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Entrepreneurship Newsletter 11/15/2024: 2 Ways to Protect Your Business from Inflation

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!

Entrepreneurship Newsletter 11/9/2024: Should a Profitable Business Still Use the Profit First System?

by Adam Litster | Nov 10, 2024 | Entrepreneurship Newsletter, Profit First, VPS

​​​​​​​ 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!

Entrepreneurship Newsletter 11/1/2024: 4 Secrets to Prevent Cash Flow Crunches when Sales Slow Down

by Adam Litster | Nov 1, 2024 | Profit First, VPS, Entrepreneurship Newsletter

​​​​​​​ 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!

Entrepreneurship Newsletter 10/25/2024: 4 Tips to Refine Your Business to Attract and Retain Your Best Customers

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:

• S stands for Separate—identifying your top customers. (Read the full article here)
• U is for Unify—finding the common traits among these customers so you can better understand and serve them. (Read the full article here)

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:

1. 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.
2. 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.
3. 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.
4. 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.

1. Get Feedback from Your Top Customers
   1. 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.
   2. Look for recurring themes, like requests for specific features or feedback about service touchpoints.
2. Prioritize Small, High-Impact Changes
   1. 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.
   2. Start with changes that directly address the top needs of your best customers, especially if those needs align with your business goals.
3. Test and Get More Feedback
   1. Try testing any larger changes on a small scale first. Offer a new feature to a select group of customers, for example.
   2. Gather feedback and use it to fine-tune the offering before rolling it out to everyone.
4. Focus on Value Adds
   1. 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.
5. Measure Results and Keep Refining
   1. 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.

Entrepreneurship Newsletter 10/18/2024: How to Attract Top Customers

by Adam Litster | Oct 18, 2024 | VPS, Entrepreneurship Newsletter, Profit First

Finding Your Top Customers: The Key to Unlocking Market Opportunities

Entrepreneurship Newsletter 10/11/2024: Surfing the Market Waves: How to Spot the Next Big Surge

by Adam Litster | Oct 18, 2024 | Profit First, VPS, Entrepreneurship Newsletter

Entrepreneurship Newsletter 10/4/2024: Profit First: Your Best Defense Against Price Increases

by Adam Litster | Oct 4, 2024 | Profit First, VPS, Entrepreneurship Newsletter

Hey there, entrepreneurs!

If you’ve been paying attention to the headlines this week, you probably heard about the dockworkers’ strike that nearly brought our supply chain to its knees. While it was resolved fairly quickly, the scare is enough to keep many business owners up at night. I personally had several conversations with my wife about what we would do if all the prices went up, how our budget would be impacted, etc. It doesn’t take much—a single disruption like this—and suddenly you’re facing price increases that ripple across your entire operation and potentially put your personal finances in jeopardy also. It’s more important than ever to put your business in the most healthy position possible so you can weather any unexpected storms.

Before we dive in, here’s what you can expect from this article:

• How Profit First creates a financial cushion to absorb unexpected price hikes.
• Why sudden price increases or supply shortages don’t have to derail your business or personal life.
• Strategies for handling rising costs without immediately passing them on to your customers.
• A real-world example of how a business owner successfully navigated rising costs using Profit First.
• Actionable steps to ensure your business is ready for the next disruption.

Now let’s dig into how you can stay profitable, even when the world around you seems unpredictable.

Profit First: Building a Buffer for Your Business

If you’re already using Profit First, you know that this system is about prioritizing profitability from day one. It’s not just a tool to track your money—it’s a strategic approach and mindset that allows you to prepare for the unexpected and build a buffer against rising costs, like the ones we’ve seen threatened by this week’s strike.

Instead of reacting to price increases after they’ve hit, you’re already ahead of the game. You’ve allocated a percentage of every dollar earned to profit, so when supply chain costs rise or inflation sneaks in, you’re not scrambling to cover your margins. You’ve built in a cushion—peace of mind that lets you focus on growth, not survival.

Handling Price Increases with Confidence

We know that, in the economic environment we live in, price increases are inevitable. Even disregarding the recent increases in strikes and natural disasters, we are facing increased regulations, political turmoil, and military conflicts around the world.  But with Profit First, you’re not caught off guard. You’re not forced to pass on the costs to your customers right away or slash your own income just to keep things running.

With a well-thought-out Profit First strategy in place, you can evaluate the situation calmly. Can you absorb the extra costs? Can you tweak your allocations slightly for a month or two without putting your business in jeopardy? Maybe you can negotiate better terms with your suppliers because you’ve built a stronger financial foundation. These are all questions that are only possible because you’ve made profitability a priority. Further, because you are prioritizing profitability, your business is providing you with the compensation you need to provide for yourself and your family AND still have some left over for profit/emergencies! You are in a position where you have the ability to act rather than react to outside stimuli or pressure, without worrying that you will have to sacrifice your own personal income to keep your business afloat.

Profit First in Action

Take the real world example of a pizza restaurant which successfully weathered the COVID-19 pandemic because they used Profit First. I read about this business in an article, which explained that despite the pandemic causing numerous challenges for the restaurant industry, the Profit First methodology allowed the owner to continue to make allocations and pay his bills throughout the pandemic, despite the fact that his doors were closed for months. By maintaining financial discipline, he could keep the restaurant operating while others around him were closing. This method gave him the ability to weather the financial storm by focusing on profitability from the start rather than waiting until year-end to assess his financial health.

This is the kind of financial flexibility Profit First gives you. It’s not just about profitability; it’s about control and confidence in the health of your business. And as we’ve seen with this week’s strike, having that control is priceless.

What You Can Do Right Now

If you haven’t read and implemented Profit First yet, now is the time. Here’s a link to get it on Amazon (I believe there is going to be a promotion on Amazon later this month!). The dockworkers’ strike is just a reminder that there will always be external factors beyond your control. But we can control how we manage our money. Profit First gives you the tools to handle the unpredictable with confidence.

And if you’re already using Profit First, take a moment to revisit your allocations. Are they set up to help you weather the next supply chain disruption or cost increase? If not, it might be time to adjust.

Bill Litster and I are experts in cash flow management. In 2022, our firm was recognized as the Profit First Professional Firm of the Year. All this is to say that if you need help or would like someone to guide you through improving your business health, we’ve got your back. Click here to schedule a call with us!

We would like to provide as much value as possible through these weekly posts. If you have any feedback or recommendations on how we can do better, or are struggling with something in your business that is keeping you up at night, let us know!

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

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Click here for my calendar to schedule a call or meeting

Entrepreneurship Newsletter 9/27/2024: Scaling without losing your sanity

by Adam Litster | Sep 27, 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.

Main takeaways for today:

• Systematization drives growth without the added stress.
• Document processes so the business runs smoothly without you.
• Delegate and automate to streamline routine tasks.
• Focus systems on your most profitable clients and services.
• Refine systems regularly to keep pace with business growth.

Scaling a business should bring freedom, not more work. But if you’re like most business owners, it can feel like growth just means longer hours and more stress. Being transparent, we are dealing with the exact same issue at our firm. We want to grow, but being in a service industry often means we “trade hours for dollars”. What we have learned (and are working to apply ourselves also!) is that we don’t have to do it all ourselves. When we build the right systems, we can scale without sacrificing our time or sanity.

Here’s how to make that happen:

1. Document repetitive processes

If you’re handling repetitive tasks yourself, you may be working harder than you need to. Every process that happens regularly—like billing, scheduling, or client onboarding should be written down. This way, any member of your team can handle it, giving you room to focus on growth, not the day-to-day grind.

Example: Our firm does bookkeeping for a handful of clients. We found recently that every time we bring on a new bookkeeping staff, we spend a large amount of time walking them through each client and training them on all the many steps involved in managing their books. We are now going through the process of documenting these processes in Standard Operating Procedures (SOP’s) for each client so that any new staff can easily reference the document and skip the hours of training. This will free us up to focus on serving our other clients and growing the business!

2. Automate and Delegate

You don’t need to be involved in every little thing. Once you’ve documented a process, take a step back and ask, “Does this need a human touch?” Many tasks can be automated—like sending reminders or tracking expenses. Those that can’t be automated, consider if you can delegate them to your team.

Example:  Sales can take up a lot of time for business owners. We know this is a crucial part of growing the business, but we often spend a lot of our time vetting and emailing incoming leads, setting up calls, etc. And as our business grows, this would only take up more of our time. Recently, we invested in a CRM and set up automated sequences so that when new leads come in, the system automatically sends out a tailored email to them with links to set up a call. When they set up the call, the system sends scheduled reminders and follow-ups. The process that previously took several hours each month is done automatically and has had an amazing impact on our business!

3. Build Systems Around Your Best Clients

Not all clients are equal. If you’re spending time and resources on low-value customers, your systems are helping the wrong part of your business. Focus on creating systems that help serve your best clients, the ones who bring in the most revenue and truly align with your vision. You will find that your ability to provide value to these clients increases, they are happier with you, and you become much more attractive to potential clients (not to mention you are now much more profitable by spending less time providing more value!)

4. Continuously Refine Your Systems

Your systems should grow alongside your business. As you expand, make it a priority to regularly assess and refine your processes. Whether it’s streamlining something further or automating new steps, evolving your systems helps you stay efficient and maximize profitability as you scale.

The key to scaling without losing control or becoming burnt out is having the right systems in place. Systematizing doesn’t just reduce stress, it gives you the freedom to step back, work on your business rather than in it, and pursue the growth you want. You will be actively leading the business in the direction you envisioned when you first opened the doors!

We can help you build the processes that drive growth without sacrificing your time or quality of life. If you’re ready to systematize your business and prepare your business to scale effectively, reach out to us! We’d love to hear your ideas and provide our expertise! Click here to schedule a call with us!

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

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Click here for my calendar to schedule a call or meeting