you engage with them in the right places. Here are some tips for tracking down these congregation points:
1. Check Out Online Communities: Take a look at the forums, social media groups, and industry-specific platforms where your top customers hang out. Facebook groups, LinkedIn, Reddit, and niche forums are great places to start.
2. Look for Industry Events: If your top customers are in a specific industry, chances are they attend certain conferences, trade shows, or webinars. These are prime spots to connect with them and learn more about what matters to them.
3. Follow Their Influencers: What blogs, podcasts, or influencers are your top customers following? Engaging with these platforms is a great way to position yourself as a solution provider.
4. Use Monitoring Tools: Tools like Google Trends, social listening software, or BuzzSumo can help you keep an eye on what your customers are talking about and where those conversations are happening.
Action Steps for You
• Start by identifying your top customers using the revenue and smiley-face method.
• Find out where your best customers gather—both online and in person.
• Get involved in those communities by providing value, offering solutions, and building relationships.
• Keep track of these congregation points and make sure you’re always showing up where your customers are.
What’s Next?
In future editions, we’ll keep digging into more of these strategies that can help you grow your business. But for now, spend a little time identifying your top customers and discovering where they spend their time. This foundation will set you up for success as we continue to explore ways to catch and ride the waves of market demand!
Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779 – Option 2
adam@betterbizinfo.com
Visit Our Website! |
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by Adam Litster | Oct 18, 2024 | Profit First, VPS, Entrepreneurship Newsletter
Hello all! In this edition:
• What is a market surge, and why is it important for business growth?
• How to identify emerging trends in your industry.
• The power of niching down to capitalize on growing demand.
• A preview of future editions, where we’ll explore how to apply these principles to our own businesses.
As business owners, we have often heard that it is extremely important to stay ahead of the curve. So why does it feel like most of the time that we are barely keeping up with the curve, if that? Lately, I’ve been diving into Surge by Mike Michalowicz, a book that teaches entrepreneurs how to spot and ride market trends for explosive growth. I’m still studying and applying the concepts myself, but the ideas resonate deeply with what we all strive for-momentum and growth that are sustainable and profitable. Today, I want to share some of the key takeaways that have made me think differently about how we approach opportunity.
What Is a Surge?
A surge is a wave of demand or opportunity in the market that, if timed correctly, can be the difference between slow growth and fast-tracking your business to the next level. The key is recognizing the signs of an emerging trend before it becomes saturated, so you can position your business to ride the wave, not just catch the tail end of it.
How Do You Identify a Surge?
It starts with paying close attention to the market. What new problems are your customers facing? What innovations are they excited about? The companies that can solve these problems first are often the ones that capitalize on a surge. It’s about narrowing your focus and diving deep into a niche that’s experiencing this wave of momentum.
By answering these questions, we will move closer to finding “buy-ready” clients, those who are already in the market and actively searching for a solution. If you can identify where demand is growing, you can meet these customers right where they are. This is a powerful way to position yourself at the forefront of a trend. I will dive deeper into how to find buy-ready clients in future editions!
Why Niching Down Matters
Also key in finding and riding the market wave is niching down. Niching makes you more competitive during a surge. By focusing on a smaller, specialized market that’s gaining traction, you stand out. Instead of trying to appeal to everyone, you target the customers who are already feeling the pressure of the problem your product or service solves. This allows you to carve out a space where you can lead, even as more competitors jump on the wave later.
What’s Next?
In future editions, I’ll dig deeper into how we can use these principles in our businesses. From finding our own niche surge to targeting buy-ready clients, the potential to capitalize on market waves is there, it’s just a matter of positioning ourselves effectively.
For now, I encourage you to start paying closer attention to shifts in your industry. What new challenges are emerging? What customer demands seem to be on the rise? These are the early signals of a surge, and spotting them early can put you in a prime position to catch the wave. If you are interested in digging into these topics with me, I’d also recommend checking out the book on Amazon!
Until next time, keep an eye on the horizon!
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Thanks for reading and have a great weekend!
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Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779
adam@betterbizinfo.com
Visit our website
Click here for my calendar to schedule a call or meeting
